These savings can go a long way in augmenting the state’s revenue and help cover the cost of providing free electricity for agriculture, free water pumps, subsidized solar installations and cash transfers to farmers, says the report
Andhra Pradesh can save over ₹76,000 crore in the coming decade by retiring old coal units as part of a planned energy transition, while still meeting the state’s growing energy requirements. According to new research by Climate Risk Horizons, a 10-year plan to phase out the oldest and most expensive coal power generators in the state can save the state over ₹6,000 crore in Year 1, ₹30,000 crore over the first five years, and approximately ₹76,000 crore over 10 years.
The analysis provided a roadmap for a financially beneficial energy transition for the state, where distribution companies have been struggling with high losses. The report said replacing expensive coal units with cheaper renewable energy has three-fold benefits of reducing electricity costs for consumers, improving the financial performance of distribution companies, and helping the state achieve its renewable energy targets.
The report highlighted three factors that make Andhra Pradesh an ideal candidate to lead the energy transition—surplus coal power capacity, extremely cheap renewables coupled with falling costs of battery storage systems, and the 2025 deadline for mandatory coal plant retrofits.
The findings are also significant in light of the recent Ministry of Power mandate requiring all new coal power plants to set up renewable energy capacity equivalent to 40% of the plant’s capacity.
The report noted that since all the plants that are 25 years or older are state-owned, phasing them out is largely a matter of political will. Short-term pain incurred from these measures, such as government-owned power generators having to shutter a plant earlier than expected, should be viewed against the significant savings that will accrue to DISCOMs and consumers.
Apart from the direct financial savings, there are significant ancillary benefits in terms of reduced pollution, greater water availability for other uses and the possible diversion of land for other productive use. Financing models that can aid the retirement of older, expensive coal plants can play a role in speeding up Andhra Pradesh’s energy transition, the report added.
“With its plentiful renewable resources and proactive energy policies, our analysis suggests that careful planning and investments can allow Andhra Pradesh to start phasing out old coal plants at a net reduction in power purchase costs, resulting in long term financial benefits for DISCOMs and the state government”, said Ashish Fernandes, CEO of Climate Risk Horizons.
The study estimated that retiring eight coal units totalling 1,680 MW at the Rayalseema Thermal Power Station, Cuddapah, and Dr. Narla Tata Rao Thermal Power Station, Vijaywada, can yield savings of ₹9,500 crore over five years. These savings can go a long way in augmenting the state’s revenue and help cover the cost of providing free electricity for agriculture, free water pumps, subsidised solar installations and cash transfers to farmers.
“With the significant rise in installed power capacity over the past decade, the state now has surplus generation capacity in the state, with coal plants running at less than 60% Plant Load Factor. Due to fresh capacity addition in the pipeline (both renewables and thermal) retiring the older coal units will not impact ability to meet electricity demand growth. AP’s ambitious renewable energy programme will enable the state to meet even aggressive projections for electricity demand growth from clean energy alone,” said Vishnu Teja, co-author of the report.
The report mentioned that at a time when state budgets are stressed, the savings from a planned energy transition can be used to meet critical budgetary needs. For example, the report said, the annual savings from replacing older, expensive coal power with renewables could be used to meet the planned allocations for solar PV to provide free electricity for agriculture, or the subsidy for nearly two crore rooftop solar installations.
Andhra Pradesh is also evaluating 33GW of new pumped hydro storage projects. However, the research suggested such a massive build out of pumped storage could be financially risky.