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Cover Story | June 2016

Coal will continue to be mainstay for power generation

Raghvendra Upadhya | Chief Knowledge Officer, IPPAI

India has embarked on an ambitious solar mission, besides focus on other renewable energy sources. How this move is expected to affect the future of coal as a source of power generation?
At the 21st Conference of the Parties to the UN Framework Convention on Climate Change (UNFCCC), COP 21 in Paris, a resolution on limiting the use of coal across countries was one of the proposals put up for consideration. In the Indian context, this is of particular relevance as coal-fired power stations form the backbone of the Indian power generation sector and will continue to remain so in the foreseeable future, the Centre´s concerted efforts to ramp up renewables such as solar notwithstanding.

In India, there is no escaping the reality that coal will continue to be the mainstay of the power generation sector. This is notwithstanding the latest round of solar auctions in January, where in the bidding for projects totalling 420 MW in Rajasthan, under the National Solar Mission, the winning bid touched a new low of INR 4.34/unit. Cost, though, is not the biggest problem in scaling up renewables such as solar. A bigger problem is how to handle a higher share of solar or wind in terms of its impact on managing the grid.

The availability of solar and wind energy is largely determined by the weather conditions, and therefore, characterised by strong variability. As a result, power generation from these sources cannot easily be matched to the electricity demand, like power generated from conventional plants such as coal-fired units and gas stations. Integration of large amount of fluctuating RE in the grid is a serious technical challenge for grid managers to ensure smooth operations of the Indian grid - the fifth largest in the world. To compound matters, RE generation forecasting in the country is in its early days.

Coal supply situation has improved, reversing the acute shortage scenario seen about two years back? Do you see any revival of interest in setting up of new coal-based power plants?
Even as Coal India´s production peaked in FY16 (2015-16) at 536 MT and stocks have piled up at pitheads, power stations with aggregate capacity of 8,000 MW are facing the grim prospect of shutting down as their short-term fuel supply contracts with the PSU have just expired. Besides, another set of units with aggregate capacity of 22,000-MW have yet to turn the letters of awards (LoAs) from CIL into long-term Fuel Supply Agreements (FSAs).

The current scenario is in contrast to the one in 2013 when CIL was finding it difficult to sign FSAs, despite constant prodding by the government. It had struggled to accept the FSA obligations even in case of power plants with long-term PPA and slated to be commissioned before March, 2015. The government at that time identified two groups of plants with an aggregate capacity of 14,600 MW and asked CIL to supply fuel to them on a short-term MoU basis as they lacked LoAs from the company. Although, most of the central sector plants in this category are likely to be commissioned before 2020, there are several private sector plants that are facing financial issues leading to delays in or stoppage of the construction work.

What is the current pipeline of new generation capacities coming up and do you see any change in the shares of different fuel sources in the next five years?
Currently, India has over 185 gigawatts (GW) of coal-based power generation capacity. It has been adding over 20 GW annually in the last four years and will continue to expand capacity at a similar pace over the next few years. However, investment in the power sector is likely to enter a lull phase in the 13th Five-Year Plan period (2017-2022). After the 12th Plan ending in 2017, the power sector is looking at an empty pipeline, both by capacity addition and capital investment. The major deals in the power sector in the last two years involved only transfer of equity and debt.

What are the environmental impacts of coal as a source of power generation? What are the better alternatives that are available, based on environmental impact?
The new power plants deploying super-critical technology contribute significantly to reduction in CO2 emissions. The focus for coal-based power sector should be efficient management, especially in the areas of Plant Load Factor (PLF), efficiency improvement, pollution control, water consumption and ash utilisation. The new laws on emissions have drawn distinctions between plants commissioned before 2003, those that came up between 2003 and 2016 and the ones going to be commissioned in 2017. The emission standards have been made progressively stringent for newer plants, thus elevating the cost for them.

Are there any modern technologies that could help reduce the environmental impact of coal as a source of energy and how?
To bring down the SO2 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.

Coal-based thermal plants in the country may have to spend massive amounts over the next two years for the technical upgrades to meet the stringent and ambitious emission norms notified by the Ministry of Environment and Forests and Climate Change (MoEFCC) recently. However, domestic financial institutions are already facing massive accumulation of non-performing assets (NPAs) on account of the power sector, and are unlikely to lend, given the uncertainties involved.

The technical feasibility of retrofitting plants remains questionable, which may make scrapping of old plants more viable than upgrading them. Additionally, the power industry and regulators would have to deal with the expenditure involved in the consequent tariff hikes.

Which is the best source of energy considering the economics and cost of electricity?
The record low tariffs, which have fallen below INR 5/unit to INR 4.34/unit, are raising uncomfortable questions about the profitability and business viability of the sector. At the same time, India cannot ignore coal which is still cheaper since the government has to provide affordable power for all.

What is the kind of fuel mix of power generation in India, do you see, say by 2022?
For a coal-dependent country such as India, the urgency is clear on the need for alternative solutions such as energy efficiency, natural gas, and renewable energy - solar thermal electricity and off-shore wind - to play their role in reducing India´s carbon footprint. Until solar-generation and battery technology evolves adequately, coal will continue to be India´s energy mainstay.

A more viable strategy might be to focus on improving the efficiency of the country´s coal-fired power plants, replacing older coal plants with supercritical units and pushing for newer technologies such as coal gasification to breach the viability barrier by taking a leaf out of the experiences of Japan, Germany and the US. A renewed push for hydro and gas-based capacity is simultaneously needed to beef up the green component in India´s base-load capacity.

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