Owner/operator: Tata Power
Tata Power’s 4-GW ultra-mega power plant near the port city of Mundra in the western state of Gujarat became fully operational this March despite serious fuel challenges, establishing India’s first 800-MW units based on supercritical technology.
India’s emergence as an economic powerhouse has been tempered by acute power shortages that stem from severe supply side constraints. In August 2012, although the country’s installed capacity soared to 207 GW, a crippling electricity deficit of up to 12% persisted, centered on five northern power-hungry states: Maharashtra, Madhya Pardesh, Uttar Pardesh, Punjab, and Haryana. The government has planned to increase 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, but it also means to retire older energy-inefficient plants and put in their place more advanced supercritical thermal ones.
Complicating India’s energy dilemma is a 2005 initiative by India’s government to provide “Power to all by 2012.” To address the deepening supply-demand chasm by incentivizing the injection of increased private investment into power generation, the government at that time also initiated an ambitious program to build several “ultra-mega power plants” (UMPPs). These comprise projects with an installed capacity of 4,000 MW to make power available at a minimum cost through economies of scale of energy-efficient and environmentally friendly technologies. However, though it was a major initiative of the 11th Plan (which ran from 2007 to 2012), so far, power purchase agreements have only been signed for four UMPPs—each on a build-own-operate basis via competitive tariff-based bidding.
In 2005, the government appointed the Power Finance Corp. (PFC) as the nodal agency for developing UMPPs, which in turn set up “Special Purpose Vehicles” that are tasked with all initial development work, including obtaining required land, water, coal blocks, and environmental and other clearances for the project—even before the projects are handed over to developers after bidding is resolved. The developers are primarily responsible for arranging funding and technology, placing orders for key equipment, as well as executing and operating the project. To date, 16 UMPPs have been planned in various states, including Andhra Pradesh, Chhattisgarh, Gujarat, Jharkhand, Karnataka, Madhya Pradesh, Maharashtra, Orissa, and Tamil Nadu.
The First UMPP
Tata Power’s wholly owned subsidiary Coastal Gujarat Power Ltd. (CGPL) in 2006 won the first of four bids awarded since 2005 for the Mundra UMPP. This plant—sited on a well-connected site of about 1,305 hectares in a coastal area south of Tunda village in Mundra Taluka, in the Kutch District of Gujarat—is also the first of those projects to fully go live. All five of Mundra’s 800-MW units were commissioned between March 2012 and March 2013.
Between 2007 and 2009, Reliance Power won bids for the remaining three UMPP projects. In addition to the 3,960-MW Sasan project in Madhya Pradesh, that company is developing the six-unit 3,960-MW Krishnapatnam plant in Andhra Pradesh (though construction has now stalled) and the similar 3,960-MW Tilaiya project in Jharkhand, whose construction has yet to begin (see more in “India’s First Coal Mine-Integrated Supercritical Plant Synchronized” in POWER’s May 2013 issue). Those delays have been blamed on recent events, which have posed a number of serious hurdles to both developers, forcing them to grapple with an array of issues, from land acquisition and mine-related clearances to a shortage of domestic coal supply and unprecedented increases in the prices of imported coal.
At 4,000 MW, CGPL’s Mundra plant’s significance to India is underscored. The plant supplies 2% of the nation’s total power, including power to five Indian states: the booming industrial western states of Gujarat (1.8 GW) and Maharashtra (760 MW) plus Haryana (380 MW), Rajasthan (380 MW), and Punjab (475 MW) in northern India, which face debilitating electricity shortages.
Among the world’s largest greenfield thermal generation projects, the massive plant is today also coal-heavy India’s most efficient fully operational thermal power plant. The project was completed in a record time of one year from the date of commissioning of the first 800-MW unit in March 2012 (Table 1). That means the average gap between synchronization of two units has been 3.5 months, “which is better than the baseline schedule of four months and is much better than the five months provided in original power purchase agreements,” says CGPL.
|Table 1. Project milestones for the Mundra UMPP. Source: Tata Power
At the same time, the plant heralds the entry of 800-MW supercritical boiler technology in India. According to CGPL, what sets the plant’s technology apart from “recirculation type” boilers in 500-MW subcritical units commonly used in the country is that the boilers for the supercritical 800-MW units are a “once-through” type. As compared to any other subcritical power plant in India, the project avoids burning 1.7 million metric tons of coal per year. Mundra’s greenhouse gas emissions per kilowatt-hour of energy generated are 750 grams of carbon dioxide (g CO2) per kWh, as compared to India’s national average of 1,259 g CO2/ kWh for coal-based power plants. “The choice of imported coal also significantly lowers sulfur emissions,” the company says. The plant uses significantly less than the stipulated 1% sulfur and 10% ash content in coal. All coal ash generated from the plant is collected and stored within the plant premises in silos and ponds.
