Coastal Gujarat Power Ltd (CGPL), a subsidiary of Tata Power Company that operates India's first ultra-mega power project (UMPP) at Mundra, has begun using a blend of almost 20 different varieties of coal in order to reduce costs without sacrificing efficiency of plant operations.
CGPL's power plant is the first live project amongst the 4 UMPPs of 4,000 mega watt each, awarded by the government till date.
The cost reduction exercise became critically important when the prices for imported coal went up. This was because Indonesia (and then every other coal exporting country) imposed huge export duties, making the coal India imported that much more expensive.
Though the Central Electricity Authority (CEA) has allowed CGPL and similar plants to raise their tariffs, irrespective of their power purchase agreements (PPAs) already signed, the matter is still subjudice as some states have challenged CEA's move. Blending of coal at a record level is one of the successive innovative strategies that CGPL has worked out to keep its losses down, without jeopardising the quantum or quality of power it had committed to generate for the five purchasing states, till the tariff issue is sorted out by the court.
Krishna Kumar Sharma, CGPL's executive director & CEO, claims that the Mundra plant is arguably the most energy-efficient, coal-based thermal power plant in the country. "As compared to any other subcritical power plant in India, this project saves 1.7 million tonnes of coal per year, thus averting carbon emissions of almost 4 million tonnes annually. The greenhouse gas emissions per kilowatt hour of energy generated will be about 750 gm of carbon dioxide per kWh, as compared to India's national average of 1,259 gm CO2/ kWh for coal-based power plants. The choice of imported coal significantly lowers sulphur emissions. The plant will use significantly less than the stipulated 1% sulphur and 10% ash content in coal," says Sharma.
The need to focus on blended coal was taken up on a war footing when CGPL's cost of imported coal shot up. The Indonesian government decreed that the difference between any negotiated price of purchase and the international market price would be payable as export duties. Subsequently, other coal exporting countries also introduced similar legislations.
This led to wiping off all advantages that coal importers like the Adani and Tata groups thought that they could enjoy, and on the basis of which they had signed PPAs for their power projects in India.
With Tata Power already having signed PPAs (or price purchase agreements) with five states --Gujarat, Rajasthan, Maharashtra, Haryana and Punjab, the sudden increase in coal prices – for no fault of its own – made CGPL suffer losses. It wanted a hike in tariffs which purchaser-states refused to consider. "This forced CGPL to work on several innovative strategies," says the official.
So it began experimenting with different varieties of coal to create a blend which would give it the calorific value needed to run a super critical thermal power plant as well as keep other costs down. Today, it uses 12 million tonnes of this blend annually.
There were other ways to keep costs down, without sacrificing efficiencies. Instead of giving the plant construction to an EPC contractor, Tata Power decided to do all the EPC work itself, and contracted out specific parcels of work to different parties. It worked on innovative solutions which could further reduce costs. As a result, costs have been kept down, even while ensuring that the plant came up well before the schedule date.
Not surprisingly, CGPL has won awards for having the best project financing deal, and was awarded the Asia Pacific deal of 2008. It is listed as one of the three best infrastructure projects by KPMG in 2010 from among the top 100 in the world.
"Today, we generate 2.6% of the nation's power requirement," says Sharma. And even after the price increase is cleared by the courts, its end tariff will still be under Rs 3 a unit.