Will India’s coal plants be left high and dry?

Thanks to the rise of low-cost electricity from wind and solar plants, a third of India’s coal power plant capacity is likely to be ‘stranded’. Since India has 197,171 MW of coal power, a third of it (65,723 MW) is quite a lot, and the big question is, what to do with them.

In 2017, most of the coal plants in the country produced, on an average, only 60 per cent of the electricity they could, and one of the bigger reasons was that the utilities were happier buying cheaper power from wind and solar. Experts calculate that if the capacity utilisation of a coal plant falls below 52 per cent — as is likely, with the rise of renewables — then the plant becomes fit to be shown the door.

Polluting coal is losing battle against clean energy even without imputing the costs of the pollution. But as Arvind Subramanian, India’s Chief Economic Advisor, pointed out last year, retiring a huge chunk of coal power plants will have its own effects on employment and economy.

However, not all is lost for coal plants, says a recent report of the Climate Policy Initiative, a US-based think-tank. CPI’s suggestion is: re-engineer the coal plant to make it “flexible,” so that it is used only for filling gaps in renewable energy production. After all, renewable energy’s biggest headache is its intermittency, for a wind turbine can send power through the lines only when the wind is blowing, and a solar module can do so only when the sun is shining.

‘Flexible coal’

The idea of using coal plants for grid-balancing is not new — bodies like the International Energy Agency have been advocating it for a few years now. Technically, it can be done. For example, the two plants at Moorburg, Germany, 800 MW each, (cited in the CPI report) have been converted to operate as flexible plants that can operate under 40 per cent of their capacity and still stay in business.

But the CPI study goes deep into the issue of Indian coal power plants, into aspects such as investments, costs and regulatory changes. It suggests “flexible coal” is a sensible thing to do. First of all, integration of large chunks of renewable energy into the grid calls for the creation of a source of power that can be switched-on and switched-off in quick time, to fill in gaps in clean power generation. Intuitively, one thinks of banks of batteries or ‘pumped storage,’ as the ‘filler’, but the CPI report calculates that batteries or pumped storage cost far more than the investments required to retrofit existing coal plants to make them flexible.

According to the Niti Aayog, batteries and pumped storage cost ₹14 crore and ₹11.4 crore per MW of capacity, respectively. As per CPI’s estimates, cost of doing up a coal plant to give it flexibility costs anywhere between ₹70 lakh and ₹2.3 crore a MW, depending upon the vintage of the plant and the extent of flexibility required.

Cost recovery

The CPI report recognises that “it is not a straightforward task to convert existing coal plants into flexible plants due to factors such as investments required for upgrades, policy environment specific to flexibility, incentive mechanism and manpower skills.” However, it could still be done.

Today, coal plants in the country operate on long- term power purchase agreements. The price they get for their electricity is the sum of a component for compensation for fixed and variable costs. But a flexible coal plant would need the covenants rewritten.

The electricity regulators (one for each State) need to calculate the compensation for flexibility on plant-by-plant basis. “This strategy could be gamed, resulting in not only higher compensation per plant but also selection of costlier options,” the report said.

It calls for the development of an “auction market for flexible coal,” allowing coal power generators to bid for opportunities to sell their flexible power.

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