ensuring affordable fuel security for ntpc

ENSURING AFFORDABLE FUEL

SECURITY FOR NTPC

NTPC OPEN COMPETITION

FOR

EXECUTIVE TALENT

Itee Aggarwal (Team Leader) Anoop Kumar Sharma Santosh Kumar Verma Saroj Yadava

NTPC Rihand

No. of Words: Date of Submission: Sign:

INDEX

TOPIC PAGE NO. OVERVIEW 1

ENERGY SECURITY 1 INDIAN POWER SECTOR AND NTPC 3

FUEL SCENARIO 6

INDIAN STAND 6 NTPC’S STAND 9

ANALYSIS 11

COAL 11

INDIAN ISSUES 11

NTPC ISSUES 15

SOLUTIONS 17

OIL AND GAS 20

INDIAN ISSUES 20

NTPC ISSUES 24

SOLUTIONS 25

NUCLEAR 27

INDAIN SCENARIO 27

NTPC PLANS 28

KEY CHALLENGES IN DEVELOPMENT OF NUCLEAR ENERGY 29

RENEWABLE 30

INDAIN SCEANRIO 30

NTPC’S FORAY INTO RENEWABLE ENERGY 33

KEY PROBLEMS 33

SOLUTIONS 34 RECOMMENDATION AND ANALYSIS 35

EXECUTIONAL FRAMEWORK 36 INTEGRATED GASIFICATION COMBINED CYCLE(IGCC) 38 CONCLUSION - THE WAY FORWARD 41 REFERENCES 43

OVERVIEW

ENERGY SECURITY

Energy security has been an important global policy issue for over four decades now,

since the first oil crisis in the 1970s. According to the International Energy Agency’s

(IEA’s) World Energy Outlook (WEO-2012) published in November 2012, the global

energy demand is likely to grow by more than one-third over the period to 2035, with

China, India and the Middle East accounting for 60% of the increase. Thereby, Energy

security becomes a pertinent issue for a country like India where the dependence on

import is increasing steadily.

Energy Security, as defined by the Integrated Energy Policy of India,

encompasses three critical dimensions:

a) meeting India’s large energy demand to sustain an annual economic growth rate

of 8 to 9 percent through 2031-32,

b) meeting lifeline energy needs of all citizens to address social development,

health and safety of the energy poor, and

c) to ensuring sustainability in energy supply and use. In the current context energy

security also encompasses an overlapping element of energy efficiency across

all aspects related to energy security. Energy Security thus entails a complex set

of coordinated initiatives and the need for energy strategies, policies and

regulations to align in making specific choices for the country in charting a low-

carbon and energy-secure growth path for the country.

India is the fourth largest primary energy consumer, after China, USA and Russia

and it accounts for more than 4.6 % of total global annual energy consumption. In

the last five years, India has averaged a growth rate of 8% and the demand for

energy has been putting pressure on its supply sources. It is an established fact that

if India continues to grow at 8% or so in the coming years a higher than average

demand for energy will persist.

Figure 1: Energy Security Aspects

INDIAN POWER SECTOR AND NTPC

The Indian power sector consists of a mix of power plants depending on different

primary fuels, including conventional sources like coal, lignite, natural gas and oil, hydro

and nuclear power as well as nonconventional sources like wind and solar power, and

agricultural and domestic waste. However, coal remains the dominant primary energy

source used in power generation accounting for 67 per cent of total generation.

According to the Planning Commission (Government of India), an important gain in the

11th Plan was the ramping up of the pace of capacity addition. The 11th Plan aimed at

an additional capacity of 78,700 MW but the actual achievement during the plan was

54,964 MW. This was 30 per cent lower than the original target but more than twice the

addition achieved in the 10th Plan.

Table 1: Installed Capacity Addition during the 11th Plan (MW)

Type Target Actual

Central State Private Total Central State Private Total

Hydro 8,654 3,482 3,491 15,627 1,550 2,702 1,292 5,544

Thermal 24,840 23,301 11,552 59,693 12,790 14,030 21,720 48,540

Nuclear 3,380 — — 3,380 880 — — 880

Total 36,874 26,783 15,043 78,700 15,220 16,732 23,012 54,964

Source: Central Electricity Authority

Table 2: Total Generation Capacity As On March 31, 2012 (MW)

Hydro Thermal Nuclear Renewables Total

Centre 9,085.40 45,817.23 4,780.00 0.00 59,682.63

State/UTs 27,380.00 55,024.93 – 3,513.72 85,918.65

Private 2,525.00 30,761.02 – 20,989.73 54,275.75

Total 38,990.40 131,603.18 4,780.00 24,503.45 199,877.03

Source: Central Electricity Authority

The actual cumulative power capacity as on March 31, 2012, was 199,877 MW which

included 24,503 MW of renewable sources of energy.

