India Can Save $1.2 Billion a Year by Shutting Old Coal Plants

(Bloomberg) -- India can potentially save 89.4 billion rupees ($1.2 billion) a year by shutting down some old coal-burning power plants and allowing newer ones to run for longer hours, according to a study.

The country should accelerate decommissioning 30 gigawatts of inefficient coal-fired capacity and set aside another 20 gigawatts of plants as reserve, a move that will lead to cost savings as well as reduce pollution, the study by New Delhi-based Council on Energy, Environment and Water, or CEEW, said.

Closing down the old plants, which consume more coal than a newer counterpart to produce a unit of power, can help reduce greenhouse-gas emissions, clean up the country’s air and reduce soil and water pollution. Shutting down the old plants will also improve capacity use of the thermal fleet, currently saddled by under-utilization.

“By clearing out the stock of inefficient assets, we create fresh breathing room and make a case for more investment in the sector -- in renewables, energy storage, system upgrades, among others,” the study said. “Each passing year of delay increases the burden on us with a higher electricity bill and more air, water, and soil pollution to manage.”

Dependence on fossil fuels, such as coal and oil, has made India the world’s third-largest emitter of greenhouse gases, putting it under pressure to cut down the use of such fuels and do more to aid efforts to deal with global warming.

The country needs to dispatch power on the basis of efficiency, instead of on plants’ variable generation cost, a system that prefers old coal stations that have access to cheap fuel because of their location close to mines, the study said.

India currently has a 203-gigawatt coal power fleet, which accounts for 53% of its installed generation capacity and about 70% of its electricity output.

CEEW examined 194 gigawatts of coal power plants over a 30-month period ended February 2020. The new system it advocates avoids 42 million tons of coal being burnt every year, a key source of the financial savings besides the positive impact on emissions and environment.

Besides the operational savings, shutting old generators will result in a one-time cost saving of 102 billion rupees that those plants would have to spend on pollution-control retrofits to stay in operation, the study said.

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