Tamil Nadu has the potential to save at least Rs 35,000 crore by phasing out ageing thermal power plants, pausing new construction and by encouraging renewable energy as per a study by Climate Risk Horizons. According to the study ‘TANGEDCO’s Recipe for Recovery’ conducted by Ashish Fernandes and Harshit Sharma, Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO) can end up saving massive amounts of money over a period of five years if the company takes urgent steps to phase out older thermal power plants in the state.
These power plants in Thoothukudi, Mettur, north Chennai and Neyveli currently have a generation capacity of 3.1 gigawatts (3,100 megawatts). “Shutting down 3,150 MW of older, inefficient coal plants will save an estimated INR 1,670 crore in terms of avoided retrofit costs for Flue Gas Desulphurisers (FDG) and Low NOx Burners. A quick phaseout of these plants (or phaseout of the power purchase agreement in the case of Central sector plant Neyveli Lignite Corporation), is the most economical option as retrofits to make them legally compliant with emission standards would require additional capex (Capital expenditure) and raise the cost of power and eventually power tariffs. All of these plants are between 28 and 40 years old,” the study explained.
The other ways to achieve the Rs 35,000 crore in savings include pausing the construction of newer thermal power plants in the state and relying on renewable energy sources to supply power instead of thermal power plants.
“If scheduled dispatch from these 3,150 MW of older plants were to be replaced with electricity either from new renewables or from the power exchange at an average of INR 3/kWh, there would be a further net savings of at least INR 1,459 crore per annum based on current tariffs. Since coal power tariffs tend to escalate annually, the actual savings over a 5-year tariff period would be over INR 7,295 crore,” the study added. Tamil Nadu has a surplus power generation capacity as of 2020, and an additional 7.3 GW of thermal power is under construction across the state. Of the 7.3 GW under construction, around 3.1 GW is at an advanced stage (meaning, it will be commissioned in the next 12 months) and the remaining is at an early stage.
The authors suggested that if the government freezes development and construction on the remaining power plants, that will free up the financial resources to the tune of Rs 26,500 crore for the cash-strapped discom. “Given the state’s power surplus situation and the cost advantages now enjoyed by renewable energy, CRH’s analysis shows there is no requirement for these new plants, and they will in fact end up worsening state finances if construction were to proceed,” a statement from Climate Risk Horizons said. The study also pointed out that phasing out thermal plants that generate power at the rate of over Rs 4 per unit with renewable energy sources or high-efficiency power plants that generate power at around Rs 3 per unit will help the discom save around Rs 6,097 crore per year.
Speaking to TNM about the study and whether Tamil Nadu has the capacity to bridge the supply gap that would arise out of phasing out of older thermal power plants, Ashish Fernandes said, “Tamil Nadu has several options to meet any electricity gap that might arise from retiring the older plants. First, for the short term, increase the generation from other younger operational plants. As the report shows there is a lot of unused capacity already. Second, purchase from the exchanges. Third, and most important for the longer term, set up new renewable energy either directly by TANGEDCO or through private contracts.” He further pointed out that if TANGEDCO continues to go down the same road, the discom will have to increase per unit tariff by Rs 2.2 approximately to make good the losses suffered.