One of the ways to meet the capacity addition targets is by increasing the number of balance of plant vendors and enhancing the capacity of the existing ones, says R Srinivasan.The growth of the economy is directly proportional to the growth of its infrastructure and the power sector is under constant pressure to bridge the demand-supply gap. The Electric Power Survey report had estimated the energy requirement in the 12th Plan period (2012-17) to be around 1,354.874 billion units. One of the reasons for delay in execution of Balance of Plant (BoP) jobs is primarily due to the lack of sufficient number of competent BOP players who can execute the job within the stipulated time and cost and so there is a need for additional players to provide competition, generate employment and reduce costs. This view was backed by Union Power Minister Sushil Kumar Shinde who had said that for the task of capacity addition to be achieved, adequate manufacturing and erection capabilities for main plant equipment and balance of plant for thermal projects needs to be assured. BoP services include not just project management, construction management, engineering and procurement of efficient equipment but also start-up services and training. There are some companies that have the experience, construction, project execution and engineering capabilities and can deliver services in terms of better price realisation and a one-point contact leading to faster commissioning and better control over equipment specifications. Let us see what the experts have to say about the BOP segment.Queried about how the segment fared in 2011- 2012, its actual potential worldwide and in India, an expert from the power sector said, “Typically BoP systems constitutes 30-40 per cent of the total investment of a power plant. It may be a little less for gas-based power plants. A nuclear power plant (NPPs) do not need coal or ash-handling systems since they have their own fuel storage and spent fuel storage systems. BoP of NPPs also constitute around 25-30 per cent of the plant cost. The electrical system is mostly considered as BoP in almost all the power plants, including hydro and renewable energy systems. India has large potential with capacity addition in the 12th Plan of around 100 GW. In view of the cost of a thermal plant of around Rs 4 to 5 crore per MW one can assimilate its potential in the thermal sector itself which is around 55-60 per cent of planned capacity addition. As per IEA data, world-wide significant growth is expected in the next 20-25 years. Fossil fuel addition may slowdown but fossil fuel will remain dominant in power generation. Significant growth is expected in gas, hydro, solar and wind-based capacity addition. The estimated investment is $37.9 trillion in energy and around 40 per cent investment in capex of power installations. So the BoP segment has large potential both in the domestic as well as international market.”Queried about what prevents the entry of companies in this market, he said, “If BoP systems are not available then the main plant cannot become operational. BoP has many components that call for specialisation in their respective fields. Each plant needs customisation - it is not a standard design or out-of-the-shelf solution. A lot of engineering effort is required to fulfill the main plant requirement for a BoP contractor and often there are changes in BoP system design as the plant design gets finalised. However to get ROI, a lot of effort is required. It mostly requires outsourcing for specialised items and co-ordination, which needs tremendous efforts. Generally time-line penalties are specified for these systems and also these systems are ordered later in the project phase. If the team setup is not tuned to the requirements, there is a risk of paying penalties. A new player will definitely think twice before taking up such a business. This may be the reason why there are lesser full-fledged BoP players. Also many of the existing players would like to be in their own domain of specialisation. New entrants may be asked to show previous experience in this field. So this might eliminate new entrants, even if the company is completely equipped to take up the task. Also, a package concept, which is crucial in meeting plant commissioning schedules, involves multiple agencies and coordination can become an issue.”Speaking about how the segment fared in 2011- 2012 and its actual potential, Umesh Agrawal, Associate Director – Energy, Utilities & Mining PwC, said, “There is a shortage in the capacity to support BoP for envisaged generation build in the country, due to the sharp increase in generation capacity addition in the last Five Year Plan. The momentum is likely to increase in the current Five Year Plan. There has been a sharp increase in interest among players considering the emerging opportunities. Players have been expanding their offerings to provide full value chain services. The market potential for BoP for thermal and nuclear power plants is estimated at about Rs 50,000 crore per annum in the current plan period.”About what prevents the entry of companies