Despite the falling costs of renewable energy, coal-based power plants will continue to be the mainstay of India’s energy basket, believes global equipment major GE. In a recent interaction, Michael Keroullé, chief commercial officer, GE Steam Power, spoke to Power Line about new and advanced technologies, flue gas desulphurisation (FGD) market opportunities in the country, key projects under implementation as well as the outlook for the power sector. Excerpts…
How has the narrative around coal-based power generation changed over the years, given the greater influx of renewables and the Paris climate change commitments, globally and in India?
The Paris COP21 agreement has really been a point of inflection for GE’s business, and has set more countries on the renewable energy trajectory, which has made coal less attractive. More than 45 per cent of the generation mix in Europe and the US is based on coal or nuclear. But now countries are adopting renewables, which GE thinks is a good trajectory, given global warming and climate change concerns. However, the increasing renewables addition is causing underestimated problems in the grid. For instance, Germany has added 50 GW of renewable energy in the grid, which has resulted in huge instability in its network. China is another example. It made a very strong statement by pledging to stop investing in coal. But it recently stated that as long as renewables are not competitive with coal, it will not build renewables.
Although there are good intentions to pursue renewables, the reality is that the country is driven by economics and not only policy. We are at this very interesting point in time in which many countries are trying to do better with their existing thermal assets. For example, we signed an agreement for a 1,000 MW coal-based plant in Poland, which had received a lot of pushback from European stakeholders. From an economic standpoint, it made sense for the country as it is a new-generation coal plant with high efficiency, reduced environmental impact and more flexibility that can support the growth of renewables. This is the trend we are observing globally. We need to continue to keep coal in the mix. The market is now more focused on higher efficiency, more flexibility and lower environmental impact, which is GE’s core competency.
Which are some of the latest technologies being offered by GE?
GE was amongst the first to go in for supercritical plants in the 1980s in the US and Europe. It was also the first to bring an ultra supercritical plant into the industry. Even in India, the first supercritical plant was set up with our technological cooperation with Bharat Heavy Electricals Limited (BHEL). Efficiency and emission reduction are big drivers for the new generation of coal plants. The new-generation coal plants by GE have lower emissions than the standards being talked about in India. In a latest Polish plant, the emission levels are less than 50 mg per nm3 of sulphur, which is even lower than that of gas plants. Another driver is flexibility, that is, plants that can ramp up and ramp down faster when we have more sun and wind, and optimise operations.
Globally, which markets have gained traction in ultra supercritical technology?
Today, if we want to finance a coal plant, we can only invest in an ultra supercritical coal plant. This means we need to go in for plants that are nearing 50 per cent efficiency. India’s coal plants have efficiencies of 33.5 per cent, which means that nearly 66 per cent of the coal burnt doesn’t generate energy. The new coal plants that we are building are operating at 47 per cent efficiency, so these are 14 per cent more efficient, and generate close to 30 per cent less CO2 per kWh. We are happy with this development, as we do want coal to be a part of the mix and ultra supercritical technology is definitely the way forward. We are implementing high efficiency coal plants in the Middle East as well. We have a flagship contract with the Dubai Electricity Water Authority for four units of 660 MW – it is the first time that a coal plant is being set up in the Middle East. With gas reserves depleting in the region, the Middle East is now looking at coal options.
Do you think that capital costs for coal-based plants are facing pressure owing to stringent emission norms, thereby making them less attractive vis-a-vis renewables?
Coal is the cheapest form of power. We hear of big announcements such as wind power being generated at 2 cents per kWh. However, the real costs, including the cost of intermittency, are much higher. Further, with just 20-25 per cent capacity utilisation factor in wind, four times the capacity will be needed to generate the same amount of energy. Coal is always dependable and we don’t need to have something on top of it to generate power. If we pile up all these costs for making renewables dependable and then compare these with coal, renewables will end up being far more expensive. Even though everyone is working on making dependable renewables more affordable, one does not know how long this may take. It could be 5 years, 10 years, 20 years, but in the meantime, we need to sustain our economy. Thus, growth in a country like India is directly connected to the cost of electricity, which means we need to continue deploying sources that are economically viable.
