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  1. 1. NTPC OPEN COMPETITION FOR EXECUTIVE TALENT ENSURING AFFORDABLE FUEL SECURITY FOR NTPC Itee Aggarwal (Team Leader) Anoop Kumar Sharma Santosh Kumar Verma Saroj Yadava NTPC Rihand No. of Words: Date of Submission: Sign:
  3. 3. OVERVIEW ENERGY SECURITY Energy security has been an important global policy issue for over four decades now, since the first oil crisis in the 1970s. According to the International Energy Agency’s (IEA’s) World Energy Outlook (WEO-2012) published in November 2012, the global energy demand is likely to grow by more than one-third over the period to 2035, with China, India and the Middle East accounting for 60% of the increase. Thereby, Energy security becomes a pertinent issue for a country like India where the dependence on import is increasing steadily. Energy Security, as defined by the Integrated Energy Policy of India, encompasses three critical dimensions: a) meeting India’s large energy demand to sustain an annual economic growth rate of 8 to 9 percent through 2031-32, b) meeting lifeline energy needs of all citizens to address social development, health and safety of the energy poor, and c) to ensuring sustainability in energy supply and use. In the current context energy security also encompasses an overlapping element of energy efficiency across all aspects related to energy security. Energy Security thus entails a complex set of coordinated initiatives and the need for energy strategies, policies and regulations to align in making specific choices for the country in charting a lowcarbon and energy-secure growth path for the country. India is the fourth largest primary energy consumer, after China, USA and Russia and it accounts for more than 4.6 % of total global annual energy consumption. In the last five years, India has averaged a growth rate of 8% and the demand for energy has been putting pressure on its supply sources. It is an established fact that if India continues to grow at 8% or so in the coming years a higher than average demand for energy will persist. Page 1
  4. 4. Figure 1: Energy Security Aspects Page 2
  5. 5. INDIAN POWER SECTOR AND NTPC The Indian power sector consists of a mix of power plants depending on different primary fuels, including conventional sources like coal, lignite, natural gas and oil, hydro and nuclear power as well as nonconventional sources like wind and solar power, and agricultural and domestic waste. However, coal remains the dominant primary energy source used in power generation accounting for 67 per cent of total generation. According to the Planning Commission (Government of India), an important gain in the 11th Plan was the ramping up of the pace of capacity addition. The 11th Plan aimed at an additional capacity of 78,700 MW but the actual achievement during the plan was 54,964 MW. This was 30 per cent lower than the original target but more than twice the addition achieved in the 10th Plan. Table 1: Installed Capacity Addition during the 11th Plan (MW) Type Target Actual Central State Private Total Central State Private Total Hydro 8,654 3,482 3,491 15,627 1,550 2,702 1,292 5,544 Thermal 24,840 23,301 11,552 59,693 12,790 14,030 21,720 48,540 Nuclear 3,380 — — 3,380 880 — — 880 Total 36,874 26,783 15,043 78,700 15,220 16,732 23,012 54,964 Source: Central Electricity Authority Table 2: Total Generation Capacity As On March 31, 2012 (MW) Hydro Thermal Nuclear Renewables Total Centre 9,085.40 45,817.23 4,780.00 0.00 59,682.63 State/UTs 27,380.00 55,024.93 – 3,513.72 85,918.65 Private 2,525.00 30,761.02 – 20,989.73 54,275.75 Total 38,990.40 131,603.18 4,780.00 24,503.45 199,877.03 Source: Central Electricity Authority Page 3
  6. 6. The actual cumulative power capacity as on March 31, 2012, was 199,877 MW which included 24,503 MW of renewable sources of energy. More importantly, the pace of capacity addition picked up in the 11th Plan and there is, at present, about 90,000 MW of generation capacity under construction which would achieve commercial production in the ongoing 12th Plan (2012-2017). If these projects proceed to completion as scheduled, and a strong effort is made to initiate new projects in the first year of the 12th Plan (2012-13), India could reasonably expect to achieve capacity addition of 80,000-100,000 MW in the entire 12th Five-Year Plan. Page 4
  7. 7. NTPC Limited, India’s largest power generating company having an installed capacity of 41184 MW, after having declared a capacity addition of 4170 MW and an addition of 4830 MW in its commercial capacity in the financial year 2012-13, comprises of 23 NTPC Stations (16 Coal based stations, 7 combined cycle gas/liquid fuel based stations), 7 Joint Venture stations (6 coal based and one gas based) and 2 renewable energy projects. Table 3: Installed Capacity of NTPC Plants (30 March, 2013) NTPC Owned (+ Owned By JVs) No. Of Plants Capacity (MW) Coal 16 (+ 6) 37,219 Gas/Liquid Fuel 7 (+ 1) 3,955 Renewable energy projects 2 10 Total 32 41,184 Table 4: Generation of NTPC Plants (2011-12) Fuel Generation (MW) Coal 28,695 Gas 3,657 Liquid Fuel 360 Renewable energy projects 0 Total 32,712 Figure 2: Growth in Generation of NTPC Plants 225 220 215 210 205 200 195 190 2007-08 2008-09 2009-10 Page 5 2010-11 2011-12
