October 1999 g e ffi t =. i~~ X g m. !~~~ # m~~~~~ a 2 = =:~~~ - - - a n.i i r < - + -a.94 giW-5~ Ul,, l Meeting India's Future Power N eeds Planning for Environmental y S ustainable Development The WoTld Bank Washington, D.C. Copyright ©E) 1999 The International Bank for Reconstruction and Development/THE WORLD BANK 1818 H Street, N.W. Washington, D.C. 20433 USA All rights reserved Manufactured in the United States of America First Printing October 1999 1 2345030201 0099 This report has been prepared by the staff of the World Bank. The judgments expressed do not necessarily reflect the views of the Board of Executive Directors or of the governments they represent. The material in this publication is copyrighted. The World Bank encourages dissemination of its work and will normally give permission promptly. 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II. Series: Environmentally and socially sustainable development series. Rural develop- ment. HG3881.5.W57P68 1998 362.1'532-dc2l 96-32776 CIP Contents 1. A Time for Decisions ..........................................................1 2. Options for Reducing Environmental Impacts .......................................................5 Reforming and Restructuring the Power Sector .......................................................... 5 Rehabilitating Generating Plants and Transmission and Distribution Networks .................. 7 Managing Demand ..........................................................8 Using Renewable Energy Supplies ..........................................................9 Internalizing the Costs of Pollution ......................................................... 13 Reducing and Recycling Combustion By-Products ......................................................... 15 Siting Plants to Reduce Environmental Damage ......................................................... 19 Using Options in Combination ......................................................... 20 3. From Knowledge to Action ......................................................... 23 Applying the Decisionmaking Process and "Toolkit" ......................................................... 23 References ......................................................... 27 Boxes 1. The Year 2015-The "Business as Usual" Scenario . ................................................2 2. Incentives and Subsidies ......................................................... 10 3. Constraints ......................................................... 11 4. Applications for Coal Ash ......................................................... 17 5. Elements of the Participatory Planning Process .................................................... 25 6. A "Toolkit" for State-Level Energy Planning ......................................................... 25 Figures 1. "All India" Emissions by Region in 2015 .......................................................... 3 Tables 1. Summary of Emissions under the Reform Scenario in Bihar, 2014/2015 ................7 2. Estimated Tenth-Year Savings from Technologies in Andhra Pradesh .................... 9 3. Estimated Electricity Saved through Demand-Side Management ............ .............9 4. Potential Contribution of Renewable Energy Technologies ................................. 10 5. Existing Air Quality Standards for the Ministry of Environment and Forestry ....... 14 6. Andhra Pradesh-Cumulative Pattern of Generation Mix .................. .................. 21 7. Andhra Pradesh-Impact on Cost and the Environment ................... .................. 21 1 A Time for Decisions Unquestionably, power plays a funda- * Power stations may require large, and mental role in the economic development frequently environmentally valuable, process. All countries seek to ensure a sup- land areas. ply of electricity that is affordable, reliable, . Large hydro and coal projects require and secure in order to sustain modem ways resettlement and rehabilitation, and of living. Producing electricity to meet affect people. modem needs affects the environment on * Acid gases that are produced when a local, regional, and global basis. As de- fossil fuels are burned are eventually veloping countries, including India, de- precipitated as acid rain. mand increasing amounts of electricity to sustain their economies, long-term plan- Avoiding environmental damage ning is needed to balance this growing from the development of energy resources need for power and environmental con- is among the key priorities of the South cems. Practical strategies are needed to Asia environmental strategy for the en- minimize the impact of growth on the en- ergy sector. Other priorities include the vironment and, through the environment, following: on human health and well-being. India's large reserves of coal are a * Dealing with indoor air pollution from major asset to the country, accounting for the use of traditional fuels, especially 70 percent of India's current production in rural households of electricity. However, excessive use of * Protection from urban air pollution this form of energy production-espe- * Developing better environmental gov- cially without the use of strategies to miti- ernance gate its effects-will cause the quality of * Mitigating the potential impacts of the country's air, land, and water re- global climate change sources to deteriorate. Specifically, * Making the Bank more responsive to energy-environment impacts. * Small particles from combustion even- tually reach the ground, threatening Studies to date have clearly demon- human health and property. strated that continuation of current poli- • Disposing of the ash that is produced cies and practices in the power sector is as a byproduct of combustion requires not sustainable in financial terms. Prices large amounts of land; leaching ash today for electricity and fuels in India are can contaminate ground water. distorted; electricity is often sold to agri- * Carbon dioxide released from fuel by cultural consumers at prices that are well combustion contributes to global below the costs of production. This prac- warming and climate change. tice leads to waste of electricity and also 2 A Time for Decisions impairs the finances of state electricity Emissions on the scale described boards. The poor financial condition of the above are bound to affect air quality and boards may make it difficult to invest in have major human health impacts. The new plants and maintain existing plants damages caused by particulate matter to properly, especially environmental control the respiratory system are a particular equipment not essential to plant operation. cause for concern. Consequences include Case studies for Andhra Pradesh and significant increases in mortality, hospital Bihar, states facing different energy chal- admissions for respiratory infections, emer- lenges with varying resources, show that gency room visits for bronchitis and other the financial performance of the power chronic pulmonary diseases, the number sectors in both states will impose an in- of days asthmatics experience shortness of supportable financial burden on their re- breath, and the number of days residents spective state governments. The rate of experience restricted activity. return on capital in Andhra Pradesh will Although the power sector contributes become increasingly negative, reaching - to the problem, most of the pollution, es- 18 percent by 2015; in Bihar it will aver- pecially in the urban areas, stems from age -14 percent from 1996 through 2015. other sources, notably residential and The financial resources needed to main- commercial stoves, industrial boilers, in- tain and operate the power plants at the efficiencies in the transport sector and the level needed to meet the projected de- liquid fuel chain, the extensive use of tra- mand are unlikely to be forthcoming. ditional fuels in city slums, and emissions Under current policies, emissions of from nonenergy sources. Urban air pol- environmentally damaging combustion lution is, therefore, a cross-sectoral issue products may be expected to increase that requires a citywide approach to rapidly, doubling in Bihar and quadru- achieve comprehensive air quality man- pling in Andhra Pradesh by the year 2015. agement. Thus, a strategy to address ur- Extrapolating the results to India as a ban air pollution must integrate a range whole reveals serious conditions (box 1 of activities at the municipal level, espe- and figure 1). cially at small sources of energy and Box 1. The Year 2015-The "Business as Usual' Scenario Without significant changes in power sector policy, by the year 2015 * India will be producing