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Friday, September 9, 2011

The coming capacity glut

Thermal power generation capacity in India is set to expand massively. Data from the ministry of environment and forests (MoEF) analysed by the Prayas Energy Group shows that the ministry has accorded environmental clearances to a large number of coal- and gas-based power plants whose capacity totals 192,913 MW. Another 508,907 MW projects are at various stages in the environmental clearance cycle, that is, they are either awaiting environmental clearance, or have terms of reference (TOR) granted, or are awaiting TOR.
It is extremely rare for a thermal power plant (TPP) to be denied environmental clearance. This means that there are around 701,820 MW of coal and gas plants waiting to be built in the coming years. Of these, coal-based plants account for an overwhelming 84%. Private sector accounts for 73% of all projects in the pipeline.
The very scale of this expansion, depicted in graph 1, has serious implications.
These additions are three times the capacity addition that would be needed to meet the needs of the high renewables-high efficiency scenario for year 2032 projected by the Planning Commission’s Integrated Energy Policy report. In the near term, with the Planning Commission proposing around 70,000 MW of thermal capacity addition in the 12th Plan, just the capacity already granted environmental clearance is 2.75 times the target.
The projects are likely to have severe social and environmental impacts. Major pollutants from coal-based plants include sulphur dioxide, mercury and ash. The MoEF has not mandated sulphur removal equipment except for a handful of plants that account for barely 3.2% of the plants given clearance. There are no ambient air quality standards for mercury, nor any limits on mercury emissions from power plants.
The MoEF now stipulates 100% utilisation of coal ash within four years of plant commissioning, but the capacity of plants to do so remains doubtful. Meanwhile, ash disposal in ponds or dumps continues to create pollution and health problems for locals. A cause for concern is that a large number of the proposed plants are located in the vicinity of areas identified by the MoEF as critically polluted.
Many of these impacts are likely to be exacerbated due to the geographical concentration of power plants. Only 30 districts will have more than half of the proposed plants, with their capacity adding up to about 380,000 MW. Fifteen districts each have plant capacities adding up to 10,000 MW or more. Several of these are adjoining districts, and hence the actual concentration of power plants would be higher than that revealed by the district-wise figures.
Apart from the environmental impacts, the projects will have significant implications in resources like land, water and coal.
These projects will require large areas of lands and massive supply of water. With water being an intensely local need, the macro level water balance is not as important as the local situation, which may be that of water stress. Moreover, the availability of water varies through the year, and it may be difficult to provide water to power plants in some parts of the year, like the summer. Given this a number of potential water conflict situations appear to be in the making.
While India is said to have abundant coal, the country has not been able to achieve the required production from these reserves, and a steep rise in imports is forecast for the end of the 12th Plan. Partly as a result of this, coal allocations being made to various coal plants are already in the nature of spreading this resource thin.
Crucially, land for such plants is invariably acquired compulsorily by governments by using the Land Acquisition Act (LAA), which allows forcible acquisition for a public purpose. With an excess capacity not serving any “public purpose”, the use of the LAA to acquire land for such projects cannot be justified.
With the delicensing of thermal power generation, it is now assumed that the market will weed out excess and inefficient capacity. However, a market-based weeding out process will be littered with many incomplete projects which would have displaced people, impacted the environment and locked up financial resources, creating stranded assets of plant and transmission facilities. The costs of such weeding will be borne, to a extent, by the common people, the country and the environment.
Hence, it is important to step in with purposive and deliberately directed interventions to completely revamp the environmental clearance procedures of power plants, to ensure a coordinated approach of different agencies for optimising fuel, land and water allocations for different projects and to reassess the long-term demand for power and measures to meet this demand optimally. Pending such a process, there is a clear case for a moratorium on any further environmental clearance to new power plants, including the 500,000 MW in the clearance pipeline, and for putting on hold those with high impacts, low local acceptance and sub-optimal use of land, water, fuel and transmission from those already given clearance.
This will be crucial in restoring balance and basic good governance processes in the development of thermal power.

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