  8. 8. FUEL SCENARIO INDIAN STAND Coal is the mainstay of India’s energy sector and accounts for over 50% of primary commercial energy supply and of the total power generated in the country,69% comes from coal based thermal power stations. Next big share of energy portfolio in India is dominated by hydrocarbons and less than 10 percent of energy is accounted by other sources like hydro, renewables and nuclear. While the pace of capacity addition is commendable, there has not been comparable progress in delivering fuel and the availability of both coal and gas to the new power plants is not assured. Demand for conventional energy in the past five years has demonstrated an increased pace with natural gas growing at highest rate of over 10% CAGR. While it is certain that India will see an increased escalation of energy demand, the question that surrounds India is at what scale and speed India’s energy demand will expand and which fuels and technologies it will use. Resolution of this problem must have high priority in the 12th Plan, the Planning Commission observed. The UMPP programme, which brings in private investment into power generation, was a major initiative of the 11th Plan. Twelve more supercritical UMPP are being planned covering Chhattisgarh, Gujarat, Tamil Nadu, Andhra Pradesh, Odisha, Maharashtra and Karnataka. ―Unfortunately, some of these projects are plagued with uncertainties regarding fuel supply because they were based on imported coal and changes in government policies in the countries where the coal mines were located have raised the cost of coal whereas the power tariff is based on a competitive bid which does not contain a provision for passing on such increases,‖ the draft document noted. Soaring Naphtha prices and poor supply because of low production has affected a number of power generators. Sand ingress and consequently decline in gas production Page 6
  9. 9. in KG-D6 basin has forced an array of gas plants to either reduce generation or shut down. Because of human life hazard associated with nuclear radiation and accidents like Chernobyl and Fukushima, nuclear power plants have attracted very strong reactions from general masses. After a lot protests, finally Supreme Court has given a go to the Kudankulam Nuclear Power Plant. Also, huge investments requirement and red tapism has put a number of solar and wind, and other renewable energy projects in backstage. The projected capacity addition in non-fossil fuel plants covers addition of hydro capacity of 10,897 MW and nuclear capacity of 5,300 MW. Besides, 1,200 MW import of hydropower from Bhutan has also been considered. In addition, it is planned to add a grid interactive renewable capacity addition of about 30,000 MW during the 12th Five-Year Plan comprising 15,000 MW wind, 10,000 MW solar, 2,100 small hydro and the balance primarily from biomass. Figure 3: Change in Fuel Mix for Generation of Electricity 6% 3% Coal Oil 12% 14% 16% 7% 11% 70% 0% Gas 58% Hydro Renewables 3% 2012 Nuclear 0% 2030 Page 7
  10. 10. With the increased consumption of energy, demand side management through increased efficiency has also gained prominence in the country. Energy conservation potential in India is estimated at ~ 23% and various initiatives have been taken to explore this potential, in order to enhance energy efficiency of the nation and make energy sector economically as well as environmentally sustainable. Page 8
  11. 11. NTPC’s STAND Currently, around 90 per cent of the company's fuel requirement is met domestically via its long-term contract with Coal India and imported coal meets 10 percent of its annual fuel requirement. Coal India is under pressure from the government and power producers to ease fuel shortages at home but has struggled for years to raise output due to problems in obtaining environmental and regulatory approval. There are disputes between NTPC and CIL relating to some issues that need to be considered in a fuel supply agreement, which are: 1. Quality of the fuel - what happens if it does not meet the specification? 2. Quantity of the fuel - what happens if the fuel supplier does not supply the fuel in accordance with the agreement? Is the fuel supplier obliged to provide a substitute fuel or fuel from other sources, if coal is not available in adequate quantities? 3. What is the deemed point of delivery? Delivery of coal can be problematic as there may be issues of safety of the fuel in transit, and the temperature at which it is stored is important in order to preserve its efficacy. Soaring Naphtha prices and poor supply because of low production has also affected NTPC’s Kayamkulam plant in past several times. To deal with the problem, NTPC will have to utilize all the sources of energy for generating electricity to reduce its dependence on one particular raw material. A strategic mix of options will ensure fuel security for its fleet of power stations. Page 9
  12. 12. Figure 4: Fuel Mix of NTPC 2011-12 1% 11% 88% Coal Gas Liquid Fuel Figure 5: Fuel Cost of NTPC Plants (% of Revenue) 66% 64% 62% 60% 58% 56% 54% 52% 50% 2007-08 2008-09 2009-10 Page 10 2010-11 2011-12
  13. 13. ANALYSIS COAL INDIAN ISSUES Coal is India's primary source of energy. The country has the fifth largest coal reserves in the world. At the same time, the coal sector is one of the most centralized and inefficient sectors in India. Two state-owned companies have a near-monopoly on production and distribution. The coal sector has been facing challenges both in terms of domestic as well as imported supplies. Table 5: Top 10 Coal Producers* Country Million Tonnes PR China 3,471 USA 1,004 India 585 Australia 414 Indonesia 376 Russia 334 South Africa 253 Germany 189 Poland 139 Kazakhstan 117 World Total 7,678 *Data for 2011 Page 11
  14. 14. The domestic production is stagnating in the coal sector as India’s coal demand increased at CAGR of 8.5% while CIL’s domestic production increased at a CAGR 4.6% only in 11th five year plan. Any additional coal requirement for new power plants would be unlikely met through FSAs with CIL; hence finding alternative sources is unavoidable. The country also faces a growing gap between demand and supply. Producers failed to reach the government's latest production target in 2012, while demand has grown by more than 7 percent per year over the last decade. Because of this gap, India's coal imports have grown by more than 13 percent per year since 2001. The total production of coal in India in 2012-13 was 557.5 million tonnes, which was 97 per cent of the target production and a growth of 3.3 per cent over the previous year. Table 6: Production, Demand and Dispatch of Coal in Last Three Years Year Demand* Production Dispatch (Sale) 2010-11 656.31 532.694 523.465 2011-12 696.03 539.95 535.299 2012-13 (P) 772.84 557.661 568.754 P = Provisional, *data in MT Table 7: Demand and Supply Scenario of Coal Year XI FYP* XII FYP (Projected) XII FYP (Projected) Demand 696.03 980.50 1373 Supply 554 715 950 Gap 142.03 265.5 423 *data in MT Based on the recommendation of the Review Committee and the Inter-Ministerial Group, the government had so far de-allocated 47 coal blocks mainly on account of lack of progress in their development. Out of the 47 de-allocated bocks, two blocks were allocated again, three blocks were assigned to Coal India Ltd and de-allocation letters were withdrawn in respect of five blocks. The production of coal from captive blocks in 2012-13 was 36.8 million tonnes against the target of 42 million tonnes, which was only 7.3 per cent of the total target envisaged for India. Page 12
