Coal-As Fuel Option

1. Coal-As Fuel Option R.L. Mattoo GM (Fuel Management), NTPC

2. Synopsis • Power sector scenario • Fuel Options • Coal as viable fuel • Issues and way forward

3. Power Infrastructure In India As on Dec .’05

4. PRESENT CAPACITY MIX FUELWISE

5. INDIAN POWER SECTOR By the year 2012, India’s peak demand would be 157,107 MW with energy requirement of 97500 MU Capacity to increase to 2,12,000 MW by the year 2012 to meet the peak demand of 1,57,107 MW

7. Factors Affecting Choice of Fuels • Fuel Options determinants: • Availability • Affordability • Reliability • Environment friendliness

8. Major Options Available • Coal • Domestic • Imported • Blended • Lignite • Gas • Domestic • LNG • Transnational piped gas • Hydro • Nuclear

9. COAL RESERVES IN INDIA (Billion Tes) STATUS AS ON 1.1.05 At the present rate of extraction, coal and lignite resources in India are expected to last for about 140 years

10. EXTRACTABLE COAL RESERVES IN INDIA FIG IN BILLION TONNES

11. LIGNITE • Reserves • Around 30,300 million tes • Location • About 88% of reserves located in state of Tamil Nadu • Balance (about 12%) located in Rajasthan, Gujarat, J&K & Kerala Limitation – Suitable only for pit head generation

12. Coal Demand Scenario In India

13. Likely Coal Supply Scenario Supply only from CIL sources

14. COAL SHORTAGE SCENARIO IN THE POWER SECTOR Shortage to be addressed through import

15. COAL AVAILABILITY vis-à-vis SHORTAGE • Coal shortage envisaged due to: • Long term linkage accorded on normative PLF of 68.5% and 80% for stations coming after 1996, whereas the national average is +70% PLF. (some of the stations like those of NTPC operating at +90% PLF) • Delay in development of linked mines RESULT - NEED TO AUGMENT COAL AVAILABILITY

16. INDIGENOUS FUEL RESOURCES: GAS LOCATION BALANCE RECOVERABLE RESERVE (As of 1st April 2005) • ONSHORE 340 BCM • OFFSHORE 761 BCM GRAND TOTAL 1101 BCM (MOP&NG Basic statistics) GAS RESERVES ARE ADEQUATE ONLY FOR ABOUT 34 YEARS AT PRESENT LEVEL OF GAS CONSUMPTION.

17. Future Gas Demand projection(Source: Hydrocarbon Vision 2025) Against the current demand of about 150 MMSCMD, supply is about 92 MMSCMD only. Gas/RLNG availability and prices of available Gas/RLNG/imported piped natural gas are two major constraints for gas based power generation

18. Fixed cost of Generation (Levelized) Variable (Fuel) cost of Generation Figs in Rs/kwh Assumptions: Coal Proj Gas Proj Capital Cost 42 32 (Rs Million /MW) Life (Years) 25 15 • Price Benchmark - Coal - the Competing Fuelcontd… • Fixed cost of Generation for coal based & Gas Based Plants are comparable. • Thus,for Gas/R LNG to compete – it has to be on fuel cost component basis

19. OTHER INDIGENOUS FUEL RESOURCES:LIMITATIONS • Other resources like crude oil, coal bed methane, renewable energy sources etc. are meagre and not capable of catering to our energy requirements in the long run. • Gas and crude oil prices are volatile in the international market and coal import is a much cheaper option than import of oil and gas especially at coastal locations. Conclusion - Coal is likely to remain our mainstay fuel for energy generation till 2031-32. However, current shortage is a cause of concern.

20. Coal Shortage – The Way Forward • Stepping up domestic coal production by allotting blocks to central and state public sector units and for captive mines to notified end users • Coal Import – needs creation of necessary infrastructure. Will also put pressure on domestic coal industry to be efficient. NTPC has imported about 3 million tes of coal in 2005-06. • Amendment in Coal Mines Act to facilitate (a) private participation in coal mining for purposes other than those specified and (b) offering of future coal blocks to potential entrepreneurs. • Technology for economic exploitation of coal lying at greater depths

21. Issues of concern with the coal sector • Pricing • 70% of the domestic coal is dedicated to power generation. • Fuel cost constitutes about 65% of the total cost of generation • Since the dismantling of APM, coal prices have been taken for arbitrary escalation with no transparency • The opening of the sector to private players will bring in competition and prices will be determined by market dynamics • Till such time, a regulatory mechanism needs to be put in place to put a check on arbitrary price hike.

22. Issues of concern with the coal sector: Contd • Infrastructural Limitations- Burdened transportation network - calls for following measures: • Transportation capacity to be increased. • Rationalization of linkages to cut down on transportation distance and better utilization of existing infrastructure • Cut down on criss-cross rail movement • Coastal stations to be run on imported coal

23. Issues of concern with the coal sector: Contd • Environmental Issues : • More emphasis on use of washed coal • Use of clean coal technology like IGCC • Strict implementation of MOEF stipulations • Proper restoration of degraded land due to open cast mining.

24. Conclusion & Way Forward • Coal shall remain mainstay for power generation in India. • Allocation of captive blocks to end users. • Allowing private participation • This will also create a competitive environment and which will enable market driven pricing structure. • Till such time, regulator to be put in place to ensure fair pricing of coal, proper development of infrastructure & efficient utilisation of resources in the coal sector. • Keeping in view the longer gestation period of coal mines, faster clearances of coal projects needs to be undertaken so as to be commensurate with the commissioning of power plants. • Coal washing and use of clean coal technology to be promoted. • Transportation network bottlenecks to be reduced by judicious rationalization of linkages.

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