S°2, NO., particulate emissions, and ash at three times the current levels * Ash disposal facilities around power plants will require 1 square meter of land per person * CO2 emissions will be 775 million metric tons per year, as compared with 1,000 mil- lion metric tons per year now produced by power generation in the entire European Union. A Time for Decisions 3 Figure 1. "All India" Emissions by Region in 2015 2,000 - 1,800 - 1,600 - 1,400- 1,200- 1,000 800- 600- 400- 200 0 C02 SO2 NOx Particulates Ash (million (k tonnes) (k tonnes) (k tonnes) (million tonnes) tonnes) C Northern region * Western region * Southern region E] East and northeast regions Source: ESMAP (Joint UNDP/World Bank Energy Sector Management Assistance Programme), India: Enviromental Issues in the Power Sector, Report no. 205/98 (Washington, D.C.: Energy, Mining and Telecommu- nications Department, the World Bank, 1998). power stations located in densely popu- electricity, the financial viability for all the lated areas and in the transport sector. This entities involved, the choice of fuel and strategy should also include a major fo- technologies, pricing decisions, and the cus on the petroleum subsector. respective roles and relationships among Currently the power sector in India the state, the power sector, regulators, and is on the verge of fundamental and sig- fuel suppliers. During this time of transi- nificant reforms that have profound tion, it is critical to determine how best to implications for environmental manage- take advantage of the opportunities it pre- ment. India is moving from a publicly sents to protect the environment and avert owned, vertically integrated, monopolis- threats to public health. tic power system with highly distorted To find a more appropriate balance prices for fuels and electricity to a more between the need to support economic liberal system with market prices, com- development and environmental con- petition, a greater role for the private sec- cerns, stakeholders must begin immedi- tor, and commercial incentives. These ately to take environmental impacts into changes will affect every aspect of the en- account as long-term plans for power gen- ergy production system: the demand for eration are developed. 4 A lime for Decisions Depending on the unique needs and situation of the geographic area, differ- ent strategies for reducing negative en- vironmental consequences from power generation may be more or less effective. Decisionmakers can choose from a range of measures, using modeling tools to de- termine which combination of options will have the greatest positive impact. For example, the environmental impacts of power development may be reduced by using less electricity, preventing waste develop a decisionmaking framework. products from reaching the environment, They tested a participatory planning pro- adopting cleaner technologies for coal cess and analytical tools that can help production, or using alternative forms of decisionmakers in India both to improve energy production that cause less environ- the planning and management of their mental damage. Sound pricing strategies power systems, taking into account the for electricity and fuel, changes in the major environmental impacts, and to assess structure of the power sector, and ways the economic and environmental tradeoffs of looking at the cost of energy produc- associated with different options for power tion that take environmental impacts into generation. This report summarizes what account would also help preserve envi- has been learned through this process in ronmental quality. two very different states, Andhra Pradesh While power system expansion plan- and Bihar, and assesses the broader impli- ning has previously been conducted at the cations of these findings for energy plan- national level using state-provided data ning in other states in India. on regional needs, the decisionmaking The case studies were supported by a process in India is being decentralized. set of special studies dealing with interfuel Some state electricity boards are being un- substitution; the welfare effects of increases bundled into separate generation, transmis- in electricity tariffs; the technical and eco- sion, and distribution entities. nomic potential for renewable energy tech- Corporatization and, to an increasing de- nologies; demand-side management; the gree, privatization are an integral part of possibilities of adopting market-based in- this process. The unbundled institutions struments in India; the options available will assume the responsibility for the criti- to mitigate the environmental impacts of cal functions of planning and coal-fired power stations and coal mining; decisionmaking. To meet the need for tools and the management, disposal, and utili- and data to support state-level zation of ash from thermal power plants. decisionmaking during this important tran- The special studies provided basic generic sition, the government of India, the World data to supplement the detailed state-spe- Bank, and the U.K. Department for Inter- cific information collected under the case national Development have collaborated to studies. 2 Options for Reducing Environmental Impacts This section is based on a review of avail- * Rehabilitating generating plants and able data, including special studies and transmission and distribution net- lessons learned from other countries. A works particularly important source of data is * Managing demand provided by case study material relating * Using renewable energy supplies to two contrasting Indian states, Andhra * Internalizing the costs of pollution Pradesh and Bihar. While no two states * Reducing and recycling combustion can adequately represent the richness by-products and complexity of the Indian subconti- * Siting plants to reduce environmental nent, these two states and their distinc- damage. tive situations offered researchers an opportunity to explore a range of issues The following section explores the and options. Bihar is relatively poor, and relative merits of these strategies and the its state electricity board is in a precari- obstacles to their use. ous situation, financially and technically. Heavy industry accounts for about 40 Reforming and Restructuring percent of the demand for power in Bihar, the Power Sector while agriculture accounts for a similar percentage of the requirements of Though it is moving toward reform, Andhra Pradesh. Although both areas India's current government policies have depended primarily on coal as a continue to maintain some fuel prices power source, Andhra Pradesh has more at artificial levels, with inevitable and ready access to other supply options than harmful consequences to the environ- Bihar. The contrasts between them, ex- ment. While most coal prices have been plored through different scenarios using deregulated, power station grades of do- computer models, have yielded insights mestic coal are still priced below the cost and examples that will be cited through- of production. The true value of the bet- out this section. ter grades is underestimated. Cleaner im- Options available to India as it seeks ported fuels are priced too high by to reduce the environmental impacts of comparison with domestic coal. Prices power generation include the following for the transport of goods by rail, includ- strategies: ing coal, are generally subsidized, further encouraging the use of the domestic * Reforming and restructuring the product and its high ash content. As a power sector result, 5 6 Options for Reducing Environmental Impacts * Indian coal is preferred as a fuel for procedures, which will increase the power generation over other fuels amount of available cash. with lower ash content. * Power system reliability will increase; * The relative prices of different grades consequently, many consumers who of coal give no incentive to the coal now install their own power sources producer to increase output of the bet- will be able to rely on the grid system. ter-quality coals. * Distorted prices for transport affect the The fact that electricity once lost or choice between pit-head and load-cen- sold to agriculture at a subsidized price ter plants, shifting the location of en- can instead be sold to agriculture at higher vironmental impacts. prices or to industry at a profit will con- * Demand is maintained at artificially tribute strongly to improved financial per- high levels. formance for energy providers. Clearly the change in tariff policy makes the dif- As government reform progresses and ference between a system doomed to fail- prices for fuel rise to a level that reflects ure and one that has