Emission norms: How money is the fuel thermal plants lack

By: | Published: March 26, 2018 3:22 AM

After the failure to meet the two-year deadline set in December, 2015 for compliance with new emission norms, power plants have been directed by the Central Pollution Control Board to meet the revised norms by 2022.

fuel emission, thermal plants, Paris climate accord, power generation India, money for power generationFinance is the biggest hurdle in this exercise, especially at private plants. (Reuters)

With the country under an obligation to meet its Paris commitments and renewables representing the future of the power sector, India’s coal-based power plants —the backbone of power generation in the country — face the challenge of cutting down on their emissions by 2022 if they are to stay in business. After the failure to meet the two-year deadline set in December, 2015 for compliance with new emission norms, power plants have been directed by the Central Pollution Control Board to meet the revised norms by 2022. The revised plan envisages installation of flue gas de-sulphurisation (FGD) units for 1,61,402 MW generation capacity and upgrade of electrostatic precipitators for 64,525 MW capacity.

Finance is the biggest hurdle in this exercise, especially at private plants. Power Minister RK Singh said recently capital expenditure on such installation would be in the range of Rs 88-128 lakh per MW. As is known, the industry is not in the best of health, with plants facing low capacity utilisation due to less-than-expected growth in demand. Stressed assets in the sector comprising 34 private power plants have an outstanding debt of Rs 1.74 lakh crore. “With high exposure and a large number of projects on watch list, no bank is willing to lend more money to developers,” Ashok Khurana, director general, Association of Power Producers, tells FE. “We have requested the power ministry to designate REC and PFC as nodal financing institutions for pollution control equipment,” he adds.

While assessing the options before power plants, officials have noted that Central Electricity Regulatory Commission (CERC) regulations allow any capital expenditure (including installation of FGDs) to be categorised under “change in law”, ensuring it could be passed on to consumers in the form of higher tariffs. As per projected figures, installation of emission-reducing equipment would necessitate a rise of Rs 0.62-0.93/unit in power tariffs — the average price at which discoms purchase power is Rs 3.5/unit. A sector representative who did not want to be identified points out that since power plants with lower generation costs get to sell their electricity first, producers that raise tariff on account of installation of FGD units would find it more difficult to sell power.

The private sector is also sceptical of the government providing the level of infrastructural support required to retrofit coal-based power plants within the specified timeline. “The clean-power agenda would require huge amounts of limestone, which is used in a big way by the cement industry. Has the government worked out any plan to raise pure limestone supply by about 95%?” asks a representative of the power industry on the condition of anonymity. Between April, 2014 and November, 2017, 6,769 MW capacity that was more than 25 years old was decommissioned. In a report, Motilal Oswal Securities has estimated that about 17,000 MW of power plants would have to be decommissioned for failure to meet the emission norms by the 2022 deadline. Kameswara Rao, partner, PwC, says states need to assess the situation, especially for older power plants, to ensure suitable capacity augmentation. “Older plants face issues of land availability and high variable costs, requiring them to consider more comprehensive steps such as a complete renovation or closure,” he says.

The Motilal Oswal Securities report also said the move for clean power would open up a Rs 1.3-lakh-crore opportunity for emission-control equipment providers in the next three years. Companies such as BHEL, L&T, GE Power and Reliance Infrastructure are expected to benefit from it. RInfra recently emerged as the lowest bidder in a FGD project tendered by NTPC for its 1,500-MW Jhajjar power plant in Haryana. Similarly, Bharat Heavy Electricals has bagged a Rs 560-crore FGD order for NTPC’s 980-MW Dadri power plant while GE Power has been awarded a Rs 309-cr contract by NTPC for its super thermal power project in Telangana.

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