The plant has won two Project Finance International accolades for its brisk pace of development: In 2008, it was awarded the Asia-Pacific Power Deal of the Year for its financing achievement in a span of 12 months, and in 2012, it won the Infrastructure Excellence Award in the Energy and Power category for the execution of the Mundra UMPP.
But it is also recognized for innovative practices, including the introduction of a “Safety Time Out” session and a Safety Intervention Audit Team, which has resulted in “improved risk perception of employees and increased safety awareness at CGPL Mundra,” the company says.
A number of in-house developments have also helped construction and operation processes. During the plant’s construction, the project team invented and deployed funnel-shaped welding spatter arrestors for works at height. The plant also uses unique wind barriers for the internal coal-handling system, which has resulted in reduced coal dust fugitive emissions to nearby villages.
During construction, CGPL also committedly interacted with the neighboring communities—10 predominantly agricultural villages within a 10-kilometer radius of the facility—to iron out agreements on land rates and land title issues within families. CGPL has since then engaged deeply with the villagers to improve employment and aid self-sufficiency (via micro-finance programs), education, health, drinking water, infrastructure, and rural energy. One way it mitigated loss of grazing land was to provide fodder for the villagers’ 3,000 cattle, an initiative that has been recognized nationally and on the state level.
But the Mundra plant continues to grapple with what is perhaps its biggest challenge: procuring imported coal in a highly volatile international market.
In 2007, Tata Power had contracted coal from Indonesia—the preferred choice for Indian developers due to advantages in logistics and mining costs—on terms that were reflected in bid tariffs. In September 2010, however, the Indonesian government issued a regulation that obliged coal producers to sell minerals and coal based on a regulated benchmark price. The new regulations rendered coal contracts between Tata Power and Indonesian producers invalid and put the company in the precarious position of procuring imported coal at an unprecedented cost that increased 150% to 200% from the start of the bid process. The coal price change has made tariff-based prices of the power purchase agreements between CGPL and the five Indian states, cemented in April 2007, unviable.
Despite India’s Central Electricity Regulatory Commission’s order this April to link compensatory tariffs to international coal prices (and its subsequent recommendation that the project’s gross compensatory tariff be raised by 56 to 58 paise/kWh (about $0.01/kWh as of August 2013) to help make it profitable again), Tata Power continues to flail financially on woes tied to international loans secured for Mundra in 2008 that are worth Rs. 17,000 crore. With the weak rupee crisis that has recently hit India, Mundra now faces a massive dollar loan liability of $1.4 billion.
To address its fuel challenges and reflect the change in the cost of Indonesian coal, CGPL has begun blending and deploying alternate coal called “eco-coal,” which it says is equally environmentally friendly and low in sulfur content but also cost competitive and therefore helping to offset costs. “Up to 70% blending is being done to offset some of the cost impact due to steep increase in international coal prices and we plan to maximize this to reduce overall cost of fuel,” the company says. “This is a partial solution that will mitigate large excursions in costs due to devaluation of Indian rupee as well as in the costs of fuel.”
Mundra’s operational success in the fog of so many uncertainties qualifies it as a POWER Top Plant. But the future of other Indian UMPPs remains uncertain. One urgent policy concern that India’s government will need to deal with in the near future is to aggressively scout and retain other global coal resources. “Besides,” Tata Power says, “it needs to create enabling policy framework wherein use of such imported fuels would be dealt with properly specially in terms of its commercial dispensation. Further, the rise in imported coal fuel prices due to regulatory issues in global markets including Indonesia would also need to be dealt lest developers would not create downstream investments here in India to use imported coal.”
For now, Tata Power—India’s largest integrated power company—will seek to further diversify its portfolio of 6,899 MW in thermal, hydro, solar, wind, and geothermal generation. With the Mundra plant completed, the company has plans to add 26 GW by 2020, of which 20% will be from renewable sources. ■
— Sonal Patel is a POWER associate editor.