Global warming, gas costs and carbon emissions could dramatically alter priorities for India's power sector with the possibility that by 2012, solar power could turn more attractive than imported coal and gas fuel for power generation says a report from the Strategic Management Group of the Tatas.
During the Tenth Five-year Plan that ended in March this year, only 23,000 megawatts of capacity was added against the original target of 41,000 MW. During the 11th Plan, the government has set a target of 68,000 MW.
Most of this new capacity is expected to be coal-based, either from pitheads or through imports, followed by hydro-electricity. This fuel mix is based on current capital costs and power generation costs for each fuel source.
Coal from whatever source and hydro-electricity seem clearly cheaper, and stay so even after trasnmission and distrbution costs as a result of which all efforts are under way to set up ultra mega power projects (UMPPs) of 4000 MW each using coal as fuel.
However, the study says new discoveries in the Krishna Godavari (KG) Basin along with liquefied natural gas (LNG) imports could boost gas availability. The preferred end use of gas is for fertilizers, petrochemicals, industrial applications and city distribution. The residual quantum can be used for power generation if the price is competitive.
But new supplies of gas at a price approaching $3.5 per Million British Thermal Units (mmbtu) can lead to a major swing in generation capacity in favour of gas.
Meanwhile, the Kyoto Protocol and carbon trading to reduce emissions caused by fossil fuels which were largely implemented by Europe and Japan but the US and developing countries were not covered. The consensus view is that some forms of cap and trade mechanism for Green House Gases (GHG) covering all countries could be implemented within the next 3 to 5 years to bring these countries into the net.
This would result in new power plants beyond a cut-off date, will have to factor in a cost for carbon emissions. The report points that the carbon emissions for power plants indicate that coal-based plants have the highest emissions while hydro, nuclear, wind and solar power have almost negligible carbon emissions. Gas falls somewhere in the middle.
High capital investment has kept solar power away from mass applications. However, capital expenditure has been steadily declining and is likely to touch $2 per watt by 2010 and, perhaps, hit $1.5 per watt by 2012. This could alter the economics of power, says the Tata study.