Coal power in India may receive a massive new push with Madhya Pradesh’s plan to set up two new, 1,320 MW coal plants. Each plant is expected to cost Rs11,220 crore (about $1.6 billion) and retail power at Rs5.5-6/unit. The state is justifying the projects based on its need for baseload power – and its installed renewable capacity of 4,386 MW is far short of its 63,000 MW peak power demand.
Madhya Pradesh is, interestingly, home to the 750 MW Rewa solar park, which retails solar power at tariffs as low as Rs2.97/unit. However, state government officials are reportedly keen to set up the new coal plants and use all of the power within the state, instead of purchasing from stressed assets in other states. This is because they want to avoid the stressed assets’ higher power tariffs and steer clear of their patchy coal supply linkages.
RPO mandate relaxed for captive plants, market opened for captive coalmines
The Indian government has relaxed captive power plants’ Renewable Purchase Obligation (RPO) mandates – most of which run on coal. Their parent companies will no longer have to obtain 21% of all of their power from renewables for 2021-2022. Instead, all such plants – as long as they don’t add additional capacity – must now follow RPO mandates for the years they were established, such as 17% for 2018-2019.
The decision effectively isolates them from RPO revisions for utility-scale fossil fuel power plants. Interestingly, most captive plants are solely operated by carbon-heavy industries, such as cement and steel manufacturing.
Meanwhile, captive coalmines can now sell up to 25% of their output in the open market. The move has been approved by the Centre to attract the private sector into owning coalmines – the response for which has so far been lacklustre — while generating additional revenue for the government.
NTPC only keen to acquire stressed assets under insolvency proceedings
India’s largest thermal power utility – NTPC – is reportedly keen to only acquire stressed power assets that are currently undergoing insolvency proceedings at the NCLT (National Company Law Tribunal). This would ensure that it can acquire the assets at discounts as high as 70% – and avoid (lengthy) out-of-court negotiations with their owners.
The country currently has 40,30 MW of thermal power stressed assets, of which around 6GW may be acquired by NTPC as part of its strategy to expand capacity through brownfield project acquisitions.
States request central grants, not loans, to retrofit polluting coal plants
Several states have requested that the Centre fund the retrofit of their polluting coal power plants with grants from the Power System Development Fund (PSDF) and the National Clean Energy Fund (NCEF).
The request for grants – as opposed to loans – comes as the retrofitting of Flue Gas De-sulphurisers (FGDs) and upgraded Electrostatic Precipitators (ESPs) could need a CAPEX investment of anywhere between Rs80 lakh to Rs128 lakh/MW (about $114,000 – $183,000/MW). This would raise power tariffs by Rs0.62-0.93/kWh. However, nearly 17GW of coal power plants may be shuttered over lack of space to install the technologies.
Private power producers – riddled with stressed asset debts – have also requested for financing from the Power Finance Corporation (PFC) and the Rural Electrification Corporation (REC) as they are struggling to secure any further loans from the banking sector.
Glencore to cap coal output, list of financiers pulling out of coal now exceeds 100
Global mining giant Glencore has announced it will begin to cap its annual output of thermal coal to 145 million metric tonnes. The decision is heavily influenced by increasing pressure by investors to pull companies away from fossil fuels, and is significant because Glencore in fact purchased Rio Tinto’s coalmines in 2018. Coal also still accounts for a majority of the firm’s profits.
A new IEEFA report, meanwhile, shows that more than 100 global investors have exit or restricted coal financing since 2013 – both over its role in driving climate change and the financial risk it poses in terms of stranded assets. The list includes large lenders like World Bank and European Bank of Reconstruction and Development (EBRD), and prominent insurers like Allianz, Swiss Re and Munich Re.
The biggest US pension funds are also asking the country’s 20 largest utilities to switch to carbon-free electricity generation by 2050. The switch has been termed as a “financial necessity”, as well as being critical to meeting global emissions reduction targets.
Saudi Aramco chief rubbishes theories of oil’s demise, calls for more investment
The CEO of Saudi Aramco, Amin Nasser, has rubbished apparently illogical theories – or a “crisis of perception” – that the global demand for oil will soon be wiped out with growing sales of electric vehicles. He said that passenger vehicles only accounted for 20% of global oil consumption, and more investment was needed to boost future supplies to aviation, shipping, trucks and the petrochemicals industry.
Finland bans coal power from 2029
Finland’s parliament has voted to ban the use of coal for power generation from May 1, 2029. The fuel accounted for 8% of the nation’s energy mix for January-November 2018. The owners of existing coal plants will be compensated (to an extent) for halting operations, although coal could still be used in Finland for emergency power supplies.