More importantly, the pace of capacity addition picked up in the 11th Plan and there is,

at present, about 90,000 MW of generation capacity under construction which would

achieve commercial production in the ongoing 12th Plan (2012-2017).

If these projects proceed to completion as scheduled, and a strong effort is made to

initiate new projects in the first year of the 12th Plan (2012-13), India could reasonably

expect to achieve capacity addition of 80,000-100,000 MW in the entire 12th Five-Year

Plan.

NTPC Limited, India’s largest power generating company having an installed capacity of

41184 MW, after having declared a capacity addition of 4170 MW and an addition of

4830 MW in its commercial capacity in the financial year 2012-13, comprises of 23

NTPC Stations (16 Coal based stations, 7 combined cycle gas/liquid fuel based

stations), 7 Joint Venture stations (6 coal based and one gas based) and 2 renewable

energy projects.

Table 3: Installed Capacity of NTPC Plants (30 March, 2013)

NTPC Owned (+ Owned By JVs) No. Of Plants Capacity (MW)

Coal 16 (+ 6) 37,219

Gas/Liquid Fuel 7 (+ 1) 3,955

Renewable energy projects 2 10

Total 32 41,184

Table 4: Generation of NTPC Plants (2011-12)

Fuel Generation (MW)

Coal 28,695

Gas 3,657

Liquid Fuel 360

Renewable energy projects 0

Total 32,712

Figure 2: Growth in Generation of NTPC Plants

190

195

200

205

210

215

220

225

2007-08 2008-09 2009-10 2010-11 2011-12

FUEL SCENARIO

INDIAN STAND

Coal is the mainstay of India’s energy sector and accounts for over 50% of primary

commercial energy supply and of the total power generated in the country,69% comes

from coal based thermal power stations. Next big share of energy portfolio in India is

dominated by hydrocarbons and less than 10 percent of energy is accounted by other

sources like hydro, renewables and nuclear.

While the pace of capacity addition is commendable, there has not been comparable

progress in delivering fuel and the availability of both coal and gas to the new power

plants is not assured. Demand for conventional energy in the past five years has

demonstrated an increased pace with natural gas growing at highest rate of over 10%

CAGR. While it is certain that India will see an increased escalation of energy demand,

the question that surrounds India is at what scale and speed India’s energy demand will

expand and which fuels and technologies it will use. Resolution of this problem must

have high priority in the 12th Plan, the Planning Commission observed.

The UMPP programme, which brings in private investment into power generation, was a

major initiative of the 11th Plan. Twelve more supercritical UMPP are being planned

covering Chhattisgarh, Gujarat, Tamil Nadu, Andhra Pradesh, Odisha, Maharashtra and

Karnataka.

―Unfortunately, some of these projects are plagued with uncertainties regarding fuel

supply because they were based on imported coal and changes in government policies

in the countries where the coal mines were located have raised the cost of coal whereas

the power tariff is based on a competitive bid which does not contain a provision for

passing on such increases,‖ the draft document noted.

Soaring Naphtha prices and poor supply because of low production has affected a

number of power generators. Sand ingress and consequently decline in gas production

in KG-D6 basin has forced an array of gas plants to either reduce generation or shut

down.

Because of human life hazard associated with nuclear radiation and accidents like

Chernobyl and Fukushima, nuclear power plants have attracted very strong reactions

from general masses. After a lot protests, finally Supreme Court has given a go to the

Kudankulam Nuclear Power Plant.

Also, huge investments requirement and red tapism has put a number of solar and

wind, and other renewable energy projects in backstage.

The projected capacity addition in non-fossil fuel plants covers addition of hydro

capacity of 10,897 MW and nuclear capacity of 5,300 MW. Besides, 1,200 MW import of

hydropower from Bhutan has also been considered.

In addition, it is planned to add a grid interactive renewable capacity addition of about

30,000 MW during the 12th Five-Year Plan comprising 15,000 MW wind, 10,000 MW

solar, 2,100 small hydro and the balance primarily from biomass.

