Retiring older coal-generation assets could save Rs 37,750 crore: CEEW

Decommissioning of coal power plants that are more than 25 years old could lead to a potential savings of Rs 37,750 crore, indicated a study by the Council on Energy, Environment and Water-Centre for Energy Finance (CEEW-CEF). The report said out of India’s total installed capacity of 300 Gw, some 35 Gw of coal-based power plants can be decommissioned on priority.

“This could result in annual savings of Rs 7,550 crore over the next five years. These savings would be generated through avoided annual capacity or fixed-charge payouts, primarily towards operation and maintenance costs. Further, the savings would add up to a total of Rs 37,750 crore,” it said.

CERC in its tariff regulations of 2019 allowed discoms the “first right of refusal” for procuring electricity from power plants older than 25 years. Thereafter, last year in December, the ministry of power in a notification gave option to the power distribution companies (discoms) to continue or exit from power purchase agreements (PPAs) for projects that have completed 25 years of operation (or the tenure specified in the PPA with the central generating stations). To avail the same, the discoms would have to relinquish the entire PPA and not just a part of it.

Earlier this month, the CERC allowed BSES to approach the Union power ministry for de-allocating its share of electricity supply from NTPC’s Dadri-I generating station. The plant supplies power at an average cost of Rs 6.50/unit, making it one of the costliest power stations providing electricity to Delhi.

BSES is also in the process to cancel its PPA with six more thermal power generation units namely Unchahar, Farakka, Auriya gas, Anta, Kahalgaon and Dadri Gas power stations– all of them owned by state-owned power generator NTPC ltd.

States such as Punjab, Rajasthan, Madhya Pradesh have also applied to exit PPAs, mainly with the gas based power stations. These states claim that the PPA term has crossed 25 years and the power from these units is costly in the range of Rs 5-7 per unit. Gas based units in India are running on low domestic fuel supply and demand higher than average tariff in the country.

Vaibhav Pratap Singh, Programme Lead, CEEW-CEF, and the study’s lead author, said, “Estimating costs is a crucial first step for decommissioning. A suitable mechanism must be designed to ensure a just transition for all stakeholders in allied sectors such as coal mining and railways. Managing equity payouts, which contribute to around 29 per cent of decommissioning costs, would also be critical. This could help lower the eventual transition costs and allocate more resources for workforce payouts.”

The report further said, retiring 95 Gw of capacity could cost up to Rs 3.5 trillion to pay off debt and equity holders. Payoffs to the workforce costs could add another Rs 57,490 crore. “Freeing up capital through decommissioning will require innovative financial mechanisms. Once unlocked, these resources could be made available for India’s transition to renewables,” it said.

BSES which exited the thermal PPA with NTPC Dadri will replace it with 500 Mw of green energy.