the capacity to meet their true "economic" cost, stakeholders future demand efficiently. in the energy system will have reason to Improving the cash flow of utilities make different choices: has significant environmental impacts. One major impact will be that providers • When the tariff structure is changed can build new plants, which will obvi- to reflect the economic costs of produc- ously increase the volume of environmen- tion, higher prices for electricity in the tal impacts. However, these plants will be residential and agricultural sectors intrinsically cleaner and more efficient, will dampen demand. displacing old plants; available cash will * As electricity producers are motivated also enable producers to bring the plants by commercial incentives rather than in line with standards. The latter effects dependence on government subsidies, will tend to bring down specific emissions they will have adequate cash flow to of pollutants. The Bihar case study dem- rehabilitate transmission and distribu- onstrates that reform would have an over- tion systems and to modernize gener- all beneficial effect on pollution levels and ating plants, reducing electricity loss at the same time produce more electricity through inefficiency. (table 1). Results for the Andhra Pradesh * Commercialincentiveswillencourage Case Study were comparable (ASCI power utilities to offer higher prices Consultancy 1998). for better coal and spur coal suppliers While reforms will have a beneficial to invest in coal beneficiation plants. effect on the environment, what other * Commercially motivated producers major effects could they have on public will search for cost-effective ways to welfare? Data are limited, but there could encourage ash utilization and dis- be significant impacts on residential con- posal. They will improve metering, sumers and on agriculture. First, costs monitoring, billing, and collection may go up for households with access to Options for Reducing Environmental Impacts 7 Table 1. Summaryof Emissions underthe Reform Scenario in Bihar, 2014/2015 Cumulative Total Ash CO2 NOX SOx SPM (million Scenario (million t) (kt, PV) (kt, PV) (kt, PV) t) "Business as Usual" 142 804 929 62 36 Reform 127 685 828 54 34 Note: CO2 = carbon dioxide, kt = metric kilotons, PV = present value, SO, = sulfur oxide, and t = metric tons. Source: SCADA 1998. electricity, but the quality of their supply cent. This figure is generally recognized will improve. Also, with proper metering, by experts familiar with the power sector demand will adjust to efficient levels. As in India as a serious underestimate. Most reforms improve the cash flow of electric- state-level studies cite a much higher per- ity companies, they should be able to of- centage-perhaps even double the pub- fer power to new consumers. lic utility figure. The losses in India are Second, increased electricity prices to much greater than in East Asian countries. agricultural customers could result in a The best performers were Singapore (9.1 more efficient use of water. This, in tum, percent) and the Republic of Korea (10.2 could lead to improved yields, since percent). overwatering dilutes the effectiveness of Factors that contribute to the high rate fertilizers. Metering could also have an of loss in India include the following: equalizing effect on access to energy. Cur- rently, small farmers often experience long * Lack of investment in rehabilitation waits for pump connections, while more of the transmission and distribution wealthy farmers are able to use diesel to system meet their energy needs. Recent studies * Weak transmission and distribution suggest that farmers are willing to pay lines more for reliable access to energy (based * Long transmission and distribution on unpublished findings from ongoing lines studies of power supply to agriculture for * Low power factor operation the World Bank). * Too many transformation stages * Pilferage and theft. Rehabilitating Generating Plants and Transmission and Modeling suggests that the percent- Distribution Networks age of power lost through transmission and distribution could be reduced in Losses of energy as a result of weak- most states to as low as 10 percent by nesses in India's transmission and dis- 2010. If energy providers are motivated tribution system were reported by public to make improvements through price re- sector utilities to be as high as 21 per- form, changes in maintenance, metering, 8 Options for Reducing Environmental Impacts monitoring, and billing and collection percent by 2015, resulting in an would make more money available to re- Indiawide reduction of measurable en- habilitate the system-clearly a win-win vironmental impacts (or attributes) of prospect. System rehabilitation not only about 10 percent. Specifically, sulfur di- would result in across-the-board reduc- oxide (SO2) and nitrogen oxide (NO.) tions in environmentally damaging emis- would be reduced by 9 percent, total sus- sions, but would yield high rates of pended particulate matter (SPM) and car- return both in financial terms and in eco- bon dioxide (CO2) by 10 percent, and ash nomic benefits to society. by 11 percent. Case studies found system improve- Many diverse technologies are avail- ments to be cost-effective both in Andhra able to reduce energy consumption. Those Pradesh and in Bihar, which has a smaller that are most likely to significantly reduce system that is in worse condition. Both are demand will vary by region, depending currently experiencing energy losses of 30 on the residential and commercial mix of percent or more. By rehabilitating the ex- energy consumers and other factors. Table isting transmission and distribution sys- 2 contains some examples of energy sav- tem, both could significantly reduce ings that the Andhra Pradesh case study operating costs and achieve measurable shows would be achieved in the tenth year environmental benefits for area residents. of a demand-side management program In Andhra Pradesh, measured envi- in that state (ASCI Consultancy 1998). ronmental impacts-"attributes"-would Other governments have tried differ- be reduced by 3 percent and operating ent policy strategies to encourage de- costs by 4 percent. In Bihar, attributes mand-side management. Examples that would be reduced by 5 to 6 percent. Ex- may also work well in India, although penditures on operations would fall by they are not among the conclusions of this more than 6 percent. work, include the following: Managing Demand . Promoting energy service companies to fund and manage investments in Energy use is currently less efficient and energy efficiency and to share savings less cost-effective than the best avail- with users able technology would allow. Conse- * Placing levies on utilities to fund en- quently, a more negative environmental ergy conservation programs impact is occurring than is actually nec- * Requiring utilities to engage in de- essary to meet load requirements. De- mand reduction activities as a condi- mand-side management refers to the use tion of construction permits or tariff of policies to reduce energy consump- increases. tion, with a resulting decrease in energy production and new plants. Modeling Demand-side management programs studies show that demand-side manage- can be implemented or funded by utilities, ment programs could reduce total sys- the state, the private sector, or other insti- tem costs (in present value terms) and tutions. Once price reforms are in place, power consumption by approximately 6 however, utilities lose their financial Options for Reducing Environmental Impacts 9 Table 2. Estimated Tenth-Year Savings from Technologies in Andhra Pradesh Savings in Year 10 Percentage Technology (gigawatt-hours) in total savings High-efficiency pumps 3,453 10.01 Fluorescent lamp standards 1,007 0.00 Industrial cogeneration 806 1.34 Metering pump sets 597 1.75 Commercial fluorescent lighting 493 1.32 More efficient rural lighting 475 1.53 More efficient urban lighting 206 0.14 High-efficiency refrigerators 167 0.29 Others 911 2.45 Total 8,115 16.38 Source: ASCI Consultancy 1998. interest to reduce demand. Consequently, megawatts, renewable energy technolo- the role of the private sector in promoting gies currently account for about 1.5 per- changes in consumer behavior may in- cent of total power generation capacity crease. For example, an independent en- (Ministry of Non-Conventional Energy ergy service company could promote such Sources 1999), of which wind power ac- programs on a commercial basis, a strat- counts for about 72 percent (992 mega- egythathasbeenusedintheUnitedStates watts) and small hydro roughly 13 and in Western Europe (table 3). percent. Biomass and solar energy sources account for the rest. The Minis- Using Renewable Energy try of Non-Conventional Energy Sources Supplies has estimated that 126 gigawatts of power generation capacity is available Over the next fifteen years renewable from renewable energy sources in the energy supplies could increase by more long term. Although the technical poten- than seven times, and their share in the tial for the use of renewable energy country's total power generation capac- sources in India is vast, the prospects for ity could nearly triple. At roughly 1,378 expansion may be limited in the short Table 3. Estimated Electricity Saved through Demand-Side Management (percent) Study 2001/2002 2006/2007 2011/2012 2014/2015 Andhra Pradesh 4.5 11.3 8.3 5.6 Bihar 2.1 7.0 8.1 9.8 CERI 7.4 7.7 8.2 CERI = Canadian Energy Research Institute and Tata Energy Research Institute. Source: Canadian Energy Research Institute and Tata Energy Research Institute 1995. 