Figure 3: Change in Fuel Mix for Generation of Electricity

70% 0%

7%

14%

6% 3%

58%

0% 3%

11%

16% 12%

Coal

Oil

Gas

Hydro

Renewables

Nuclear

2012 2030

With the increased consumption of energy, demand side management through

increased efficiency has also gained prominence in the country. Energy conservation

potential in India is estimated at ~ 23% and various initiatives have been taken to

explore this potential, in order to enhance energy efficiency of the nation and make

energy sector economically as well as environmentally sustainable.

NTPC’s STAND

Currently, around 90 per cent of the company's fuel requirement is met domestically via

its long-term contract with Coal India and imported coal meets 10 percent of its annual

fuel requirement.

Coal India is under pressure from the government and power producers to ease fuel

shortages at home but has struggled for years to raise output due to problems in

obtaining environmental and regulatory approval.

There are disputes between NTPC and CIL relating to some issues that need to be

considered in a fuel supply agreement, which are:

1. Quality of the fuel - what happens if it does not meet the specification?

2. Quantity of the fuel - what happens if the fuel supplier does not supply the fuel in

accordance with the agreement? Is the fuel supplier obliged to provide a

substitute fuel or fuel from other sources, if coal is not available in adequate

quantities?

3. What is the deemed point of delivery? Delivery of coal can be problematic as

there may be issues of safety of the fuel in transit, and the temperature at which

it is stored is important in order to preserve its efficacy.

Soaring Naphtha prices and poor supply because of low production has also affected

NTPC’s Kayamkulam plant in past several times.

To deal with the problem, NTPC will have to utilize all the sources of energy for

generating electricity to reduce its dependence on one particular raw material. A

strategic mix of options will ensure fuel security for its fleet of power stations.

Figure 4: Fuel Mix of NTPC 2011-12

Figure 5: Fuel Cost of NTPC Plants (% of Revenue)

88%

11%

1%

Coal Gas Liquid Fuel

50%

52%

54%

56%

58%

60%

62%

64%

66%

2007-08 2008-09 2009-10 2010-11 2011-12

ANALYSIS

INDIAN ISSUES

Coal is India's primary source of energy. The country has the fifth largest coal reserves

in the world. At the same time, the coal sector is one of the most centralized and

inefficient sectors in India. Two state-owned companies have a near-monopoly on

production and distribution. The coal sector has been facing challenges both in terms of

domestic as well as imported supplies.

Table 5: Top 10 Coal Producers*

Country Million Tonnes

PR China 3,471

USA 1,004

India 585

Australia 414

Indonesia 376

Russia 334

South Africa 253

Germany 189

Poland 139

Kazakhstan 117

World Total 7,678

*Data for 2011

COAL

The domestic production is stagnating in the coal sector as India’s coal demand

increased at CAGR of 8.5% while CIL’s domestic production increased at a CAGR 4.6%

only in 11th five year plan. Any additional coal requirement for new power plants would

be unlikely met through FSAs with CIL; hence finding alternative sources is

unavoidable. The country also faces a growing gap between demand and supply.

Producers failed to reach the government's latest production target in 2012, while

demand has grown by more than 7 percent per year over the last decade. Because of

this gap, India's coal imports have grown by more than 13 percent per year since 2001.

The total production of coal in India in 2012-13 was 557.5 million tonnes, which was 97

per cent of the target production and a growth of 3.3 per cent over the previous year.

Table 6: Production, Demand and Dispatch of Coal in Last Three Years

Table 7: Demand and Supply Scenario of Coal

Based on the recommendation of the Review Committee and the Inter-Ministerial

Group, the government had so far de-allocated 47 coal blocks mainly on account of lack

of progress in their development. Out of the 47 de-allocated bocks, two blocks were

allocated again, three blocks were assigned to Coal India Ltd and de-allocation letters

were withdrawn in respect of five blocks. The production of coal from captive blocks in

2012-13 was 36.8 million tonnes against the target of 42 million tonnes, which was only

7.3 per cent of the total target envisaged for India.

