Companies

Sembcorp India awaits for clarity on cost recovery for upgrading thermal power projects

Twesh Mishra New Delhi | Updated on August 16, 2019 Published on August 16, 2019

Representative image   -  istock/zhangxiaomin

Sembcorp completes 450 MW of projects tendered by SECI

Sembcorp Energy India Limited is awaiting clarity from the Centre for recovering costs to be incurred while upgrading coal-based power projects to lower emissions. The Singapore-based Sembcorp Group operates 2640 MW thermal, 1390 MW wind and 35 MW solar energy projects in India. The company expects to add 350 MW of wind power generation capacity to be commissioned by December 2019.

It has called for bids to upgrade its thermal power project in Krishnapatnam, situated in Andhra Pradesh’s SPSR Nellore Districtfor complying with the new flue-gas desulfurisation (FGD) norms for thermal power projects.

The implementation of the norms implies a reduction in the emissions from coal-based power projects with an additional burden on the troubled projects that are already operating on thin margins.

“The timeline for meeting the FGD norms are strict but we will be meeting the timelines for our project. The Centre has recently clarified that capital expenditure for setting up FGD units and other equipment to lower emissions will be passed through to consumers, allowing generators to recover the costs incurred. But this clarification has come only for power purchases made under long term contracts. We are in the process of finalising the tenders for our FGD units. The Centre too is expected to soon clarify on cost recovery for the same from spot and medium term power market sales,” Vipul Tuli, Managing Director at Sembcorp Energy India said.

According to Tuli, around half of the Sembcorp Krishnapatnam thermal power project capacity is tied to long-term power purchase agreements while the rest is sold through short to medium term market sales as well as spot market sales. The project is running at a plant load factor (an estimate of the capacity utilised out of the total installed capacity) of 84 per cent. This is well above the 55 per cent or so average plant load factor reported by thermal power plants in the country. Tuli said that this is because the power produced is high on the merit order (This is because it is cheaper than other sources of power available to the power distribution companies).

“Since different power projects are adhering to different timelines for complying with the FGD norms, there may be a situation where power from a more efficient and cleaner power project is competing with others in the short to medium term and spot market. This would make it harder to recover the additional cost incurred,” he told BusinessLine.

Revised emission standards

The Ministry of Environment, Forest and Climate Change (MoEFCC) notified the Environment (Protection) Amendment Rules, 2015 on December 7, 2015. These rules had introduced revised emission standards for Thermal Power Plants. To meet the revised emission standards, these coal-based projects would have to install or upgrade various emission control systems like FGD system, Electro-Static Precipitators (ESP) system among others. As per implementation plan prepared by Central Electricity Authority (CEA), the existing thermal power plants are required to comply with the new emission standards by 2022.

Besides thermal, Sembcorp India is also investing in the renewable energy sphere. “We have commissioned 450 MW of wind power generation capacity from projects bid out by SECI (Solar Energy Corporation of India) till date. Of this, 250 MW was completed ahead of time from projects awarded under SECI 1. Another 200 MW has been completed from projects awarded under SECI 2 and SECI 3,” Tuli said.

“This phased commissioning is part of the 250 MW and 300 MW capacity respectively that Sembcorp won in the SECI 2 and SECI 3 wind bids,” he added.

“We are also planning to increase our footprint in the solar energy business and want to have a balanced portfolio of renewable energy in India,” Tuli said.

Published on August 16, 2019
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