The new MoEFCC norms impose huge costs on power generators, even as they are necessary for the country in the emerging global ecosystem. For this the government has to play a balancing act.?
The Ministry of Environment, Forest & Climate Change (MoEFCC) has notified the revised standards for coal-based Thermal Power Plants (TPPs) in the country in December 2015, with the primary aim of minimising pollution, in line with the country´s intent/commitments made at CoP21 at Paris last year. These standards are proposed to be implemented in a phased manner over two years´ timeframe. It may be recalled that India´s Paris commitments include reduction of the emissions intensity of its GDP by 33 to 35% by 2030, from 2005 level; achieving about 40 percent cumulative electric power installed capacity from non-fossil fuel based energy resources by 2030, and introduction of new, more efficient and cleaner technologies in thermal power generation.
The new environmental norms deal with pollutants like Suspended Particulate Matter (SPM), sulphur dioxide (SOx), Nitrogen Oxide (NOx) and Mercury. Norms for specific water consumption by TPPs have also been notified to conserve water.
The installed capacity of coal based TPPs was 1,85,172 MW as on March 31, 2016 and 72,355 MW is under construction which is likely to be affected by the new norms. The new standards are aimed at reducing emission of PM10 (0.98 kg/MWh), sulphur dioxide (7.3 Kg/MWh) and Oxide of nitrogen (4.8 kg/MWh), which will in turn help in bringing about an improvement in the Ambient Air Quality (AAQ) in and around TPPs. The technology employed for the control of the proposed limit of SOx and NOx will also help in control of mercury emission (at about 70-90%) as a co-benefit. Limiting the use of water in thermal power plant will lead to water conservation (about 1.5 M3/MWh) as TPP industry is water-intensive, the ministry said.
However, power generating companies (GENCOs) are concerned that they may have to spend massive amounts to meet the prescribed technical upgrades. Though the government has had interactions with all the stakeholders it has not taken several issues raised by the industry into account while issuing the new norms, is the argument of the industry.
For the purpose of application of the new norms, TPPs are divided into 3 categories, viz. those:
(i)installed before 31st December, 2003
(ii) installed after 2003 up to 31st December, 2016 and
(iii) Installed after 31st December, 2016.
The standards have been made stringent for recent plants, compared to earlier ones and most stringent for those plants to come up in future. The new SPM norms specify 100 mg/Nm3, 50 mg/Nm3 and 30 mg/Nm3 respectively for these three categories against 350 mg/Nm3. In case of SOx, the TPPs are divided into units less than 500 MW capacity and units of 500 MW and above and more stringent norms are made applicable to the latter. That kind of division is not there in case of NOx reduction, but the division is based only the above categories (See Table-1, 2 & 3 for more details).
Estimates are that the TPPs burning coal account for about 50-60 per cent of PM and 30-40 per cent of SOx and 40-50 per cent of NOx produced by the industrial sector. You get pollution from cars/autos and from other sources as well. ´Of the total industrial sector, power sector is a huge contributor to the pollution. If you clean this sector, it will have an overall impact,´ said Priyavrat Bhati, Programme Director - Green Rating Project, Centre for Science and Environment (CSE).
Basically, the previous particulate matter (PM) emission standards were between 150-350 milligram (mg) per Nm3. The newer plants are to meet the standard of 50 mg/Nm3. For SOx and NOx there were no standards. At present, the SOx and NOx are estimated on 700-800 mg/Nm3. Lot of plants do not collect data, they go by just the rule of thumb. For the new plants, these standards will result in SOx being cut to 100 mg/Nm3, that is over 80 per cent cut. The same is the case with NOx.
Based on age, different plants have different levels. Essentially, going forward, for the new age plants, the cuts could be between 80-90 per cent for main pollutants like SO2 and NOx. For those emitting around 350-400 mg/Nm3 a cut to 100 mg/Nm3 means a 75 per cent reduction. The other way to look at it is the total pollution load, which for NOx is 5.5-6 million tonnes, and going forward, based on the generation etc., even estimating 600 billion units of production from the coal-based power sector, it could be around 35 per cent basically.
´As per some reports though, it is estimated that new plants which comply with the new norms will have 25 per cent lower PM emissions, 50 per cent lower Sox and 67 per cent lower NOx emissions as compared to current plants which have been commissioned recently,´ Ashok Khurana, Director General, Association of Power Producers (APP).
The new norms are considerably more stringent than the existing norms and have also been applied on a retrospective basis, which means that many of the existing TPPs are facing a huge capital expenditure and do design re-engineering for compliance.
The total cost of the upgrade of extant capacities is estimated at Rs.2.4 lakh crore, Gaurav Sharma, Senior Analyst, Independent Power Producers Association of India (IPPAI) citing industry estimates.
´Preliminary estimates indicate capital expenditure requirement in the range of Rs.1.25 Cr/MW to Rs.1.5 Cr/MW, i.e about 20-25% of the capital cost of a coal-based TPP. Considering the above estimates, the total outlay involved could be about Rs.2.5 lakh crore,´ said Khurana.
´It will also lead to additional operating costs of about Rs.3.5 lakhs/ MW/ year. Further, operating parameters like auxiliary consumption will increase by about 1 to 1.5 % and there will be increased water consumption and degraded Station Heat Rate (SHR). All put together, it will lead to an increase in the cost of power ranging from about Rs.0.50 to Rs.1.25 per unit depending upon the plant specific requirement,ö Khurana added.
However, CSE has put the rough cost of brazing up the existing plants of 186-GW capacity to the new norms in the range of Rs.80,000 crore-1.1 lakh crore, including partial addition or full adoption of new technologies to meet the norms. Bhati said, ´Now, in terms of economic (or capital) cost, for the oldest plants it could be put at Rs.0.4-0.5 crore per MW, for the newest plants it could be Rs.0.7-0.9 crore per MW.´ For old plants it is lower, because they do not have to cut their emission so sharply.
