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2 nd Coal Conference

2 nd Coal Conference . By: B.M.VERMA Advisor- Essar Power (M.P.) Limited Ex- Chairman Jharkhand State Electricity Board Ex- Chairman & Managing Director Uttarakhand Power Corporation Limited Contact: +91- 9810588500/9899337132 Email: bmverma@yahoo.com,b.verma@essar.com. DEMAND.

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2 nd Coal Conference

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  1. 2nd Coal Conference By: B.M.VERMA Advisor- Essar Power (M.P.) Limited Ex- Chairman Jharkhand State Electricity Board Ex- Chairman & Managing Director Uttarakhand Power Corporation Limited Contact: +91- 9810588500/9899337132 Email: bmverma@yahoo.com,b.verma@essar.com

  2. DEMAND AND SUPPLY

  3. Consumer Expectations Consumer Relationship Quick Grievance Redressal Payments Convenience Easy Mechanism of Attribute Change Correct Billing Faster Fault Removal Easy New Connection Reliable & Quality Power Transparent Meters Reading We Interact, We Listen, We Learn, We Act….

  4. 4.1.2007 SHORTAGE / ROSTERING (IN MW) Unrestricted Drawl Schedule Rostering Rostering Overdrawl 7 8 9 10 11 1 18 19 20 21 Gross Shortage Gross Shortage

  5. POWER CUT Date: 06-04-06 & 07-04-06 Power Cut Unrestricted Demand Demand Met (Total Availability) Hydro Gen. Net Import from Grid Time in Hrs.

  6. KING COAL ! • Reserves • Proven 91 billion Tons • Indicated 116 billion Tons • Inferred 37 billion Tons • TOTAL 245 billion Tons • Coal reserves: > 250 years at present levels of consumption • Concentrated in Eastern India

  7. CAPACITY ADDITION DURING XIITH PLAN (2012 - 2017)

  8. Coal Units in 12th Plan • It is estimated to commission • 12 Nos. units of 660MW (XIIth Plan) • 31 Nos. units of 800MW (XIIth Plan)

  9. UMPP on Imported Coal • PPP PROJECTS: • Ultra Mega Power Projects: Three Ultra Mega Power Projects awarded through tariff based bidding only Mundra is progressing fast • –Project: 4000 MW Power Project in Mundra, Gujarat • –Cost: USD4 billion • –Status: 1st. Unit Commissioned in February 2012 • Problem due to increase in cost of Imported Coal.

  10. Hydro-Electricity • Inferred potential > 120 GW • Installed capacity 30 GW • Most big projects are in North-Eastern states of Arunachal Pradesh, Sikkim, Uttaranchal and J&K • Problems of rehabilitation and resettlement with large projects • Environmental issues • Water sharing agreements with neighbors National Hydro Power Corporation, Government of India

  11. Other OPTIONS

  12. Indian power sector is passing through a very critical phase .

  13. Capacity Addition Scenario

  14. Impact of Enabling Environment • 30 number of Case-1 and Case-2 bids have been concluded • PPA’s have been executed for an aggregate capacity of 41,059 MW including Ultra Mega Power Projects • Case 1- 14,819 MW • Case 2- 10,240 MW • UMPP – 16,000 MW • However, conditions and premises under which the bidding documents were prepared and under which the bids were submitted have changed drastically over the last 5-6 years, necessitating a relook.

  15. Tariff Adjustment – A Necessary Evil? Source: IDFC Presentation on Power, March 2012

  16. Coal Balance for the XIIth Plan • In order to meet this shortage of 238 MT for domestic coal based plants, the Working Group on Power for 12th Plan estimates an import requirement of 159 MT after adjusting for GCV. • An additional 54 MT is likely to be imported for plants based on imported coal, thus bringing the total import requirement to 213 MT.

