CHENNAI: THE 4,000 megawatt Cheyyur power plant — pegged to be the largest thermal energy production facility in Tamil Nadu once it becomes operational — is among the top-12 non-performing assets in India, according to a new report released by the Institute for Energy Economics and Financial Analysis (IEEFA).
The report, released on Wednesday, has reviewed 12 non-performing assets in India’s thermal coal-fired power sector, which are unable to operate at a competitive price range. “Each of the 12 power plants reviewed had questionable economics behind their investment proposal,” says Tim Buckley, lead author of the report.
“This, because lower cost renewable alternatives can be built in a third of the time, and at 30 per cent less cost,” adds Tim, who is also the director of energy finance studies with IEEFA. The Cheyyur plant, the report notes, was one of the 16 ultra mega power plants (UMPP) proposed way back in 2008, when large scale coal-fired power was considered one of India’s best energy options. However, only two UMPP have been built since then (Reliance Power’s Sasan and Tata Power’s Mundra), and both are stranded assets, notes the report.
Trouble with Cheyyur
In February, the Union Environment Ministry denied clearance for the Cheyyur UMPP as the fuel source had been changed from 10-12Mtpa of imported coal to 18- 20Mtpa of lower energy domestic coal. The greater scale of coal meant change in land use requirement, which nearly doubled to 2,000 acres.
The developers of the 25,970 crore-project -- Coastal Tamil Nadu Power Limited (CTNPL) -- a special purpose vehicle of the government-owned Power Finance Corp (PFC), has been directed to reapply for clearances, including conducting a fresh environmental impact assessment and holding public hearings once again.
Bad economics
In 2015, IEEDA modelled the likely cost of electricity from import coal-based Cheyyur plant at Rs 4.90/kWh in 2021, rising to a Rs 5.95/kWh over the life of the project, presuming plant load factor (PLF) of 80%. IEEFA notes that in the four years since that modelling was undertaken, the average coal-fired power plant in India has operated at less than 60 per cent PLF.
Assuming cost of imported 5,000kcal thermal coal is $65/tonne, Cheyyur’s required tariff would be Rs 5-6/kWh, with ongoing fuel cost escalations over the life of the project. Tamil Nadu has consistently awarded wind and solar tenders at below Rs 3/kWh in the last three years, half the modelled price required for Cheyyur proposal, and with zero price indexation over the 25-year contract life.
A new report titled Winds of Change: No New Coal States of India, by New Delhi-based Climate Trends states that three States — Tamil Nadu, Rajasthan and Karnataka — would follow in the footsteps of Gujarat and Chhattisgarh to declare a ‘new new coal’ policy. This implies that these states will not need any new coal power plants in the future. All their future energy demands could be cost-effectively met by renewable and flexible energy sources.
Aarti Khosla, Director, Climate Trends, said: “Karnataka, Rajasthan, and Tamil Nadu are states with the highest renewable energy (RE) potential. Their installed RE capacities are either higher than coal power or are on a path to overtake it.” Shweta Narayan, India Coordinator at the Healthy Energy Initiative, says the environmental concerns, land acquisition problems, rise of renewables and overall feasibility goes against thermal power plants.
Need for no-coal policy
Tamil Nadu non-fossils exceeds fossils by 2.3 GW
Coal stands at 13.5 GW whereas renewables stands at 15.6 GW
TN has the highest installed capacity of wind energy, as well as the largest wind power farm at 1500 MW
Despite the fast growth in renewables, the state government continues to propose and build more thermal power plants
According to the state’s
energy policy note for 2018-19, there are 5 on-going projects with combined capacity of 5,700 MW
Study shows the combined debt for Rajasthan, Karnataka and Tamil Nadu stands at $6bn, or
Rs 43,562 cr
These three States account for more than half of the country’s DISCOM (Electricity Distribution Companies) debt
Yet, TN has the highest new coal power pipeline in India
TN and Rajasthan governments cannot afford to hand out free electricity when their DISCOMs are bleeding
The only way for them to repay their dues is to buy cheap electricity, which must be renewables-based
