The many significant issues within India’s thermal power sector

The current economic climate and rapid expansion of wind and solar infrastructure have increased investment prospects and rising employment opportunities. The low tariffs on renewable energy are also slowly rendering the viability of coal-fired power plants during the 25-year terms of zero-indexation contracts. The economics of low-cost renewable energy have destroyed the viability of new import-fired power plants and progressively eroding non-mine mouth coal-fired plants’ viability. India is looking to continue using coal-fired power generation for its enormous domestic coal reserves, lack of commercially viable oil and gas reserves of scale, and because of strong energy demand growth.

Case studies: The various ways in which Indian thermal power plants are stranded

Cyrus Mistry’s Tata Power Mundhra Power Plant failed to achieve stable fuel supply. Mahagenco’s Koradi Thermal Power Station and Jaypee Power Ventures’ Nigrie Thermal Power Plant have financial uncertainties and operational challenges. Furthermore, the utilities of Lanco Amarkantak Thermal Power Plant have accumulated significant losses due to subsequent bankruptcies, while lenders are yet to find an easy exit from these projects. IEEFA notes that the investments made in non-performing assets have questionable economics behind them, with lower-cost renewable alternatives around the corner.

Water scarcity

India’s thermal coal-fired power plants use more than half of the country’s domestic water needs, which are causing draws in groundwater levels and depletion of surface water. From 2013 to 2016, coal-fired power plants were responsible for the consumption of over 80% of all industrial freshwater consumption in India.

Reducing water scarcity

Renewable energy alternatives offer partial solutions to the water scarcity problem created by coal-fired plants. Wind, solar PV, and concentrated solar power use minimal water and provide ecosystem services.

Air pollution

Thermal power plants in India are responsible for most (around 70%) of the country’s particulate pollution. Air pollution from coal-fired thermal power plants is blamed for about 81,000 premature deaths and over 108 million cases of serious health impacts in 2019, with economic costs of as much as Rs 83,000 crore per year in terms of premature deaths and hospital admissions. Coal dust, fly-ash, and sulphur dioxide are the primary culprits.

Divestments from thermal power

Many significant financial institutions worldwide have divested wholly or partially from coal mines and thermal power plants to mitigate the financial impact of stranded assets. This trend is likely to sideline India from attracting international capital.

Recommendations

India’s Federal Government must prioritise reducing air pollution and water scarcity by committing to addressing the associated emerging environmental policies (ESG). India’s pattern of insufficient capacity utilisation, the lack of a business environment to support technological advancement, and inadequate management of facilities, such as supply chain management, are putting the country at risk of increased financial debt. It is in the interests of India’s Federal Government to eliminate the expensive problem of stranded assets from the thermal power sector. India must auction out its coal reserves more rapidly and improve the infrastructure for domestic transportation. As well as this, the country’s Federal Government needs to engage institutional investors worldwide more actively, reach out to credit rating agencies, and green bonds certified as “low-carbon, sustainable projects.”