Upgrade power plant, get more coal supply

Written by Noor Mohammad | Noor Mohammad | New Delhi | Updated: Jul 29 2014, 07:03am hrs
Small and old power generation units with a combined capacity of 25,000 MW in the government sector will be encouraged to replace their equipment with new ones above supercritical capacity threshold with assured coal linkages, as per a new policy formulated by the Narendra Modi government. The move would help increase the countrys installed power capacity significantly and in a hassle-free manner, as these old plants already have environmental/water clearances.

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Also, as these plants with obsolete machinery are fuel guzzlers and operate much below their rated capacities, the new policy would also be environment-friendly and in sync with Indias intent to regulate the carbon intensity of its economy under multilateral commitments.

These old plants are generally of capacities ranging from 100 MW to 200 MW, while the minimum sizes in which supercritical units are globally available are 660 MW and 800 MW. Mostly, these plants, which have largely neglected repair and maintenance, are run by state, which rely on relatively cheaper power from them to avoid load shedding. There are also a few such plants with central PSUs like Damodar Valley Corporation and Neyveli Lignite Corporation.

Official sources from the Union power ministry told FE that the proposed in situ capacity expansion would entail investments to the tune of over R1 lakh crore. These new capacities would supplement the capacity augmentation drive through larger power plants including ultra mega power projects being developed through the public-private partnership model. In the last couple of years, Indias power capacity addition targets have been outstripped thanks to the completion of projects rolled over from previous years.

The normal operational life of a power plant is 25 years, though they can still be run at low efficiency, say, at a plant load factor of 40-50%. One-sixth of Indias installed coal-based generation capacity, or 25,000 MW, is already well past operational life.

Despite little possibility of turning around operational performance of these derated capacities through repair, utilities remain stuck with them as currently there is no policy incentive from the Centre for replacing existing machinery with new ones.

Further, there is a risk in implementing life-extension projects to improve the operational performance of these plants as the regulator could deny capitalisation of expenditure if the resulting efficiency is below the promised level. These plants have in turn become fuel-guzzlers due to drastic reduction in their operational efficiency. Indias power sector, which accounts for 40% of countrys total emissions, remains under the scanner of green activists. Compared with sub-critical plants, supercritical units have better economies of scale as well as higher energy efficiency.

The power ministry, sources said, would not only assure utilities that replace their obsolete plants with supercritical units that their existing fuel linkage would be intact but promise additional coal linkages for the extra capacity to be created.

Kameswara Rao, leader, energy, utilities and mining at PwC, said: Renovation and modernisation (R&M) programmes can improve derated generation capacity only up to 12-20% while capacity can be easily enhanced by two to three times by putting up new supercritical plants in the same locations.

State utilities tend to hang on to their old plants as these generate some power, which will stop if plants are decommissioned for replacement. For this reason, Rao said an offer of bridging power demand-supply gap during the construction period is necessary for this policy to work.

Debasish Mishra, senior director, Deloitte, said: Completely scrapping the project and building a new project with supercritical technology is a good idea, given the limited resources available in the country such as land, water and fuel.