Economy

Power companies seek more time to implement Flue Gas Desulphurisation system in thermal plants

Venkatesh Ganesh Mumbai | Updated on July 03, 2020

MSEDCL has suffered heavy losses as 60 per cent of its revenue comes from the industrial and commercial sector   -  Bloomberg

Risks remain over pandemic-led supply chain disruptions, Chinese imports

The Association of Power Producers (APP) has sought a deferment in timelines of 2-3 years for Flue Gas Desulphurisation (FGD) systems implementation in Thermal Power Plants (TPPs), as a result of disruption in supply chains and to counter Chinese imports.

APP has raised concerns over FGD implementation on the back of Covid-19 impact on supply chain and increased geopolitical risks around China. “The pandemic has caused havoc in the supply chain and there is a growing clamour for the boycott of products from Chinese companies.

The Chinese suppliers have scale and supply FGD equipment in large numbers,” noted APP, which represents power companies like Tata Power, GMR, JSW, Adani, among others. China contributes around 70-80 per cent of FGD systems. Implementation of FGD systems are mandatory as the Ministry of Environment Forest and Climate Change (MoEFCC) notification to curb SOx emissions in both existing and upcoming thermal power plants. FGD systems help in reducing emissions from coal-based thermal power plants.

APP is of the view that the timelines for implementation should be looked into by a committee, consisting of officials from the Power Ministry, Environment Ministry (MoEFCC) and CEA to examine each TPP on a case-by-case basis, and recommend specific revised timelines for each TPP based on individual status of progress.

The committee may first start with a thorough assessment of domestic FGD manufacturing capacity and ramp up potential, in order to accurately assess the extension required in the timelines, APP noted.

CEA data

Data from Central Electricity Authority (CEA), around 341 out of a total of 441 TPPs have not yet awarded tenders for implementation, underscoring the stress faced in FGD implementations. Further, the target for FGD commissioning was 37.61 GW by end of December 2020.

Of this, only 1.7 GW of TPPs have met their target and around 36 GW of TPPs will miss their deadline, thereby further loading the already strained FGD supply chain, pointed out APP.

Also, the Covid-19 pandemic has caused a dilemma for developers who are struggling to award FGD implementation contracts, which is delaying the implementation.

Such a high level of potential default across the Centre, State and private TPPs is not due to neglect by the power generation companies but due to regulatory hurdles and reluctance of banks to take on additional exposure to the power sector in the face of uncertainty of cash flows arising out of the existing and new investments to install FGD systems.

Also, many TPPs are awaiting dues from Discoms for the period prior to August 2019, compounded now due to Covid-19, stated APP.

These developments have created uncertainty — all Regulatory orders till date have mentioned EPC tenders to be carried out through International Competitive Bidding mode. With these developments, now developers will be in a dilemma whether to award a tender to a bidder from a source of origin where trust has been impaired and public sentiment is negative, stated APP. Further, in the cases where order has already been placed with Chinese manufacturers, there is uncertainty whether the contractor will be able to meet the pre-agreed timelines thereby pushing more projects to non-compliant status.

In the backdrop of all this, APP has sought FGD timelines to be deferred by 2-3 years, which would give the industry time to manufacture such systems completely in India.

Published on July 03, 2020

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