  15. 15. In order to achieve the target production of 795 million tonnes by the terminal year of the 12th Five-Year Plan (2016-17), the government has taken steps to expedite environment and forest clearances, seek higher number of rakes with the Ministry of Railways, and approach the state governments for necessary assistance in land acquisition etc. In addition, Coal India Ltd and its subsidiaries have taken a series of steps to augment coal production which include increasing the efficiency of equipment and mechanisation, strict supervision of existing mines and ongoing projects, and capacity addition from new projects. India’s coal imports have more than doubled over the last five years. Also, different characteristics of coal typically permit existing power plants to blend imported coal with domestic coal only up to 10% to 15%. Meanwhile the import of coal during 2009-10, 2010-11 and 2011-12 was 73.26 million tonnes, 68.92 million tonnes and 102.85 million tonnes, respectively. In 2012-13, 110.43 million tonnes of coal were imported up to January 2013. The demand for 2013-14 is estimated at 769.69 million tonnes and the total all-India coal production has been planned at 604.55 million tonnes. Thus, the estimated gap of 165.14 million tonnes of coal would have to be met through imports. Coal has been placed under Open General License and can be freely imported at prevailing international prices by anyone after paying the applicable import duty. In addition the dynamism in the regulations of the countries from where coal is being imported pose further hurdles by way of political risks. Figure 6: Increase in Demand of Imported Coal (MT) 80 70 60 50 40 30 20 10 0 2007-08 2008-09 2009-10 Page 13 2010-11 2011-12
  16. 16. The Indonesian government recently implemented the Indonesian Coal Price Regulation, which requires prices for all transactions to be benchmarked against a set of international and domestic indices and all sale contracts to be modified retrospectively by September. Several developers have already entered into long term PPA’s with distribution utilities based on fuel tied up from Indonesian mines which have now been covered under the new law posing uncertainty over the operational viability of the affected plants. According to the Ministry of Coal, one of the ways to reduce the dependence on imports is to devise a PPP policy framework with Coal India Ltd as one of the partners in order to increase the production of coal for supply to power producers and other consumers. This was announced in Budget 2013-14. Prior to the announcement, the ministry set up a committee to devise the PPP policy framework with CIL and the committee has since had its first meeting and deliberated on various models. Some of the challenges in increasing the production capacity are as follows:  According to the data proved by CIL, 179 forestry proposals are awaiting clearances and if all approvals are secured on time, it can more than double its output to 1,132 MT, given that mines start production from 2016-17.  Majority of the coal projects have been halted and delayed due to issues in acquiring land and strict rules and regulations (R&R).  Even subsidiaries of CIL, such as MCL in Angul, face issues pertaining to R&R.  Bottlenecks in domestic coal transportation and lack of proper road connectivity further increase the challenge. Also, availability of railway wagons and mismatch of demand and supply of wagons and coal off take affect production capacity.  Delay in mining activities at captive coal blocks and concerns relating to the increasing ash content of run-of-mine (ROM) coal further hinder production. Page 14
  17. 17. NTPC ISSUES NTPC has an annual coal requirement of 160 million tonnes (MT), of which it will have to import around 16 mt. The state utility has contracted to import 16.4 million tonnes of coal in 2012/13, a third more than the previous year. Whether it is gas or coal, it is always more viable to source fuel from the domestic market, if sourced from overseas, it becomes expensive, which leads to higher electricity tariff. Thus, NTPC wants to trim its overseas buys. Electricity produced from expensive fuel is finding few takers, which may eventually affect NTPC’s revenues. Figure 7: Coal Receipt by NTPC (2012-13) 45 40 35 30 Domestic 25 Imported 20 15 10 5 0 2QFY12 3QFY12 4QFY12 1QFY13 Projects for 2,600 MW are linked to three mines that were seized from NTPC due to a lack of progress and then reallocated last year, but formal allotment has still not come. In addition, delay in allocation of coal blocks is hurting power generation plans of NTPC, as it expects 40 mln T coal from its own licensed mines by 2017.In spite of having market value of $23 billion, is finding it difficult to acquire mines abroad, largely due to state control that slows decision-making. Page 15
  18. 18. Table 8: Import of Coal to NTPC Plants in 2012-13 Thermal Power Station Capacity as on 31.3.2013 (MW) Coal Imported (million tonnes) Average landed cost of imported coal (`/tonne) Talcher Super 3,000 2.218 5,905 0.45 Farakka 2,100 1.048 6,578 0.19 Kahalgaon 2,340 1.075 7,008 0.24 Ramagundam I & II 2,100 0.339 6,293 0.05 Simhadri 2,000 1.479 5,082 0.09 Dadri 1,820 1.213 7,318 0.21 Rihand 2,500 0.104 7,551 0.03 Tanda 440 0.004 7,828 0.03 Unchahar 1,050 0.216 7,398 0.09 Vindhyachal 4,260 0.096 7,625 0.02 Korba 2,600 0.365 6,974 0.1 Sipat 2,980 0.983 6,917 0.28 Total 9.14 Page 16 Indicative increase in tariff (`/kWh) due to blending of imported coal
