India’s Reliance Power in March synchronized the first of six 660-MW units of its Sasan Ultra Mega Power Plant (UMPP) in the state of Madhya Pradesh, readying it to supply power to 14 distribution companies across seven states. The plant (Figure 1) has been hailed as India’s first supercritical project to integrate a coal mine—an important achievement in a country that is battling chronic coal shortages. Though India has large coal reserves, domestic mining companies are struggling to keep up with demand needed to sustain its existing coal plants, which account for 55% of its generation.

1. A pit-head plant. India’s Reliance Power synchronized the first of six supercritical units of its Sasan Ultra Mega Power Plant (UMPP) in Madhya Pradesh. The plant has been allocated three captive coal mine blocks. That is significant because, though India has large coal reserves, domestic mining companies are struggling to keep pace with demand from existing coal plants, which account for 55% of the nation’s generation. Courtesy: Reliance Power

Located in Singrauli—India’s emerging energy capital and a locale that has installed nearly 10 GW of coal projects because it is near an artificial lake and rich coal deposits—the Sasan pit-head plant has been allocated three captive coal mine blocks, which have reserves of more than 750 million tons. The company says it could complete the 4,000-MW plant’s five other units within the next 15 to 20 months, ahead of schedule.

The project was the first of India’s UMPPs prioritized by the power- and fuel-short country’s government under a program to inject increased private investment into power generation. A major initiative of the 11th Plan (which ran from 2007 to 2012), power purchase agreements have so far been signed for four UMPPs of 4,000 MW each on a build-own-operate basis and competitive tariff-based bidding.

Between 2007 and 2009, Reliance Power won bids for three of these projects: In addition to the Sasan project in Madhya Pradesh, it is also building the six-unit 3,960-MW Krishnapatnam plant in Andhra Pradesh and the similar 3,960-MW Tilaiya project in Jharkhand.

A source at India’s Ministry of Power told POWER this March that Reliance has halted all work at the Krishnapatnam project site while it awaits a decision from the Indian Arbitrator Council on an appeal of a crippling June 2012 decision by the Delhi High Court. The court denied a petition from Reliance to block 11 state utilities from imposing $73 million in fines, cashing in $55 million in bank guarantees, terminating power purchase agreements, and recovering land allotted for the coal plant for Reliance’s failure to implement the project on time. Reliance had declared “ force majeure, ” arguing that the project was not viable because new rules by the Indonesian government resulted in a 150% surge in imported coal prices. At Tilaiya, meanwhile, construction of the plant awarded to Reliance in 2009 has been held up because land had not been handed over to the developer by the Jharkhand state government.

The fourth UMPP, in Mundra, Gujarat, is owned by Tata Power. Four of the five 800-MW units were commissioned between March 2012 and January 2013. The fifth unit has been synchronized to the grid and is expected to be commissioned soon.

Both Tata Power and Reliance have recently approached the country’s Central Electricity Regulatory Commission seeking higher power tariffs, citing increased generation and operation costs that are pegged to higher water prices in some states. Federally owned coal mining company Coal India’s increased prices for domestic coal, renewables surcharges, and an excise duty by the Indian government also add to costs, they say.

India’s acute energy shortage stems from severe supply side constraints, particularly coal and gas shortages, that are expected to continue in the near future. Even so, the country’s planning commission last September increased its new generating capacity target from 76 GW to more than 88.4 GW—the bulk from new coal capacity—over its 12th Plan period, which runs from 2012 to 2017. The new capacity would “bridge the gap between peak demand and peak deficit, and provide for faster retirement of the old energy inefficient plants,” the commission’s planning document says.

The 11th Plan sought to add 78.6 GW—but only achieved close to 52 GW. Observers note that nearly 90 GW is under construction, however. The 12th Plan should see additions of up to 11.9 GW of new hydro, 5.3 GW of new nuclear, and imports of 1.2 MW of hydropower from Bhutan.

About 50% of planned coal-based capacity for the 12th Plan is expected to use supercritical technology. Only 11 supercritical plants, with a total capacity of 7.4 GW, had been installed as of December 2012, but the government blames delays on the “uncertainties” regarding imported fuel supply. Even so, at least 12 supercritical UMPPs are planned for the states of Chhattisgarh, Gujarat, Tamil Nadu, Andhra Pradesh, Odisha, Maharashtra, and Karnataka, the government notes.

Meanwhile, in March, India established a target to install 30 GW of renewable power during its 12th Plan. A total of 27 GW of renewable capacity has so far been installed across the country, bringing renewables’ share to about 12.5% of India’s total installed power capacity of 213 GW. More than half (12.4 GW) of that renewable capacity was added over the past three years. The newly formulated Integrated Energy Policy calls for 15 GW of new wind power installation, most (about 7 GW) in the southern state of Tamil Nadu. About 19 GW of wind has already been installed. Plans also call for 10 GW of new solar and 2.1 MW from small hydro. The balance is expected to be made up by planned biomass power.

The Indian Ministry of New and Renewable Energy said it would provide various fiscal and financial incentives—such as capital/interest subsidies, accelerated depreciations, and customs duties—to promote renewable capacity additions. Utilities are also expected to receive “preferential” tariffs for renewable power purchase agreements, and the government said it would introduce renewable energy certificates and a renewable purchase obligation.

The planning document says energy efficiency will be India’s most cost-effective option for achieving short- to medium-term energy savings. India recently initiated the National Mission for Enhanced Energy Efficiency under the National Action Plan for Climate Change, outlining necessary technologies, financing, and fiscal incentives, and even creating energy efficiency as a market instrument.

Sonal Patel is POWER’s senior writer.