Hindustan Power Projects Private Ltd,is in an advanced stage of commissioning more than 5000 MW by 2017 of combined power assets by investing R32,000 crore. The company—earlier known as Moser Baer Projects Pvt Ltd—aims at a capacity mix of 4 GW from thermal, 2 GW from solar and 500 MW from hydro sources in the next five years. In an interview with FE’s Sumit Jha, chairman Ratul Puri discusses the company’s plans and power sector issues. Excepts:
What is the company’s goal in terms of capacity addition in the next four-five years?
Our goal is to reach 6 GW of combined capacity, comp rising 2 GW of solar, 4 GW of thermal and 500 MW of hydro capacity We have achieved about 550 MW so far and will reach a capacity of 3 GW by the end of this year.
Does HPP intend to participate in the coal block auctions?
We have 2,500 MW in Madhya Pradesh (MP) and 1320 MW in Chhattisgarh (construction work is yet to begin as we do not have fuel supply assurance). The first phase of the MP plant is likely to be commissioned in a couple of months. We will participate in the coal block bids in the second tranche for our Chhattisgarh plant. We are not looking at operational blocks for the Chhattisgarh plant as the plant is some distance away from being operational.
Why is HPP not participating in the auction for the MP plant since it will make the company independent from Eastern Coalfield that has a contract with you?
Not many of the coal blocks have the capacity to produce coal cheaper than the subsidised rate of R660 (for power sector) per tonne, rate at which Coal India (CIL) and its subsidiaries sell. Operational blocks will find takers but for blocks that are not developed at all, the end user will struggle to get a price lower than CIL’s. Blocks with a stripping ratio of 2:1 can still produce cheaper coal than that offered by CIL, but many of these blocks have a stripping ratio that ranges from 5:1 to 10:1, making it impossible to extract coal for lower than R1,000 per tonne from those blocks.
How has your experience been in selling power from your plants? Many developers complain that despite demand, state discoms have been preferring load shedding to buying power. But Kerala managed to tie up long-term contract for power that was cheaper than the trend see last year. Does that indicate that the situation might be improving?
The new Case 1 bidding regime (used by Kerala recently) only gives the first year tariff compared to a levellised tariff earlier. The current Case 1 bidding has got many flaws in it structure. Nine out of ten generators you speak to will tell you they don’t like it. Industry needs to be louder about Case 1 bidding, but I think there has been a fair bit of criticism of these norms from the state.
What explains your foray into solar power? What’s the rationale when solar power is still struggling to find takers?
The future lies with solar. Coal thermal has to remain the mainstay for India for the next 15-20 years, but I doubt I will build a new thermal power plant 10 years from now. The reason for that is renewable energy will keep declining in its cost. Solar power is already close to grid parity.
How do you view the current state of solar power capacity addition in the country?
Mega solar plants of 1 GW and above and smaller plants of 5 MW are both the wrong ends of spectrum. In India, we need distributed installation of solar capacity. For example, a 1GW plant in Rajasthan will not be absorbed in entirely in that state. Since solar runs at 20% PLF, the transmission cost will be five times higher than conventional thermal plants running at 80% PLF. The transmission cost becomes close to R3 per unit. There is no economy of scale in solar power generation. What India needs is 25-50 MW plants distributed widely across the country.
A solar power capacity that is distributed across the country may get stuck into land acquisition problems as bigger plants have bigger spread and require large area. Is that a concern for the industry?
In every district there is some fallow land where no crops can be grown. We acquired a substantial area of land in a agriculture-heavy state like Punjab. So land is not a problem, but building transmission lines, which won’t be in use during night, thus, raising the cost, is a major challenge. Our aim should be generate locally and consume locally, thereby, cutting down on transmission cost. Locally consumed power is also good for grid security.
Most solar bids have taken the route of reverse bidding. Is that the best way to go about it considering Tamil Nadu recently executed successful solar bids on the feed-in-tariff (FIT) model?
In the case of reverse bidding there will always be players who would bid for unsustainably low tariff, thereby, ruining the bid process. The same happened with the UMPP (ultra mega power project) bidding where several bidders quoted tariffs that didn’t account for many factors. In the solar arena, FIT (which typically makes use of long-term agreements and pricing tied to costs of production for renewable energy producers) is the right way to go about it as it will provide inexperienced players to learn from their mistakes without causing irreversible damage to the process.