There are many technical and operational issues involved in adhering to the new norms.
´To bring down the SOx emissions, flue-gas desulfurisation (FGD) technology is required, which would result in massive changes to the boiler. The relevant selective catalytic reduction (SCR) technology is the current available technology to bring down nitrogen emissions (NOx). However, no company in India currently possesses the technological capabilities required to meet the reduction in NOx emissions,´ says Sharma.
´The technical feasibility of retrofitting of plants remains questionable, which may make scrapping of old plants more viable than upgrading them,´ Sharma added.
Many of the existing plants simply do not have sufficient space for installation of additional equipment such as additional fields for ESP, DeNOx systems etc., or spare land for FGDs. ´For example, some vendors have expressed the need to first set up a small pilot project to test the suitability of SCR technology for NOx reduction in Indian coal with high ash content. For SOx reduction systems such as FGD, the availability and transportation of good quality limestone (Estimated overall requirement of 24 million TPA) and disposal of gypsum (estimated 34 million TPA) in environmentally friendly manner may pose a problem,´ says Khurana.
Another major issue is, the short window for implementation would force plant shutdowns for an average 5 to 6 months. Sequential installation may require even longer shutdown time, leading to wide scale disruption in power supply across the grid.
Bhati says that all the technologies required to meet the new environmental norms were mature, except SCR, to test which NTPC is undertaking a pilot project. For SO2, FGD is already being used in some imported coal-based plants and there is no issue on whether the standards are met or not.
It would be impossible for meeting the deadline (December 2017 for the existing plants and before commissioning for plants to be installed after January 2016). ´This is because of a number of factors, such as limited vendor availability, large scale plant retrofitting which takes considerably more time, need for phasing out implementation in order to minimise disruptive effect of plant shutdowns, uncertainty on benchmark costs and regulatory capex approvals without which financing cannot be done, etc.,´ Khurana says. Citing all these reasons and global experience, he advocates staggering of the programme over a period of 7 to 10 years.
The plants which are under construction have already frozen their design parameters and any changes at this stage will delay the commissioning of plants.
Bhati, on the other hand says, half of the 34,000 MW of old plants can be closed down based on parameters like poor performance, poor efficiency, poor availability, poor environmental standards etc. Besides, states should be incentivised to replace them with super critical technologies or transfer their coal linkages to new players etc., such that the employment is not affected and the old plants get replaced. As old plants retire, the new plants with higher efficiency will run at higher PLF. That will improve the overall health of the power sector.
APP has been highlighting that some of the norms are just impossible to achieve, such as the requirement of installing cooling tower and meeting specific water consumption of max 3.5m3/mwh.
The additional capital expenditure (capex) and operating expenses will have a significant impact on the power tariff and affect the offtake of power by debt-ridden power distribution companies (discoms).
While APP is estimating the additional cost incurred would lead to cost of power going up in the range of Rs.0.50 to Rs.1.25 per unit, CSE estimates the impact on power price in the 20-30 paise per unit range for the power plants.
In order to facilitate funding from financial institutions, clarity is required in the pass through of power price arising from additional capital investments.¨Generators should have the assurance that the resultant tariff increases, as approved by the appropriate regulator, would be effected by the procurers with immediate effect, in full. Further, as the generators would need regulatory approval of capex before tying up financing, it is crucial that an institutional body comes out with benchmark costs in order to speed up the process of in-principle approvals,¨ APP suggested.
However, the producers feel that as Ujjwal Discom Assurance Yojana (UDAY) scheme itself entails timely tariff increases, further spike in costs would be stoutly resisted by the consumers.
The industry and regulators would have to deal with the additional expenditure involved and consequent tariff hike, hence, a careful evaluation is necessary and making sure that the additional burden shall not be passed on to the consumers in the form of a tariff hike, proposes IPPAI.
CSE also feels so. ´We believe, while cess is being levied on the power sector, a portion of it could be spent on the power sector either to subsidise their loans or provide some other support that could help them to install these pollution control equipment. It will give a lot of relief and offset the tariff hikes in the sector,´ said Bhati. The power sector is presently shelling out about Rs.22,000-23,000 crore per annum towards coal cess/clean energy cess.
Coal is expected to remain central to India´s power needs. Environmental consciousness is on rise and climate change is presenting its darker side every now and then, stirring up concerns relating to protection of environment. In that context, and to maintain use of coal, the cheapest means, we have to maintain its acceptance in society and its environmental sustainability has to be vouched. So the new norms are part of efforts to maintain that balance.
The future focus for coal-based TPPs should be efficient management, especially in the areas of PLF, efficiency improvement, pollution control, water consumption and ash utilisation. The new TPPs deploying ultra-super critical technology contribute significantly to reduction in CO2 emissions.
A thorough cost-benefit analysis at the sector level before notifying the new norms would have given the required thrust to implementation programme. Health costs, including hospitalisation cost, health cost, productivity cost, absence from work etc., due to pollution would definitely surpass the costs that the power generators would incur.
But a study would have been more convincing.
Prescribing environmental measures for old plants at the evening of their life seems slightly eccentric. Setting some parameters and closing down or replacing them as many as possible would be a right idea.
Though generating companies are not fully responsible for the rising bad debts of power sector, banks funding is unlikely to come by for investments for meeting norms without the assurance from the government that the additional capital costs would be passed on to the users. Or else the additional costs these norms are thrusting on the power generators should be amortised through subsidies.
At a time when 25,000-MW capacity is begging for buyers, solutions are not easy to come by.
Is the government ready to bite the bullet?
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