Conversion of FO-fired plant to coal: CPPA-G raises questions on Hubco plan

Central Power Purchasing Agency Guaranteed (CPPA-G), the power sector market operator, has reportedly raised many 'ifs and buts' on M/s Hubco's proposed plan to convert its power plant from Residual Fuel Oil (RFO) to coal, well informed sources told Business Recorder. M/s Hubco had submitted a plan to the government to convert furnace oil-fired plant into a coal-fired power plant prior to expiry of Power Purchase Agreement (PPA in 2027
CPPA-G, in its comments on the proposed conversion plan has stated that Hubco's proposal highlights multiple gains and benefits that could be harnessed in future, however, the other side of the coin should be noted before reaching any decision.
Being a market operator and custodian of existing Power Purchase Agreement (PPA) of M/s Hubco under section 7 of the grid code, the comments of CCPA are as follows: as per grid code ( planning code PC4), NTDCL is mandated to prepared Indicative Generation Capacity Expansion (IGCEP) considering the demand and supply position of the country. Hence, prior to any commitment with new projects or any modification in the existing power projects, endorsement of site, size and technology should be aligned with IGCEP prepared by NTDCL and Renewable Energy Policy under discussion with the Ministry of Energy (Power Division).
NTDC has recommended that conversion of Hubco's furnace oil-fired plant into coal-based plan should be treated as an additional candidate project in IGCEP's upcoming iteration and as such the technical and financial data required by power system planning of NTDC should be provided to NTDC to consider this plant (Hubco with conversion) as a candidate plant. The selection decision will only be based on least cost selection criteria to be ensured through IGCEP.
It was instructed by the erstwhile Ministry of Water and Power, in a letter of June 2016 that no further financial commitments would be justified for purchasing of power on imported fuels. Hence, proposal of Hubco to utilize pulverized coal boiler with imported sub-bituminous coal cannot be entertained.
PPA for Hubco's project was signed in March 1997 between Wapda and Hubco for 30 years which is going to expire in March 2027 following which any further extension in the existing agreement would be on new terms and conditions. However, recently, after the restructuring of NTDCL, CPPA being a sole entity for power purchaser was mandated to deal with this issue.
According to CPPA-G, the current demand supply balance includes Hubco's 1200 MW as committed available capacity until 2027 and it is feared that during the period of conversion, its unavailability can cause shortage in the system even if it is selected through IGCEP process. This point must also be considered by NTDC while treating Hubco as a candidate in next IGCEP iteration.
CPPA-G further commented that Hubco power plant was established under Power Policy 1994 and its PPA does not support the concept of conversion proposal. Furthermore, the proposal of the company is not in line with the government's policy being implemented and followed since 1994 and 2015. Thus, the first and foremost task is for the government to formulate a policy as other parallel (RFO- fired) projects may also request the same concept which should be formulated in consultation with all major stakeholders so that collective wisdom of all stakeholders may be applied in vital national interest.
CPPA-G further states that converting technology to the complex from RFO- fired boiler will result in upward shifting on the merit order which will eventually provide an economical benefit to the system. Other equipment of the complex will not be changed. Therefore the question is whether further extension in the PPA is technically viable or useful for another 25 years after retrofitting remaining old equipment given that existing steam turbine along with other plant equipment was meant for a 30 year term, of which more than 20 years have passed?
The project has paid the entire debt component during the operation cycle of more than 20 years which has significantly resulted in reduction of Capacity Purchase Price (CPP) but the acceptance of such a proposal would imply that power purchaser will be bound to pay again full capacity payment as per new agreement. On the other hand the existing project, after expiry of its PPA, will have the opportunity to trade under the competitive wholesale market framework.