Investing in R&M

Giving a new lease of life to existing plants

The renovation and modernisation (R&M) of coal-based thermal power plants (TPPs) is of significant importance as it improves generation availability as well as safety and reliability. The all-India plant load factor of coal-based TPPs has decreased from a peak of 78.61 per cent in 2008-09 to 64.46 per cent in 2014-15 due to various reasons such as coal shortage, poor fuel quality, backing down of plants, transmission constraints and gas shortage. The R&M of thermal units plays a vital role in resolving some of these issues and equipping the operating units with the latest technology to improve their performance in terms of output, reliability and availability; reduce maintenance requirements; and minimise inefficiencies.

Key drivers

The R&M of old TPPs is an economical option to supplement the capacity addition programme as it increases power availability and efficiency. It also helps extend the useful economic life of generating units by 15-20 years. R&M focuses on full load operations of the unit beyond its original design life, uprating of the generation unit and improvement beyond the design parameters.

The availability of coal is the most important factor that drives the R&M of plants. Since it is an exhaustible resource, saving of coal through efficiency enhancement of plants is desirable. R&M results in reduced coal consumption and additional power generation. A comprehensive R&M programme in a typical 200-210 MW unit can increase the output by 4-8 per cent, improve the heat unit rate by 10-15 per cent and extend the plant life by 15-20 years. With increased emphasis on the environment for clean technology, there is a shift from generation maximisation to generation optimisation, which necessitates efficiency enhancement through R&M.

Market size

As per the National Electricity Policy, 2005, TPPs that are performing below acceptable standards should undergo R&M as per well-defined plans featuring a necessary cost-benefit analysis.

During the Twelfth Plan period, 70 TPPs, aggregating 12,066 MW, have been identified for life extension (LE) works, while 65 thermal power units have been identified for R&M works, with an aggregate capacity of 17,301 MW. Of these, R&M/LE works in 27 units with an aggregate capacity of 3,192.26 MW had been completed as of December 2015. This comprises 1,472.26 MW of central capacity and 1,720 MW of state sector capacity. At present, seven coal-based generating units with an aggregate capacity of 1,040 MW have been shut down for carrying out the R&M/LE works. During 2014-15, LE works were undertaken in eight units with an aggregate capacity of 901.76 MW, while in 2015-16, LE works have been carried out at three units with a total capacity of 451 MW.

R&M and LE works are carried out by the concerned central and state power utilities, depending on the requirements of power plants. The government has also taken various steps in this regard such as monitoring of R&M and LE works by the Central Electricity Authority (CEA), providing technical inputs through the CEA and NTPC to the concerned power utilities, making funds available in the form of loans through the Power Finance Corporation and the Rural Electrification Corporation, and extending external cooperation for assistance in terms of technology and finance.

The CEA is also carrying out technical studies for overcoming barriers to energy efficiency R&M in India as a part of the Coal Fired Generation Rehabilitation Project funded by the World Bank. Under the backward region grant fund (BRGF) scheme, the government has approved Rs 10.53 billion for R&M works. As of December 2015, the Planning Commission had released Rs 9.25 billion for R&M works under the BRGF scheme.

External cooperation for R&M/LE of thermal power plants

Some pilot R&M projects in India have been financed by external funding agencies such as the KfW Development Bank, World Bank and European Union under which soft loans are provided for these projects. KfW and the World Bank have provided some grants for technical assistance for the preparation of feasibility reports/detailed project reports and for carrying out R&M related studies at select thermal units.

Japan’s Ministry of Economy, Trade and Industry, and India’s Ministry of Power have agreed to extend their cooperation for the sharing of technical expertise and for the actual implementation of the mutually agreed techno-economical R&M solutions. In addition, KfW has financed a project for the development of the tender procedure and model contract for the R&M of fossil fuel-based TPPs in India. For this purpose, Lahmeyer International India has been appointed as a consultant.

The World Bank has been providing technical assistance to the CEA under the umbrella project “Coal Fired Generation Rehabilitation Project-India” through the rehabilitation of 640 MW of capacity across West Bengal, Haryana and Maharashtra. This project has two components – energy efficiency R&M for pilot projects, and technical assistance to the CEA and utilities. The first component would fund the implementation of energy efficient R&M of 640 MW capacity, comprising the 210 MW Bandel TPS Unit 5 of West Bengal Power Distribution Company Limited, the 210 MW Koradi TPS Unit 6 of the Maharashtra State Power Generation Company and the 2×110 MW Panipat TPS Units 3 and 4 of Haryana Power Generation Corporation Limited.

For the first component, the World Bank has earmarked a loan worth $180 million through International Bank for Reconstruction and Development loans and $37.9 million through a Global Environment Facility (GEF) grant. The World Bank has earmarked a $7.5 million GEF grant for the second component, which is aimed at providing support for the implementation of energy efficient R&M pilots, developing a pipeline of energy efficiency R&M interventions, overcoming barriers and strengthening the institutional capacities of implementing agencies for improved operations and maintenance (O&M) practices. Under this project, four studies are being conducted – a study on the reduction of barriers to R&M interventions in TPSs in India; a study on developing markets for the implementation of R&M in TPSs in India; the review of institutional capacity, and capacity strengthening interventions in CEA; and the review of experience from pilot R&M interventions in TPSs in India.

An MoU has been signed beetween the CEA and the Japan Coal Energy Centre for conducting a preliminary study on efficiency and environment improvement in coal-fired power plants. This agreement is aimed at carrying out necessary diagnostic activities in select plants pertaining to energy efficient R&M works and finding out measures to overcome barriers for promoting R&M in coal-fired power plants in India.

Challenges and future potential

In India, the implementation of R&M works is difficult owing to various bottlenecks. The cost of R&M projects is high due to a skewed risk-benefit balance in the contractual agreement. Further, difficulty in controlling the scope of the project, as well as tight schedule and budgets cause delays in the completion of R&M. In addition, the poor financial health of state discoms, inefficient O&M practices and lack of appropriate regulatory incentives to undertake R&M have an adverse impact on R&M project performance.

However, the future market potential for R&M is reasonably good. According to the study report prepared by Mercados Energy Markets under the CEA’s coal-fired generation rehabilitation project, the total combined potential of R&M and LE during the Thirteenth Plan period is estimated to be in the range of 14,570 MW to 20,460 MW. Based on this, the total market size of R&M/LE is estimated to be between Rs 212.02 billion and Rs 331.29 billion. This offers a huge market opportunity to both suppliers and technical consultants across the R&M value chain.

Utilities need to prepare an R&M roadmap so as to reflect management commitment to the implementation of the project through a fair and transparent process. Regulators in each state need to design incentive and enforcement mechanisms that encourage utilities to undertake R&M of their inefficient and old plants. In order to develop the market, it is important to encourage competition by awarding R&M projects through fair, transparent and competitive mechanisms. Apart from this, public-private partnership models for R&M should be promoted. The adoption of such measures in the R&M process will ensure higher efficiency levels in TPPs.


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