Fuelling power

Businessworld
Kandula Subramaniam

India has an installed power generation capacity of slightly over 145 gigawatt (GW). Of this, over half, or 77 GW, is in thermal coal projects and another 59 GW in gas/liquid fuel power projects. While nuclear power capacity adds up to 4 GW, the balance is in the form of hydro and other renewable energy projects. At one level, the government promises to add over 780 GW of fresh capacity during the current Eleventh Plan, but even the existing assets are being underutilised due to fuel shortage. And a coal and gas shortage threatens to aggravate this by delivering substantially less than the 145 GW installed capacity.

This month, of the 77 coal-based plants, the number of plants with less than a week’s stock of coal stood at 48, and those with less than four days’ stock - dubbed as critical - stood at 25.

It gets worse when it comes to gas-based stations. Take, for instance, GVK’s new 220-MW Jegurudau power plant in Andhra Pradesh, which is ready but there is no gas supply. Commissioning of two other 909-MW stations (Gautami and Konaseema) is held up due to gas shortages. Documents accessed by BW show that the 41 gas/liquid fuel-based power projects — spread across the private and state sectors — barely get 58 per cent of their fuel requirements.


Despite all efforts by the Centre to revive the erstwhile 2,000-MW Dabhol power project (now called Ratnagiri Power) directly under the supervision of the UPA government’s first empowered group of ministers chaired by Pranab Mukherjee, the project still does not have an assured source of gas supply for the entire unit.

Ratnagiri Power (Dabhol) still does not have assured gas supply (Pic by Sanjit Kundu)

Some power plants such as Kayamkulam (350 MW) in Kerala; Maithon (90 MW) in Jharkhand; Basin Bridge (120 MW) in Tamil Nadu; Tanir Bavi (220 MW) in Karnataka; and the 174-MW Cochin project in Kerala are awaiting supplies that would allow them to switch over to natural gas from otherwise expensive alternatives such as naphtha.

Power tariffs are split into two components: fixed and variable charges. While the variable charge is dependent on the fuel consumption, the former takes into account return on equity, debt servicing requirements and operation and maintenance charges. In the event an alternative fuel is not allowed by the concerned state government, the contract period would be reworked and the time period would be extended to allow the recovery of the fixed costs. That way, the fuel risk and even the payment obligation are going to be borne by the final consumer.

Vote-bank obsessed politicians give priority to fertiliser plants and LPG extraction units from available fuel, leaving gas for power stations at third place.

Nuclear Power

Before the signing of the nuclear deal, the nuclear fuel shortage had forced the Nuclear Power Corporation to slash production of power to half of the plants' capacities.

The nuclear power industry has been a government monopoly; there will be influential voices within the government that will want to keep it that way. The current reactors will remain with the government, and it would make sense if the government expanded its programme with foreign technology to a certain extent, since it is important to keep the official nuclear establishment up-to-date. But much faster expansion of generation capacity can be achieved if the private sector is brought in at this stage to import and learn technology and construct atomic power stations.



It would be a good idea to choose half a dozen firms, contract them to build nuclear power stations, and leave them free to make or buy the technology, subject to technical supervision from the Atomic Energy Commission.

The French minister of state for foreign trade, Ann Marie Idrac, is currently in New Delhi to enhance trade between the two countries. With 58 standardised nuclear power reactors, France today has a leading and unique position in the world, thanks to the scale and continuity of its nuclear programmes, particularly in terms of safety and operational records. He said, "In 1998, France initiated the political process that led to the NSG granting an exemption to India on September 6, 2008. The successful completion of the process now offers India the possibility of cooperating fully with France on all aspects of civil nuclear energy, including the supply of equipment, nuclear material and reactors to India."

Low carbon economy

Three of the world's largest polluters — the US, China and India — still don’t see climate change as an economic opportunity. Instead, they resist cutting climate change-causing greenhouse gases on economic grounds. The troubling reality is that China (6.2 billion tonnes per annum) and India (1.34 billion tonnes) are the world’s lar-gest and fourth-largest carbon dioxide (CO2) emitters. The US is second with 6 billion tonnes and Russia third with 1.5 billion tonnes. But China’s and India’s emissions are growing at 11 per cent and 6 per cent a year, as opposed to US’s 1.7 per cent, and India will cross Russia by 2015.