  19. 19. SOLUTIONS In the backdrop of increasing coal demand and reliance on coal for power generation, collective effort of the government, power producers, coal miners and service providers are necessary to ensure modern and sufficient infrastructure. Figure 8: India’s Coal Reserves As such, coal production depends on various factors such as the pace of land acquisition, and obtaining environment and forest clearances, the government has taken various steps to increase the production of coal during the 12th Plan in order to meet the growing demand and to reduce dependency on imports. These steps include emphasis on implementation of new projects and expansion of existing projects, Page 17
  20. 20. improving coal evacuation and movement, involvement of private sector and achieving close coordination with various line agencies for clearances of projects. However, despite these measures, it is expected that there will remain a gap between domestic demand and production by the terminal year of the 12th Plan (2016-17) which will need to be met through imports. Further, to reduce reliance on imported coal and boost the domestic supply, development and expansion of coal mines in the country is necessary. To ensure timely and smooth development of coal mines and for meeting coal demand, following steps should be taken: 1. Establishing a single window clearance process for coal mines. At present, all related subjects such as land, water, mineral, environment and forest, etc. are administered by different independent departments and ministries at the state and central levels. Since the functions of departments and ministries are dependent and complimentary to each other with regard to the allocation and regulation of minerals, it is suggested that a single window agency at the state and central level may process the application. A single window committee will help to streamline the entire approvals process and bring about speed and consistency in decision-making. 2. Support in land acquisition and R&R related issues to ensure timely and smooth completion. Offering projects with secured clearances will boost timely development as well as increase the industry participation. 3. Currently, commercial sale of coal is allowed for government companies only. To meet the growing coal demand, it is prudent to consider commercial sales of coal by Private Developers though suitable framework may need to be developed for coal pricing, balance profits to private developers etc. 4. Measures to be imposed to improve productivity of the coal mines and improve recovery from the coal mines. Page 18
  21. 21. 5. Fund Raising Exploration is a specialised job and is considered a risky venture. So investment should be encouraged in this sector through proper incentive and security of tenure. The government may consider creating funds to support overseas acquisition to supplement domestic resources. This is required since mining is a capital intensive industry. Further, mining projects often require investment in supporting infrastructure which is more capital intensive than mining. 6. Steps need to be taken to promote research and exploration activities and modern underground mass production technologies which will also help in dealing with land acquisition related issues as land requirements for UG mining will be lesser. 7. Indian Railways, port authority and the industry need to work in close collaboration to plan development of infrastructural facilities as per requirements. 8. Lack of incentives for exploration The exploration and exploitation for minerals requiring huge capital should be extended the same benefits and incentives which are available to the oil and gas sector under the new exploration licensing policy (NELP) 9. Lack of policy support for transfer of mining concessions A lot of mining leases have been provided in the past comprising small areas to individuals. The mine owners are not able to mine scientifically while complying to all the environmental norms and would like to dispose off these areas or develop them through forming a joint venture. States may allow transferring these assets at a premium so that these dormant assets can be developed to increase supply in domestic market, leading to the utilisation of dormant resources. Page 19
  22. 22. OIL AND GAS INDIAN ISSUES Oil & gas resources form a major part of our primary energy mix and touch our lives in more ways than one. The developing Indian economy has been constantly challenged for sourcing primary energy. India is dependent on imported crude oil to the extent that recently the US Energy Information Administration (EIA) has observed that India was the world’s fifth largest net importer of oil in 2010, importing more than 2.2 million bbl. /d, or about 70 percent of consumption. Figure 9: Status of Exploration in the Indian Sedimentary Basins in 2010-11 22% Poorly Explored 44% Moderately to Well Explored 22% Unexplored Exploration Initiated 12% Page 20
  23. 23. India has only 0.5% of world’s proven oil reserves and it houses more than 15 percent of the world’s population; the current reserve to production ration is ~18 years. In terms of Natural Gas, India has 1,241 billion cubic meters (bcm) of proven and indicated reserves, which are 0.6 percent of the world's total proven gas reserves. At existing production levels of 50.9 bcm per year, the country has a Gas R/P ratio of about 26.9 years. There are 26 sedimentary basins in India covering 3.14 million sq. km of area. Of these 26 basins, 22 basins fall into the three categories - of being prospective, having identified prospectively and proven to be commercially productive. Of the total area of 3.14 million sq. km, 22 percent can be categorized as moderately to well explore. Exploration efforts have been initiated in 44 percent of the area and 34 percent remains poorly to completely unexplored (Figure 5). Currently, 1.06 mn sq. km areas are under active petroleum Exploration Licenses in 18 basins and a total of 35,601 sq. km area is under Mining Lease. Figure 10: India Oil and Gas R/P Ratio 70 60 50 40 30 20 10 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Gas (R/P) Page 21 Oil (R/P)
