Win-win: India can save 54,000 crore in power costs and reduce air pollution by replacing expensive coal plants with renewables

Press release - December 21, 2017
India’s coal power tariff data shows that replacing the most expensive coal power plants with electricity generated by solar photovoltaic’s (PV) and wind can save discoms and consumers up to 54,000 crores ($8.3 billion) annually.

New Delhi 21 December, 2017 | New analysis1 of India’s coal power tariff data shows that replacing the most expensive coal power plants with electricity generated by solar photovoltaic’s (PV) and wind can save discoms and consumers up to 54,000 crores ($8.3 billion) annually. Focussing only on replacing older (>20 yrs), expensive plants can still yield 20,000 crore ($3 billion) in reduced power purchase costs annually.

This analysis, undertaken by Greenpeace India, compared 2015-2016 tariff data published by the Central Electricity Authority2 against an assumed renewable energy tariff of Rs 3/kWh. New tariff bids for solar PV and onshore wind have dropped well below Rs 3/kWh, with solar PV reaching a record low of 2.443 and wind reaching a record low of 2.644

Commenting on the analysis, Greenpeace campaigner Ashish Fernandes said, “It’s now widely accepted that new coal power plants are not financially competitive with new renewables in India5. Our analysis shows that significant cost-savings can accrue to the country and to cash-strapped discoms through a planned phase out of the most expensive coal power plants already in operation and their replacement with cheaper renewable energy.”

“This will lower average electricity purchase costs across the economy, benefiting domestic and industrial consumers alike, as well as reducing subsidy burdens on state discoms. Shutting down the oldest and most expensive coal power plants will also yield environmental and social benefits by reducing coal consumption and air pollution, which is killing thousands every year.”

The analysis’ key findings are:

  • Nearly 2/3rds of India’s coal power generation is no longer price competitive with electricity from new solar PV or wind projects.
  • At least 65% of India’s current coal power generation, representing 94GW of India’s total coal capacity of 194GW, is being sold to distribution companies at rates higher than tariffs that can be expected from new renewable energy projects.
  • Of these 94GW of uncompetitive coal plants, about 30GW is above 20 years old.   
  • Replacing older, more expensive coal power plants with solar PV and/or wind energy can yield cost savings of approximately 52,000 crores ($8 billion) per year, assuming an average tariff for new RE projects of Rs 3/kWh.
  • Replacing expensive power plants over 20 years of age first would yield an annual reduction in power costs of at least 20,000 crore ($3 billion).

For example, NTPC’s Dadri power plant (Unit 1 & II) is over 20 years old and sell power at Rs.4.50 and Rs.5/unit respectively. The heavily polluting Badarpur power plant sells power above Rs 5/unit. In Punjab, the Ropar power plant has a tariff of over Rs. 6/unit. All these power plants play a significant role in the air pollution crisis gripping north India.

Greenpeace India’s Nandikesh Sivalingam commented on the analysis: “These numbers are conservative as the price of power from coal is only going to increase in the future. Virtually all of India’s coal power plants are in violation of the new air pollution standards and the Supreme Court and Green Tribunal are monitoring this closely. These plants still have to incur substantial retrofitting costs to ensure legal compliance, costs that will reflect in the tariffs sooner or later.”

Coal India is also likely to raise its coal prices, having seen its costs rise and margins squeezed.6 At the same time, further cost reductions for solar PV and wind are expected, by 47-66% in the case of onshore wind and solar PV respectively.7  

Fernandes said, “For many plants, a phased shutdown and replacement with renewable energy will be more economically viable than retrofitting. When viewed through this lens, a planned phase out of the older and more expensive coal plants becomes an economic boon and a social necessity, rather than an environmental luxury.”

  Coal Power Plants selling electricity above Rs3/kWh Coal Power plants selling electricity above Rs.3kWh & older than 20yrs
Installed capacity 94GW 30GW
% of total coal capacity 48% 15%
Generation (million kWh) 456351 140315
% of total coal power generation 65% 20%
Potential annual savings from replacement with RE 54,730 crores ($8.3 billion) 20,486 crores ($3 billion)

 

NOTES:

  1. Link to Analysis
  2. Central Electricity Authority, Rate of Sale of Power, Monthly Executive Summary October 2017
  3. http://pib.nic.in/newsite/PrintRelease.aspx?relid=161755
  4. http://www.livemint.com/Industry/sMC62YoWv4LybaPZnKivMM/Indias-wind-power-tariff-falls-to-a-record-low-of-Rs264-pe.html
  5. Accelerating India’s Clean Energy Transition, Novemeber 2017, BNEF
  6. https://economictimes.indiatimes.com/industry/indl-goods/svs/metals-mining/cil-mulls-increase-in-prices-to-meet-rise-in-wage-costs/articleshow/61679592.cms
  7. https://about.bnef.com/blog/global-wind-solar-costs-fall-even-faster-coal-fades-even-china-india/

For more information:

Madhulika Verma, Cell: +91 99711 37736
Ashish Fernandes (Author),
Nandikesh Sivalingam, Cell: +91 96864 50785