3. Brief Facts of the Case

3.1 The State Commission passed the Tariff Order dated 02.03.2012 determining the tariff for procurement of power by the Distribution Licensees from the biomass based projects for the control period 2012-14.

3.2 The Tariff Order dated 02.03.2012 was challenged before this Tribunal in Appeal No. 93 of 2012 by Biomass Project Developers. By judgment dated 18.02.2013, the Tribunal allowed the Appeal and remanded the matter back to the State Commission for re-determination of tariff as per the directions given in the judgment.

3.3 Pursuant to above, the State Commission issued public notice and also issued Explanatory Memorandum on the aspect of proposed variable/fuel cost. After public hearing, the State Commission passed the Impugned Order dated 03.05.2013 re- determining the tariff of biomass based projects for the control period 2012-14.

3.4 Aggrieved by the Impugned Order dated 03.05.2013 passed by the MPERC, the Appellants have filed Appeal No. 144 of 2013 before this Tribunal.

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3.5 This Tribunal passed an Order in Appeal No. 144 of 2013 dated 29.05.2014 remanded the matter back to the State Commission and directed to re-determine the norms for Gross Calorific Value (GCV) of the fuel and Station Heat Rate (SHR) and also directed in the interim period till re-determination of GCV and SHR, the Distribution Licensee has to pay the generators at the tariff decided by the State Commission in the Impugned Order subject to adjustment on the final determination by the State Commission.

3.6 The State Commission as per the directions of the Tribunal's Order dated 29.05.2014 issued a public notice and also directed to determine of new and renewable energy of the Government of Madhya Pradesh to furnish a report regarding Gross Calorific Value and Station Heat Rate of the available Biomass fuels in the state of Madhya Pradesh.

3.7 The State Commission after receiving the report from the Deputy Commissioner, NRED, Bhopal regarding biomass fuel available in the state of Madhya Pradesh regarding Gross Calorific Value and Station Heat Rate, the State Commission considered GCV for the biomass fuel 3600 KCal/kg as fixed in

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the Impugned Order and also Station Heat Rate of 3800 KCal/KWh.

3.8 Aggrieved by the Order passed by the State Commission dated 13.08.2015, the Appellant M.P. Biomass Energy Developers Association and Ors. filed this Appeal No. 211 of 2015 and prayed for the following reliefs:

(a) Allow the appeal and set aside the Order dated 13.08.2015 passed by the State Commission to the extent challenged in the present appeal.

(b) Determine the Station Heat Rate and Gross Calorific Value applicable to the biomass generators in the State based on the evidence available on record;

(c) Pass such other Order(s) and this Hon'ble Tribunal may deem just and proper.

4. We have heard Mrs. Swapna Seshadri, Learned Counsel for the Appellants, and Mr. C.K. Rai, Learned Counsel for the State Commission and Mr. Manoj Dubey, Learned Counsel for Respondent No. 2. After going through the Impugned Order and submissions made by the rival parties and the material submitted by the rival parties, the following questions would arise for our consideration:

Issue No. 1: Whether the State Commission erred in considering the same Gross Calorific Value (GCV) at 3600 KCal/kg?

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Issue No. 2: Whether the State Commission has erred in maintaining the Station Heat Rate at 3800 KCal/KWh which had been specifically set aside by the Tribunal in the Judgment dated 18.02.2013?

5. Issue No. 1 and Issue No. 2 are inter-related and hence we will take up both the issues together for consideration.

6. The following are the submissions made by the Learned Counsel of the Appellants:

6.1 that the State Commission erred in maintaining the Gross Calorific Value at 3600 KCal/kg which is almost the same as 3612 KCal/kg as fixed by the State Commission in the Tariff Order dated 02.03.2012 and 03.05.2013 and which had been specifically set aside by this Tribunal.

