Solar power costs trend down, wind blows away tariff advantage...

 

Wind and solar, the two major renewable sources of energy being harnessed in India, offer a study in contrast.

While the price of solar energy has come down by 50 per cent in the last five years, primarily due to the introduction of competitive bidding based on tariffs, wind energy continues to be paid 'feed-in' or preferential tariffs, leading to a visible surge in tariffs the same period.

For instance, in 2011, when the government invited bids to build 500 MW of solar power capacity, participants quoted an average Rs 12.15 per unit of power—a very high rate compared to the average Rs 3.5 per unit price for domestic coal-fired electricity.

In just two years though, the gap has come down sharply. While the price of coal-fired electricity has now gone up to about Rs 5 per unit now, solar energy costs (based on solar photovoltaic technology) is now around Rs 7.

KPMG Advisory Services, in a 2012 report, projected that the cost of solar power in India could be on par with other conventional sources of electricity by 2017.

Wind power has offered a different experience altogether. Even though larger turbines are being developed that are proving more efficient at India's lower wind speeds, wind energy costs are heading northward.

India is forecast to put up 2,050 megawatts of wind capacity in 2013, compared with the 2,000 MW expected in the United States, there are already protests in states such as Maharashtra over the increasing tariffs, where tariffs for wind power have increased from Rs 3.37 to nearly Rs 6 per unit over the last four years.

In other states, including Tamil Nadu and Karnataka too, the wind tariffs have been inching upwards.

The Central Electricity Authority (CEA) in a new report titled 'Large Scale Grid integration of Renewable Energy Sources – The Way Forward', said, "The history of regulation worldwide bears out that cost-plus tariff in generation, as is being followed for wind in India, does not normally result in reduction in tariff."

While pricing remains an issue, the other big challenge, as renewable energy capacity grows in the coming years, is with respect of the large-scale grid integration of renewables.

Especially, since around 32,000 MW of renewable energy sources is slated to come up in the next five years in eight renewable energy rich states.

In order to ensure that the grid operates safely, it is essential for the grid operator to foresee what is expected to happen a few hours ahead, in order to be able to take appropriate measures.

"The bigger the renewable energy programme, greater the need for accurate forecasting. We need to develop state-of-the-art forecasting centres in all renewable energy-rich states. We have a very large integrated grid with each state responsible for maintaining its load-supply balance.

"Accordingly, each state buying renewable energy should remain responsible for balancing its variations, while the renewable energy forecasting centre in the producing state should do the forecasting on day ahead basis and go on to update it so that the buyer of renewable power gets at least an hour to adjust. If this is not done, scaling up of renewable energy power may endanger grid security," said former chairman, CEA, Ravinder, who only uses his first name.

He is one of the authors of the new report on renewables, along with Neerja Mathur, current chairperson of the CEA.

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Loss of output from captive coal mines costs the nation Rs 1.4 lakh crore...

 

What could be the financial cost to the nation of the loss of output from captive coal mines allocated to corporates over the past decade? The cost is a whopping Rs 1.46 lakh crore -- a result of delayed clearances for coal blocks and the companies’ own failure in developing the mines.

The humongous loss figure has been arrived at by adding the additional cost of coal imported to make good the shortfall with the cost of lost generation of electricity over the past five years.

According to consultancy firm KPMG, the total loss of output from captive coal mines over the past five years stood at 394 million tonne (MT) based on delays with reference to a normative time of 54 months to develop allocated mines. Of this, 200 MT shortfall was substituted by imported coal. Assuming the delivered cost of this coal at Rs 3,980 per tonne, and the cost of domestic coal for a port-based plant at Rs 2,380 per tonne, the additional cost of imported coal works out to Rs 32,000 crore.

The balance shortfall of 194 MT could not be substituted by imports and led to loss of generation. Assuming coal consumption of 0.68 Kilogram for generation of every unit (1 KWh) of electricity, the nation lost 285.2 billion units (BUs) of generation. Further, taking into account the average cost of power at Rs 4 per unit, the total value of lost generation stood at Rs 1,14,000 crore.

