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Tangedco open to reviewing need for new coal projects

M Ramesh Chennai | Updated on March 02, 2020

Utility will take a decision based on cost edge versus ‘solar plus storage’

Tamil Nadu’s state-owned electricity generation and distribution company, Tangedco, is open to reviewing the need for new coal-fired projects, if there is a clear trend showing that the cost of energy from ‘solar plus storage’ plants is lesser than that of coal.

“We are collecting data. If the trends show clearly that RE+storage is cost effective, the government may have to review new coal projects,” a senior official of Tangedco told BusinessLine.

Recent capacity auctions show the beginning of such a trend. In January, the government of India-owned SECI closed a tender to purchase electricity from RE+storage plants wherein the bidders could quote different prices for peak and non-peak time power supplies. In a jaw-dropping development, the weighted average tariff of the winning bidders came in at ₹4.04 (5.7 cents) a kWhr (Greenko, 900 MW) and ₹4.30 (6 cents) a kWhr (ReNew Power, 300 MW). In contrast, new coal-based projects cannot afford to sell power to utilities at less than ₹5 a kWhr.

Tangedco, a utility that is deeply in the red, with 2017-18 losses at ₹7,760 crore, is constructing five new coal-based power plants of total capacity of 5,700 MW; and it proposes to build seven more to add another 13,300 MW.

While there is no going back on the ongoing projects, they being in advanced stages of construction, the proposed seven could be reviewed, the official said. He, however, stressed that Tangedco would not rush to cancel the proposed power plants because it is “too premature” to take such a call. “At the moment, it is too big a risk to keep coal projects in abeyance, but we have an open mind,” he said.

For sure, Tangedco is not the only utility that is putting up coal-based power plants—utilities of several states have similar plans. After all, the cost of RE+storage power going so low is a recent development. Experts, such as Pranav Mehta, Chairman of National Solar Energy Federation of India, have been quick to point out that coal power is pricing itself out of the market.

Tangedco’s five ongoing plants of 5,700 MW are estimated to cost ₹48,410 crore or ₹8.49 crore a MW of capacity. This will inevitably put a heavy capital charge on the tariff. And then there is the cost of purchase of coal.

In course of time, users of coal would need to price-in carbon dioxide, which will make coal power even costlier. On top of these, many financiers are refusing to lend to coal projects due to concerns of global warming. Though Indian financiers, who typically lend to state-owned utilities, have explicitly declared they would not lend to coal projects, many experts observe that it is but a matter of time before they do so.

Pending dues

Meanwhile, Tangedco hopes to clear its dues to wind and solar companies soon, as it expects a favourable response from the central funding agencies such as PFC, IREDA and REC for a bridge loan.

Tangedco has told the funding agencies that they may pay Tangedco’s creditors directly; Tangedco would take the loans on its books.

The utility has requested for about ₹2,000 crore for immediate payment. Tangedco owes around ₹2,000 crore to renewable energy companies and around ₹14,000 crore overall to its power suppliers and other contractors.

In response, the central government has asked Tangedco for a clear road map detailing how the utility intended to improve its financial position and pay back the loans. To this, the State government has given a letter of comfort stating that it stood fully behind Tangedco and requested the financiers not to “put the squeeze on Tangedco”.

 

Project

Capacity

Cost of the project

Cost/MW of capacity

 

MW

Rs crore

Rs crore

 

Ennore TPS

1 x 660

6,380

9.66

 

Ennore SEZ

2 x 660

9,800

7.42

 

North Chennai

1 x 800

6,376

7.97

 

Uppur TPS

2 x 800

12,778

7.98

 

Udangudi

2 x 660

13,076

9.90

 
     

Total

5,700

48,410

8.49

 

 

Published on March 02, 2020

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