10 Options for Reducing Environmental Impacts and medium terms because of a number generation capacity) is feasible through of constraints (see box 3). A special study renewable energy technologies in 2011- of renewable energy technologies (Envi- 12 even in the absence of any incentive ronmental Resources Management 1997) and subsidy scheme (see box 2). The spe- has found that continuation of govern- cial study, therefore, concludes that gov- ment policy can give a boost to the pen- ernment incentives will need to continue etration of renewable energy in the short and medium term to enable technologies to 11,440 megawatts, renewable energy technologies to pro- roughly 4 percent of total generation ca- vide an increasing share of the nation's pacity in 2011-12 (see table 4). Sensitiv- power supply. These incentives are out- ity analysis on capital costs show that lined in box 2. The renewable energy capacity addition of 8,560 megawatts technologies could become more attrac- (nearly 3 percent to the country's total tive economically if energy sector reform Box 2. Incentives and Subsidies A number of incentives are offered for renewable energy technology projects, which in- clude soft loans, reduced customs duties on imported material and equipment, 100 per- cent depreciation allowance, exemptions from excise and sales tax, remunerative price with escalation clause for power fed into the grid, facilities for wheeling and banking power, and large capital subsidies. For example, in Maharashtra, up to 30 percent capital subsidy is being offered to private developers of wind power projects. For biomass, a capital subsidy of up to 50 percent of the cost of projects (subject to a maximum of Rs. 2.5 crores per megawatt) is being offered. In the northeastern region, the recently announced a government incentive package for the promotion of small hydro projects includes a capital subsidy of up to Rs. 3 crores per megawatt or 50 percent of the project cost. Re- garding SPV, the Ministry of Non-Conventional Energy Sources provides two thirds of the project cost (subject to a maximum of Rs. 2 crores per 100 kW) for the procurement of SPV modules, structures, cables, power conditioning units and grid interfacing equip- ment, while the balance is required to be met by implementing agencies. The solar ther- mal power plant in Rajasthan would be supported by grants from the central government of up to Rs. 50 crores and from the Global Environment Facility of $49 million, including a technical assistance component of $4 million. Table 4. Potential Contribution of Renewable Energy Technologies (gigawatts) Installed capacity in gigawatts (electrical) 2001/2002 2006/2007 2011/2012 With government financial incentives 4.5 (3.4%) 7.1 (3.5%) 11.0 (3.8%) Without government financial incentives 3.1 (2.3%) 4.9 (2.4%) 6.7 (2.3%) Note: Percentages of the totals for India are in parentheses. Source: Environmental Resources Management 1997. Options for Reducing Environmental Impacts 11 Box 3. Constraints Although the cost of generation of small hydro at about Rs. 1.43 per kilowatt-hour is highly competitive with conventional technologies, some renewable energy technologies, such as solar photo voltaic (SPV) and solar thermal, are far less economically attractive than conven- tional technologies. For example, despite the rapid declines in SPV costs, the current esti- mated cost of SPV modules are around $4 to $5 Wp (peak watt). Even if the cost declines by 50 percent to approximately $2.5 per Wp, the technology would remain uncompetitive com- pared with $1.05 to $1.35 Wp (Rs. 3.5-4.5 crores per megawatt) for other renewables and con- ventional technologies, notwithstanding the low variable costs associated with SPV technology. Several other factors constrain the use of renewable energy technologies. They are classi- fied as technological, institutional, financial and economic, and infrastructural, as follows: Technological * Most renewable energy technologies have not achieved maturity within the country, and a large portion are imported. * Renewable energy sources are site-specific, and the supply may not be continuous. * Technical information is not easily available either for the entrepreneur or the consumer. Institutional * A top-down centralized govemment approach is generally adopted for this poten- tially highly decentralized option. * Little encouragement has been received from the state electricity boards. * There is a lack of awareness about the potential environmental benefits. * There is a lack of serious education and training for operation and upkeep. * Incentives are misused; they are related to investment rather than to performance of plants. Financial and economic * Diesel and electricity are subsidized for use by agriculture and residential consumers. * Funds allocated to renewable energy sector are minimal when compared with fossil fuel and nuclear energy options. * In some cases, large initial investments are required. Infrastructural * The land requirement for renewable energies could be very high. * Poor grid availability proves to be a major deterrent. * There is a lack of proper maintenance and servicing facilities at the local level. A number of options to address the constraints exist, some of which are already at various stages of implementation: the collection of information; dissemination and train- ing campaigns; the reorienting of the investment portfolios of power utilities to develop decentralized power options and encouragement for the utilities to ensure grid connec- tion to private developers; formulation of a policy for power purchase; promotion of the financing of economically viable renewable energy technologies by developing and intro- ducing innovative financing schemes, such as lines of credit, revolving funds, and hire- purchase plans, to the conventional loan schemes; and formulation of government policy and legal and regulatory frameworks that encourage private sector participation. 12 Options for Reducing Environmental Impacts becomes more widespread and the sub- these and other states within South In- sidies associated with conventional en- dia. Ninety-eight sites have been iden- ergy are reduced. Agriculture and tified with annual mean wind speeds residential consumers of power are of more than 18 kilometers per hour. heavily subsidized by the state govern- Together they would provide 5,000 ments. Net subsidies to power consum- megawatts of energy. Constraints in- ers-revenue requirements less the clude operational problems in match- contributions state electricity boards re- ing supply and demand, since wind quire from state governments- power often varies seasonally. amounted to roughly $3.7 billion in * The potential for small hydro power 1995-96, about 1.4 percent of gross do- in India is also strong, with an esti- mestic product. mated potential to contribute 10,000 Water, wind, and biomass are the most megawatts. The Ministry of Non-Con- economically feasible renewable sources ventional Energy Resources, which of energy for the near term in India. Solar has examined 2,679 sites that have energy, however, has enormous potential potential capacities of up to 3 mega- if it can be made more economically vi- watts each, estimates that small hydro able. Even in the near term, it may be an power could represent 1 percent of the economically competitive option for likely installed Indiawide capacity for many remote areas where the cost of grid power generation by the year 2015. connection is very high. * The technical potential of solar energy in India is huge. The country receives * The high rate of photosynthesis from available biomass in India, such as crop