Putting the two figures together, the total loss due to captive mining shortfall in value terms adds up to a staggering Rs 1,46,000 crore. E-mails sent to the power and coal ministries seeking comments on the alarming loss figure did not elicit any response.

According to KPMG Partner Santosh Kamath, the loss figure for the power sector highlights the need for increasing the speed of clearances and permits. “The calculation shows the value of time is not adequately recognized or appreciated. This loss is actually a loss to the nation. However, not all the loss of Rs 146,118 crore may be related to delays in clearances as there could be other factors as well. None the less, clearances are a major reason,” he said.

The private power industry does not seem to agree with the analysis. “The coal imports carried out to bridge the shortfall have to be seen only in cases where the project is ready but the mine is not. There are very few such cases,” said Ashok Khurana, Director General of industry body Association of Power Producers (APP).

The government has allocated 218 coal blocks with reserves exceeding 49 billion tonne (BT) to companies since 1993 when the coal mining sector was partially opened up for captive production by private companies. Around a half of the reserves were allocated to the private sector. Around a tenth of the total reserves have been bagged by power generator NTPC alone.

The coal ministry, under fire for alleged irregularities in allocation of blocks, has cancelled allocation of 51 blocks so far based on the recommendations of an inter-ministerial panel that found the efforts made by corporates in developing blocks wanting. Most of the companies have cited delayed environment and forest clearances apart from land acquisition and Resettlement and Rehabilitation (R&R) issues for their failure to commission the mines.

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Lack of financing for new power projects a big concern: KPMG

 

The absence of funds for new power projects is an area of big concern and should be dealt with seriously, according to a report.

"A big concern today is a lack of financing available for new projects. The 13th plan (2017-22) requires Rs 1.27 lakh crore of private sector equity and the project pipeline looks weak, and if we don't correct the situation immediately, we will be back into a cycle of high deficits," consultancy firm KPMG said in a report.

There is a strong imperative to bring in strategic and financial investors, it said.

The lack of funds and the poor pipeline are due to the current stalemate on various projects. Power projects face delays in land acquisition and environmental approvals and issues related to allocation of coal and passing on costs of importing the fuel.

"Over 33,000 MW of projects are operating below 60 per cent plant load factor, mainly due to fuel issues," according to the report. "This could pose a risk to over Rs 1 lakh crore of bank loans, which could turn into NPAs (non-performing assets)."

Delays in environment and forest approvals are taking a huge toll on projects. Clearances are pending for about 1,03,000 MW of power projects and 726 million tons per annum of mining capacity, it said.

Each day of delay for 100 million tons per annum of coal production costs the nation Rs 42 crore and USD 17 million in foreign exchange due to imports, according to the report.

KPMG also said that there is need to rope in global participation in underground coal mining, which is currently less than 10 per cent of India's coal production.

"Bring in international participation in underground mining and operational excellence initiatives in mining companies," the report said.

Underground miniing needs to be given a fillip as it is needed for long-term coal security, it said.

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Solar Power can meet 5-7% Power Requirement in India by 2021-22: As per KPMG Report…

A study published by KPMG, a global consulting company has forecast that solar power can meet 5-7% of India’s total power requirements by 2021-22.

In a written reply to a question in Rajya Sabha today, Minister of New and Renewable Energy Dr. Farooq Abdullah said India has good potential for solar power as it receives solar energy equivalent to over 5,000 trillion kWh per year, which is far more than the total energy consumption of the country. He said the daily average solar energy incident varies from 4 – 7 kWh per square meter of the surface area depending upon the location and time of the year. The Minister added that the solar radiation is available at most locations in the country for about 300 days in a year.

Dr. Farooq Abdullah informed that the total installed capacity of grid connected solar power plants as on date is 45.5 MW. He said the Government has launched Jawaharlal Nehru National Solar Mission in January 2010, which aims to set up 20,000 MW grid solar power by 2022 in addition to 2,000 MW of off-grid solar power. He said deployment of solar power is, thereafter, expected to increase rapidly due to declining prices of solar power, indigenization and technology improvements.

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