6.2 that the State Commission erred in ignoring the test reports dated 8.9.2014 and 10.7.2015 placed by the Office of the Commissioner, New and Renewable Energy before the State Commission on the vague basis that weighted average GCVs are not available. It is not understood as to why the State Commission could not compute the weighted average GCVs based on the data submitted before it.

6.3 that the State Commission failed to appreciate that the most important property of biomass feed stocks is with regard to

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combustion and to the other thermo-chemical processes is the moisture content, which influences the energy content of the fuel and also the efficiency, fuel consumption and also the viability of the Biomass Power Plant.

6.4 that the State Commission failed to appreciate that the GCV of fuel is determined based on the moisture, sand and ash content of the Biomass used. For reduction of moisture, the only economical solution is the natural drying. However, even the process of natural drying requires high inventory levels because of the seasonal availability of certain types of biomass and there is almost no way to deal with the seasonal rainfall which makes the fuel wet. Therefore, the GCV of fuel needs to be adjusted taking into account the moisture content which is unavoidable.

6.5 that the State Commission failed to even take note of the fact that on an average, the Biomass plants are operated with the minimum moisture content of 25 % to 30 % which affects the GCV further. On as feed basis, the GCV usually varies between 2600 to 2900 kCal/kg. The GCV of Juliflora based plant is around 2800 kCal/kg, which has been also captured in the independent survey of state government. Therefore,

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assumption of any higher GCV than actuals is unrealistic and adds to the problems of the developers.

6.6 that the State Commission erred in maintaining the Station Heat Rate at 3800 kCal/KWh which had been specifically set aside by the Tribunal in the Judgments dated 18.2.2015 and

29.05.2014.

6.7 that the State Commission failed to appreciate that this Tribunal set aside the Orders dated 02.03.2012 and 03.05.2013 of the State Commission twice over which had fixed the station heat rate at 3800 kCal/KWh.

6.8 that the State Commission erred in ignoring the test reports dated 23.03.2015 placed by the Office of the Commissioner, New and Renewable Energy before the State Commission on the vague basis that many plants may run on multiple fuels. It is not understood as to why the State Commission could not compute the correct Station Heat Rate when the studies had placed 5 different scenarios before the State Commission and even if an average of all five it taken, the Station Heat Rate works out to be more than 4500 kCal/kWh.

6.9 that the State Commission failed to appreciate that the Station Heat Rate of the Biomass Power Plant is the major

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factor which gives the efficiency of operation. The SHR completely depends on the Fuel Characteristics and is affected by factors like sand, moisture and sizing in the fuel. Unlike coal, the multi fuel operation of the Biomass Power Plants is also not possible with variations in the Station Heat Rate most of the days in a year. The seasonal influence is also there and the variations in the Station Heat Rates are between 4000 KCal/KWH to 5000 KCal/KWH.

6.10 that the State Commission, as a statutory authority cannot ignore the ground realities and go on fixing whimsical norms and parameters for tariff determination.

7. Per Contra, the following are the submissions made by the Learned Counsel of the Respondents, State Commission:

7.1 that the Gross Caloric Value for determination of tariff depends upon the mix of biomass fuel available in any particular state. Due to variation in the quantum of different fuels available in various parts of the State, simple average GCV for the fuel mix throughout the State cannot be considered for determination of tariff applicable for all projects. Since there was no established ground to determine the weighted average Gross Calorific Value of the

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fuel for the Madhya Pradesh and in absence of the weighted average GCVs, the State Commission found it difficult to arrive at the reasonable GCV for the purpose of determination of tariff for the State.

7.2 that the reasons for retaining the GCV of 3600 KCal/kg are as follows:

i) It is admitted fact that the normative value of GCV has to be decided based on the types of biomass fuels used in the State.

ii) But, due to variation in the quantum of different fuels available in various parts of the State the exact type of biomass fuel used in the State could not be ascertained.

iii) There is no established ground to determine the weighted average GCV.

iv) That the Appellants have not furnished proper data giving the proportion of different biomass fuels used by them.

v) The State agency namely Department of New and Renewable Energy of the Government of Madhya Pradesh also did not submit weighted average GCV despite request to that aspect made by the State Commission.