residues, makes this a prospec- -____ tive resource. Bagasse-based cogen- eration uses a combination of direct combustion and gasification of biom- ass to generate energy. At the time of this report, eighteen biomass projects have been installed and another sev- enteen are under construction. There are technical challenges, however, in using this resource effectively, as well as logistical ones in ensuring an ad- equate and timely supply of fuel on a year-round basis. The estimated po- tential for bagasse conversion in India is approximately 3,500 megawatts. * The first wind farms in India were in- stalled in the coastal areas of Tamil Nadu, Gujarat, Maharashtra, and Orissa. The main potential is for use in Options for Reducing Environmental Impacts 13 enough solar energy to generate more its emissions to target levels or face sig- than 500,000 terawatt-hours of elec- nificant consequences (the "command tricity, assuming 10 percent conver- and control" strategy), and market-based sion efficiency. This is three orders of instruments that seek to change the na- magnitutde greater than the likely demand ture of the incentives and disincentives for electricity in all of India by 2015. faced by polluters to perform acts that However, even though the cost of benefit society. photo voltaic cells is falling and unit Guidelines and standards are in- costs of production are expected to tended to be a means of forcing a busi- decline, the cost of solar energy is still ness to change its operations in order to higher than that of other renewable reach prescribed levels, increasing the energies. As further technical progress cost to the business. In principle, the ad- is made, it will probably become a sig- verse environmental impacts of decisions nificant long-term energy source. in the power sector could be reduced by Even in the near term, it may be an implementing more stringent standards economically competitive option for than those currently applied in India. For many remote rural areas. this reason, the study attempted to esti- mate the incremental costs of implement- ing the World Bank's new standards for Internalizing the Costs of air quality and emissions, which are more Pollution stringent for SO2 and SPM than current Indian standards. Analysts concluded that The government is responsible for setting the incremental costs associated with the rules for how the costs of environmen- meeting World Bank standards need not tal pollution are apportioned between so- be substantial if plants are properly sited. ciety and the polluting agency. The More significant benefits, however, principle of "the polluter pays," which has will result from improved implementa- generally been adopted in environmental tion of existing standards than from regulation, obliges the polluting agency adoption of new and stricter standards to bear the cost of reducing or maintain- (table 5). Participants in the National ing its environmental waste at an ac- Decisionmakers Workshop held as part ceptable level. This is called of this study stressed that better imple- "internalizing" the costs. If the rules of mentation of monitoring and enforce- environmental management set by the ment procedures will be of more government were both adequate and en- immediate benefit to India. forced, all costs would be internalized Market-based instruments attempt within the agency. The agency would be to meet environmental objectives by motivated, by whatever means chosen by working through market mechanisms. the policymakers, to fully bear these costs, The common element of all market-based and would therefore make the changes instruments is that they work through needed to reduce its emissions. This can the market, attempting to alter the behav- be accomplished by using technical stan- ior of economic decisionmakers, such as dards that require the polluter to reduce firms and households, by changing the 14 Options for Reducing Environmental Impacts Table 5. Existing Air Quality Standards for the Ministry of Environment and Forestry Air quality standard Residential and rural areas Industrial and mixed areas (mg/m3) S02 NO SPM S02 NOX SPM 24-hour average 80 80 200 120 120 500 Annual average 60 60 140 80 80 360 incentives and disincentives they face. Several significant barriers exist to For example, if ash disposal permits were successful use of market-based instru- allocated equally to all new power plants, ments in India: regardless of their circumstances, some permits might be sold by those that find . Misconceptions among stakeholders it easiest to meet the targets, which about market-based instruments would reduce the total cost of compliance . A vested interest in the status quo on for all power plants. Other examples of the part of both regulatory agencies market-based instruments include pollu- and firms tion or input taxes, product charges, and . A lack of good governance, including differential tax rates. Market-based in- an ineffective institutional framework, struments are most easily applied in situ- a lack of local-level capability, and in- ations where there are few "actors" and sufficient technical understanding of where impacts can be measured easily. issues at the state board level They also work best when polluters must * The challenge of changing the current face hard budget constraints. legal system A number of studies have demon- . The "soft" budgets of the state-owned strated the cost-effectiveness of market- enterprises that dominate the power based instruments over traditional sector "command and control" regulatory strat- * The potential for malpractice in the use egies that require all polluters to meet the of funds raised through market-based same discharge standards. Market-based instruments instruments acknowledge and use the key * The potential for higher costs to the fact that the costs of reducing pollution industry in some instances. are not the same across all firms. Simula- tions done in the United States show that Before market-based instruments can these instruments can be between 1.5 and do their work, a suitable legislative and 4 times as cheap as a "command and con- regulatory framework for administering trol" regime across a range of pollutants them must be established. Further, it is and locations. Realizing these potential essential to recognize that unless power savings, however, will require careful de- plants and companies have strong com- sign and implementation. mercial incentives to make the desired Options for Reducing Environmental Impacts 15 choices, market-based instruments will high ash content of Indian coal makes not produce the desired effects. ash disposal one of the most pressing environmental problems India faces as Reducing and Recycling a result of its reliance on coal-powered Combustion By-Products energy. The steady increase in open-cast mining, which now supplies the bulk of Two specific clean coal technologies were Indian coal, has been a major factor in the considered in the case studies conducted falling calorific value and rising ash con- in this project: Pressurized Fluidized Bed tent of Indian coal. Storage of fly ash de- Combustion in Bihar and Integrated-Gas- mands large land areas; once land is used ification Combined Cycle in Andhra for this purpose, it is expensive to reclaim Pradesh. The two technologies, consid- the land so that it can be used in other ered the most feasible in current circum- ways.' Often, this financial investment in stance, do improve combustion efficiency land recovery is not made and the land is and reduce emissions to the environment. simply lost. Case study data suggest that the use of The Andhra Pradesh and Bihar case these technologies would result in only studies clearly highlight the environmen- marginal reductions in ash and CO2, but tal hazards associated with current prac- that they would have more substantial tice. In Andhra Pradesh, only 5 percent of impacts on total SPM and SO2, reducing the ash stock piled outside thermal plants them by as much as 17 percent in Bihar. is used by industries. The rest is dumped Their use would also reduce NO emis- in ash ponds or left in a pile outside the sions by 8 to 10 percent. Both require plants. In Barauni (Bihar), ash ponds are higher capital and operating costs, how- located on permeable sand, allowing ever, which exceed those of power plants groundwater contamination. Ash has that do not use these technologies by 10 spilled to local agricultural lands. Rivers to 15 percent. Consequently, neither tech- in Patratu are said to be full of ash; dur- nology would be implemented on the ba- ing dry seasons, there are significant emis- sis of normal