Challenge to Thermal Power Plants in India – Need of FGD – A commitment to Pollution Free Power – Proper Financial Model to Combat

1. Challenge to Thermal Power Plants in India –
Need of FGD – A commitment to Pollution
Free Power – Proper Financial Model toFree Power Proper Financial Model to
Combat
‐ S GhoshS. Ghosh

2. As per notification in MoEF
gazette dated 07 12 2015 SO2 emissiongazette, dated, 07.12.2015, SO2 emission
norms for thermal power plants in India is
amended as:
<500 MW >=500 MW
TPPs installed upto
31.12.2016
600
mg/Nm3
200
mg/Nm3
TPPs installed from or after
1.1.2017
100
mg/Nm3
100
mg/Nm3

3. • India witnessed first electrification in the city of Kolkata in
1899, seventeen years after New York and eleven years after
London.
• After 117 years India has achieved highest per capita consumption
of electricity of 1075 KWh only (2015‐16 figure), which is muchof electricity of 1075 KWh only (2015 16 figure), which is much
lower than other developing economies in the world. China
enjoying above 4300 KWh, Iran above 2600 KWh, Argentina above
2500 KWh f t2500 KWh, a few to name.
It h th t I di ill i t dd & l t i it t• It shows that India will require to add more & more electricity to
keep pace with its GDP growth of 8%, annually.
• Where 68% of total installed capacity in India is contributed by
thermal power, it is obvious that FGD market will attract a p
significant portion of total infrastructure investment in India in
coming days.

4. All India Installed Capacity of Electricity as of Jan, 2017 ‐
R Wi
RES
Resource Wise
Hydro
RES
16%
Coal
G
Coal
59%
Nuclear
14% Gas
Diesel
Nuclear59%
Diesel
1%
2% Nuclear
Hydro
RES
Gas
8%
1% RES
It shows that thermal power alone contributes ~ 68% of total

5. All India Installed Capacity of Thermal Power as of
Jan, 2017 ‐ Sector Wise
SC t l
Jan, 2017 Sector Wise
State
33%
Central
28%
State
Private
CentralPrivate
39%
Central

6. • Total installed capacity of thermal power in India as of Jan, 2017 is 214.6
GW, which shows a huge requirement of FGD installation in Indian TPPs. ItGW, which shows a huge requirement of FGD installation in Indian TPPs. It
requires an investment of around 1075‐1290 bn INR.
• Projected installed capacity of thermal power at the end of 13th five year• Projected installed capacity of thermal power at the end of 13th five year
plan (2017‐2022) is 279.3 GW, which requires an additional investment of
around 325‐390 bn INR for installing FGD plants by 2022.
• Coal based power alone is having an installed capacity of 188.4 GW out of
total thermal capacity of 214.6 GW (as of Jan,17). i.e. An 87% contribution
b l b d l h ll fby coal based TPPs only. This 87% calls for a sure investment in FGD
business, which amounts to be ~ 950‐1150 bn INR.
• NTPC alone is having an installed capacity of 49.9 GW thermal power out
of 214.6 GW total in the country as of now. This necessitates a single
owner’s investment in FGD, of around 250‐300 bn INR.,
• Capital Investment is around 5‐6 mn INR/MW.

7. • Now to combat this huge investment requirement in installing FGD for
Indian TPPs it is necessary to chalk‐out a proper financial modelIndian TPPs, it is necessary to chalk‐out a proper financial model.
• For big power utilities in India, they require an investment ranging fromFor big power utilities in India, they require an investment ranging from
INR 4,500 cr. to 30,000 cr. under single umbrellas and in single shots, while
such investment is not returning any direct business.
• To avoid the entire risk under single umbrella, it is a better choice to think
f i l i d l Wh i k ll k ffor a non‐conventional investment model. Where risks as well as stake of
the assets created will be shared between parties.

8. • The Hybrid Annuity Model (HAM):
By features HAM is a mix between the models – BOT Annuity and
EPC.
The owner will contribute to 40% of the project cost in the execution
stage through fixed annual payments, or part thereof.
fThe remaining payment will be made on the basis of the
performance of the developer and performance of the assets
created by it over an agreed period of time after declaration ofcreated by it over an agreed period of time after declaration of
COD.

9. Ways to financial performance of the assets created:
• Choice to use cheaper high sulfur coal,
• Signing contract for salable by product• Signing contract for salable by‐product,
• Recovery of debt through tariff revision ‐ Tariff revision formula to
b d t CEA/ CERC b d it l dit S lf t t ibe proposed to CEA/ CERC based on capital expenditure, Sulfur content in
coal, Captive power consumption, Business from By‐product.
• A hike in electricity tariff of around Rs 0 25 – 0 30 would• A hike in electricity tariff of around Rs. 0.25 – 0.30 would
typically take care of the additional capex.
• Improved carbon credit in lieu of reduced greenhouse gases• Improved carbon credit in lieu of reduced greenhouse gases
shall be traded at market price.

10. SSources:
• http://www.ntpc.co.in/en/power‐generation/installed‐capacity
• http://www.cea.nic.in/reports/monthly/executivesummary/2017/exe_sup // / p / y/ y/ / _
mmary‐01.pdf
• https://en.wikipedia.org/wiki/List_of_countries_by_electricity_consumpti
on
• MoEF gazette notification, 07.12.2015
CEA D f N i l El i i Pl (V l 1) D 2016• CEA ‐ Draft National Electricity Plan (Volume 1), Dec, 2016.