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Clean energy transition could save Maharashtra 75K-crore in 10 years: Study

According to a new report published on Thursday, Maharashtra could save as much as 75,000 crore in the next decade by implementing three steps in its energy sector: shutting down old coal power plants by 2022, halting the construction of a new unit at the Bhusawal thermal power plant (which is in surplus to the state’s requirements) and replacing coal contracts with cleaner alternatives over the next 10 years
By Prayag Arora-Desai
PUBLISHED ON JUN 11, 2021 12:43 AM IST

According to a new report published on Thursday, Maharashtra could save as much as 75,000 crore in the next decade by implementing three steps in its energy sector: shutting down old coal power plants by 2022, halting the construction of a new unit at the Bhusawal thermal power plant (which is in surplus to the state’s requirements) and replacing coal contracts with cleaner alternatives over the next 10 years.

This analysis comes at a time when Covid-19 is causing tax revenues to fall sharply. For comparison, with the savings opportunities presented in the new report by research group Climate Risk Horizons (CRH), Maharashtra’s fiscal slippage for the financial year (FY) 2021-22 is estimated at 33,000 crore, according to India Ratings. Maharashtra’s current fiscal deficit, as per FY 2020-21, is 78,617 crore. At the crux of the report – Maharashtra’s Energy Transition: A 75,000 crore Savings Opportunity – is a strategic move away from the polluting coal-based power, which is set to get more expensive in coming years.

“The pandemic has hit the Maharashtra State Electricity Distribution Company and the state government’s finances. As the government explores ways to cut costs and improve financial health, retiring old coal plants should be part of the mix. A judicious retirement of these assets and incentivising their replacement with cheaper renewable energy will help the state build back better,” said Ashish Fernandes, lead analyst at Climate Risk Horizons, and corresponding author of the report.

Such a step, the report says, is possible due to a “convergence” of three factors that provide a strong impetus for Maharashtra to undertake such a transition.

Firstly, there is a surplus generating capacity in the state. Secondly, renewables and battery storage are becoming cheaper. Finally, there is a legal mandate for all power plants to install pollution control technology by December 2022-24, which is in itself a costly undertaking.

Older coal plants are typically less efficient, more polluting and will soon need to comply with the 2015 emission norms notified by the Union environment ministry by 2024 at the latest. As such, the report identifies that the Bhusawal power unit-3; Chandrapur units 3-7; Khaparkheda units 1-4; Koradi unit 6 and Nashik units 3-5 could be retired instead of incurring expenses retrofitting them with pollution control devices. Most of these plants are located around Chandrapur and Nagpur.

“This will save approximately 2,063 crore in avoided costs. The cost of electricity from these units is also far more expensive than today’s competitive tariffs for renewable energy. So replacing the scheduled generation from these old units with cheaper renewable electricity will save another 1,600 crore annually. That’s 8,000 crore over five years,” said Fernandes.

Shutting down these old units would allow Mahagenco (Maharashtra State Power Generation Company) to replace coal from distant mines with supplies from mines closer to the remaining operational coal fleet. This rationalisation can cut the cost of transporting coal by 627 crore and possibly as much as 967 crore annually, the CRH report states.

Freezing the construction of the upcoming unit at Bhusawal would save another 3,158 crore in the first year of the transition.

“This unit is at a relatively early stage of construction and... is neither required nor competitive with alternative electricity sources,” the authors stated.

Thus, the first-year savings presented in the report are 7,504 crore, and 16,636 crore in five years, the reports calculated.

Moreover, in the long term (between 2025-2030), CRH estimated that phasing out all coal plants with tariffs more than 4/kWh (kilowatt hour) and replacing them with renewable sources (with tariffs up to 3/kWh) could result in savings up to 12,528 crore annually or 62,641 crore in five years. This is based on projected power tariffs for FY 2024-25.

“As mentioned earlier, recent tariffs discovered for solar and wind in India have been in the 2–3/kWh range... Against a 3/kWh renewable energy tariff benchmark, any power plant with a tariff above 4/kwh is uncompetitive... The long term savings potential if Maharashtra gradually phased out power purchases from coal plants charging tariffs above 4/kWh and replaced that volume of electricity with renewable power at 3/kWh (or lower) is obviously significant,” the report noted.

Responding to CRH’s analysis, independent analyst Sunil Dahiya from the Centre for Research on Energy and Clean Air, said, “Research has shown that Nagpur’s residents breathe some of the most heavily polluted air in the state, with several coal power plants in and around the city. Reducing the air pollution levels that residents are exposed to has never been more urgent. Retiring old coal plants and gradually phasing out the rest needs to be part of public health planning along with efforts towards curbing other sources.”

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