As it pushes ahead with the March 2022 target of 227 gigawatts (GW) of renewable energy (RE) capacity, India’s green push is dented by the feeble progress on resolving the problems facing the country’s fleet of aging and inefficient coal- and lignite-fuelled thermal plants. A fresh consultation paper issued by the Central Electricity Regulatory Commission (CERC) on Terms and Conditions of Tariff commencing from April 1, 2019, is mostly ambiguous on the issue of old thermal plants.
“A clear policy/regulatory decision are required in view of a number of thermal stations crossing the age of 25 years,” the paper notes, adding that the possible options could be replacement of inefficient sub critical units by supercritical units, phasing out of the old plants and renovation of old plants or extension of useful life. More importantly, the paper goes on to add that the “performance of a unit does not necessarily deteriorate much with age, if proper O&M practices are followed”.
As per latest available data, about 37 GW (1 GW is equal to 1,000 mega watt) of coal-based stations are more than 25 years old. Many of these stations are high polluting units and are unable to comply with the new pollution norms thereby requiring flue gas desulphurisation (FGD) installation, which would increase the generation cost by 35 paise to 40 paise per unit and in the interim period shutdown would be required. In terms of carbon dioxide emissions, most of these units emitting CO2 in the range of 1.1-1.3 kg/kWh, as compared with only 0.82kg/kWh by modern supercritical thermal plants.
Experts maintain that this approach is in contravention with the larger objective of the Electricity Act 2003, of moving towards competition in generation and the broader duty of the CERC under law to develop electricity market. “The commission should be less protective about saving or extending the life of coal-guzzling power plants. There is idle thermal capacity of highly efficient plants in the country which must be harnessed and irrespective of ownership efficient should be given preference in allocation of coal. As a national regulator of all interstate generating stations, the commission should not lose sight of the larger perspective and merely focus on intricacies of micro tariff determination aspects. The policy of balancing the interest of generators and beneficiaries per se implies that commission’s priority should be ensure cheaper, reliable and cleaner electricity to the nation,” former Chairperson CEA Ravinder (uses only his first name) said.
A coal-fired plant typically has a life of 25 years, beyond which it offers certain advantages and disadvantages. On the positive side, these plants have already recovered most of the depreciation and completed loan repayments. Accordingly, they may have financial advantage in terms of lower fixed cost. However, it has been observed that their operational cost is generally high due to less efficiency, such as high consumption of coal due to higher station heat rate (SHR). These plants usually do not confirm with the new environmental and other norms also. Accordingly, it calls for fresh investment which increases the cost of power.
According to a market intermediary, considering both the pros and cons associated with old plants, it is best to leave it to the beneficiaries to decide whether it is a feasible source of supply or not. The existing beneficiaries should be allowed to review and exit the PPA and not be forced to continue with a plant which cannot otherwise compete or survive in an open market.
The irony of the newer, cost-efficient and lesser polluting supercritical thermal plants not getting customers or coal, even as inefficient, highly polluting and aging plants continue to sell costly power under the protection of long-term power purchase agreements (PPAs) to distribution companies (discoms), is hard to get away from. At the root of the problem is the fact that discoms are unable to exit from uneconomical PPAs signed decades ago with older, polluting generating stations. An exit option would relieve discoms from onerous financial liability and the funds thus released can be used by them to buy cheaper and more power, and supplying it to consumers at better rates.
Exit from legacy PPAs would also improve the offtake of efficient thermal plants as well as private hydropower plants, reducing carbon emissions as well as financial stress in the generation sector. Paradoxically, while being inefficient, the old coal/lignite thermal power plants are inflexible and not capable of quickly changing their output in tandem with 175 GW RE generations giving varying output each time of the day. Modern supercritical power plants are capable of flexing their generation, and they are indispensable for integrating large-scale RE, as we have limited gas power plants and just a few pump storage hydroelectric plants required to support the variable nature of RE generation.