  17. Summary of Mercados Report on Feasibility of Large Scale Coal Imports • Key Assumptions • Coal requirement of existing linkage based plants (99,436 MW as of Jan 2012) @ CV of 3000 kcal/kg is 487 MT. Captive mine linked projects (5800 MW) is 28 MT, thus total of 515 MT. Plant by plant analysis performed to estimate future requirements. • Linkage coal supply estimates by 2016-17 based on 90% of ACQ for plants commissioned before Mar 2009 and 80% of ACQ for plants commissioned after Mar 2009 (based on Prime Minister/President directive) • However, the domestic coal shortfall of 260 MT cannot be directly met by imports due to technical constraints on blending of imported coal. • By considering average blending limit of 15% for existing plants and 30% for upcoming plants, imported coal requirement works out to be 111 MT (including the demand for imported coal based projects). This indicates ~26,000 MW coal based capacity is expected to remain stranded by 2016-17 • The XII Plan Working Group Report’ import estimation of 213 MT does not seem practically possible under current blending constraints. Nevertheless, if such a scenario arises where the country needs to import ~213 MT coal, capacity constraints in inland transport infrastructure would not permit this to happen.

  18. As power, coal and gas are regulated sectors the government has to make the power sector in sync with the ground realities of fuel availability and its pricing and bring about necessary measures to improve the financial condition of the distribution utilities so that they have the ability to procure power for the end consumers.

  19. Coal Issues Being Faced by Power Producers in the Country

  20. Today the major challenge before the power developer is to arrange adequate quantity and appropriately priced fuel for power generation

  21. Shortage of Domestic Coal – Current Situation • FSAs for 305 MT have been signed for ~ 68,000 MW capacity commissioned prior to 31 March 2009 • A total capacity of 25,500 MW expected to be commissioned after March 2009 and before March 2012 have LOAs executed but are pending FSAs 68,000 MW 11,500 MW 14,000 MW TOTAL 93,000 MW 411 MT • Deficit of 64 MT coal due to which 22,000 MW capacity is not operating at optimal capacity • Shortage of domestic coal has led to unwillingness of CIL to provide firm commitment for supply of 100% of normative requirements (as mandated under NCDP). Thus 33 thermal plants commissioned between FY09 and FY10 do not have FSA signed.

  22. Shortage of Domestic Coal – XIIth Plan • Linkage coal based plants where activities have been initiated and likely to be commissioned during 12th Plan period = 40,000 MW requiring 167 MT • Plants where LOA has been issued but no construction activities initiated = 31,000 MW requiring 144 MT • Requirement of linkage coal by end of 12th Plan period = 722 MT • Looking at the fact that 83% of the 12th Plan capacity addition is based on coal, it is estimated that the total coal deficit will be 238 MT by the end of 2017 • As per R.K. Pachauri (Director General, TERI), India will be importing 1400 MT of coal and 750 MT of oil by 2030, which will cost the nation 20% of the GDP

  23. Reasons for the Shortage (1/4) • Unprecedented growth in Private Sector generation capacity addition • Delays in Environmental Clearances • Stagnant Production by Coal India

  24. Reasons for the Shortage (2/4) • Unprecedented growth in Private Sector generation capacity addition • Original overall capacity addition target was 78,700 MW out of which private sector target was 15,043. • Private sector target was revised to 19,800 MW as per Mid Term Appraisal (MTA) of Planning Commission • Out of ~ 54,300 MW capacity commissioned during XIth Plan till 31.12.2011, private sector contribution has been a massive 28,280 MW Increasing contribution of private sector in the total capacity addition M W Source: CEA

  25. Reasons for the Shortage (3/4) • Environmental Clearances • Critical coal bearing areas stuck under MoEF notification on Jan 2010 dealing with Comprehensive Environment Pollution Index (CEPI) led to critical coal bearing areas stuck. Out of 43 areas with a CEPI score of more than 70, seven coalfields – Chandrapur, Korba, Dhanbad, Talcher, Singrauli, IB Valley and Asansol were impacted and had a moratorium on mining placed on them. • MoEF classified some coal mining areas as ‘No-go’ based on their location with respect to dense forest areas. 203 coal blocks were identified as No-go areas thus having a serious impact on coal production

  26. Reasons for the Shortage (4/4) • Stagnant Production by Coal India • CIL production has remained static ~ 535 MT in last two years. • Monopolistic market design and lack of competition has kept productivity and efficiency much below global norms. • Dominance of open cast mining due to short term and cost benefits – deeper coal reserves remain inaccessible.

