The 4000 Megawatt (MW) Cheyyur Ultra Mega Power Plant is a non-starter at best, or a financial disaster for consumers, TANGEDCO and the state government if it actually gets built, states a report by the Institute of Energy Economics and Financial Analysis (IEEFA).
The report assessed tariff rates and risks associated with the Cheyyur project after the Government of India proposed revised bidding guidelines to make the project more attractive. This was in response to the withdrawal of prospective bidders who said the project was too risky.
The project is scheduled to begin at the end of 2016. The report estimates that electricity from the power plant will cost of Rs 5.93 per unit. â€śSeen together with Tamil Naduâ€™s indebtedness, TANGEDCOâ€™s hopeless financial situation and the political culture of extending freebies and heavily subsidized electricity,â€ť said S. Gandhi, former Tamil Nadu Electricity Board (TNEB) engineer and president of Power Engineers Society of Tamil Nadu.
The four other ultra mega power plant projects in India have a lower tariff cost of Rs 1.15 to Rs. 3.7 per unit.
He said that land acquisition for the coal conveyor corridor, road and rail access and the ash pipeline have not even commenced. The potential land-losers have indicated that they will not part with their farms.
The report claims that in 2016-2017, there will be a generation of 11.2 per cent excess electricity in the state. â€śIn such a case, there is no use of a power plant which will generate 4000 MW of electricity. Instead, the state should invest in proper transmission and distribution of the electricity,â€ť he said.
The total cost of the Cheyyur power plant will be about Rs 27,000 crores.
It is better to invest in renewables like solar energy, he said. â€śThe investment cost on the renewable will come approximately equivalent to the cost of the power plant but there will no further cost in case of renewables,â€ť said Gandhi.
The report also states that the real issue with the Tamil Nadu electricity sector is not the availability of power generating capacity but the high indebtedness and grid transmission and distribution losses. TANGEDCO had accumulated losses of Rs 650 billion as of March 2015.
Moreover, one of the key reasons for the losses incurred is in transmission and distribution of electricity in the state.