  24. 24. All stakeholders, therefore, continue to remain engaged in quest for energy. This provides immense opportunity to investors to develop business opportunities in a country where demand exists. The opportunities are backed by a democratic governance system and a powerful judiciary. However, these opportunities are not without their share of unique challenges. This background paper aims to examine the interplay of these opportunities and challenges and at the same time identify some of the megatrends that will shape the future of the Indian oil & gas industry in the next couple of decades. Figure 11: Natural Gas Demand and Supply 300 279.43 262.07 250 225.52 200 196.64 179.17 163.36 150 100 166.17 145.89 105.28 Demand Supply 104.4 50 2007-08 2008-09 2009-10 2010-11 2011-12 * The oil & gas sector in India continues to be dominated by the central public sector undertakings. While the influence of private companies in the upstream sector is increasing, state owned ONGC continues to be in possession of the largest acreage for exploration and production. Reliance Industries Limited is the largest private sector player in the upstream sector in India and has gained increasingly important role especially in the gas sector. The gas transportation, distribution and marketing sector is Page 22
  25. 25. dominated by the state owned Gas Authority of India Limited (GAIL) which enjoys a virtual monopoly on the sector. However, the City Gas Distribution (CGD) sector may see entry of private companies in the years to come. The downstream marketing sector is also dominated by public sector refiners IOC, BPCL and HPCL, all of them incidentally are integrated oil companies with each of them in refinery segment. Reliance Industries Limited (RIL) is the largest refining company in India, though. Essar Oil Limited with its own refinery on the West coast is another major private sector company in the sector. The E&P services and equipment sector in India sees participation from major international companies such as Schlumberger, Halliburton, Baker Hughes, Transocean, Weatherford etc. Some domestic companies having invested in assets have also started playing key role in offshore services. Figure 12: Projected Natural Gas Demand in Power Sector 250 200 150 100 50 0 2012-13 2013-14 2014-15 Page 23 2015-16 2016-17
  26. 26. NTPC ISSUES NTPC’ s 6 gas and 1 liquid fuel based power plants were operational in the year 20122013.Plants based on gas are suffering from decline in supply. Sand ingress in the KGD6 basin has added to the problems. The company is looking forward for equity in oil and gas field abroad. Also, it has shown interest in oil and gas exploration ventures. NTPC is planning on expansion of its gas fired plants (e.g. Gandhar) to reduce the huge dependency on coal for its thermal units. However, some its plans have been delayed indefinitely following the Power Ministry of India's advice to not plan any gas-based projects until 2015-2016 as a gas shortage looms for the power sector in the country. Table 9: NTPC Gas Consumption 2008-09 (in mmscmd) PMT Requirement Requirement (90% PLF) (85% PLF) Anta 1.99 1.88 1.29 0.09 0.00 1.38 Auriya 3.15 2.98 2.05 0.12 0.00 2.17 Dadri 3.94 3.72 2.23 0.03 0.06 2.32 Faridabad 2.04 1.93 1.14 0.02 0.02 1.18 NCR 11.12 10.50 6.71 0.26 0.08 7.05 Kawas 3.11 2.94 0.54 0.83 0.00 1.37 Gandhar 3.12 2.95 1.44 0.90 0.00 2.34 WR 6.23 5.88 1.98 1.73 0.00 3.71 NTPC 17.35 16.39 8.69 1.99 0.08 10.76 Station APM/PMT Spot RLNG Spot/Fallback Total RLNG Page 24
  27. 27. SOLUTION The sector is teeming with opportunities but at the same time its dealing with some fundamental issues which can hinder its progress and thwart the achievement of its growth objective. While some of these issues are specific to a sub-sector, other such as infrastructure development is applicable to the entire sector. Some of these major issues have been discussed below: a) Limited participation by foreign companies in the Indian upstream sector - Prospectively or Policy: The nine rounds of NELP have seen enthusiastic participation by the state owned companies, the participation by private players especially the foreign majors has been limited. These companies bring a lot of investment muscle required for development of capital intensive and high risk upstream projects. More importantly however, these companies bring technological expertise and diverse project experience. b) Upstream skills, technology and equipment shortage: Upstream talent shortage and ageing workforce is an issue being faced the global as well as Indian upstream industry. The industry is especially pressed with shortfall of labor with specialized skills such as reservoir engineering or with experience of developing unconventional gas assets. c) Enablers for acquisition of oil & gas assets abroad: Indian Oil & Gas companies, especially the public sector companies have been competing with aggressive Chinese counterparts and IOCs for acquisitions of assets abroad. However, in many cases these companies have to lose out to the competition due to the slow speed of clearances and decision making process in place for making large investment decisions. Page 25
  28. 28. d) Ambiguity on policies relating to pricing and marketing of domestic gas as well as the gas end-user segment policies creating hurdles to gas market development e) High import dependence for energy amounts to high vulnerability and compromised energy security; The Arab spring in the recent past was a significant cause of concern for India, owing to high dependence on the region for energy supplies. Page 26
