1. Government falls way short of renovation and maintenance targets

Government falls way short of renovation and maintenance targets

The renovation and modernisation of ailing thermal power plants under the 12th Five Year Plan has been severely affected by poor financial condition of state utilities

Mumbai | Updated: March 14, 2017 5:12 AM
Power minister Piyush Goyal said recently that companies should now focus on replacement of old plants with energy efficient technologies rather than looking for renovation and modernisation of plants that are over 25 years old. (Reuters)

The renovation and modernisation of ailing thermal power plants under the 12th Five Year Plan has been severely affected by poor financial condition of state utilities as a mere 4,702.26 MW capacity could be modernised against the planned target of around 30,000 MW for the period 2012-17.

Higher project cost of more than 1.5-2.0 crore/MW made companies apprehensive to go ahead with the renovation and maintenance (R&M) exercise, said a person directly involved in the R&M exercise. The poor financial conditions of utilities on account of higher outstanding from the discoms had been another cause of concern, the person said.

State utilities undertook modernisation or life extension for 15 power units of around 2,230 MW capacity, while the central utilities modernised or took life extension for 17 power units or 2,472.26 MW capacity as of December 31, 2016, as per the Central Electricity Authority Report.

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Power minister Piyush Goyal said recently that companies should now focus on replacement of old plants with energy efficient technologies rather than looking for renovation and modernisation of plants that are over 25 years old.

In December 2015, the environment ministry had brought new norms for coal-based power stations to cut down emissions of particulate matter (PM10), sulphur dioxide (SO2) and oxides of nitrogen (NOx) and improve the ambient air quality around power plants. The ministry had for the first time fixed SOx and NOx norms for power stations and mandated that plants adhere to these guidelines by 2017 end.

NTPC director technical AK Jha told FE that renovation and modernisation of old power plants should not be seen in isolation. R&M is not a target in itself, rather the ultimate objective should be to meet the demand and supply criteria at an affordable price adhering to the environmental norms.

Companies would look at these projects only if it makes business sense. Falling plant load factors, large outstandings with discoms, and higher costs will play an important part in companies’ decision to go for the life extension, renovation or modernisation of plants.

These exercises should also be seen in the context of falling renewable — wind and solar — power project cost and tariffs, Jha said.

Of the total projects completed, NTPC alone completed around 2,255 MW of power capacity under the life extension and R&M plan for 2012-17.

Kameswara Rao, leader, energy practice at PwC, said, “It is an ideal time for utilities to undertake renovation and modernisation of power plants, as there are no power shortages now, which earlier dissuaded them from any prolonged shutdown. Also, these old power plants are inefficient and place more burden on use of coal and water. They need to invest in renovating facilities to meet new environmental norms.”

“Another challenge for old plants earlier was that of raising bank finances, but utilities now have stronger balance sheets post UDAY. Besides, the government has not only addressed the coal supply issues, but now allows state governments to utilise coal in other state-owned or private generation projects to maintain production levels and lower costs,” Rao said.

Vikas Srivastava

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