market incentives. sions of fugitive dust. In 1996/97 alone, coal production gen- Not only does the ash cause environ- erated 62 million metric tons of ash. The mental damage, but it also increases the 1. During combustion in power plants, the pulverized coal particles are injected into the furnace and ignited in suspension. The mineral matter in coal is transformed, leading to the formation of ash. The ash residues of combustion possess a wide range of both physical and chemical properties that depend on the coal utilized, the combustion regime under which they are generated, and the method of collection. The ash that enters the flue gas stream is called fly ash, and the ash that falls through to the furnace bottom is called bottom ash. Fly ash generally constitutes about 80 percent of the total ash produced. Coal ash is a complex material in terms of specific gravity, size, morphology, microstructure, and mineralogy. The ash matrix consists of a mixture of aluminosilicates, silicates, iron oxides, and a certain amount of alkali-silicates in both amorphous and crystalline form. The mineralogical constituents of coal ash are SiO2, Al203, Fe203, and CaO. 16 Options for Reducing Environmental Impacts cost of transport to the power station site essential, however, to make this option at- and causes wear and tear on equipment. tractive (ASCI Consultancy 1998). Plants that burn the high ash coal are in- The major economic benefit resulting trinsically more expensive and less effi- from the use of the washed coal is the cient because they must handle large lower capital cost experienced by plants quantities of noncombustible and abrasive specifically designed to burn this coal. matter. However, the waste carbon must be dis- To date, limited use has been made posed of, contributing to environmental of coal washing, a process that removes damage. Much of the large volume of some of the mineral matter that would solid waste products is in the form of fine result in ash prior to burning. Because carbon particles suspended in water. Ash of the properties of Indian coal (it is diffi- from improperly designed ash ponds can cult to separate mineral matter from car- enter the aquatic ecosystem, contaminat- bon without also losing carbon), the ing groundwater, as well as reservoirs, economic tradeoffs for coal washing streams, and rivers. While well-designed make it a controversial option. Conse- and well-managed ash disposal systems quently, situational analysis is needed to would result in minimal pollution, most determine when transport is economi- ash ponds in use at India's power plants cally feasible. The Andhra Pradesh Case are not properly designed or operated and Study concluded that washing coal with do not comply with Central Pollution marginally high ash content (30-38 per- Control Board standards. cent) or with calorific values greater than Some of this lost coal can be burned 4,000 kilocalories per kilogram may not in a fluidized bed process or used as be advantageous. However, as long as the backfill in mines. An alternative ap- total cost remains competitive with that proach to the fly ash problem is to en- of imported coal, coal washing is a viable courage its use in a wide variety of alternative for coal with high ash content commercial applications. To date, how- and low calorific value that must be trans- ever, India has been less successful ported over distances of more than 1,000 than other countries in encouraging kilometers. Cost recovery incentives are commercial use of this waste material. q!_~~~~~~~~~~~~~~ = ~~~~~~~- Ivy. Options for Reducing Environmental Impacts 17 In 1996/97, only 2 percent of the 62 mil- filler, as a soil conditioner, or as a replace- lion metric tons of ash produced by ment for cement. Some buildings in India burning coal in India was used commer- have already been built with concrete that cially. By comparison, China produced contains ash. A report prepared for the 55 million metric tons of ash and re- World Bank sees the greatest potential for cycled 25 percent of it. This poor record environmental benefits in "low value- is not for any lack of possible applica- added" uses of fly ash (uses that do not tions relevant to the country's needs. The require significant processing) (Water and greatest emphasis has been placed on its Earth Science Associates 1996). Examples use in construction materials, since In- include uses in industrial effluent treat- dia has a chronic shortage of housing, ment, road making, embankment construc- and building materials are always tion, and plantation raising (box 4). needed. It is necessary to add binding There are, however, obstacles to the reagents to ash and clay, however, to use of these productive variations that meet applicable standards. As a result, planners must take into account. These the production of bricks from fly ash include quality variations in the coal, appears to be economical only when pro- transportation costs, technological limita- duction exceeds 25,000 bricks per day tions, impaired quality as a result of wet and when the bricks are used within 50 methods of coal collection and disposal, kilometers of the production site. and consumer resistance to products that A variety of other applications are also contain coal ash. Potential users must also promising. For example, it may be used as consider the following: Box 4. Applications for Coal Ash Agriculture: As an absorbent, artificial aggregate, fertilizer, and soil conditioner. Building materials: For aggregate, bricks, building blocks, ceramic products, paving ma- terials, roofing tiles, wallboards, and paneling. Cement and concrete: In cement, cement extender, cement substitute, concrete, concrete filler, foamed concrete, and mortar. Civil engineering: Aggregate, asphalt filler, backfill, embankment materials, foundations and road construction, grout, and hydraulic barriers. Industrial materials: Abrasives, absorbents, artificial sand and aggregate, ceramic mate- rials, decorative materials, filter media, gas cleaning, and industrial fillers. Materials recovery: Recovery of alumina, iron and silicon, and trace elements. Waste treatment: Grout and waste stabilization. Source: Water and Earth Science Associates 1996. 18 Options for Reducing Environmental Impacts * The price that industry must pay to the ash disposal, in practice these standards are generators for the ash (if any), plus the often not met. The poor compliance implies cost of transport that the actual cost of ash disposal in In- * The cost of alternative materials dian power plants is much lower than the * The impact of using coal ash on the costs in well-designed and well-managed quality of the end product systems. Many state electricity boards are * The impact that using coal ash has on apparently more likely to save money the cost of the production process. through poor ash pond management than by encouraging industry to use ash. Con- The National Thermal Power Corpo- sequently, the economic potential for the ration, which runs thirteen coal-fired use of ash in India is far from realized. The power plants in India, has been success- previously cited "Review of Coal Ash Uti- ful in increasing the utilization of fly ash lization" (Water and Earth Science Associ- by developing policies to encourage en- ates 1996) suggests that the current trepreneurs to make use of the waste. In problems of ash disposal and manage- 1991 it established an Ash Utilization Di- ment could in part be corrected through vision at the corporate level, with Ash stronger enforcement of present environ- Utilization Cells at each power plant. Its mental standards. six-year program to promote the internal Currently the government of India use of ash in construction and to facilitate provides some fiscal incentives to en- the use of ash by private companies suc- courage the use of ash. Bricks and other ceeded in increasing ash utilization in its building materials using 25 percent or plants from 2 to 3 percent in 1991 to 10 more fly ash as raw material are exempt percent in 1996/97. The corporation's in- from excise duty. Also, import machinery centives for entrepreneurial use included needed to produce building materials such policies as the following: from ash is exempt from customs duty if it is not available within the country. The * Dry fly ash is provided free of cost to government has also taken several admin- users in and around the power station istrative actions: for an initial period of five years. * Surplus land is made available for a * It has asked state governments to pre- discounted rent to companies that use pare action plans for using 50 percent ash. of