Power generators allowed to recover FGD cost over plants’ life

By Sarkaritel September 11, 2020 08:09

New Delhi, Sep 11  Old thermal power plants who have to conform to new emission standards by retrofitting their plants with Flue Gas Desulphurisation (FGD) units have got a lifeline from the Central Electricity Regulatory Commission (CERC) as it has allowed generators to recover additional cost on pollution control equipment from electricity charges over a 25 year period.

In a staff paper floated by the CERC, it has said power plants will be allowed to recover their costs in parts from buyers during the tenure of power purchase agreements (PPAs). So, 90 per cent of the cost of installation can be recovered over the life of the emission control equipment, which is also estimated at 25 years, and the remaining 10 per cent could be salvage value.

After a PPA expires, the power producer will have to tie up with another procurer or sell power in the market to recover its remaining costs.

A notification issued by the Environment and Forest Ministry in December asked captive thermal power plants to meet new emission standards for sulphur dioxide (SO2) and nitrogen oxide (NOx) by June 30, 2020 and other power producers by December 2022.

Industry players estimate the additional cost to be a few hundred crores for every generating unit, which could raise power generation costs.

If retrofits are installed after a power project is commissioned, power units could face difficulty in recovering costs. The useful life of a project and retrofit is assumed at 25 years. To match them, if the retrofits are installed later, the power producer has the option of extending the life of the project by 10-15 years through renovation and modernisation.

The Power Ministry has asked the Environment and Forest Ministry to relax the deadline for installation of pollution reducing equipment by thermal power plants by upto two years to give the units sufficient time to carry forward the design changes effectively.

The letter mentions that more time should be given to 322 out of the 448 units that are planned for FGD systems, which removes polluting sulphur dioxide from exhaust flue gases.

The total capacity of the 322 units is about 1 lakh MW. This would mean that a large portion of installed thermal plants would benefit if the Environment Ministry gives more time for pollution reducing initiatives to power producers.

The installation of FGD is required largely by old and inefficient plants that continue to supply power to discoms at tariffs determined several years ago. Newer plants with super critical technology already use equipment that are not only less polluting but also highly efficient.

By Sarkaritel September 11, 2020 08:09