In India, more than 60 per cent of business leaders feel the country should lead the way in green initiatives, says consultancy firm KPMG, which estimates this to become a $3-trillion industry by 2050. For example, GE’s Ecomagination initiative, which began in 2005 with 17 products and $700 million in research, today has 60 green products with $17 billion in revenues and $1 billion in R&D.

High Emissions Industries

For India to agree to cuts in carbon emmissions, western countries must transfer the latest clean technologies, such as hybrid car engines or energy-efficient machines, at subsidised prices. New Delhi must also press international donors, such as the World Bank, to provide subsidised capital to invest in these technologies.

From government estimates, coal-based power generation, which supplies 53 per cent of India’s total power (77GW) and emits 51 per cent of its CO2 (638 million tonnes), is India’s most polluting industry. To clean the power industry, players such as NTPC, Tata Power, Reliance Energy and Lanco must look at two things — next-generation supercritical boilers and renewable energy (RE) such as wind and solar power.

Supercritical boilers are manufactured by BHEL. Larsen & Toubro (L&T) has already invested Rs 300 crore in a plant in Hazira. Back-of-the-book calculations show that India’s 30,000-MW ultra mega power projects alone are a Rs 99,000-crore market for supercritical technology.


"Solar energy will provide 70 per cent of all our energy needs by 2100," says K. Subramanya, CEO of the Rs 670-crore Tata BP Solar. Likewise, wind power could add up to 100 GW — or 69 per cent of India’s current generation capacity — to the electricity grid, says Sanjeev Ghotge of the World Institute of Sustainable Energy.

The downside is that solar and wind energy cost Rs 20 crore per MW and Rs 5 crore per MW respectively, while coal costs Rs 3 crore per MW. Better tax breaks and higher feed-in tariffs such as those offered by the US and Germany, can boost renewable energy. A national solar mission will rapidly increase solar power’s contribution to the national grid — currently less than 0.5 per cent. There is also money to be made in building a more efficient power transmission grid.

About 30 per cent of a steel plant’s operating costs are for power, which is why Shishir Tamotia, CEO of Ispat Energy, invested Rs 84.7 lakh to maintain a steady blast furnace temperature, recover waste heat and gas, and install energy-efficient lights and air conditioners.

Transport generates 10 per cent of India’s emissions. With annual car sales expected to quadruple to 4 million by 2020, emissions will also increase. Now, car makers are investing in electric, hybrid and hydrogen vehicle research. In India, Bangalore-based Reva already makes the world’s best-selling electric vehicle (EV), and Mahindra & Mahindra and Tata Motors are also chasing the market with research in EVs and hybrids.

In India, a range of taxes — not counting import duties — raise cars’ basic cost by at least 20 per cent. If these taxes are waived for clean cars, their prices could match conventional-fuel vehicles.

Homes and SMEs

The US Green Buildings Council says American homes and offices contribute 38 per cent of the US’s CO2 emissions. India’s figures are lower because heater and air conditioner usage is lower. Even so energy-efficient buildings cost 5-10 per cent more, but they pay back within 3-4 years.

Companies such as Trane and Shristi Infrastructure are chasing what the Confederation of Indian Industry (CII) estimates will be a $4-billion market by 2012 for green buildings in India.

Earlier, consumers wanted cheaper products. So, retailing giants such as Wal-Mart went to China for these. Now, they want environment-friendly products. "Indian companies will be able to supply these," says David Wheat whose aptly named consultancy HaraBara Inc. helps SMEs transit to low-carbon mode.


However, Malini Mehra, director of the Kolkata-based Center for Social Markets, says SMEs (small and medium enterprises), which contribute upto 60 per cent of India’s GDP, need guidance. "They don’t have access to information or a clear and supportive policy environment that encourages transition to a low-carbon economy," she says.

India’s old-world economy needs new thinking to escape the trap set by high oil and commodity prices as well as the looming dangers of a high-carbon economy. India’s best bet is to get future engineers, managers and social workers to think green. The recently created Indian Youth Climate Network is one such initiative that will encourage inter-disciplinary thinking among the youth. "A strong green workforce will prevent the developed world from reaping all the benefits of clean and green economic development," says Ernst & Young partner Sudipta Das, adding that this would help Indian companies compete better internationally.

Businessworld
Pierre Mario Fitter and Alexis Ringwald