Year Demand* Production Dispatch (Sale)

2010-11 656.31 532.694 523.465

2011-12 696.03 539.95 535.299

2012-13 (P) 772.84 557.661 568.754

P = Provisional, *data in MT

Year XI FYP* XII FYP (Projected) XII FYP (Projected)

Demand 696.03 980.50 1373

Supply 554 715 950

Gap 142.03 265.5 423

*data in MT

In order to achieve the target production of 795 million tonnes by the terminal year of

the 12th Five-Year Plan (2016-17), the government has taken steps to expedite

environment and forest clearances, seek higher number of rakes with the Ministry of

Railways, and approach the state governments for necessary assistance in land

acquisition etc. In addition, Coal India Ltd and its subsidiaries have taken a series of

steps to augment coal production which include increasing the efficiency of equipment

and mechanisation, strict supervision of existing mines and ongoing projects, and

capacity addition from new projects.

India’s coal imports have more than doubled over the last five years. Also, different

characteristics of coal typically permit existing power plants to blend imported coal with

domestic coal only up to 10% to 15%. Meanwhile the import of coal during 2009-10,

2010-11 and 2011-12 was 73.26 million tonnes, 68.92 million tonnes and 102.85 million

tonnes, respectively. In 2012-13, 110.43 million tonnes of coal were imported up to

January 2013. The demand for 2013-14 is estimated at 769.69 million tonnes and the

total all-India coal production has been planned at 604.55 million tonnes. Thus, the

estimated gap of 165.14 million tonnes of coal would have to be met through imports.

Coal has been placed under Open General License and can be freely imported at

prevailing international prices by anyone after paying the applicable import duty. In

addition the dynamism in the regulations of the countries from where coal is being

imported pose further hurdles by way of political risks.

Figure 6: Increase in Demand of Imported Coal (MT)

0

10

20

30

40

50

60

70

80

2007-08 2008-09 2009-10 2010-11 2011-12

The Indonesian government recently implemented the Indonesian Coal Price

Regulation, which requires prices for all transactions to be benchmarked against a set

of international and domestic indices and all sale contracts to be modified

retrospectively by September. Several developers have already entered into long term

PPA’s with distribution utilities based on fuel tied up from Indonesian mines which have

now been covered under the new law posing uncertainty over the operational viability of

the affected plants.

According to the Ministry of Coal, one of the ways to reduce the dependence on imports

is to devise a PPP policy framework with Coal India Ltd as one of the partners in order

to increase the production of coal for supply to power producers and other consumers.

This was announced in Budget 2013-14. Prior to the announcement, the ministry set up

a committee to devise the PPP policy framework with CIL and the committee has since

had its first meeting and deliberated on various models.

Some of the challenges in increasing the production capacity are as follows:

According to the data proved by CIL, 179 forestry proposals are awaiting

clearances and if all approvals are secured on time, it can more than double its

output to 1,132 MT, given that mines start production from 2016-17.

Majority of the coal projects have been halted and delayed due to issues in

acquiring land and strict rules and regulations (R&R).

Even subsidiaries of CIL, such as MCL in Angul, face issues pertaining to R&R.

Bottlenecks in domestic coal transportation and lack of proper road connectivity

further increase the challenge. Also, availability of railway wagons and mismatch

of demand and supply of wagons and coal off take affect production capacity.

Delay in mining activities at captive coal blocks and concerns relating to the

increasing ash content of run-of-mine (ROM) coal further hinder production.

NTPC ISSUES

NTPC has an annual coal requirement of 160 million tonnes (MT), of which it will have

to import around 16 mt. The state utility has contracted to import 16.4 million tonnes of

coal in 2012/13, a third more than the previous year. Whether it is gas or coal, it is

always more viable to source fuel from the domestic market, if sourced from overseas, it

becomes expensive, which leads to higher electricity tariff. Thus, NTPC wants to trim its

overseas buys. Electricity produced from expensive fuel is finding few takers, which

may eventually affect NTPC’s revenues.

Figure 7: Coal Receipt by NTPC (2012-13)

Projects for 2,600 MW are linked to three mines that were seized from NTPC due to a

lack of progress and then reallocated last year, but formal allotment has still not come.

In addition, delay in allocation of coal blocks is hurting power generation plans of NTPC,

as it expects 40 mln T coal from its own licensed mines by 2017.In spite of having

market value of $23 billion, is finding it difficult to acquire mines abroad, largely due to

state control that slows decision-making.