fly ash by the year 2000. * The corporation invests equity in joint * It has asked State Pollution Control venture companies for ash utilization. Boards to be lenient with industries that use industrial wastes. The National Thermal Power * It has required environmental clear- Corporation's experience suggests that ances of thermal power plants, which the use of fly ash can be encouraged by emphasizes the need to arrange for changes in plant policy. Most plants, how- dry ash collection and use. ever, do not appear motivated to pursue these policies. While in theory power Two additional policy options could plants are required to meet standards for be used to increase the use of fly ash: Options for Reducing Environmental Impacts 19 * Binding utilization levels. Binding present, such as vehicle emissions, resi- targets imposed by the central govern- dential coal burning, small generators ment could be effective, provided that used in power shortages, and pollution the targets are well designed and geo- from nonenergy sources. It is important graphically differentiated to reflect the to measure the background levels of pol- economic potential for the use of ash lutants to determine whether a plant can in different areas. be added without exceeding target levels. * A tax on ash disposal. Such a tax would One reason for siting plants in load areas, have to be combined with power sec- despite the high levels of pollution that tor reform and commercial and regu- may already exist, is to reduce the costs latory incentives to have a significant of transmitting and distributing energy. effect. If environmental standards are Currently, India's system is inefficient in enforced more strictly, however, an ash many areas. For example, in Bihar, trans- disposal tax will be unnecessary. mission lines could lose as much as 9 per- cent of the energy transmitted from a new power plant, compared with less than 1 Siting Plants to Reduce percent loss in the best international prac- Environmental Damage tice. If not corrected, this loss will require the production of more electricity, which Since the construction of many new coal- will further increase pollution. fired plants will be needed to meet forecast Though siting new plants at load cen- demand, it is important to consider the en- ters does reduce the amount of energy lost vironmental impacts attributable to plant in transmission, the coal itself must be location. It is instructive to consider the rela- transported farther to reach the load cen- tive disadvantages and advantages of two ter (predominantly by rail). The environ- types of power plant sites: at a load center mental impact of this transport is (that is, in an area where a high population comparatively slight, however. Similarly, of power users is concentrated), and at the though sources of pollution also exist at pit-head (in a sparsely populated area). the pit-head, the levels are much less sig- In many cities, other significant nificant. In rural areas, existing back- sources of pollution will already be ground pollution includes SPM. At the T ,i, 20 Options for Reducing Environmental Impacts coal mine itself, SPM will arise from the energy sources, and rehabilitation of the mine itself and as a result of vehicles trans- transmission and distribution system porting material from the mine. These would reduce coal-based power genera- background SPM levels could be reduced tion by 15 percent by 2015. Total system to acceptable limits through the use of costs would fall by about 7.5 percent, with high-efficiency electrostatic precipitators. striking environmental impacts. SO2 lev- When new plants are sited, the char- els would decline by 7 percent, -NO by 4 acteristics of the terrain must also be con- percent, total SPM by 8 percent, and CO2 sidered. Air dispersion modeling in the by 10 percent. Bihar case study led to the conclusion that Participants in the National concentrations of SPM, NO., and SO2 tend Decisionmakers Workshop and the Na- to be higher on hilltops than flat terrain, tional NGO Workshop stressed that op- though any area will have specific geo- tions will not be used or sustainable graphic characteristics that increase or de- without some measure of reform. Four crease its ability to disperse pollutants. critical strands must be woven together Planners will need to model the type and to achieve success: quantity of pollutants released in relation to areas where people are living in the * Getting the price of electricity right greatest numbers. so as to send the correct signals to consumers to encourage them to in- Using Options in vest in energy-saving practices and Combination technology Getting the price of fuels right to "cre- When these options are used together, ate a more level playing field" for natu- significant environmental benefits can ral gas and renewable energy sources be achieved even though the individual * Increasing the commercial motiva- impact of each option may be modest. tion of utilities to give them the in- In Andhra Pradesh, a combination of centives to make choices that benefit options consisting of greater use of renew- the environment, such as improving able energy sources, demand-side man- ash management and rehabilitating agement, coal washing and clean coal transmission and distribution systems technologies, and rehabilitation of the * Increasing the funds available to transmission and distribution system utilities to make improvements by could reduce coal-based power genera- raising tariffs. tion by 18 percent by 2015. Total system costs (in present value terms) would fall Introduced as an integrated package by about 4.5 percent, with significant en- within the framework of sector reform, vironmental benefits: SO2 and NO levels case studies and other evidence suggest would fall by 27 percent and 21 percent, that an appropriate combination of op- respectively, while the decline in total tions can succeed together in significantly SPM, CO2, and ash would be on the order reducing environmental damage from of 16-18 percent (tables 6 and 7). power generation, with its associated In Bihar, a mixture of demand-side negative impacts on the quality of life and management, greater use of renewable health of residents. Options for Reducing Environmental Impacts 21 Table 6. Andhra Pradesh-Cumulative Pattern of Generation Mix (over the study period 1997-2015) Scenario CoalHydrocarbons HydroOther Renewables Gigawatt- Gigawatt- Gigawatt- Gigawatt- hour % hour % hour % hour % IFS 965,474.0 70.0 232,923.0 16.9 181,182.0 13.1 - - Combinations 786,548.0 63.5 246,261.0 19.9 181,183.0 14.6 24,352.0 2.0 Memo: reduction in coal-based generation 178,926.0 18.5 -Not available. Notes: 1. IFS refers to interfuel substitution. The scenario assumes that current tariff policies and demand trends will continue and that traditional supply side planning and choices between fuels will be made on the basis of economic cost. 2. Combinations: The scenario examines the combined effort of demand and supply side measures. On the demand side, the scenario considers demand-side management (DSM) and transmis- sion and distribution (T&D) loss reduction (T&D losses assumed to decline from 20 percent under the refer- ence case to 10 percent), the impact of which is manifested in reductions in generation equivalents. The supply-side measures consider such options as clean coal, new technologies (pressurized fluidized-bed com- bustion in Andhra Pradesh), and a reasonable amount of renewables introduced. Table 7. Andhra Pradesh-Impact on Cost and the Environment Emissions CO, SO, NO, Total SPM Ash Total cost (million (metric (metric (million (million Land Scenario (Rs. billions) metric tons) kilotons) kilotons) metric tons) metric tons) (ha) IFS 742.2 1,235 2,552 2,576 252 251 2,008 Combination 708.4 1,011 1,851 2,027 212 207 1,656 Memo: % reductions in present value of cost and environmental impact 4.6 18.1 27.5 21.3 15.9 17.5 17.5 Notes: 1. The present value (PV) of Total Cost = PV of (Investment in committed and new plans + Variable Costs + Invest- ments in T&D - Salvage Value). 2. Variable costs include fuel, variable operations and maintenance, and fixed operations and maintenance costs. 3. The land required for ash disposal is 8 hectares per million metric tons of ash. 4. The discount rate is 12 percent for local pollutants, such as SO., NO,, and total SPM. 5. No discounts are given for CO2 emissions, ash, and land. 6. The PV of DSM is estimated from the IRP report (Meier 1996). Associated T&D costs are adjusted downward to reflect reduced investments corresponding to lower demand. 