Pulling the plug

Faced with the imperative of moderating coal use in India even as the fuel cannot, realistically speaking, be phased out, the NITI Aayog has drawn up an important ‘draft’ report on the prospects of coal in the coming decade. The report bases its projections on eight major studies, and points to a modest growth in coal-fired power through 2030, despite its share in electricity generated projected to fall from 72 per cent now to just over 50 per cent by then. With issues such as battery storage and grid integration remaining areas of uncertainty with respect to renewables, there can be no getting away from an absolute increase in demand for thermal-based power over the next decade as a baseload option. Therefore, the question of how to produce that electricity as efficiently (coal consumed per unit of power generated) and cleanly (low sulphur and carbon emissions) as possible becomes crucial. Some expert bodies which advise NITI Aayog on energy policy are of the view that coal-fired power should be drawn largely from new plants in order to meet these parameters, thereby scrapping old ones. There is, however, a broad consensus that no further projects should be planned. The NITI Aayog report clearly says that the extra electricity demand can be met from a coal-fired generation capacity of about 250 GW by 2030 (renewables accounting for the rest), against 210 GW at present, to be met from thermal projects in the pipeline. The report rightly observes that conceiving further thermal capacities will create a problem of stranded assets.

The question that needs to be squarely addressed is how many old plants should be phased out. The views of experts advising NITI Aayog on energy policy appear to diverge, even as the latter has called for a ‘thermal plants scrappage policy’. The National Institute of Advanced Studies has suggested the “progressive retirement of 36 GW of total capacity”, while the Council on Environment, Energy and Water recommends “30 GW of India’s coal-based capacity for accelerated decommissioning” and “temporarily mothballing a further 20 GW of relatively new capacity”. Scrapping plants which are over 25 years old will, according to CEEW, yield a one-time savings of over ₹10,000 crore in terms of avoided pollution retrofits. However, all old plants are not decrepit. There is the unmistakable benefit of these plants being fully depreciated. A study by Prayas Energy Group says that of the 46.6 GW of active capacity that was commissioned before 2000, 21.6 GW of capacity generates power at a variable cost of less than ₹2.5 per unit. The 19.8 GW of capacity that is uneconomical can be considered for closure. Pollution control equipment may be a viable option for the efficient units.

Going overboard in closing down plants brings with it a political risk — in the event of outages, the call to set up new thermal plants will increase, introducing further environmental and financial risks. A measured approach to the issue is the need of the hour.

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