In India, on pithead coal power plants, NTPC India has been able to maintain coal power tariff at 4.5 cents on the average, although non-pithead plants produce at about 6 cents. 50% of coal tariff is fixed cost and about 50% is fuel and variable cost. Lignite based electricity is more expensive, which is about 6.6 cents, as revealed by CERC-NLC determination.
Nepra took international prices of coal at an average of around 89 USD per tonne FOB which adding transportation and handling of another 40 USD per tonne becomes 129 USD per tonne or 5.763 USD per MMBTU. International coal prices have been coming down and were almost halved in 2015 to 40 USD per tonne. Prices have now recovered to 69 USD per tonne. At current prices, if reference tariff is computed now, it would be at 109 USD per tonne or 4.8323 USD per MMBTU.
TCEB has issued a tariff of USD 50.59 per tonne as opposed to 34.68 USD/tonne of lignite prices for captive users in India. The major advantage for Thar coal appears to be that there is no transportation costs which would otherwise add about 40 USD per tonne extra costs in transportation and handling.
Thar coal is of low CV of about 6000 Btu per lb as against normal sub-bituminous coal of 10,253 Btu per lb. Thar Coal price compares favorably; 3.8402 USD per MMBTU with international/Indonesian reference prices of 5.763 USD per MMBTU. In that case, why Thar electricity tariff is almost equal to imported coal tariff? Perhaps, high RoE is responsible. Thar coal's electricity may become cheaper if ROE is corrected and thermal efficiency is enhanced .If current imported coal prices are taken, then in that case, Thar coal electricity would be comparably more expensive than that of imported coal.
Nepra tariff is silent about power plant specs. It only specifies on performance measure such as thermal efficiency. It is however silent on environmental performance, relying on EIAs. One is not sure what is being actually supplied and installed in ongoing coal power plant projects. At COD, they only measure heat rate and electrical supply variables. I hope, if either Nepra or EIA procedures provide for the measurement of environmental performance at COD. Normally, environmental issues receive least attention and are managed somehow. But consumers are actually paying for environmental equipment in the form of tariff and any leniency or deviation should not be acceptable.
One is not sure as to what is the logic of issuing tariff for Thar coal transported to Port Qasim. Has any feasibility study been done for proving the transportability which cannot be done, however, until some Thar coal is actually available, which it is not and may perhaps take another six months or one year? There have been counteracting news and discussions regarding transportability of Thar coal which has to be tested against actual field testing. Some time back, an agreement had been reached with Sindh government that a percentage of Thar coal would be used in imported coal power plants. That has perhaps been forgotten, for, Nepra tariff makes no mention of it, or any effort has been done by the IPPs to design their boiler furnaces accordingly. Thar coal may perhaps be used only when the foreign exchange issue makes it necessary. To be fair, this could not have been done due to short time that was available to handle the unknown Thar coal.
I have made the following recommendations to Nepra; 1) Thar coal IRR on Equity be brought in line with other coal power plants, ie, 15%; 2) KIBOR margin should be reduced to 1%; extra margin to be awarded on proof; 3) an international study should be commissioned on LIBOR margin to bring down LIBOR margin if possible; 4) coal handling terminal charges and its CAPEX be reconsidered, although it is related with imported coal; and 5) USC and SC technology on lignite is now competitively available from many sources and thermal efficiency figures of (44-45%) may be accommodated within the available CAPEX in the existing determination if possible. High efficiency comes at a cost. Chinese should be consulted, if those kind of thermal efficiency figures are available with them on lignite of 600MW and over.
Proposals for reducing Thar coal tariff should not be understood as being against Thar. On the contrary, a balanced approach is being argued. High prices increase producer's incentive. Low prices mean buyer's incentive. Solar and Wind promoters in this country kept lobbying for higher prices and got them, but resultantly, very few projects could be installed. History of other countries has indicated that market and investment expand at low prices. Thar promoters have to adopt a market sense. There is no monopoly of any energy source. If there was any, it has been broken by the imported coal which one would like to discourage, which compares quite unfavorably with Thar coal power tariff of Rs 8.5 per kWh. Imported coal tariff should have come down automatically with a reduction in international coal prices by 25-50%. Thar coal should be kept competitive with imported coal. And solar prices have come down to 6 cents as against a coal tariff of 4.5 cents in India. Secondly, circular debt can only be eliminated if the gap between cost of production and consumer tariff is reduced along with eliminating theft. All will have to participate proportionally in this effort.
(To be continued)
(The writer has been Member Energy, Planning Commission until recently)