0

5

10

15

20

25

30

35

40

45

2QFY12 3QFY12 4QFY12 1QFY13

Domestic

Imported

Table 8: Import of Coal to NTPC Plants in 2012-13

Thermal Power Station Capacity as on

31.3.2013 (MW)

Coal Imported

(million tonnes)

Average

landed cost

of

imported coal

(`/tonne)

Indicative increase

in tariff (`/kWh)

due to

blending of

imported coal

Talcher Super 3,000 2.218 5,905 0.45

Farakka 2,100 1.048 6,578 0.19

Kahalgaon 2,340 1.075 7,008 0.24

Ramagundam I & II 2,100 0.339 6,293 0.05

Simhadri 2,000 1.479 5,082 0.09

Dadri 1,820 1.213 7,318 0.21

Rihand 2,500 0.104 7,551 0.03

Tanda 440 0.004 7,828 0.03

Unchahar 1,050 0.216 7,398 0.09

Vindhyachal 4,260 0.096 7,625 0.02

Korba 2,600 0.365 6,974 0.1

Sipat 2,980 0.983 6,917 0.28

Total 9.14

SOLUTIONS

In the backdrop of increasing coal demand and reliance on coal for power generation,

collective effort of the government, power producers, coal miners and service providers

are necessary to ensure modern and sufficient infrastructure.

Figure 8: India’s Coal Reserves

As such, coal production depends on various factors such as the pace of land

acquisition, and obtaining environment and forest clearances, the government has

taken various steps to increase the production of coal during the 12th Plan in order to

meet the growing demand and to reduce dependency on imports. These steps include

emphasis on implementation of new projects and expansion of existing projects,

improving coal evacuation and movement, involvement of private sector and achieving

close coordination with various line agencies for clearances of projects. However,

despite these measures, it is expected that there will remain a gap between domestic

demand and production by the terminal year of the 12th Plan (2016-17) which will need

to be met through imports.

Further, to reduce reliance on imported coal and boost the domestic supply,

development and expansion of coal mines in the country is necessary. To ensure timely

and smooth development of coal mines and for meeting coal demand, following steps

should be taken:

1. Establishing a single window clearance process for coal mines.

At present, all related subjects such as land, water, mineral, environment and

forest, etc. are administered by different independent departments and ministries

at the state and central levels. Since the functions of departments and ministries

are dependent and complimentary to each other with regard to the allocation and

regulation of minerals, it is suggested that a single window agency at the state

and central level may process the application. A single window committee will

help to streamline the entire approvals process and bring about speed and

consistency in decision-making.

2. Support in land acquisition and R&R related issues to ensure timely and

smooth completion. Offering projects with secured clearances will boost

timely development as well as increase the industry participation.

3. Currently, commercial sale of coal is allowed for government companies

only. To meet the growing coal demand, it is prudent to consider

commercial sales of coal by Private Developers though suitable framework

may need to be developed for coal pricing, balance profits to private

developers etc.

4. Measures to be imposed to improve productivity of the coal mines and

improve recovery from the coal mines.

5. Fund Raising

Exploration is a specialised job and is considered a risky venture. So investment

should be encouraged in this sector through proper incentive and security of

tenure. The government may consider creating funds to support overseas

acquisition to supplement domestic resources. This is required since mining is a

capital intensive industry. Further, mining projects often require investment in

supporting infrastructure which is more capital intensive than mining.

6. Steps need to be taken to promote research and exploration activities and

modern underground mass production technologies which will also help in

dealing with land acquisition related issues as land requirements for UG

mining will be lesser.

7. Indian Railways, port authority and the industry need to work in close

collaboration to plan development of infrastructural facilities as per

requirements.

8. Lack of incentives for exploration

The exploration and exploitation for minerals requiring huge capital should be

extended the same benefits and incentives which are available to the oil and gas

sector under the new exploration licensing policy (NELP)

9. Lack of policy support for transfer of mining concessions

A lot of mining leases have been provided in the past comprising small areas to

individuals. The mine owners are not able to mine scientifically while complying

to all the environmental norms and would like to dispose off these areas or

develop them through forming a joint venture. States may allow transferring

these assets at a premium so that these dormant assets can be developed to

increase supply in domestic market, leading to the utilisation of dormant

resources.

INDIAN ISSUES

Oil & gas resources form a major part of our primary energy mix and touch our lives in

more ways than one. The developing Indian economy has been constantly challenged

for sourcing primary energy. India is dependent on imported crude oil to the extent that

recently the US Energy Information Administration (EIA) has observed that India was

the world’s fifth largest net importer of oil in 2010, importing more than 2.2 million bbl.