7.3 that in the above circumstances the State Commission is left with no other alternative but to continue with the GCV at 3600 KCal/kg till a detailed study is carried out by an

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independent agency or the Department of New and Renewable Energy, Madhya Pradesh.

7.4 that Station Heat Rate depends on several factors such as plant capacity, plant design and configuration, technology (type of boiler and pressure level etc.), plant operation and maintenance practices, quality of fuel and operation performance over varying load conditions. The NRED had submitted before the State Commission that:

a) That have analyzed the operating performance of the biomass power plants of the Madhya Pradesh.

b) As per SLDC data, one of the better performing biomass power plants viz. M/s Arya biomass project of

10 MW operated at Plant Load Factor (PLF) of 60% for the period from June, 2014 to December, 2014 and other biomass power plants are operating at less than 50% PLF.

c) The Station Heat Rate (SHR) is a function of Specific Fuel Consumption (SFC) and the Gross Calorific Values (GCVs) of the fuels used. In its order dated 18.03.2014, the CERC accepted the SFC suggested by the Technical Committee at 1.5-1.8 Kg./kWh. Based on the aforesaid benchmark, the SHR for the biomass power plants works out to in the range of 4229 to 4586 KCal/kWh.

7.5 that various SERCs had considered different SHRs and other than the norms specified by the CERC for the purpose of tariff determination as under:

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** 3950 for air cooled condensers.

** for air cooled condensers.

7.6 that as directed by the APTEL, the Appellants have not furnished information regarding design heat rate, as certified by the manufacturer, factors affecting SHR due to practical consideration and any other data that is relevant to decide to SHR to the State Commission so as to consider the same by the State Commission.

7.7 that for the aforesaid reasons the State Commission was of the view that majority of biomass power plants may not run on single fuel and a mix of fuels shall be used. The biomass power projects were already allowed to use fossil fuel @ 15%. Thus, the Commission does not find any reason to enhance the Station Heat Rate of 3800 kCal./kWh considered in the impugned order for the purpose of tariff determination till a detailed study is carried out by some independent agency or the Department of New and Renewable Energy, Madhya Pradesh.

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7.8 that based on the order dated 03.05.2013, the Commission decides to continue the same tariff for the projects commissioned during FY 2014-15 & 2015-16 as determined for the projects commissioned during the FY 2013-14.

8. Our Consideration and Conclusion on both these issues

8.1 This Tribunal in the Judgment dated 29.05.2013 in Appeal No. 144 of 2013 remanded the matter again to the State Commission. The State Commission has failed to give a reasoned finding for Gross Calorific Value of fuel and Station Heat Rate and hence this Tribunal remanded the matter to the State Commission to re-determine the norms. This Tribunal also directed the distribution licensee to pay the generators at the tariff decided by the State Commission in the Impugned Order subject to adjustment on the final determination by the State Commission in the interim period till re-determination of GCV and SHR,

8.2 As per the directions of this Tribunal, the State Commission issued a public notice to the Appellants, Respondents and to the Department of New and Renewable Energy, Government

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of Madhya Pradesh (hereinafter referred as "NRED) and hearing was held on 03.07.2014.

8.3 As per the request of the State Commission, the Deputy Commissioner, NRED, Bhopal conducted tests on biomass available in the state of Madhya Pradesh and submitted the GCV test results of two samples of Rice husk, one sample of Wheat husk and Mulberry each.

8.4 Further, the Deputy Commissioner, NRED, Bhopal vide letter No. 2354 dated 23.03.2015 submitted the values of SHR worked out on the basis of the GCVs of various biomass fuels.