  27. Is Imported Coal a Viable Option? (1/4) Restrictions on export, additional customs and duties etc Almost 1/3rd of current crude import bill Most plants can take up to 28% imported coal max Distribution utilities to get exposed to fluctuating price risks Logistical Issues Port-rail connectivity is a serious constraint in coal evacuation from ports

  28. Is Imported Coal a Viable Option? (2/4) • Increasing Coal Prices due to Resource Nationalism • Indonesia introduced regulations on Price Fixing of Coal and Minerals Selling Price in 2010, according to which all coal mining licence holders are obliged to sell coal at a rate higher than a determined reference price. Indonesia’s Mining Law additionally imposed a Domestic Market Obligation under which coal mining companies are required to allocate coal as per Government decree for the domestic market prior to any export deals • Australia has imposed a fixed carbon tax of A$23 a tonne from July 2012 onwards. A Mineral Resources and Rent Tax (MRRT) has also been made applicable to iron ore and coal mining business whose annual profits exceed $50 million. • Forex Outgo • Coal import bill for FY12 (uptil Oct 2011) was ~ Rs 40,000 Crores, almost 40% more than the imports during the same period of the previous fiscal and almost 1/3rd of the current crude oil import bill. Unless domestic coal production is augmented, the coal import bill could rise to Rs 150,000 Crores

  29. Is Imported Coal a Viable Option? (3/4) • Price Volatility • Volatility in internationally traded coal prices has increased significantly since 2008 as compared to 2001-2005 and recent coal price index movements have been highly volatile on a month to month basis. US$/T

  30. Is Imported Coal a Viable Option? (4/4) • Logistical Constraints • Port-Rail Connectivity – railways account for the inland haulage of only 24% of port cargo (with large chunk linked to the major ports) indicating the weak rail connectivity to ports other than the major ports • Inland Rail Infrastructure – Transportation of imported coal to the consumption centers is a major road block. There are seven major trunk routes via which coal is transported in the country. These routes cater to more than 90% of the total coal requirement and are already operating at 100% capacity utilisation. • Technical Constraints in Blending • While domestic coal shortfall is expected to reach 260 MT by the end of the 12th Plan, technical constraints in blending will limit the use of imported coal to a maximum of 30% in plants set up on the assurance of domestic coal. Thus blending possibility will be restricted and there will be a risk of ~ 30,000 MW capacity getting stranded.

  31. Other Issues related to Coal Shortage • Non Adherence to New Coal Distribution Policy (NCDP) • FSA documents as proposed by CIL is not in consonance with the NCDP • Impact of the above documents • Complete uncertainties regarding fuel supply – projects will not be bankable • Projects under competitive bidding will not know on what basis to bid for fuel cost • Very serious cost push for retail tariff • Technical limitations to designing boilers which can run efficiently with such varied and uncertain coal parameters

  32. Suggested Measures to Increase Domestic Coal for 11th Plan Projects • Divert E-auction coal to supply under FSAs/LOAs • Coal India sold 45 MT under e-auction route in 2010-11, just over 10% of its total production • Diversion of 50% of E-auction coal could potentially add ~22 MT of coal to coal supplies under linkages (FSAs/LOAs) • Reduce normative quantity under FSAs for projects already commissioned • A 10% reduction in normative quantities under FSA for projects already commissioned before 31st March 2009 can add ~ 30 MT of coal for supplies under linkages • Above measures will increase coal supply under linkage by ~ 52 MT thus reducing the coal import requirement for the 11th Plan projects to ~ 12 MT. This will reduce the cost impact of imports as well as relieve the pressure of blending constraints.