/d, or about 70 percent of consumption.

Figure 9: Status of Exploration in the Indian Sedimentary Basins in 2010-11

22%

22%

12%

44% Poorly Explored

Moderately to Well Explored

Unexplored

Exploration Initiated

OIL AND GAS

India has only 0.5% of world’s proven oil reserves and it houses more than 15 percent

of the world’s population; the current reserve to production ration is ~18 years. In terms

of Natural Gas, India has 1,241 billion cubic meters (bcm) of proven and indicated

reserves, which are 0.6 percent of the world's total proven gas reserves.

At existing production levels of 50.9 bcm per year, the country has a Gas R/P ratio of

about 26.9 years. There are 26 sedimentary basins in India covering 3.14 million sq. km

of area. Of these 26 basins, 22 basins fall into the three categories - of being

prospective, having identified prospectively and proven to be commercially productive.

Of the total area of 3.14 million sq. km, 22 percent can be categorized as moderately to

well explore. Exploration efforts have been initiated in 44 percent of the area and 34

percent remains poorly to completely unexplored (Figure 5). Currently, 1.06 mn sq. km

areas are under active petroleum Exploration Licenses in 18 basins and a total of

35,601 sq. km area is under Mining Lease.

Figure 10: India Oil and Gas R/P Ratio

0

10

20

30

40

50

60

70

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Gas (R/P) Oil (R/P)

All stakeholders, therefore, continue to remain engaged in quest for energy. This

provides immense opportunity to investors to develop business opportunities in a

country where demand exists. The opportunities are backed by a democratic

governance system and a powerful judiciary. However, these opportunities are not

without their share of unique challenges. This background paper aims to examine the

interplay of these opportunities and challenges and at the same time identify some of

the megatrends that will shape the future of the Indian oil & gas industry in the next

couple of decades.

Figure 11: Natural Gas Demand and Supply

The oil & gas sector in India continues to be dominated by the central public sector

undertakings. While the influence of private companies in the upstream sector is

increasing, state owned ONGC continues to be in possession of the largest acreage for

exploration and production. Reliance Industries Limited is the largest private sector

player in the upstream sector in India and has gained increasingly important role

especially in the gas sector. The gas transportation, distribution and marketing sector is

179.17

196.64

225.52

262.07

279.43

105.28 104.4

145.89

163.36 166.17

50

100

150

200

250

300

2007-08 2008-09 2009-10 2010-11 2011-12 *

Demand

Supply

dominated by the state owned Gas Authority of India Limited (GAIL) which enjoys a

virtual monopoly on the sector. However, the City Gas Distribution (CGD) sector may

see entry of private companies in the years to come. The downstream marketing sector

is also dominated by public sector refiners IOC, BPCL and HPCL, all of them

incidentally are integrated oil companies with each of them in refinery segment.

Reliance Industries Limited (RIL) is the largest refining company in India, though. Essar

Oil Limited with its own refinery on the West coast is another major private sector

company in the sector. The E&P services and equipment sector in India sees

participation from major international companies such as Schlumberger, Halliburton,

Baker Hughes, Transocean, Weatherford etc. Some domestic companies having

invested in assets have also started playing key role in offshore services.

Figure 12: Projected Natural Gas Demand in Power Sector

0

50

100

150

200

250

2012-13 2013-14 2014-15 2015-16 2016-17

NTPC ISSUES

NTPC’ s 6 gas and 1 liquid fuel based power plants were operational in the year 2012-

2013.Plants based on gas are suffering from decline in supply. Sand ingress in the KG-

D6 basin has added to the problems. The company is looking forward for equity in oil

and gas field abroad. Also, it has shown interest in oil and gas exploration ventures.

NTPC is planning on expansion of its gas fired plants (e.g. Gandhar) to reduce the huge

dependency on coal for its thermal units. However, some its plans have been delayed

indefinitely following the Power Ministry of India's advice to not plan any gas-based

projects until 2015-2016 as a gas shortage looms for the power sector in the country.

