Falling PLF, rising renewable make retiring old plants viable: report

Coal Insights Bureau

India’s coal power fleet delivered just over half its maximum generation output in fiscal FY20, touching a historical low and marking a 21-percentage point decline in a decade from 78 percent in 2010.

Low capacity utilization of coal plants and the ambitious targets for renewable capacity may make it economic to retire coal plants built before 2000, a report by BloombergNEF has suggested.

“Projects owned by the federal government were used far more than those owned by private IPPs or state governments. This is because federal plants typically have lower fuel costs as they are located closed to the coal mines,” the report said.

A key factor behind this over capacity is the government’s over estimation of the growth in national power demand as seen from the downward revision made in 2018.

This, the report claimed, led to overestimation in new coal capacity with 96GW of coal plants added to the grid over 2011-16 alone.

At the same time, renewable capacity grew, with the introduction of the 2022 targets and its falling costs.

Renewables have priority dispatch and the newer installations have lower levelized costs of energy, helping them secure a larger share of growth than coal.

Case for retiring old plants

In 2020, the finance ministry announced that the government would advise utilities operating old and high-emission thermal power plants to close them. However, no list of power plants or timeline were provided.

The low capacity factors of coal plants and the ambitious targets for renewable capacity may make it economic to retire coal plants built before 2000. These plants would have already recouped most or all of their fixed investments. These represents nearly one-fourth of the current installed capacity.

By retiring older plants, the emission intensity of the grid would improve as plants built in the 2010s are using higher efficiency super-critical technology.

At the beginning of 2020, there were 36GW of coal plants under construction, of which 90 percent were built by the government-owned companies.

“If all or most of this capacity comes online, the coal fleet capacity factor will fall further. This will put additional pressure on coal plants, even those built after 2000 to close down.