The Hindu Business Line : Tough times ahead for Kayamkulam plant

IF the decision of the Kerala State Electricity Board not to draw power from high-cost thermal plants is any indication, NTPC's Kayalamkulam unit is in for serious problems ahead.

Its 350-MW naphtha based power plant has been non-operational from May for want of takers of power. The KSEB and the Tamil Nadu Electricity Board, which had agreed to lift 50 per cent each of the total power, are not taking it because of the high cost involved.

However, these Boards are paying the Corporation Rs 9.5 crore each a month towards the fixed cost share of the power plant set up at a cost of over Rs 1,300 crore, an NTPC source said. Naphtha price is ruling at higher levels and hence NTPC could not sell power at below Rs 4 per unit, which has been fixed by the Central Electricity Regulatory Commission (CERC) considering all the aspects relating to cost of generation, he said.

The unit cannot switch over to coal and the only solution is to use LNG as fuel and in that case gas should be available at affordable costs, he said.

A senior KSEB official pointed out that under the "merit order system" currently followed by the electricity boards, it could source as much as power needed from the Southern grid at low cost.

The KSEB would be drawing the allocated share fully in next fiscal from the Central Generating Stations, which would be increased to 1042.9 MW from the present 867 MW.

Besides, he said, with abundant rains this year the hydel projects were in a comfortable position with very good water storage. Given this situation, the state could go without high cost thermal power, he said.

The KSEB had already announced that it would not draw power from NTPC Kayamkulam and BSES, Kochi, next year also.

According to the official, net effect of the merit order system is that "costly generation will be pushed out". The thermal plants using "high-cost fuel such as naphtha would be compelled to go for LNG or dismantle the plant and take it away," he said.

Given this changing scenario, there are apprehensions that NTPC might not go ahead with the expansion of the Kayamkulam plant by 1950 MW as envisaged in the next Plan.

The main reason attributed is that NTPC had made it clear that "unless gas is priced at around $3 per mmbtu, the cost of power will soar, making it unviable for state electricity boards to purchase power".

Against this, the price of LNG from the proposed terminal to be set up here by the Petronet LNG is expected to be above $4 per mmbtu, PLL sources pointed out. Therefore, expansion of the Kayamkulam plant would depend on availability of LNG at around $3 per mmbtu on the one hand and regular takers of power from the plant after its expansion on the other.