Table 9: NTPC Gas Consumption 2008-09 (in mmscmd)

Station Requirement

(90% PLF)

Requirement

(85% PLF) APM/PMT Spot RLNG

PMT

Spot/Fallback

RLNG

Total

Anta 1.99 1.88 1.29 0.09 0.00 1.38

Auriya 3.15 2.98 2.05 0.12 0.00 2.17

Dadri 3.94 3.72 2.23 0.03 0.06 2.32

Faridabad 2.04 1.93 1.14 0.02 0.02 1.18

NCR 11.12 10.50 6.71 0.26 0.08 7.05

Kawas 3.11 2.94 0.54 0.83 0.00 1.37

Gandhar 3.12 2.95 1.44 0.90 0.00 2.34

WR 6.23 5.88 1.98 1.73 0.00 3.71

NTPC 17.35 16.39 8.69 1.99 0.08 10.76

http://www.power-technology.com/features/featurepower-struggle-india-controversial-energy-industry/

SOLUTION

The sector is teeming with opportunities but at the same time its dealing with some

fundamental issues which can hinder its progress and thwart the achievement of its

growth objective. While some of these issues are specific to a sub-sector, other such as

infrastructure development is applicable to the entire sector. Some of these major

issues have been discussed below:

a) Limited participation by foreign companies in the Indian upstream

sector - Prospectively or Policy:

The nine rounds of NELP have seen enthusiastic participation by the state

owned companies, the participation by private players especially the

foreign majors has been limited. These companies bring a lot of

investment muscle required for development of capital intensive and high

risk upstream projects. More importantly however, these companies bring

technological expertise and diverse project experience.

b) Upstream skills, technology and equipment shortage:

Upstream talent shortage and ageing workforce is an issue being faced

the global as well as Indian upstream industry. The industry is especially

pressed with shortfall of labor with specialized skills such as reservoir

engineering or with experience of developing unconventional gas assets.

c) Enablers for acquisition of oil & gas assets abroad:

Indian Oil & Gas companies, especially the public sector companies have

been competing with aggressive Chinese counterparts and IOCs for

acquisitions of assets abroad. However, in many cases these companies

have to lose out to the competition due to the slow speed of clearances

and decision making process in place for making large investment

decisions.

d) Ambiguity on policies relating to pricing and marketing of domestic

gas as well as the gas end-user segment policies creating hurdles to

gas market development

e) High import dependence for energy amounts to high vulnerability

and compromised energy security; The Arab spring in the recent

past was a significant cause of concern for India, owing to high

dependence on the region for energy supplies.

INDAIN SCENARIO

India has well recognized the role of nuclear energy as a part of its long term energy

security measure. Nuclear power supplied 20 billion kWh (3.7%) of India electricity in

2011 from 4.4 GWe (of 180 GWe total) capacities and after a dip in 2008-09 this is

increasing as imported uranium becomes available and new plant come on line. Some

350 reactor-years of operation have been achieved by the end of 2011. The current

installed capacity of nuclear power plants in India stands at around 4780 MW. Nuclear

capacity additions in India have been relatively slow during the Eleventh Plan period.

During the five year period, against a target of 3380 MW, only around 880 MW of

capacity was added. The draft 12th Five Year Plan has targeted a capacity addition

target of around 5,300 MW from nuclear energy. In the long term, the various scenarios

under the Integrated Energy Policy (IEP) envisage the nuclear capacity to be 48 GW to

63 GW by year 2030.

Figure 13: Share of Nuclear Power in India (In Terms Of Fuel Source for Electricity Generation)

0

5

10

15

2012 2017 2030

NUCLEAR

Figure 10: Nuclear Power Installed Capacity of India

Power Station State Type Units Capacity

Kaiga Karnataka PHWR 4 x 220 880

Kakrapar Gujarat PHWR 2 x 220 440

Kalpakkam Tamil Nadu PHWR 2 x 220 440

Narora Uttar Pradesh PHWR 2 x 220 440

Rawatbhata Rajasthan PHWR 1 x 100, 1 x 200, 4 x 220 1, 180

Tarapur Maharashtra BWR(PHWR) 2 x 160, 2 x 540 1,400

Total 20 4, 780

NTPC PLANS

National Thermal Power Corporation (NTPC) in 2007 proposed building a 2000 MWe

nuclear power plant to be in operation by 2017. It would be the utility's first nuclear

plant and also the first conventional nuclear plant not built by the government-owned

NPCIL. This proposal became a joint venture set up in April 2010 with NPCIL holding

51%, and possibly extending to multiple projects utilising local and imported technology.

