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On verge of retiring, thermal power producers not keen to invest

According to guidelines by the CEA, coal-based thermal power projects that have completed 25 years of operations are to be retired

Jayajit Dash  |  Bhubaneswar 

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Thermal producers that are three to four years shy of reaching the retirement age are not keen on investing in technology upgrade to meet the latest emission norms notified by the Ministry of Environment, (MoEF&CC).

The ministry guidelines mandate thermal projects to invest Rs 1-1.2 crore per Mw in installing latest equipment to meet the norms to mitigate pollution. The deadline originally fixed for compliance is the end of December this year.

Older coal-fired generating units are hesitant to make capital investments. Since they run the risk of being retired after three to four years, any additional investment appears imprudent. Facing stiff competition from renewable energy sources, especially solar in tariffs and cost of production, thermal plants feel they should not be burdened with additional investments.

"No thermal producer would like to commit on unviable investments at a time when competition from renewables is getting intense. Also, the imminent retirement after a few years for projects nearing that age would make that investment useless as it cannot be recovered in such a short span”, said an official with an Independent Producer (IPP).

According to guidelines by the (CEA), coal-based thermal projects that have completed 25 years of operations are to be retired. Alternatively, they can switch to super critical technology to still continue operations. But, the switch to the super critical technology seeks to escalate capital cost by 20-25 per cent.

Across the country, 40,037 Mw of thermal capacities were commissioned before 1993 and are headed for orderly closure, marking the end of inefficient, sub-critical plants.

In Odisha, thermal units of NTPC and state owned Odisha Generation Corporation (OPGC) are staring at retirement. In Odisha, two 500 Mw units of NTPC Kaniha station were commissioned in 1995 and 1996. Similarly, state owned OPGC commissioned its first two units of 210 Mw each in 1994 and 1996 respectively.

"For OPGC alone, the burden works out at about Rs 800 crore for upgrading the two old units. The investments on upgrading the units look unfruitful as OPGC has already sunk in sizeable investments on new, super critical units”, said an Odisha government official.

The Union ministry had earlier discussed a proposal to research ultra super critical technologies. But, the upgrade from sub critical to ultra super critical technology is fraught with 40-50 per cent capital cost escalation and retains stranded asset risk.

A report by US-based (IEEFA) says considering ongoing solar and wind cost deflation running at more than 10 per cent annually, the stranded asset risk of investing in new HELE (High Efficiency Low Emission) coal-fired plants is already stark with commercial viability highly questionable.

First Published: Tue, December 12 2017. 20:28 IST