Phasing out coal-based plants: The way forward 

Context: The world including India is making plans to decarbonise in context of the looming threat of climate change 

Challenges in achieving 500GW non-fossil fuel generation capacity by 2030

There are questions on the availability of the sufficient demand in the economy

Such a huge capacity of renewable generation needs grid stability.  

Renewable energy requires to be stored. Therefore, there is the issue of the projected cost of storage in the years to follow.  

DISCOM health: The private sector needs support of the distribution company to invest such a huge amount in renewable generation. But, DISCOMS may not be healthy enough to give confidence to encourage private investment. 

Concerns over general investment climate: Reopening power purchase agreements (PPAs) and delaying the dues of the renewable generators has brought in bad publicity.

Status of Coal based power sector in India 

As of January 2022, India coal-based electricity generation capacity stands at 203 GW). Out of total, 31% of the capacity is in the central sector, 33% is in the state sector and 36% is in the private sector.  

How to phase out India’s coal-based plants to decarbonise the power sector?  

We need to fix a criterion on the basis of which coal-based plants would be phased out.  It can be done on the basis of –

Age of the coal plant:

– The argument against decommissioning coal plants reaching 25-years of age is that the station heat rate (SHR) of a properly maintained plant running at good capacity does not become adverse over time. The SHR provides the calorific value of coal required for every unit generated. So the lower the SHR, the more economical is the plant. This means an older plant is economical

Station Heat Rate (SHR)

– Phasing out could also be considered on the basis of the SHR. All plants above a certain SHR could be decommissioned since they are relatively more inefficient. However, this may lead to an increase in the total generation cost because many pithead plants would get decommissioned necessitating transporting coal to longer distances. Coal transport is expensive and at long distances the cost can go up by 30 to 40%.

However, there will be savings since a higher coal cost will be offset against an increased efficiency as high SHR plants would be decommissioned.

Merit-order dispatch

– In a merit order scheme, all plants are compared on the basis of their variable cost, lowest to highest. Since we have more capacity than we actually need, the high variable cost plants are not used at all. The discoms still have to pay the fixed cost of such plants. So one could explore the option of decommissioning these high cost plants as one possible criterion.

Challenges in decommissioning of coal plants 

33% of the coal capacity is in the state sector and the central government does not have the authority to decommission a state plant. The state govts, may not be willing to decommission inefficient plants due to political concerns as doing so may lead to large scale unemployment.

What is the way forward?

There is a need to immediately decide on the criteria to be adopted for decommissioning coal-based plants 

The addition of renewable capacity and decommissioning coal-based plants should go hand in hand.  

40 GW of renewable capacity must be added each year between now and 2030 to fulfil targets. 

Source: The post is based on an article “Phasing out coal-based plants: The way forward” published in the Business Standard on 24^th Mar 22.