Having estimated that the new environmental norms for coal-based power units would inflate their capital costs by over a quarter or R1.25-1.5 crore/megawatt, state-run NTPC...
Having estimated that the new environmental norms for coal-based power units would inflate their capital costs by over a quarter or Rs 1.25-1.5 crore/megawatt, state-run NTPC and the Association of Power Producers (APP) comprising private sector developers have separately petitioned the government, seeking relaxation of the norms for older plants and a realistic time frame of 5-10 years for others to comply.
In letters strikingly similar in their content and showing the unity among developers, NTPC and APP argued that the tariff shock from the proposed norms, which would vary from 40 paise to Rs 1.5/unit, could derail the Ujwal DISCOM Assurance Yojana (UDAY) for the financial turnaround and revival of power distribution entities. Although the additional cost for the comprehensive environmental upgrade is allowed to be a pass-through, the power producers feel that as UDAY itself entails timely tariff increases, further spike in costs would be stoutly resisted by the consumers.
According to a notification issued by the ministry of environment, forests and climate change ((MOEFCC) in December last year, coal-based power stations will have to adopt a set of new globally compliant emission norms within two years, that is, by December 2017. 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.
Citing the examples of South Africa, China and the US where such technological changes have been implemented in a staggered manner over a course of 5-10 years, NTPC has estimated that a multi-unit station would require nearly 4-5 years for the proposed upgrade.
“Technical modification would need to be made for 62 gigawatt (GW) capacities commissioned before 2003 and have less than 10 years of residual life, making the entire exercise financially unviable to recover the cost of retrofitting in the remaining life of the plants,” APP said. It suggested that these plants be exempted from new norms and could be run for lesser number of hours to minimise carbon footprint. NTPC concurred with the suggestion in its representation.
While NTPC estimated an average tariff hike of 45 paise per unit, APP pegged it between 50 to 125 paise per unit for the power plants of its members. The companies also said that upcoming plants would need to extend their scheduled commissioning date and approach banks to retain their ‘standard asset’ classification. Furthermore, APP pointed to the possibility of excessive foreign exchange outflow in importing equipment as domestic capacity for technological changes stood at a fraction of the demand. As per industry estimates, the domestic capacity for technology needed to bring down NOx and SO2 emission was only for 15 GW against requirement of nearly 160 GW for two years.
Currently, the country has nearly 173 GW of coal-based capacity and another 75 GW capacity is under construction.
The total cost of the upgrade of extant capacities is estimated at Rs 2.5 lakh crore. Among the firms to be impacted by the new MoEFCC norms are Adani Power, JP Power, Jindal Power, KSK, Lanco, Reliance Power, Sterlite and Tata Power, besides NTPC.
According to sources, the plants concerned would need to install boilers with flue-gas desulfurisation (FGD) technology for SO2 emission cuts and selective catalytic reduction (SCR) for NOx emissions. “Due to the impracticality of time schedule, we will not be able to borrow cheap funds from international market which in turn will increase the project cost and cost of electricity to consumers,” NTPC said.
As solutions, the power companies have proposed that the norms be applied only for post-2003 plants. Even for these plants, they sought some relaxation as the technology available was untested for more abrasive Indian coal.
The APP suggested that if units have 5-10 years – instead of two years as stipulated now- for the makeover, the country could use the interim period to build domestic capability to manufacture boilers with these technologies to encourage Make in India.
“It seems the emission norms notification were issued under international pressure after COP 21 (the 2015 Paris Climate Conference), as the stakeholders had unanimously opposed the regulation in the consultative meeting with the MoEFCC,” an industry insider told FE.
As reported by FE earlier this month, power minister Piyush Goyal had said that he was in consultation with MoEFCC minister to relax some of the conditions. He had also hinted that older plants could be exempted from the regulation while newer ones could be provided more time to comply.