The high cost of meeting pollution standards

India’s thermal generation sector is weighed down by non-performing assets worth $40 billion-$60 billion, according to a study by Institute for Energy Economics and Financial Analysis (IEEFA), a think tank.

The reasons are many: low-cost tariffs for renewable power (Rs 2.50-Rs 3 per unit vs. Rs 4-Rs 4.50 per unit for thermal); fuel supply; land acquisition issues; outdated technologies; failure to sign power purchase agreements (PPA) with state distribution companies are some of the main ones.

The problem of the coal-fired power plants has been further compounded by a 2015 order from the Ministry of Environment, Forest and Climate Change (MoEFCC), legislating new standards to limit the concentration of sulphur dioxide (SO2), nitrogen oxides (NO2), particulate matter (PM) and mercury (Hg).

The earlier deadline of December 2017 was allowed to die a natural death because no thermal plant had installed the necessary equipment. The new deadline of 2022 too is likely to be missed by many companies because of their inability to pass on the higher cost of generation to the distribution companies. After all, it was only in December 2017 that the Central Electricity Authority published technical guidelines on flue gas desulphurisation, the tech used to remove SO2.

A recent study by the International Institute for Sustainable Development (IISD), Global Subsidies Initiative (GSI), and the Council on Energy Environment and Water (CEEW) called “India’s Energy Transition: The Cost of meeting air pollution standards in the coal-fired electricity sector” shows that the capital expenditure required to install SO2, NO2, and PM pollution-control technology is estimated at Rs 86, 135 crore. And if some old plants are retired by 2027, because of their inability to fix such installations for any reason, then the cost will come down to around Rs 73,176 crore.

A deeper analysis of the cost for retrofitting flue gas desulphurisation will constitute 81% or Rs 67,416 crore of the total capital requirement, while NO2 control technologies like over-fire air burners account for 16% or Rs 15,430 crore and the electrostatic precipitators for particulate matter accounts for 3% or Rs 3,289 crore.

Hence, installing such pollution-control mechanisms come at a cost. “This will add between 32 paisa and 72 paisaper kilowatt hour to coal- based power plants to their existing tariffs(or around 9% to 21% to their average generation tariff) depending on the size of the units and other factors,” says the report.

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