  29. 29. NUCLEAR INDAIN SCENARIO India has well recognized the role of nuclear energy as a part of its long term energy security measure. Nuclear power supplied 20 billion kWh (3.7%) of India electricity in 2011 from 4.4 GWe (of 180 GWe total) capacities and after a dip in 2008-09 this is increasing as imported uranium becomes available and new plant come on line. Some 350 reactor-years of operation have been achieved by the end of 2011. The current installed capacity of nuclear power plants in India stands at around 4780 MW. Nuclear capacity additions in India have been relatively slow during the Eleventh Plan period. During the five year period, against a target of 3380 MW, only around 880 MW of capacity was added. The draft 12th Five Year Plan has targeted a capacity addition target of around 5,300 MW from nuclear energy. In the long term, the various scenarios under the Integrated Energy Policy (IEP) envisage the nuclear capacity to be 48 GW to 63 GW by year 2030. Figure 13: Share of Nuclear Power in India (In Terms Of Fuel Source for Electricity Generation) 15 10 5 0 2012 2017 Page 27 2030
  30. 30. Figure 10: Nuclear Power Installed Capacity of India Power Station State Type Units Capacity Kaiga Karnataka PHWR 4 x 220 880 Kakrapar Gujarat PHWR 2 x 220 440 Kalpakkam Tamil Nadu PHWR 2 x 220 440 Narora Uttar Pradesh PHWR 2 x 220 440 Rawatbhata Rajasthan PHWR 1 x 100, 1 x 200, 4 x 220 1, 180 Tarapur Maharashtra BWR(PHWR) 2 x 160, 2 x 540 1,400 Total 20 4, 780 NTPC PLANS National Thermal Power Corporation (NTPC) in 2007 proposed building a 2000 MWe nuclear power plant to be in operation by 2017. It would be the utility's first nuclear plant and also the first conventional nuclear plant not built by the government-owned NPCIL. This proposal became a joint venture set up in April 2010 with NPCIL holding 51%, and possibly extending to multiple projects utilising local and imported technology. One of the sites earmarked for a pair of 700 MWe PHWR units in Haryana or Madhya Pradesh may be allocated to the joint venture. NTPC said it aimed by 2014 to have demonstrated progress in "setting up nuclear power generation capacity", and that the initial "planned nuclear portfolio of 2000 MWe by 2017" may be greater. However in 2012 it indicated a downgrading of its nuclear plans. NTPC, now 89.5% government-owned, planned to increase its total installed capacity from 30 GWe in about 2007 to 50 GWe by 2012 (72% of its coal) and 75 GWe by 2017. It is also forming joint ventures in heavy engineering. NTPC is reported to be establishing a joint venture with NPCIL and BHEL to sell India's largely indigenous 220 MWe heavy water power reactor units abroad, possibly in contra deals involving uranium supply from countries such as Namibia and Mongolia. Page 28
  31. 31. KEY CHALLENGES IN DEVELOPMENT OF NUCLEAR ENERGY  Safety aspect: The recent disasters at the Fukushima NPP in Japan have raised concerns regarding the safety of nuclear power projects. The need is to revive the confidence in the technology & safety aspects w.r.t. installation of nuclear power projects and ensuring that the highest & most robust levels of nuclear safety are in place.  Fuel supply: While India has developed indigenous technological capability in all aspects of nuclear power, the ability to develop nuclear power is restricted by the very limited availability of Uranium. India is poorly endowed with Uranium. Available Uranium supply can fuel only 10,000 MW of the Pressurised Heavy Water Reactors (PHWR). Further, India is extracting Uranium from extremely low grade ores (as low as 0.1% Uranium) compared to ores with up to 12-14% Uranium in certain resources abroad. This makes Indian nuclear fuel 2-3 times costlier than international supplies. The substantial Thorium reserves can be used but that requires that the fertile Thorium be converted to fissile material. The pace at which we can expand nuclear power generation using indigenous fuel sources is thus severely limited even though the eventual potential for nuclear power generation is vast.  Social & environmental concerns: Issues related to social & environmental impacts needs to be addressed to encourage acceptance of the nuclear power project by all stakeholders. Page 29
  32. 32. RENEWABLE INDIAN SCENARIO The country possesses vast renewable energy potential. In the early 80s, India was estimated to have renewable energy potential of about 85 GW from commercially exploitable sources, namely in wind, bio-energy and small hydro. These estimates have since been revised to reflect technological advancements. Initial estimates from Centre for Wind Energy Technology (C-WET) suggest that wind energy potential at 80 meters height (with 2 per cent land availability) could be over 100 GW. Some studies have estimated even higher potential ranges up to 300 GW. Figure 14: Renewable Energy Potential in India Renewable Potential (GW) 50 20 15 Sufficient to generate 50 MW/sq. Km Wind Bio-energy Small Hydro Solar Source: Ministry of New and Renewable Energy (MNRE) The MNRE has initiated an exercise for realistic reassessment of the wind power potential, whose results are expected by the end of 2013. A very significant part of the Page 30
  33. 33. total Renewable Energy (RE) potential still remains to be exploited. The current installed capacity of renewable energy sources stands at around 26,368 MW (as on Nov-2012). Figure 15: Renewable Energy Installed Capacity Renewable Capacity (MW) Small Hydro, 3464 Biomass, 1242 Cogeneratio n, 2199 Solar, 1047 Wind, 18321 Waste to energy, 93 Source: Ministry of New and Renewable Energy (MNRE) The key drivers for renewable energy are the following:  The demand-supply gap, especially as population increases  A large untapped potential  Concern for the environment  The need to strengthen India’s energy security  Pressure on high-emission industry sectors from their shareholders  A viable solution for rural electrification Page 31
  34. 34. Given the overall policy & regulatory push, renewable energy is envisaged to play an important role in the long term. The projected change in the mix of installed capacity & electricity generation by fuel type by the end of 2030 is shown in the figure below. Figure 16: Renewable Sector - Eleventh Plan Period Performance Fuel Mix – Installed Capacity basis 100% 2 12 4 100% 9 17 20 75% Fuel Mix – Generation Basis 3 6 5 9 12 14 75% 33 12 16 9 1 13 3 0 57 56 11 30 50% 58 25% 42 0% 0% 2012 Coal 69 0 6 1 50% 25% 5 70 15 7 0 Oil Gas 2017 Hydro Renewable 2030 2012 Nuclear Page 32 Coal Oil 2017 Gas Hydro 2030 Renewable Nuclear