7. The PV of T&D rehabilitation cost is estimated independently at one third the generation cost. 3 From Knowledge to Action Applying the Decisionmaking * Workshops are an important part of the Process and "Toolkit" consultative process. They can be used effectively to raise planners' awareness The study yielded two key products that of the environmental impact of power are immediately applicable in other situ- generation, achieve consensus among ations in which power system planners participants on project activities, and use data to guide their decisions and show planners how to identify the best minimize the serious impact of power strategies to mitigate negative impacts production on the environment. The first in their planning areas. is a tested decisionmaking process to * Workshops are effective vehicles for help planners develop sound plans for publicizing findings. They provide power development. opportunities to make relevant agen- The second key product is a "toolkit" cies in target states aware of the consisting of a series of planning "mod- decisionmaking process and the ana- ules" that can be used flexibly and that lytical tools available to accompany it; provide a variety of choices to users in to encourage them to adopt similar different states with a wide range of con- approaches to achieve their corporate cerns. Although the software programs planning, environmental, and regula- used in the project performed well, alter- tory objectives; and to help them de- native software programs, which experts sign a program to enable them to use believe would work equally well, are also the process and tools successfully. available. To help states choose the best * Sound corporate planning in power planning tools for their situation, the lo- system expansion is essential to man- cal and international consultants who age adverse environmental impacts worked on the activity produced a prac- effectively. tical description of the toolkit in the * The planning process will work best if Manualfor Environmental Decisionmaking, reforming states are targeted. Without recently published by the Energy Sector progress toward power sector reform, Management Assistance Programme the developmental impact of the pro- (ESMAP Report 213/99, June 1999). cess will be significantly hampered. In disseminating the process and as- sociated tools, planners and consultants People involved in the planning pro- will benefit by applying the lessons cess may include representatives from learned from the experience gained in state agencies, state electricity boards, this study: unbundled transmission and generation 23 24 From Knowledge to Action companies, independent power produc- would occur in specific sets of circum- ers, academic institutions, nongovern- stances of interest to planners-for ex- mental organizations (NGOs), and central ample, given stated economic policies, power agencies, as well as consultants energy sector policies, policy instruments, (box 5). Their work is best structured and power sector options. around a set of questions that may be an- Having defined the questions to be swered through the appropriate applica- answered, the project parameters, and the tion of modeling tools. For example, to scenarios to be explored, specific tools can explore the environmental impact of re- be applied to carry out the necessary stud- form, questions could include what the ies. Special studies can also be carried out consequences would be of choosing plants as needed to research issues outside the on the basis of economic costs and allow- scope of the existing "toolkit." ing environmental costs to be internal- The toolkit consists of a series of linked ized? Or, to explore the feasibility of modules (box 6). Computer modeling en- technical options, questions could include ables planners to determine what would how much it would cost to use new clean occur under each of the identified sce- coal technologies to wash coal, what the narios. Key modules tested in this study potential would be for renewable energy may be used to generate "outputs" in the supplies, and what level of environmen- general areas of demand forecasting, tal benefits could be achieved by using power system planning, environmental these methods? analysis, and financial analysis. Once the questions are clear, it is es- As results are reached, those partici- sential to determine basic parameters, pating in the planning process should not such as the study boundary (which con- only be informed of these results, but also sumers and power plants will be studied), be actively assisted in understanding the study period, and assumptions to be their importance for decisionmaking and used for modeling. Scenarios can then be in using them appropriately in the plan- developed to determine what results ning area. From Knowledge to Action 25 Box 5. Elements of the Participatory Planning Process * Disseminate a questionnaire to senior officials in the energy and environment sector, as well as to nongovernmental organizations, and to private investors to obtain their views on issues and priorities. * Establish an advisory group to guide the report development process. * Conduct technical workshops for specialists to reach consensus on methodology for projections and modeling. * Conduct seminars for nongovernmental organizations and decisionmakers to exchange information and encourage involvement and interest in the planning process. * Disseminate results on an ongoing basis to state contacts, nongovernmental organiza- tions, and other key officials through designated coordinators and periodic seminars. * Hold workshops for decisionmakers and nongovernmental organizations to dissemi- nate findings, elicit feedback on results, and determine next steps. Box 6. A "Toolkit" for State-Level Energy Planning Tools tested in this project that are available to help other states in India to integrate envi- ronmental concerns in power planning and to assess the impact of future energy produc- tion strategies on the environment include four modeling activities: * Demandforecasting: To examine historic demand and project future demand, taking into account the impact of such variables as growth in income, price reform, demand- side management, and rehabilitation of transmission and distribution networks. * Power system planning: To calculate the schedule of investments in power plants that will meet the forecast demand at the least cost. AS-PLAN software was used to project system production costs and emissions of SO2, NO., SPM, ash, and coal requirements, taking into consideration such parameters as reserve margins, reliability constraints, and loss of load probability. * Environmental analysis: To indicate the impact of emissions from power plants on local air quality. An air dispersion model was used to estimate concentration of SO2, NO., and SPM in the air. * Financial analysis: To calculate the financial impact of alternative power develop- ment options. A simple spreadsheet model was constructed from AS-PLAN and other sources showing such key data as capital and operating costs, revenues, and debt service requirements. References ASCI Consultancy. 1998. "Environmental Issues in the Power Sector: Andhra Pradesh Case Study." ASCI Consultancy, Centre for Infrastructure Management, Admin- istrative Staff College of India, Hyderabad. Canadian Energy Research Institute and Tata Energy Research Institute. 1995. "Plan- ning for the Indian Power Sector: Environmental and Developmental Consider- ations." Canadian Energy Research Institute and Tata Energy Research Institute, Ontario. Environmental Resources Management. 1997. "Renewable Energy in India: A Spe- cial Study." Environmental Resources Management, London. March. ESMAP (Energy Sector Management Assistance Programme). 1999. India: Environ- mental Issues in the Power Sector. ESMAP report 213/99. Washington, D.C. Meier, Peter. 1996. "Integrated Resource Plan for Andhra Pradesh." U.S. Agency for International Development (USAID), Office of Energy, Environment, and Tech- nology, Washington, D.C., May. Ministry of Non-Conventional Energy Sources. 1999. Annual Report, 1998-99. Min- istry of Non-Conventional Energy Sources, Government of India, New Delhi. SCADA (Sone Command Area Development Agency). 1998. "Environmental Issues in the Power Sector: A Case Study of Bihar." SCADA, Bihar, India. Water and Earth Science Associates. 1996. "Review of Coal Ash Utilization." Water and Earth Science Associates, Ontario. 15@ The World Bank 1818 H Street, N. W. Washington, D.C. 20433 USA Telephone: (202) 477-1234 Facsimile: (202) 477-6391 Telex: MCI 64145 WORLDBANK MCI 248423 WORLDBANK Internet: www.worldbank.org E-mail: booksC@worldbank.org