Closing down old thermal plants in 11 key States could save ₹53,000 crore: Report

Savings will accrue from not having to spend on retrofitting them to reduce the toxicity of their emissions, say authors.

Representational image.

Shutting down thermal power plants older than 20 years in 11 key States can save the exchequer ₹53,000 crore over five years, says an analysis by Climate Research Horizon. The savings will accrue from not having to spend on retrofitting these plants to reduce the toxicity of their emissions, as well as switching to renewable energy, the authors estimate.

These projections also come at a time when India has announced plans to auction 41 coal mining blocks in an ostensible bid to be less reliant on imported coal.

Financially stressed discoms

Several of the power distribution companies (discoms) are financially stressed though India has surplus power generation capacity. While free power for agriculture and power theft are one reason, the authors opine, another is that several States have installed capacity based on projections that are far in excess of actual requirements.

“This has resulted in huge over capacity in the electricity system, and disproportionate fixed cost obligations for many discoms. In conjunction with delayed payments from cash-strapped government entities and the requirement to provide free and subsidised power to significant segments of their customer base, this has been a recipe for disaster,” note authors Ashish Fernandes, CEO and Lead Analyst, CRH, and Harshit Sharma, Lead Researcher.

In her Budget speech in February, Finance Minister Nirmala Sitharaman announced that utilities would be urged to shut down old and polluting power plants to meet air emission norms.

The 11 States analysed were Andhra Pradesh, Bihar, Chhattisgarh, Gujarat, Karnataka, Madhya Pradesh, Maharashtra, Tamil Nadu, Telangana, Uttar Pradesh and West Bengal. They together account for nearly half of discom dues.

The surplus generation capacity notwithstanding, an additional 60,000 MW thermal power is officially under construction across the country, with another 29,000 MW in the proposal/permitting stage. Of this, 17,235 MW is likely to be completed by 2022 in these States.

Short term pain

The average cost of coal-fired projects is ₹4 per unit and generally sees an upward escalation whereas new solar power plants are being bid out at less than ₹3 per unit, again, a reason, the authors say for States and private players to exit coal plants.

There could be “short term pain”, the authors warn, from shutting down plants. Such pain incurred from these measures is like some lenders having to forego income from outstanding loans due to the renegotiation of fixed costs, or government owned generators having to shutter a plant earlier than expected. “This however should be viewed against the significant savings that will accrue to discoms and consumers.”