8.5 The test reports pertaining to Gross Calorific Value and Station Heat Rate submitted by the Deputy Commissioner, NRED, Bhopal are as under:

Table-I: Gross Calorific Value

1. In context of the state of Madhya Pradesh, the Biomass Policy allows the coal to be used as fuel to the extent of 15%. We have built 5 scenarios with different ratio of fuel mix as stated below:

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2. Based on the benchmark of SFC of 1.5 - 1.8 kg/kWh (as per CERC order), the SHR for biomass in the five scenarios works out to be in range of 4,229- 4,586kCal/kWh.

……………………………..

Table-II: Test Results of Station Heat Rate Table 1: Station Heat Rate for Biomass Project (Scenario 1)

Table 2: Station Heat Rate for Biomass Project (Scenario 2)

Table 3: Station Heat Rate for Biomass Project (Scenario 3)

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Table 4: Station Heat Rate for Biomass Project (Scenario 4)

Table 5: Station Hear Rate for Biomass Project (Scenario 5)

The Station Heat Rate is therefore worked out in range of 4,229-

4,588KCal/KWh and same is submitted for consideration with

request for early settlement of matter so that biomass power plants

can be taken up for speedy development.

8.6 We have gone through the test results submitted by the Deputy Commissioner, NRED, Bhopal and as per the test results, the GCV of biomass fuel with respect to Rice Husk is 3335 KCal/kg and 2833 KCal/kg, GCV of Wheat Husk Sample is 2763 KCal/kg and Mulbury sample is 4011 KCal/kg.

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8.7 Further, the Deputy Commissioner, NRED, Bhopal conducted a test on six samples of the mix of Rice Husk, Wheat Husk, Mulbury and Coal with different combinations in five scenarios and conducted test for determination of Station Heat Rate. According to the test report based on the benchmark of SFC of 1.5 - 1.8 kg/kWh (as per CERC order), the SHR for biomass in the five scenarios works out to be in range of 4,229-4,586 KCal/KWh.

8.8 It is pertinent to mention here that even though the Deputy Commissioner, NRED, Bhopal submitted the test results pertaining to GCV of biomass fuel available in the State of Madhya Pradesh and also Station Heat Rate, the State Commission considered their earlier values 3600 KCal/kg of Gross Calorific Value and 3800 KCal/KWh of Station Heat Rate. The Commission's views are quoted below:

"Gross Calorific Value (GCV):

"The Commission is of the view that there is no established ground to determine the weighted average Gross Calorific Value of the fuel for the Madhya Pradesh. In the absence of the weighted average GCVs, it would be difficult to arrive at the reasonable GCV for the purpose of determination of tariff for the State. In the Impugned Order, the Commission had considered GCV @ 3600 KCal/kg.

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Station Heat Rate (SHR)

The Commission is also of the view that majority of biomass power plants may not run on single fuel and a mix of fuels shall be used. The biomass power projects were already allowed to use fossil fuel @ 15%. Thus, the Commission does not find any reason to enhance the Station Heat Rate of 3800 KCal/KWh considered in the Impugned Order for the purpose of tariff determination till a detailed study is carried out by some independent agency or the Department of New and Renewable Energy, Madhya Pradesh".

We feel that the State Commission failed to appreciate the test results submitted by the nodal agency of the State of Madhya Pradesh i.e. NRED, Bhopal.

8.9 We have gone through the CERC's (terms and conditions for tariff determination from renewable energy sources) Regulations, 2012 which provide for terms and conditions and procedure for determination of tariff of the various renewable energy technologies inter alia biomass based rankine cycle power plants. To arrive the technical parameters of the biomass fuel available in the country, the Central Commission constituted a Committee on 11th October, 2012 under the Chairmanship of the Secretary, CERC to undertake a detailed Study on the