India currently has a lot of coal plants that are not performing optimally. The older assets are not able to generate at the lowest possible cost, as the efficiency is very low. This leads to higher coal consumption and generation costs. Hence, once generators start looking into efficiency improvement through retrofits, they will actually gain in terms of operational cost, to an extent that is far greater than the cost of installing FGD systems. Our view is that we need to implement FGD as society needs clean air. We are also looking at ways to mitigate the economic impact of the additional capex by way of efficiency improvement and reduction in the operating cost of assets.
How does GE see the market for emission control systems in India evolving? Are there any areas of concern?
We are very happy with the government launching the FGD programme and with the pace at which it is being undertaken. This year has seen a significant number of FGD orders. GE has participated in the reverse auctions and won a few of them. A capacity of around 37 GW has already been awarded, of which almost 32 GW has been mainly driven by NTPC. This year, we see around 44 GW of orders going through the state utility tenders. The independent power producer segment is going slow as it is apprehensive about the tariff increases being made a pass-through due to various criss-cross notifications. Overall, we see a healthy market of $2 billion-$2.5 billion spread over the next five years.
This definitely involves an investment for customers, but there are solutions for mitigating the cost impact in terms of improving the efficiency and reducing operational costs. For instance, GE has carried out retrofits for modernising the Ukai project for Gujarat State Electricity Corporation Limited, a first-of-its-kind shaft line retrofit, which brought significant improvements in efficiency. The customer was very happy with the cost versus benefit equation.
What are some of the key orders being executed by GE? Do you plan to use your manufacturing facilities in India as an export hub?
GE has a huge order backlog. In the past year, we have signed an agreement for supplying steam turbine generators for Adani Power’s Godda project (2×800 MW), which is being built in India for power supply to Bangladesh. We made big headway in the FGD market and have won five projects – the Solapur Super Thermal Power Project (2×660 MW), the Tanda Super Thermal Power Project Stage II (2×660 MW), the Feroze Gandhi Unchahar Thermal Power Project (1×500 MW), the Meja Thermal Power Project (2×660 MW), and Phase I of NTPC’s super thermal power project (STPP) (2×800 MW) in Telangana. We intend to secure many more projects going forward and participate in the new coal-based plant tenders.
GE has also implemented the first Predix Asset Performance Management (APM) solution in India for Tata Power’s thermal business. This is one of the two deals that GE won in India to optimise 8 GW of Tata Power’s thermal and renewable energy power portfolio using digital solutions. Nuclear is important for us too. GE and BHEL have a licence and technical assessment agreement for this. The government has recently announced the setting up of 10 new nuclear power reactors. We will be working with BHEL on these tenders, and hopefully, we will secure part of these. GE has been the number one in terms of turbines for nuclear activity globally. The last pillar of our strategy is our service activity, as our business is fully integrated from new-build to life cycle business, in which we offer service activities including spare parts, maintenance, repairs and retrofits of the existing assets. We have invested in India, for India and have, so far, kept to that. That being said, opportunistically, we are looking at exporting from India. We did a small order for export for a plant in Cambodia last year.
What is GE’s outlook for the sector in India?
We still see quite an active phase of investment in environmental improvements. We believe that there will be investments in new coal plants to the tune of 9-10 GW per year, in line with previous years. We can see that continuing till 2025. For instance, Madhya Pradesh has issued a tender for a new coal-based power project. Two 660 MW units of Mahagenco at Koradi have also received the cabinet approval. We can see 50 per cent of the electricity coming from coal even in 2040.
We can see many more plants going the efficiency improvement route. We are really working on making the benefits of bottom line improvements or tariff reduction visible to consumers. There has been a lot of criticism about things not moving as fast as they should on emission control. But things are actually moving relatively fast. The FGD programme is proof of that. GE has a team of 2,000 highly skilled people in India to serve customers. It is definitely a place where we want to stay, and keep growing and offering better value to customers.