in this market, Umesh said, “Companies need past credentials and access to latest technology to qualify for opportunities in the market place. However, we are seeing many companies trying to build capabilities and capacities in the space considering the shortage and its attractiveness. There would be a need for creating a number of alliances with global players in the space to create domestic capacity and capabilities in some of the niche technology intensive areas.”PrivatisationCommending the enthusiastic response of the private sector to the opening up of the power sector, Union Power Minister Sushil Kumar Shinde had said that the investment in the private sector had grown rapidly and its share in total capacity was likely to go up from less than 10 per cent in the 10th Plan to about 32 per cent in the 11th Plan. During the 12th Plan, the private sector is expected to contribute significantly to generating new power capacity and its share is likely to touch 60 per cent. The power minister noted that several joint ventures, such as L&T-MHI, Bharat Forge-Alstom, Ansaldo-GB Power, Toshiba & JSW, Thermax-Babcock & Wilcox, and BGR- Hitachi, had been formed in the private sector to manufacture power plant equipment for new power projects.As a recent case in point of BOP activity, TRF and Sinofinn have signed a memorandum of association for jointly executing ash-handling projects in thermal power plants in India.THE WAY AHEADSo there is a need for more domestic players to meet additional demand, promote competition and ensure the timely completion of projects. It is also essential to develop more players in critical areas like main plant, coal, ash and fuel-oil handling, etc.The manufacturing capability of both main plant as well as BOP equipment should be commensurate with capacity addition. There is a need for adequate construction and erection agencies and manpower development including training facilities should be commensurate with large capacity addition. Also the pace of decision-making and cumbersome payment procedures adopted by some utilities needs to be accelerated.About the future of BOP, the expert said, “The future of this segment is bright as the power market is growing significantly both in India as well as across the world. The relaxation of qualification criteria or monetary benefits may encourage this segment to grow. Some financial benefits like tax relaxation too may attract more companies in this segment. End-to-end solution providers are the requirement for the one-stop shop, which normally any developer expects so that design, engineering, fabrication, construction and commissioning responsibilities lie only with one agency. If existing BoP companies form an association or a well co-ordinated team with companies intending to be in this segment, there can be strong potential of gaining better margins in this segment, which can further encourage new players.”To this Umesh added, “With about 20 GW envisaged to be added every year, we see a bright future for the segment in the Indian context. We might see a number of international alliances and acquisitions for development of a strong BoP industry supporting the growth of generation build in the country.”In view of these developments, capacity addition targets can be achieved if we augment the number of existing indigenous manufacturing facilities, create additional capacity with new players for main plant equipment, develop more vendors and enhance the capacity of the existing BOP vendors. There is also a need to review the stringent qualifying requirements for vendors as specified by some utilities.Balance of Plant ServicesThe Balance of Plant (BoP) package varies from vendor to vendor and includes coal/lignite handling system, ash-handling system, compressed air system, mill reject handling system, lighting, cooling tower HVAC, water system, fire fighting systems (detection, protection and alarm systems), chimney switchyards, fuel-oil handling and storage systems, power distribution, intake water, water treatment plants, cooling water systems, air compressors, air-conditioning and ventilation systems, cooling towers, civil and mechanical design consultancy packages, desalination plants, security systems (video monitoring of crucial portions of power plants), system integration of unit to the grid, E-BOP, etc. Some companies also offer facility management engineering services that include a cost-effective communication network.Electrical Balance of Plant (eBOP) Recently, Alstom T&D India had successfully commissioned an electrical balance of plant (eBoP) package for a 2x600 MW power plant located at Salaya in Gujarat’s Jamnagar district.The Essar Group awarded this Rs 2,050 million contract to Alstom T&D India for design, manufacturing, supply, erection, testing and commissioning of an eBoP package for the power plant. The eBoP system is a critical package that ensures smooth construction of the power plant’s electrical equipment. A well-performing eBoP solution is essential for the efficient, reliable and stable operation of a plant.
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