"Performance/Viability of Biomass based plants operating in

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the Country including the prevailing biomass prices". The scope of the work of the Committee was as under:

i) Assessment and evaluation of technical parameters like: Heat rate, Auxiliary Consumption, through performance assessment biomass plants commissioned in various states of India;

ii) Fuel analysis (both Proximate and ultimate analysis) of different biomass fuel by taking fuel and ash sample collected from different plants to arrive at representative value of GCV and moisture variation for different fuel;

iii) Analysis of losses in calorific value of fuel during storage;

iv) Evaluation of trend in the biomass power plant operation like break-up of fuel consumption (biomass types usage trends), generation v/s specific fuel consumption, PLF v/s Auxiliary Consumption;

v) Analysis of O &M expenses of the commissioned plants;

vi) Analysis of the Capital cost of the commissioned plants;

vii) Surplus biomass available for energy production;

viii) Study on prevailing Biomass prices and price trend in various states;

ix) Measures for viability of biomass plants.

x) Recommendation for removing the present hurdles coming in the sector for promoting the growth of the Biomass sector.

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8.10 The Committee deliberated and collected information and data from different stake holders and also visited sites of power developers to understand the issues at stake in different operation of the biomass based power plants.

8.11 The Committee after detailed examination recommended the following normative parameters for consideration of the Commission for determination of generic tariff of biomass plants:

i) Station Heat Rate (SHR):

a) 4200 KCal/kWh for station using travelling grate boilers; and

b) 4125 kCal/kWh for stations using AFBC boilers

ii) Gross Calorific Value (GCV): 3100 kCal/kg

8.12 The Central Commission after going through the Reports considered the Station Heat Rate as 4000 KCal/KWh and Gross Calorific Value at 3300 KCal/kg for the determination of RE Tariff Regulations 2012 for biomass based rankine cycle power plants with water cooled condenser.

8.13 We have also gone through the Report of the Committee and noticed the MNRE recommendations on SHR which are as follows:

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MNRE recommendation on SHR for different Biomass source

National Productivity Council recommendation on SHR for different Boiler

8.14 Further, the Expert Committee of Central Electricity Authority (CEA) in its Report of September, 2005 on

"Operational Norms for biomass based power plants"

recommended specific fuel consumption of 1.36 kg/kWh with average calorific value of fuel as 3300 kCal/kg and implicit assumption of SHR of 4500 kCal/kWh.

8.15 We have also gone through the Study Report of the National Productive Council who has conducted a detailed performance assessment study of the biomass plants and as per the assessment, the average Station Heat Rate for biomass power plants is around 4300 KCal/KWh.

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8.16 The Station Heat Rate data based on performance assessment of biomass power plants by National Productivity Council is as under:

Plant Date Unit Biomass SFC Average Station Generation Consumption (kg/KWh) GCV of Heat Rate (KWh) (MT) Fuel as (KCal/KWh)

fired

(KCal/kg)

Shriram 09.11.10 to 148800 280 1.88 2076 3906.45 Powergen 10.11.10

Limited, 10.11.10 to 144600 275 1.90 2076 3948.13 Dindigul 11.11.10

11.11.10 to 152900 292 1.91 2076 3964.63

12.11.10

Global 27.09.10 to 179400 309 1.72 2540 4374.92 Powertech 28.09.10

Equipments 28.09.10 to 172200 294 1.71 2568 4384.39 Limited, 29.09.10

Vandavasi 29.09.10 to 178200 294 1.65 2559 4221.92

30.09.10

Shriram 26.12.10 to 152400 236.22 1.55 2696 4178.80 Non- 27.12.10

Conventional 27.12.10 to 154500 243.18 1.57 2696 4243.45 Energy 28.12.10

Limited 28.12.10 to 165300 249.04 1.51 2736 4122.11 Pattukottai 29.12.10

Orient Green 11.02.12 to 236600 455.91 1.93 2379 4584.15 Power 12.02.12

Company 12.02.12 to 236100 431.11 1.83 2379 4343.97 Limited 13.02.12

Pollachi 13.02.12 to 236600 433.13 1.83 2379 4355.10

14.02.12

Sanjog 07.08.12 227000 281.5 1.24 3495 4334.11 Sugars Eco 08.08.12 234400 305.55 1.30 3495 4555.88 Power Pvt. 09.08.12 196200 264.87 1.35 3495 4718.25 Limited

Average Station Heat Rate 4282.42

8.17 It is to conclude after going through the Study Reports of various agencies such as National Productive Council, Central Electricity Authority, MNRE etc. and we found that the test results submitted by the Deputy Commissioner,

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NRED, Bhopal is almost nearer to the value suggested by the agencies specified above.

