New thermal plants: A reality check

The quest to secure India's energy future should not lead to suboptimal policy solutions

The five-yearly exercise of the Central Electricity Authority (CEA) to frame a National Electricity Plan (NEP) kicked off last year with the task of assuring power supply at the lowest prices. The draft NEP is currently being finalised. The challenge is that this recommends creation of new capacity of up to 51 GW (25 per cent of existing capacity) of coal-fired plants.

This does raise eyebrows when India is committed to a net-zero emissions scenario by 2070. If it must, then the obvious answer leans towards the lowest hanging fruit — improve the performance of the existing plants and bump up their output; and the other, add capacity to existing stations or brownfield expansion. Whatever capacity must be freshly created, should it not be located near the coalfields so that long-distance hauling of coal is avoided? Several states seem to be making choices contrary to this. Haryana has just invited an international bid for a 600 MW thermal plant. Beside Haryana, states like Gujarat, Tamil Nadu, Madhya Pradesh, Assam and Punjab, are also toying with the idea of setting up new capacities. All the above (except MP) are located far away from coal-bearing states. The CEA has to rise to the occasion to ensure these are not just populist investment decisions that will lock the nation into polluting, long-lasting investments.

But, is the growth in renewables not fast enough to cater to the rising power demand? The draft NEP has answered this question in the negative, and rightly so. According to the estimates, even if the renewable energy (including large hydro) capacity grows at four times the pace it has grown in the past five years, India would need new (greenfield or brownfield) thermal power plants in a decade from now. Let us accept that the tipping point when renewable will rise to the occasion to obviate thermal growth is a while away.

If higher supply must come from fossil solutions, then let the draft NEP recommend the most efficient way forward. Making existing plants produce more power ought to be the first choice. The draft NEP projects only about 55 per cent plant load factor (PLF) by 2026-27, which surprisingly rises to 61 per cent by 2031-32. Technically, it is quite feasible to achieve above 70 per cent PLF after accounting for maintenance. This would translate into an additional 12 per cent energy production, obviating the need for nearly half the fresh capacity proposed and avoiding investment of about Rs 2.2 trillion.

The country could well save this capital, and utilise it to enhance the pace of renewables. Granted, there are challenges of grid management, especially as the rising solar generation leads to a thermal power surplus in the daytime, which in turn may result in lower PLF. This calls for investment in storage solutions. Recognising this, the draft NEP has stated that “the operation of coal-based plants in a more flexible mode unlike as base load stations earlier, needs to be emphasised in the wake of huge intermittency of renewable-based generation”. Let the draft NEP be more ambitious on fast forwarding storage, which is anyway a long-term solution for grid stability. Hence, investments avoided in fresh thermal capacity to the extent feasible could go into green-friendly solutions.

We now turn to the pit head versus load-centre location issue. The sudden rise in power demand in the post-Covid period and lower generation by imported coal-and gas-based plants (affected by geopolitical reasons) have tightened the power market. States are facing supply challenges and seem to be of the considered view that having their own capacity is the best option. Fresh capex infusion into buildings/power plants is politically savvy as it offers a good report-card on their governments. However, better (cheaper, too) options exist, and this is the “planning” the draft NEP ought to offer. These could be inviting offers from private developers who may set up capacity outside the state (Bangladesh is setting up a thermal plant in India for 100 per cent export to itself), contracting power from generators who may have untied capacity, and the like. If the state’s own generation company must invest, then why not explore the option of setting up capacity close to coalfields? We do know that transporting electrons over transmission lines is a cheaper option. With the strengthening of the grid, transmission should no longer be a constraint. The railways charge a fortune for transporting coal as they cross-subsidise passenger traffic from freight income, and coal is charged higher than other goods. Their haulage capacity ought to be used for manufactured goods and other loads, reducing the strain on their infrastructure. Imagine, if the dedicated freight corridor got occupied in hauling coal rather than manufactured goods for which it was intended!

The global commodities market, including for energy, is in turmoil. Every country is trying to secure its energy future and so should India. The unleashing of the coal sector has thrown up options that were inconceivable in the coal-scarce situation several years ago. Let this not lead to suboptimal solutions. India’s electricity future can, and should be adequately addressed by a well-conceived NEP.

Kacker is a former member of a high powered committee, Ministry of Coal, and Jain is former secretary, coal