Feb. 17 (Bloomberg) -- India may have a geothermal energy policy by March, spurring investment from companies including Tata Power Co. and Thermax Ltd. that aspire to build the nation’s first electricity plant tapping underground heat.
The Ministry of New and Renewable Energy is consulting with state officials to draft a national policy that will include how development blocks may be awarded, according to Ramesh Narayan Sawant, a director at the ministry’s geothermal department.
“We must consult with each of the states and hopefully that is done by the end of this month so the policy framework can be drafted by the end of March,” Sawant said in a telephone interview this week from New Delhi.
Asia’s third-largest economy wants more non-polluting, domestic energy sources to reduce its dependence on foreign suppliers and cut carbon emissions. The country, which imports more than 75 percent of its crude oil and burns polluting coal to generate more than half of its power, first needs a framework agreement with Indian states to ensure they don’t contest the right to allocate geothermal fields.
Some states “are trying to stake a claim to the natural resource in their state,” Sawant said. “We need to work with those states to make the most of India’s geothermal resources.”
Geothermal’s advantage over wind and solar power lies in its potential to generate around the clock, said Ashish Sethia, lead analyst at Bloomberg New Energy Finance in New Delhi.
The technology represents a fraction of the $243 billion new investment made last year in clean energy systems, which are dominated by wind farms and solar plants, according to the London-based analysis firm.
Tata Power, India’s largest investor-owned power producer, said the ability to deliver a constant, or baseload, supply is a top attraction to geothermal in a nation that suffers from a chronic shortfall of electricity generation.
“The big challenge we have to address is the infirm nature of renewable power: How do you have it when you want it?” Tata Power Executive Director Banmali Agrawala said in an interview in November. “We chose geothermal because we consider it to be the only baseload form of renewable energy there is.”
Tata Power holds an 11.4 percent stake in Geodynamics Ltd., which is building a 50-megawatt geothermal plant with Origin Energy Ltd. in Australia. Mumbai-based Tata Power may bring that technology to India after the government issues its geothermal policy, Agrawala said on Feb. 15 by telephone.
Indian companies in the race to put up the first geothermal plant include Thermax, a Pune-based power equipment maker, and Geosyndicate Power Pvt., founded by D Chandrasekharam, a geothermics professor at Indian Institute of Technology Bombay.
India’s government has identified 10,600 megawatts of power that could be generated from underground heat trapped in rocks, less than the nation’s power capacity shortfall of almost 15,000 megawatts as of January 2010.
Thermax Managing Director M S Unnikrishnan said there’s more to be found. The company and its Iceland-based partner, Reykjavik Geothermal, expect to begin exploring the Ratnagiri region in western Maharashtra state shortly, he said on Feb. 11 by telephone.
“The project is on,” Unnikrishnan said. The amount of exportable heat discovered underground will determine the size of any subsequent plant. The companies must drill during a five-year window set by the Indian government, he said.
Geosyndicate Power is awaiting tariff approval from the state electricity regulator to build a 25-megawatt demonstration plant at a cost of $43 million in Andhra Pradesh state.
Electricity from harnessing underground heat currently costs about twice as much as conventional coal-based energy, said BNEF’s Sethia. Tata Power’s Agrawala estimates exploration costs at $5 million per well.
That gap may narrow as the cost of fossil fuels rise and governments shape policies to price the environmental damage of conventional energy sources.
The cost of generation plus an equity return of 10 percent for geothermal can go as high as $114 per megawatt-hour compared with $55 per megawatt-hour on average for conventional power plants in India, Sethia said. The cost for coal-fired plants may increase with rising use of imported fuel, he said.
India’s introduction of a carbon tax on coal last year is a sign of policies that will help the price of conventional and renewable power projects converge, Agrawala said.
“With coal-based generation, we feel we could have challenges,” Agrawala said. “The gap between renewable power and conventional power is narrowing.”
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