8.18 Hence, we do not find any justification in the contention of the State Commission regarding consideration of the GCV as 3600 KCal/kg and Station Heat Rate as 3800 KCal/KWh.

8.19 Further, the Central Commission in their RE Tariff Regulations, 2012 considered GCV as 3100 KCal/kg and Station Heat Rate between 4125-4200 KCal/KWh. This Tribunal in the Judgments dated 18-02-2013 in Appeal No. 93 of 2012 and dated 29.05.2014 in Appeal No. 144 of 2013 clearly directed the State Commission and remanded back to work out the Gross Calorific Value of the fuel and Station Heat Rate but the Commission stick onto the parameters of Gross Calorific Value as 3600 KCal/kg and Station Heat Rate as 3800 as KCal/KWh and determined the Tariff.

8.20 In our opinion, the State Commission without considering the test results of Nodal Agency for Renewable Energy Sources in the State of Madhya Pradesh, Bhopal and without considering the Central Commission's Tariff

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Regulations, 2012 on Renewable Energy Sources, the State Commission arbitrarily reduced 5% of the SHR considered by Central Commission on 4000 kCal/kWh and considered the SHR value as 3800 kCal/kWh, which is not correct and reasonable.

It is true that the Station Heat Rate of the biomass plants depends upon the design aspects of the plants and GCV of fuel etc. but when there is basis in arriving at the technical parameters of the biomass fuels conducted by various agencies, the State Commission has to consider the reports in arriving at the values towards GCV and

SHR.

8.21 We have cautiously and deeply pondered over the issues involved in this Appeal and we have no hesitation in noting down that this is the third round of litigation in Appeal before this Appellate Tribunal only on the same two issues relating to Gross Calorific Value (GCV) and Station Heat Rate (SHR).

We further note without any hesitation that the State Commission every time in the instant matter on remand has been sticking or clinging to its own earlier values on

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these issues thereby completely bypassing and ignoring the directions given by this Appellate Tribunal in earlier two rounds while remanding the matter back to the State Commission, namely, Madhya Pradesh State Electricity Regulatory Commission. In the facts and circumstances of this matter, we do not think it proper to remand the matter third time to the State Commission thereby giving absolute power to be misused by the State Commission again. We ourselves are adopting the work of fixing the values of both these things. We after careful and serious analysis and survey of the aforesaid reports given by various agencies decide the Gross Calorific Value (GCV) in question as 3100 kCal/kg and Station Heat Rate (SHR) at 4200 kCal/kWh. In these circumstances, the State Commission is bound to re-determine the tariff considering the GCV and SHR determined by us in this Judgment. Both these issues are hereby decided in favour of the Appellants and thus Appeal is liable to be allowed.

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ORDER

The instant Appeal being Appeal No. 211 of 2015 is hereby allowed and the Impugned Order dated 13.08.2015 passed by the State Commission is hereby set aside. The State Commission is directed to re-determine the tariff adopting the Gross Calorific Value (GCV) and Station Heat Rate (SHR) determined by us above within two months from today positively under intimation to this Appellate Tribunal for our perusal. The State Commission is expected to comply with this Judgment in letter and spirit without seeking any excuse of any kind whatsoever. No costs. Pronounced in open Court on this 4^thday of May, 2016. (T. Munikrishnaiah) (Justice Surendra Kumar) Technical Member Judicial Member

√ REPORTABLE/NON-REPORTABLE

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