Greenpeace Analyses Coal Revenues Suffer Rs 2,400 Crore Loss In 2016 Due To Drought

Greenpeace analysis reveals water scarcity, poor planning pose major financial risk

Add a comment
Feature story - June 13, 2016
June 9, 2016, Mumbai: The water scarcity crippling large parts of India has already cost coal power companies nearly 7 billion units in lost electricity generation, with an estimated revenue loss of Rs. 2,400 crore in the first five months of 2016 alone, according to an analysis by Greenpeace India presented today at a press conference in Mumbai.

The Greenpeace findings (1) have been independently reviewed by equity analysts at the research firm Equitorials.

Speaking at the press conference, Ravi Chellam, Executive Director of Greenpeace India said, “The coal power sector is already a water guzzler, consuming 4.6 billion cubic metres a year (2) - water that could have met the most basic needs of 251 million Indians (3). Shocking as these figures are, they will more than double if all proposed coal plants are built. We already know that the expansion of coal power will increase air pollution and deforestation; this data shows us that  it will also worsen the water crisis, posing a serious financial risk to lenders and investors in these projects.”

The Greenpeace analysis is based on daily outage reports from the Central Electricity Authority (CEA), and Right to Information replies from National Thermal Power Corporation (NTPC). Water shortages have led to coal power plant shut downs in West Bengal, Karnataka and Maharashtra. NTPC, Adani Power, GMR, Mahagenco and Karnataka Power Corporation are among the companies affected. Most of the losses have occurred between March and May, when plants have been unable to run due to a lack of water for cooling.

Equity Analyst Jai Sharda, Founder of research house Equitorials, concurred with the results, saying “It’s clear that water scarcity can have a real impact on the profitability of coal power projects. Project lenders and shareholders alike should look carefully at this; the power sector cannot afford more stranded projects or non-performing assets.”

As the analysis shows, repeated shutdowns at NTPC’s Farakka plant between February and April resulted in lost generation of over 1 billion units of electricity, translating into lost revenue of Rs. 390 crore. Shutdowns at Adani’s Tiroda power plant in Maharashtra in May have cost the company 570 million units of electricity, with a value of nearly Rs 200 crore. For most of the month of May, over 4 GW of coal power was shut down due to unavailability of water.

The Greenpeace analysis includes case studies of two regions where water scarcity poses a financial risk to new coal plants – Solapur in Maharashtra and the Krishna basin in Karnataka. NTPC’s Solapur power plant is facing commissioning delays due in part to uncertainty over water supplies. In Karnataka’s Krishna basin, NTPC’s Kudgi power plant and KPCL’s Raichur power plant were affected by lack of water this summer. More coal plants are being built in the water-stressed region.

Shripad Dharmadhikary from Manthan Adyayan Kendra cautioned that on current trends, water conflicts between industry and agriculture are bound to multiply. “Coal power plants are already in conflict with other water users across the country, especially in Maharashtra.  Despite this, we have central and state governments continuing to give permits for more coal power plants, even in water stressed areas. What is of concern is that the siting policy for thermal power plants - itself an outdated document from 1987(4)- does not even consider water stress as a criteria when deciding the location of a coal project.”

Since 2014, the Ministry of Environment, Forests and Climate Change has given final Environmental Clearance to 17GW of coal power plants, and first stage Terms of Reference to another 33 GW of new coal plants. The CEA’s April quarterly report shows 72GW of thermal power projects under construction (5) India’s energy projections made in advance of the Paris climate summit in December 2015 indicate another 300 GW of thermal power proposed by 2030.

“For financiers looking to invest in the building of these coal power plants, particularly in those areas that habitually experience water stress, the water crisis should set alarm bells ringing,” concluded Ravi, “In this era of worsening climate change, coal power is an expensive habit that we simply cannot afford: not just because of the high environmental and social costs associated with it, but also because of the massive financial risks posed by these plants’ dependence on vast quantities of ever-more precious water supplies.”

Notes:

1. URL of briefing: http://bit.ly/GreenpeaceCoalWater
2. Water Demands of Coal Power Plants in Drought Affected Regions of India https://secured-static.greenpeace.org/india/Global/india/cleanairnation/Reports/WaterdemandsofcoalpowerplantsindroughtaffectedregionsofIndiaFINAL.pdf
3. Based on the World Health Organisation’s estimate of the amount of water required - 50 litres per day - in order to meet the most basic hygiene and consumption needs per person. http://www.who.int/water_sanitation_health/diseases/WSH03.02.pdf (page 22).
4. Information obtained from Ministry of Environment, Forests and Climate Change, February 2015.
5. http://cea.nic.in/reports/quarterly/tpmii_quarterly_review/2016/tpmii_qr-04.pdf pg 26