‘Scrap old & new coal plants to save ` 1.45 L cr’
Shuttering old coal plants and freezing under-construction plants can save over Rs 1,45,000 crore for the country, finds a report. This will also improve the financial health of the power distribution companies, or discoms.
After looking at 11 major coal power states which account for over 50 per cent of discom overdues, Bengaluru-based Climate Risk Horizons has identified possible areas for savings and cost rationalisation, starting with the retirement of coal plants that are over 20 years old and are less efficient than newer plants.
Shutting down 36.5 GW of old coal plants will avoid 18,000 crore worth of capital expenditure that needs to be incurred on retrofits to bring the plants in compliance with the 2015 emission norms. Replacing scheduled generation from these old plants with cheaper electricity, either from new renewables or from the market, would save another Rs
7,000 crore annually and Rs
35,000 crore over a five-year tariff period, as electricity from most of these plants is relatively more expensive.
“Our analysis shows that it is far more efficient and cost-effective to shut down these old plants by 2022, rather than spend thousands of crores to retrofit them... Given state governments’ precarious finances and the level of stressed assets in the banking sector, incurring debt for additional capex is difficult. These costs would also have to eventually be recovered from discoms and consumers via higher tariffs”, said Ashish Fernandes, CEO and lead analyst of Climate Risk Horizons, in the report.
The report also identifies 14 GW of state-owned plants in the early stages of construction in Bihar, Maharashtra, Tamil Nadu, Telangana and Uttar Pradesh. Freezing expenditure on these projects would save over Rs 92,000 crore.
Given the country’s power surplus situation and the cost advantages now enjoyed by renewable energy, there is no requirement for these new plants, and they could in fact end up worsening state finances if construction were to proceed.
According to Praveer Sinha, CEO and MD of Tata Power, around 60,000 MW of old coalbased power plants can be closed down quickly.
An internal study by Tata Power had found that there were about 280 coal-fired plants of a total capacity of 35,000 MW, which were over 25 years old. Further, there are another 200 of a capacity of about 25,000 MW. The debt raised for these had already been fully paid back. That makes a total of 60,000 MW that can quickly go out of the system”, Sinha said while attending the webinar by Climate Risk Horizons.
Subdued power demand due to Covid-19 and difficulties in revenue collection, the overdues of discoms to generators have increased to Rs 114,733 crore. Replacing electricity from older coal plants with cheaper renewable sources will reduce the gap between cost of supply and revenue generation for discoms.
The Centre is in the process of disbursing Rs 1,00,000 crore by way of relief to discoms to enable them to pay their dues to generators. This is expected to be a temporary fix, says the report.