Power bills to rise on green norms

Power companies stare at Rs 2.5 lakh crore investment to meet COP guidelines, which would inflate electricity tariffs

Brace for some power tariff hikes this year as companies generating electricity from coal might start raising a whooping Rs 2.5 lakh crore from consumers beginning this year to compensate for the investments they are required to make to meet pollution emission norms.

Power plants are required to invest this amount, calculated at a conservative estimate, for not generating any new capacity but to fulfill the global Cop 21 (2015 Paris Climate Conference) norms.

As per the provisions of power purchase agreements, such investments can be recovered from consumers using the 'Change in Law' provisions, documents submitted by the power sector to the government showed.

The current deadline is end of 2017, which may get extended as the power sector feels that meeting the deadline is impossible.

The process of adhering to the norms, however, would create windfall gains to the power and pollution control equipment makers. The figure of Rs 2.5 lakh crore is conservative as the industry fears that the demand would be so much that it would create scarcity and push up equipment prices, further escalating the burden on the thermal power industry.

"Our members are committed to adhere to norms as we all are conscious of adverse implications on the environment. However, looking at costs of around Rs 1.25 crore for every megawatt and its impact on operational costs, we have requested the government and CERC for regulatory guidance. That is awaited, many members have already filled petition before the regulator," Ashok Khurana, director general, Association of Power Producers, said.

In December 2015, Ministry of Environment, Forest and Climate Change had issued new guidelines for emission levels covering sulphur dioxide, oxides of nitrogen, mercury, particulate matter and water consumption, applicable to coal-based power plants. These norms are to be implemented within two years of notification, by December 2017.

At present, the country has about 173 gigawatt of installed coal-based capacity and another 75 gw under construction which would be impacted by the new norms, Khurana said.

Apart from the challenges in implementing this mammoth scale of operations across the industry, the power sector fears there could be scarcity of equipment, pushing up prices.

"If all this goes without any planning we could face grid problem. As a way out, the sector can go for region-wise upgradation so that the grid is not impacted. The equipment is also needed to be available in such quantity. Many of the required technologies have limited suppliers or only available with international vendors. This may lead to further cost inflation due to the supply-demand mismatch," he said.

"In order to comply with the Cop 21 norms, the country will need to renovate, modernise or replace its existing coal-fired plants. This is critical since many of the existing plants are reaching end of their life cycle," Siemens said.

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