  35. 35. NTPC’S FORAY INTO RENEWABLE ENERGY Figure 17: NTPC Into Renewable Energy Wind Capacity (MW) Plant/Location 500 Karnataka 200 Kerala 200 Gujarat 15 NTPC- Anta in Rajasthan 5 Andaman & Nicobar 5 NTPC-Dadri (Uttar Pradesh) 5 NTPC-Faridabad (Haryana) 10 (Phase-1) NTPC-Ramagundam (Andhra Pradesh) 10 NTPC-Unchahar (Uttar Pradesh) 10 NTPC-Talcher Kaniha (Orissa) 50 Madhya Pradesh 15 (Phase-2) NTPC-Ramagundam (Andhra Pradesh) 25 NTPC-Singrauli (Uttar Pradesh) 8 NTPC-Singrauli (Uttar Pradesh) 3 NTPC-Rihand (Uttar Pradesh) - Tapovan (Uttarakhand) - Tattapani (Chhattisgarh) Solar Small Hydro Geothermal KEY PROBLEMS:  High initial investment cost  High tariff of generated energy  Grid connectivity and variable generation issue  Slow pace from installation to generation Page 33
  36. 36. SOLUTIONS It is well recognized globally that early commercialization of Renewable Energy (RE) technologies is highly dependent on support from the government through mix of policy and regulatory instruments. Over the years, the Government of India has introduced a number of policy and regulatory initiatives for promoting RE.  NAPCC provides guidance for promotion of renewable energy NAPCC provides guidance on enhancements in the policy & regulatory regime to help mainstream renewables based sources in the national power system.  Jawaharlal Nehru National Solar Mission (JNNSM): Targets 20,000 MW of grid-connected solar power capacity and 2,000 MW of off-grid solar power capacity by 2022.  National Tariff Policy: Directed SERCs to fix a minimum percentage of purchase of energy consumption from RE sources (RPO). This created a demand side stimulus for RE development.  Introduction of Generation Based Incentives (GBI) for solar and wind energy: This scheme offers fiscal incentives along with tariff on power generation from solar and wind. It shifted investment interest from installation to generation.  Creation of Department of Non-conventional Energy Sources: An independent department for development, demonstration and application of RE. RE sources were recognized as potential alternative energy sources and received special consideration. Page 34
  37. 37. RECOMMENDATIONS & ANALYSIS By looking at various approaches we will be opting a solution which will not only solve NTPC’s fuel security problem but help NTPC develop as an integrated major. Being a leader NTPC will also be showing path to other organizations also. Few developments which are underway include:  FY14 would see two crucial developments on fuel security for NTPC – (1) Commencement of production from its first captive mine, Pakri Barwadhi. (2) Installation of jetty and in-land water transport system for Farakka and Kahalgaon (F&K) project.  NTPC plans to commission 15GW of capacity in 12 th plan (11.9GW remaining). Similar capacity is planned for 13th plan at 14.7GW; total capacity under construction is 20GW and balance under project award. This provides strong visibility on growth option. Our solution is integrated approach in which we will be focusing on:  Developing coal mines in INDIA with help of JV’s and man power training.  Forming an association for import of coal with other power producers.  Acquiring coal mines abroad and signing MOU’s.  Addition of capacity in Renewable resources and nuclear arena. Page 35
  38. 38. EXECUTIONAL FRAMEWORK Step 1: By Opting For Coal Based Development Only Approach 1 & 2 Figure 18: Scenario in 2017 Coal Demand Supply Scenario forecast FY 14 FY 15 FY 16 FY 17 Coal Demand 187 198 205 218 On date supply 119 119 119 119 LoA / New Supply 22 25 32 38 Total Linkages 141 144 151 157 %age Demand 75 74 73 72 Captive Production 3 8.5 19.5 37 E-auction 3 3 3 3 Total Domestic(A+B) 147 155.5 173.5 197 %age of Demand 79 79 85 90 Imports (Domestic equiv.) 40 42.5 31.5 21 Actual Imports 23.5 25 18.5 12.4 Balance to be Met(B) The 12.4 million tons demand from foreign will be met by acquiring coal mines in Nigeria or Indonesia and some by import from Australia etc. To reduce formation of cartels and hike in prices by demand supply gap we will form an association in India that will be importing total coal on countries behalf for all by negotiation, will be important part of strategy. Step 2: In Adding 3rd Approach of Renewable sector. renewable sector NTPC is increasing If we make a target of 1000 MW addition each year in combined area’s :  Solar(250 MW per year)  Wind (500MW per year)  Biomass(200 MW per year)  Small hydro(50 MW per year) We will be accumulating further 5,000 MW by 2017. Reducing domestic equiv. import to around 7 MT in place of 21 MT. Page 36 its foray.
  39. 39. Step 3: Adding 4th Approach of Nuclear sector. NTPC is expected to invest around Rs. 1,000 crore for setting up nuclear power plants of at least 2,000 MW capacities. If we come up by 2,000 MW addition with the help of NPCIL for which we have set a up a JV with it.Then our Import will reduce to 2MT of domestic equiv. coal. This is equivalent to just 0.75 MT of imported coal. Figure 19: NTPC’s revised target portfolio for 2017 6000 2000 2000 Coal 6000 Renewable Nuclear 49000 Gas Hydro Indicative Data Page 37
  40. 40. INTEGRATED GASIFICATION COMBINED CYCLE (IGCC) IGCC combines gasification technology with combined cycle technology. The first step in the IGCC process is gasification. Gasification converts any hydrocarbon into a synthesis gas comprised mainly of hydrogen (H2) and carbon monoxide (CO) at high temperature and pressure. The gasification process allows the separation of the pollutants from the synthetic gas. With CO2 capture option, syngas passes through a Water Gas Shifter (WGS) and converts the syngas to primarily CO 2 and H2. Next the syngas is ―cleaned-up‖ by removing the acid gases (such as hydrogen sulphide), particulate matter, Hg and other pollutants. After the CO2 separation unit, CO2 can be stored and hydrogen is combusted in a combined cycle gas turbine that produces electricity. Both the syngas production process and the gas turbine combustion processes generate steam that is utilized to produce electricity. Advantages of IGCC include the reduction of CO2 emissions, increased efficiency, and flexible fuel supply. IGCC technology with CO2 capture also results in superior environmental performance by reducing emission of pollutants (e.g., SO 2, NOx, particulate matter, and mercury). The collection of sulphur and gasification slag obtained from the process has by-product value, which avoids the cost of by-product disposal, and easier CO2 removal. The energy consumption for CO2 capture is lowest in comparison with conventional power plant and NGCC plant. The main disadvantage of IGCC is the capital cost. In addition, IGCC is a complex process that requires a high degree of component integration. Page 38