  33. Suggested Measures to Increase Domestic Coal for 12th Plan Projects • Increasing Coal India’s production output • Adopting MDO (Mine Developer and Operator) system • Introducing Competition in Coal Sector • Other related sectors such as power generation, oil & gas etc have benefited from an increase in competition through private sector participation. • Accelerating Captive Coal Block Development • Incentivize surplus coal production from captive mines through appropriate pricing clarity • Expedite e-auctioning of coal blocks in a manner to ensure a level playing field while minimizing impact on tariffs • Reserving coal blocks for the regulated sectors • Environmental Clearances • Expedite E&F clearances for coal bearing areas by cutting down procedural delays while keeping safeguards intact • Allow parallel processing of Forestry and Environmental clearances for both Coal block projects as well as end use projects such as power plants. • Creating Level Playing Field for Private Sector • 12th Plan coal linkage policy should give weightage to best performing projects , irrespective of their belonging to Central, State or Private sector.

  34. Conclusion • To conclude, generation capacity addition plans, currently on the anvil clearly point to a continued dominance of coal as a fuel source. • Growing demand – supply gap in the domestic coal sector; high price scenario, volatility and logistical challenges associated with the imported coal and consequent concerns on energy security, underscore the need for accelerated development of domestic coal resources. • Any delay in initiating steps for augmenting domestic coal production would jeopardize the capacity addition and adversely impact economic growth

  35. Primary energy consumption per capita

  36. ELECTRIC POWER REQUIREMENTS Required for 8% economic growth by 2015: Installed Capacity 250 GW Generation 1500 billion kWh Per Capita Consumption 1000 kWh

  37. India’s Future Growth • India needs sustained economic growth > 8% to radically improve its Human Devp Index • Growth in last few years ~ 5%-7% • Growth hampered by infrastructure: electric power • Peak shortfall • Average shortfall • High T&D Losses: • Unscheduled black-outs, especially in rural areas • Supply to agriculture sector not metered and almost free

  38. GROWTH AREAS • Present growth is skills or resource driven(exports: software, gems and jewels, garment manufacture) • Future Growth will have to be on value addition & engineering • Rural sector to play a major role(agricultural and dairy produce; minimizing wastage and improving efficiency) • Infrastructure building (roads, buildings, railroads etc.,) • ManufacturingThe elasticity has to be greater than 1 for powering future growth

  39. Elasticity and Electric Power Needs • Target economic growth ~ 8% • Elasticity of electricity with GDP stabilizing at ~ 1.2 • Implications for future electric power requirements by 2015: • Capacity addition • Investments • Fuel mix • Pricing and Policies • T&D reforms

  40. The Task Ahead • Need To Add : • 135 GW in ten years • 13.5 GW per annum • One Power Plant (1.1 GW)/mth • Maximum added till now is 4,600 MW (One in four months) ( China adds one per week !! )

  41. FUEL SUPPLY: OPTIONS FOR FUTURE • Coal • Conventional • Gasification • Natural Gas • Hydro • Nuclear • PHWR + FB + AHWR • PLWR • Wind • On-shore • Off-shore • Biomass • Solar • Photo voltaic • Concentrating Solar Power

  42. ALL INDIA GENERATION CAPACITY (ALL FIG. IN MW)

  43. Indian Energy Scenarios: 2015 Same Fuel Mix as now Aggressive Nuclear Capacity Addition

  44. Investment Opportunities • Coal Based 660/600 MW Sets • Jharkhand • Orissa • Chhattisgarh • Madhya Pradesh • All other states on linkage • Import Coal Based Power Station on the Coast Line

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