Coal accounts for about three-fourth of the total electricity generation in India. However, plans to phase out coal-fired power in order to reduce the carbon footprint, financial stress in the sector and lack of fresh investments have raised significant questions about the role of coal in the future energy generation mix. In the session, “Future Role of Coal-fired Power Plants”, Gopalakrishnan Venu, executive director, NTPC; Prashant Jain, regional general manager (RGM) and managing director, GE Power India; and Athar Shahab, chief executive officer, Nabha Power, discussed these issues…
Projected share of coal
The thrust on renewables is welcome, but there is a need to be cognisant of its contribution to generation. Against a 56 per cent share in capacity, coal accounts for 80 per cent of generation, whereas renewables contribute to just about 8 per cent of generation with a 22 per cent share in capacity. The contribution of thermal power plants is not likely to change in the foreseeable future. The baseload capacity will be met by coal-fired plants while renewables would continue to expand in capacity. Renewables, particularly solar and wind, will continue to hold a small share in generation.
In capacity terms, it is expected that the present installed coal-based capacity of 200 GW will be enhanced to around 250 GW by 2022 and 300 GW by 2027, of which 50-55 GW is under construction. The remaining 45 GW will need to come from both private players and state and central PSUs. NTPC has recently tendered two plants based on ultra-supercritical technology of 2×800 MW each, Singrauli Stage 3 and Lara Stage 2.
As per the Central Electrification Authority’s estimates, the grid demand is expected to be 1,500 BUs in the next three to four years. Today, coal supports about 1,000 BUs of demand. On the assumption that 175 GW of renewable energy will be integrated into the grid, renewables will add 200-250 BUs to the grid. So, an additional demand of 250-300 BUs will have to be met from coal-based generation.
Private players’ experience
Private players have had a very difficult experience in the power sector given that they all need to deal with the same bankrupt entity that does not have the wherewithal to pay for the electricity procured. A lot of issues in the sector such as payment delays and PPA disputes can be attributed to the counterparty’s financial condition, which has not been fixed in so many years of reforms.
There is also a huge amount of stressed capacity. Globally, governments have stepped in during such crises when power plants have run into difficulties. Unfortunately, India is approaching the issue of stressed assets through a legal process, which is in contrast to how insolvencies are dealt with outside the country. Fundamental ingredients need to be put in place. Even though today you may have a contract, the harsh reality is that enforcing it is not possible. The industry has also been very concerned about the recent developments in Andhra Pradesh as there might be a repeat in other places.
Stressed assets resolution
With regard to stressed assets, projects with coal supply arrangements and PPAs in place will eventually get sold. There have been various such transactions in the recent past and more transactions are expected in the near term. Overall, companies with fairly big coal-based power portfolios should be very comfortable in the long term, particularly if they have access to coal and PPAs even for 85 per cent of the capacity.
Some states recently invited tenders for medium-term PPAs. Tariffs discovered in these auctions have been very interesting. Instead of bidding aggressively, as seen in earlier years, developers are quoting quite realistic tariffs.
Projects that lack coal supply and PPAs will face difficulty in finding buyers. Coal auctions under the SHAKTI scheme have helped in providing a degree of comfort, but to what extent would this make the plants viable is uncertain. Concerted efforts should be made to bring these plants on stream. A power plant is not a consumer product and is not open to market dynamics. It relies on resources provided by the government under very tightly awarded contracts. Eventually, it is Indian money that has been locked into these projects and you cannot allow them to fail.
Issues and concerns
Today, capacity addition in the private sector is virtually nil. Whatever capacity is being added is by NTPC and some state electricity utilities. Renewables may add generation capacity, but not so much in terms of the quantum of power generated. The lack of attention in creating further baseload capacity is an area of concern. Besides, the NPA crisis, and fuel and PPA-related issues hamper the development of coal-based power generation. The sector now has a climate where private investors are not interested in putting up thermal capacity. This will create difficulties going forward when such capacity is needed. The question marks will always remain on coal because the messaging or narrative around renewables is so loud in the country. Additional capacity will be needed either because of the retirement of old plants that will not be able to keep up with the revised emission standards or to fulfil the demand for baseload power.
That said, there are other aspects thatneed to be looked into such as grid balancing, following the large-scale addition of renewables. For this, flexibilisation of coal plants will become important. Further, the sector’s high carbon footprint will need to be reduced. Coal plants are now required to add wet flue gas desulphurisation (FGD) systems in order to meet the COP21 commitments. This is adding a pressure of 30-40 per cent on tariffs, which is a challenge.
Another area where projects are largely struggling today is coal blending and the quality of coal. Plant owners are dealing with various standards and grades of coal. Blending such coal takes a toll on boiler efficiency. Appropriate technologies can be deployed for blending so that the unaccounted for losses can be optimised and reduced by 5-7 per cent.
Outlook
Plant load factors are likely to remain in the range of 60 per cent. It is also being observed that solar panel degradation is happening at a fast pace in India due to quality issues in components. Also, the sector is likely to see the retirement of old and inefficient plants. However, decommissiong is a much more difficult process than constructing a plant. There are a number of issues involved, including the lack of adequate and experienced contractors. The process of dismantling has also raised safety concerns.
On the technology side, while there are various technology options available today, there is a lack of funds to implement these technologies. FGD installation is further expected to add 30-40 paise to the cost of generation. Thus, it is recommended that instead of this being made a pass-through in tariffs, the coal cess, which is anyway being levied on consumers, could be utilised towards this. This will help in making coal-based power affordable for customers. Another key technology is wet FGD, which is being adopted by the central and the state sector-owned plants for meeting the emission norms. However, while large capacity plants are more suited for wet FGD technology, small plants of 200-300 MW could adapt to dry FGD technology. This will lower the capex requirement and the pass-through.
Digitalisation is critical to improving the operational performance of plants. For example, the 20-odd GW of capacity that is operating in flexible mode is primarily because these plants are either not able to meet the load despatch or are getting 26-30 despatch schedules per day. The developers are already flexing their plants on a daily basis. However, through digitalisation, this can be done in a much more reliable way such that the ramp rates improve and the net energy being provided to the grid is optimised.