1 Case Study 1: Basic Oxygen Furnace (BOF) Gas based Electricity Generation S. Kumar, S. Sharma and R.M. Shrestha Asian Institute of Technology 4 April 2005

2 To provide the background of Case study 1 – Project description – Baseline Methodology description The project details Baseline Methodology –Methodology: Applicability conditions –Identification of Baseline scenario –Additionality –Project Boundary –Baseline formulae –Leakage –Emission reductions –Data Sources and Vintage Presentation Objective Presentation Outline Presentation Objective and Outline

3 INTRODUCTION

4 World steel production – 965 million metric tonnes (mmt) ((63.3% by BOF) China (1 st ) – mmt; Japan – mmt; USA – 90.4 mmt India (8 th ) – 31.8 mmt (48.7% by BOF process) Total production for the Asian region was 41.4 mmt, a rise of 10.3% on February China produced 24.8 mmt of crude steel in February, up 21.2% on the same month in Source: SOME STEEL DATA 2003 Feb. 2005

5 The Jindal Vijayanagar Steel Plant ( JVSL) is the most modern, technologically efficient and eco-friendly integrated steel plant of its kind, and uses the revolutionary Corex technology. The Plant has a hot rolling capacity of 2.5 million tpa. During the production of steel using BOF process, CO is produced. This has a calorific value of about 2,000 kcal/Nm 3. This gas is currently flared. It is proposed to collect and use this gas as a fuel in a power plant to produce electricity. The electricity to be supplied to the state grid (about 95 GWh per year). The power plant currently uses coal. as a fuel for internal heating requirements of the plant It is estimated that the primary emission reductions would amount to 575,967 tonnes of CO2 during the 10 year crediting period. Source: Project Documenthttp:// SOME PROJECT DATA

6 BOF gas, 2000 Kcal/NM 3 Used as fuel for heat Power Plant (i)Supply to existing power plant (sister concern) no capacity increase (BASE: only coal); & (ii) Few New proposed power plant supplying to grid PROJECT: Gas Collection, cleaning, storage and distribution system Base Case: Flared PROJECT DESCRIPTION - SCHEMATIC STEEL

7 Source: BOF GAS BASIC OXYGEN FURNACE (BOF) OPERATION

8 VSNL Plant 540 km 460 km PROJECT LOCATION

9 BASELINE METHODOLOGY

10 Methodology: Applicability conditions Part of waste gas used for internal heating requirements within the steel manufacturing industry, and remaining waste gases would normally have been flared in the absence of the project activity; Project activity does not induce diversion of waste gases required for internal usage, to project activity; No change in process except changes due to collection, stabilization and transportation of waste gases to electricity generators; No local regulations/ programmes to constrain use of GHG intensive fuels (like coal), nor any regulation making use of waste gases mandatory; and Project activity results in supply of electricity to local grid, excluding grids with surplus power, unless cost of generation and supply is favourable for inter-grid transfers. Though not stated – methodology applicable to project that supplies gas to –Existing power plant with no expansion of capacity, or –Existing power plant with gas meeting requirement of capacity expansion, or –New power plant supplying to grid.

11 Identification of Baseline Scenario Approach – 48(a) existing actual or historical. The baseline scenario (ie. in the absence of the proposed project activity) has the following components: –Flaring of excess BOF gas –In absence of use of BOF gas for electricity generation use of more GHG intensive fuels for generation of additional electricity at the existing power plants leading to emission of GHG (Case I); and need to establish new power plants to meet any shortfall in supply, with possibility of further GHG emission (Case II).

12 Identification of Baseline Scenario –Case I: Partial replacement of existing GHG intensive fuel in an existing power plant (no generation increase). The baseline scenario is therefore continued use of the GHG intensive fuel. Baseline: GHG intensity of existing power plant. –Case II: Use of waste gas to generate additional power in existing power plant and/ or generate power in new power plant(s). The baseline scenario in this case is electricity would have otherwise been generated by the operation of grid- connected power plants and by addition of new generation sources. Baseline: Combined Margin grid intensity – based on ACM0002 methodology.

13 Additionality Use of Tool for assessment and demonstration of Additionality –Investment analysis investment comparison analysis using a financial indicator (such as IRR, NPV,cost benefit ratio, levelized cost of electricity generation or Rs./kWh values), and checking whether there is at least one identified alternative which is better for investment than the project activity. The chosen alternative to the project is flaring of the waste gases, and purchasing power from the grid. The cost of power in the alternative scenario in comparison to the project activity is Rs 1.94/kWh.

14 Project Boundary Source: Project Document This includes points of generation of waste gases in steel mfg operation, stabilisation, cleaning and transportation of these gases to the power plant through a gas handling network, delivery of power to grid, and all associated equipment for such project activity, under the control of the project proponents.

15 Baseline Case I: Formulae used Partial replacement of existing GHG intensive fuel in an existing power plant (no generation increase).

16 Baseline Case 2: Formulae Used Operating Margin Build Margin The sample group m consists of either: · five power plants that have been built most recently [including plants under construction], or · power plants capacity additions in the electricity system that comprise 20% of the system generation (in GWh) and that have been built most recently [including plants under construction]. Use of waste gas to generate additional power in existing power plant and/ or generate power in new power plant(s).

17 Leakage Due to use of displaced hydrocarbon fuel by other smaller power generators who currently use renewables. –However, in cases where there could be demand for power, such possibilities are ruled out since this would necessitate replacement and use of alternate power generating technology, which may not be feasible for a smaller generator. Diversion of waste gas use to producing electricity –rate of waste gas generation fixed a priori, and –the waste gas utilisation for internal heating and steam generation cannot be less than the sectoral average in the country or region CF: Correction Factor for gas quantity eligible for emission reduction = Minimum[(X-Z), Y, W] / W –Y : minimum quantity of waste gases flared in the steel manufacturing industry (average of sector during the last 3 years) – Z: average amount of waste gases used for internal requirements of all waste gas generators (in similar steel manufacturing sector) in the region or country during the last 3 years –X: the minimum quantity of waste gases generated in the steel manufacturing industry sector during the last 3 years, and –W: waste gas supplied to power plants –If the steel industry sector values for X,Y and Z are not available, then CF = 1

18 Emissions Reductions In existing power plant where only fuel replacement occurs –ER y (1) = Baseline I * CF – PE y In existing power plant where fuel replacement occurs along with additional power generation –ER y (2) = (Baseline I + Baseline II)* CF – PE y In a Greenfield power plant connected to the grid or approximate emission reduction –ER y (3) = Baseline II* CF – PE y If more than one of the above occurs, then ER y (4) = (Baselinei * CF) - PE y Note: PEy = 0

19 Data Sources and Vintage Fuel –Consumption, Calorific value, heat rate: Proprietary data –Emission factor : IPCC –Heat Rate : Proprietary data Electricity delivered: Regional Electricity Board Waste Gas: Proprietary data Local level data: 3 years old or of lesser vintage Regional level data: 5 years vintage

20 Next …. Basic information regarding the project has been presented Whether the Methodology has been completely defined Transparency and Conservativeness has been taken into account Is the Methodology correctly applied Thank You