  41. 41. Table 19: Calculation results of IGCC system combined with different CO capture technology 2 IGCC with precombustion CO CO capture 2 IGCC with postcombustion CO 2 capture 3 Coal, 10 kg per day 3017 3843 4128 3 95% O , 10 kg per day 2 3620 4612 4953 Gross Power, MWe 875 1115 799 Auxiliary Power, MWe 375 615 279 3 CO produced, 10 kg per day 2 9292 11838 10733 3 CO emission, 10 kg per day 2 9292 2368 ~0 Thermal-to-Electric Efficiency based on HHV 48.5% 38.1% 35.4% IGCC without Feeds capture Performance Figure 20: IGCC Configuration Page 39 2
  42. 42. Figure 21: Baseline IGCC Configuration Studies indicate that coal-based IGCC has the capability for combined reduction of CO2 emissions and increased efficiency compared to conventional power Page 40
  43. 43. CONCLUSIONS - THE WAY FORWARD To achieve fuel security we have to devise certain options in domestic and international front. Country’s power generation plans are at the cross roads of growth and poised for a quantum leap. Matching progress required in the coal sector through creation of enabling policy environment. In the deficit scenario of coal, Government would have to create an enabling policy environment to facilitate:  Greater domestic/captive production, IL/SCCL to ensure total coal requirement (including import) for the power sector as per NCDP.  Encouragement of setting up new power plant at coastal area with imported coal.  Ports to be identified with power project for import/coastal cum riverine transport.  There must be some integrated clearance for both coal linkages as well as movement clearance to power utilities.  Supply of sized coal to power utilities.  Incorporation of rapid loading system at each and every siding/mines of the coal company. From existing mines we can increase the production by:  Adaptation of modern technology to increase productivity.  To increase the availability of the major HEMM (Shovel, Dumper, Dragline, Dozer etc.).  The rapid depletion of shallow reserves calls for exploitation of deep seated reserves through efficient technology. This can be done by inviting international players with state-of-the-art technologies. Page 41
  44. 44. From Upcoming Mining Project:  Time frame clearance of coal mining projects. Up front forest and environment clearance  Allocation of more coal blocks to private players/ end users with strict deadlines and steep penalties for failure.  A special purpose vehicle (SPV) may be set up initially to take care of all regulatory clearances, which is then transferred to the Mine developer. For fulfilling the dire necessity in short term we can for:  Import of coal  E-Auction  Tie up through MOU at premium price.  To take up with CIL for finalization of FSA for new units at 90% commitment level  Transportation of coal through Inland Waterways at Farakka/Kahalgaon/Barh  NTPC may contemplate handing over their own fleet of wagons to Railways for increased coal movement In long term we can go for:  Development of captive mines allotted.  Acquisition of assets (Domestic and abroad).  Go for port based plants.  Re designing the boilers for high GCV coal. Enablers for coal solvency  Sourcing of coal by optimizing portfolio mix, Domestic /Import/Captive/Acquiring Mines abroad etc.  Uninterrupted Transportation System (MGR/IR).  Well-equipped unloading system at station end with sufficient redundancy. Page 42
  45. 45. REFRENCES  The Economic Times, http://economictimes.indiatimes.com/  The Hindu, http://www.thehindu.com/  Business Standard, http://www.business-standard.com/  The Indian Express, http://www.indianexpress.com/  The Hindu Business Line, http://www.thehindubusinessline.com  Business World, http://www.businessworld.in  Live Mint, http://www.livemint.com  KPMG KBuzz Sector Insights, India Energy Conclave 2007 India Energy Inc. – Emerging Opportunities and Challenges, December 2007, http://www.kpmg.com  Pricing Policy, http://www.coalindia.in/  Power Line, http://www.tatapower.com  Ministry of Coal,GOI, http://www.coal.nic.in/  India Infrastructure, http://www.indiainfrastructure.com/  Infraline Energy, http://www.infraline.com/  Central Electricity Authority, GOI, http://www.cea.nic.in  Ministry of Power- Northern Regional Power Committee, GOI , http://www.nrpc.gov.in/  Planning Commission, GOI, http://planningcommission.gov.in/  The Singareni Collieries Company Limited' (SCCL), GOI, http://scclmines.com/  International Energy Association, http://www.iea.org/  Oil India Ltd., http://www.oil-india.com/  U.S. Energy Information Administration, http://www.eia.gov/ Page 43
  46. 46.  Indian Energy Congress, http://indiaenergycongress.in/  Bureau of Ocean Energy Management, http://www.boem.gov/  NTPC Ltd. Annual Reports, http://www.ntpc.co.in/  PricewaterhouseCoopers India, http://www.pwc.in/  Coal Controller, GOI, http://www.coalcontroller.gov.in/  Motilal Oswal NTPC Financial Reports, http://www.motilaloswal.com/  Industrial Research and Consultancy Centre, IIT http://www.ircc.iitb.ac.in/  Central Electricity Regulatory Commission, http://www.cercind.gov.in  Project Monitor, http://www.projectsmonitor.com/  EDF Energy, http://www.edfenergy.com/  The Telegraph India, http://www.telegraphindia.com  Reuters India, http://in.reuters.com/  CMR Research, http://cmrindia.com/  Indian Power Sector.Com, http://indianpowersector.com  Infochange, http://infochangeindia.org/  The Statesman, http://www.thestatesman.net  The Guardian, http://www.guardian.co.uk/ Page 44 Bombay,