How economic and environmental concerns are stalling mega power projects in TN

Across the country, 16 UMPPs were planned. Of this, only two were actually built and both are stranded assets.
How economic and environmental concerns are stalling mega power projects in TN
How economic and environmental concerns are stalling mega power projects in TN

It has been five years that a proposed 4,000 ultra mega power project (UMPP) in Tamil Nadu’s Cheyyur received an environment clearance but the construction of the plant has not begun yet.  Putting a dampener on the proposed power project, the Union Ministry of Environment, Forests and Climate Change (MoEFCC), on January 23 demanded a completely fresh application for the project's environmental impact assessment.

The plant had received an environment clearance in 2013. However, this will not be valid anymore as the project proponent wanted to change its source of coal from imported to domestic.

The Cheyyur Tamil Nadu Power Ltd. (CTNPL) is a wholly owned subsidiary of Power Finance Corporation (PFC). The Rs 25,970 crore-project has been running into several controversies since it was proposed.

While conservationists slammed the project say it has the “potential to irreversible damage to Odiyur Lagoon,” which is located near the proposed plant, financial experts said it was just too expensive. Despite getting an environmental clearance in 2013, there is no sign of physical constructions even after nearly six years.

The project proponent, in December 2018, submitted an online application to the MoEFCC to change its source of coal from imported to domestic. This could be to cut coal costs, as a study from the Institute of Energy Economics and Financial Analysis deemed the project financially unviable, primarily due to the high costs of imported coal.

“Coal constitutes 55% of the annual expense for the plant. If the global markets could sustain current coal prices in the $65 per ton range delivered, the price would still be more than twice as high as Coal India’s price of $25 per ton,” read a 2015 report, adding that this does not include “likely increases to coal costs that will occur as India and the world adopt more stringent carbon policies”.

Domestic coal, with a lower calorific value, generates more fly ash than imported coal. Subsequently, the land requirement for the ash dyke almost doubled from 1,058 acres to 2,007 acres. The ash generated from coal plants is mixed with water and the sludge is dumped in ash dykes.

Across the country, these ash dykes are a threat to the community living around it, the wetlands and other water bodies and to the general ecology.

“Large ash dykes are disasters waiting to happen,” said wildlife and conservation biologist Ravi Chellam. While environmental norms dictate that all fly ash generated be made available for manufacturing of cement and other industries, nearly a third of the fly ash in the Tamil Nadu is dumped in ash dykes near villages, decimating local livelihoods and ecology.

According to the latest annual report of the Central Electricity Authority, Tamil Nadu generated 10.42 million tonnes of fly ash but could utilise only 6.99 million tonnes.

Challenging the 2013 environment clearance given to the plant, the Bombay Natural and History Society challenged the expert appraisal committee observation that migratory birds are found to be negligible in this (Odiyur) lagoon saying that there at least 77 species of water birds.

“Among these, there are eight species which are on the threatened list of 42 bird species of India as per Birdlife International/IUCN’s (2011),” read their 2014 report.

While noting that the physical construction still hasn’t begun even after five years of obtaining the environment clearance, an expert appraisal committee noted that several parameters would change with the use of domestic coal.

“It has been informed that the project configuration, layout and other technical parameters will also be revised. Accordingly, the committee is of the opinion that a fresh EIA and Public Hearing may be required,” read the minutes of the committees meeting on January 23.

“In the last five years, the baseline status in the area may have changed and new industries may have come up. Presently, the EC is valid till September 2020. It may not possible to complete the construction within the validity period, even if it is extended for a further period of three years,” it added.

Despite switching to cheaper domestic coal, the ultra mega power project is unlikely to make financial gains.

“Ultimately coastal barging of coal from North East India to TN is only marginally less expensive than using entirely imported thermal coal. The cost of transporting coal 1,600 km is prohibitive, particularly now that wind and solar energy is consistently below Rs3/kWh with zero tariff indexation for 25 years. And renewable energy will get 5-10% cheaper every year going forward as economies of scale and continued technology improvements are made,” wrote Tim Buckley, the director of energy finance studies from IEEFA, to The News Minute.

Officials from Coal India Limited said that the move makes sense. “Indian coal is not just cheaper but its availability is a lot more stable. This change is a good move as it also saves a lot of foreign exchange for the country,” said one official, requesting anonymity. As of February 14, India has coal stocks for 14 days of consumption, while their ideal target is 12 days.

Across the country, 16 UMPPs were planned. Of this, only two were actually built and both are stranded assets, said Buckley, emphasizing the financial unviability of large coal-fired power plants.

“The Tata Mundra 4.0GW plant in Gujarat needs a massive 30-year consumer subsidy and a major bank loan write down to even allow it to be remotely gross cash flow breakeven. Private capital has learned the hard way from this decade long thermal power investment debacle, and the NPAs in the public banking sector are hard to overlook,” he said.

T Pandian, a retired headmaster in a school in Gengadevankuppam near Cheyyur, describes his village as green, peaceful and fertile — dotted with palm trees, banana plantations and other farming lands. He fears all of this could be destroyed if the power plant comes up.

His village is on the path of the proposed conveyor belt that would carry coal from the proposed harbour to the plant. The conveyor belt will be 5 kms long and will be covered. However, he does not trust the authorities.

“The belt will leak coal dust all along the way and will destroy our farming lands. There is no way that the authorities will ensure its safety,” said the 67-year-old, who is now a farmer. As part of the environment clearance, the project developers will have to conduct a public hearing.

“I will attend the hearing and make sure that my and my village’s concerns are addressed,” he said.

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