Coal-based thermal plants in the country may have to spend a massive Rs 2.4 lakh crore 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.
Coal-based thermal plants in the country may have to spend a massive Rs 2.4 lakh crore 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. The cost would likely be a pass-through, implying consumers will have to fork out some 20 paise per unit additionally for each unit of electricity.
The MoEFCC aims 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. They would also bring down mercury emission by 70-90% as an additional benefit.
Although the country didn’t have norms for SO2, NOx and mercury emissions earlier for coal-based thermal power plants, it had standards for PM10 emission that were lax by global standards. According to industry sources FE spoke to, the plants adhering to new norms for PM10 wouldn’t entail any substantial cost for the upgrade. But the norms regarding other emissions would inflate capital costs by nearly a quarter or about R1.4 crore per MW.
Currently, India has over 170 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. While FE has estimated the compliance cost for existing plants at R2.4 lakh crore, the investments in the new units will also have to be jacked up proportionately if not more steeply due to the new norms.
The existing thermal power units in the country produce around 960 billion units of electricity annually at the current rate of capacity utilisation. These plants will have to meet the extra cost from the new MoEFCC norms by incremental tariff of 20 paise per unit or about 6% over the next 15 years, assuming the capacity use is not altered.
The 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.
“To bring down the SO2 emissions, flue-gas desulfurisation (FGD) technology is required, which would result in massive changes to the boiler,” a top executive of a company involved in manufacturing boilers told FE. He added the cost for this technology was nearly Rs 50 lakh per MW. Apart from state-run power equipment maker BHEL and multinational Alstom, which have the FGD technology in India, Chinese machinery manufacturers could also grab the huge market being unfolded in India, analysts said. “However, domestic (FGD) capacity is limited to 10-15 GW/annum versus the demand of 80GW over two years. And hence Chinese and Korean manufacturers are expected to take larger share of the pie,” said Axis Capital in a research note.
However, no company in India currently possesses the technological capabilities required to meet the reduction in NOx emissions. The relevant selective catalytic reduction (SCR) technology comes with a price tag of about Rs 90 lakh per MW. Even plants in the US have struggled to meet the NOx norms over the last decade, sources said.
“We had exhaustive consultations with stakeholders before finalising these norms,” MoEFCC secretary Ashok Lavasa told FE. He expressed the hope that firms would be able to meet the cost of the upgrade.
By and large, power producers had still not completed their due diligence regarding the cost involved in making their coal-based plants achieve the emission standards stipulated by the government. “We are still doing our calculations on this and wouldn’t want to hazard a guess on the cost involved,” an official with NTPC said. However, Ashok Khurana, the director general of Association of Power Producers, a group of independent power developers, said that the issues of practical implementation of these norms need to be addressed. “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 the consequent tariff hike,” Khurana said.
“There is a cost implication to the newly announced emission norms but the exact cost is not available with the power ministry as the process of stakeholder consultation and determination of norms was carried out by MoEFCC,” power secretary PK Pujari told