One of the sites earmarked for a pair of 700 MWe PHWR units in Haryana or Madhya

Pradesh may be allocated to the joint venture.

NTPC said it aimed by 2014 to have demonstrated progress in "setting up nuclear

power generation capacity", and that the initial "planned nuclear portfolio of 2000 MWe

by 2017" may be greater. However in 2012 it indicated a downgrading of its nuclear

plans. NTPC, now 89.5% government-owned, planned to increase its total installed

capacity from 30 GWe in about 2007 to 50 GWe by 2012 (72% of its coal) and 75 GWe

by 2017. It is also forming joint ventures in heavy engineering.

NTPC is reported to be establishing a joint venture with NPCIL and BHEL to sell India's

largely indigenous 220 MWe heavy water power reactor units abroad, possibly in contra

deals involving uranium supply from countries such as Namibia and Mongolia.

KEY CHALLENGES IN DEVELOPMENT OF NUCLEAR ENERGY

Safety aspect:

The recent disasters at the Fukushima NPP in Japan have raised concerns

regarding the safety of nuclear power projects. The need is to revive the

confidence in the technology & safety aspects w.r.t. installation of nuclear power

projects and ensuring that the highest & most robust levels of nuclear safety are

in place.

Fuel supply:

While India has developed indigenous technological capability in all aspects of

nuclear power, the ability to develop nuclear power is restricted by the very

limited availability of Uranium. India is poorly endowed with Uranium. Available

Uranium supply can fuel only 10,000 MW of the Pressurised Heavy Water

Reactors (PHWR). Further, India is extracting Uranium from extremely low grade

ores (as low as 0.1% Uranium) compared to ores with up to 12-14% Uranium in

certain resources abroad. This makes Indian nuclear fuel 2-3 times costlier than

international supplies. The substantial Thorium reserves can be used but that

requires that the fertile Thorium be converted to fissile material. The pace at

which we can expand nuclear power generation using indigenous fuel sources is

thus severely limited even though the eventual potential for nuclear power

generation is vast.

Social & environmental concerns:

Issues related to social & environmental impacts needs to be addressed to

encourage acceptance of the nuclear power project by all stakeholders.

INDIAN SCENARIO

The country possesses vast renewable energy potential. In the early 80s, India was

estimated to have renewable energy potential of about 85 GW from commercially

exploitable sources, namely in wind, bio-energy and small hydro. These estimates have

since been revised to reflect technological advancements. Initial estimates from Centre

for Wind Energy Technology (C-WET) suggest that wind energy potential at 80 meters

height (with 2 per cent land availability) could be over 100 GW. Some studies have

estimated even higher potential ranges up to 300 GW.

Figure 14: Renewable Energy Potential in India Renewable Potential (GW)

The MNRE has initiated an exercise for realistic reassessment of the wind power

potential, whose results are expected by the end of 2013. A very significant part of the

50

20

15

Wind Bio-energy Small Hydro Solar

RENEWABLE

Source: Ministry of New and Renewable Energy (MNRE)

Sufficient to

generate 50

MW/sq. Km

total Renewable Energy (RE) potential still remains to be exploited. The current installed

capacity of renewable energy sources stands at around 26,368 MW (as on Nov-2012).

Figure 15: Renewable Energy Installed Capacity Renewable Capacity (MW)

The key drivers for renewable energy are the following:

The demand-supply gap, especially as population increases

A large untapped potential

Concern for the environment

The need to strengthen India’s energy security

Pressure on high-emission industry sectors from their shareholders

A viable solution for rural electrification

Wind, 18321

Waste to energy, 93

Cogeneration, 2199

Biomass, 1242

Small Hydro, 3464

Solar, 1047

Source: Ministry of New and Renewable Energy (MNRE)

Given the overall policy & regulatory push, renewable energy is envisaged to play an

important role in the long term. The projected change in the mix of installed capacity &

electricity generation by fuel type by the end of 2030 is shown in the figure below.

Figure 16: Renewable Sector - Eleventh Plan Period Performance

Fuel Mix – Installed Capacity basis Fuel Mix – Generation Basis

56 57

42

1 1

0

9 6

3

20 15

13

12 17

33

2 4 9

0%

25%

50%

75%

100%

2012 2017 2030

Coal Oil Gas Hydro Renewable Nuclear

70 69 58

0 0

0

7 5

3

14 12

11

6 9

16

3 5 12

0%

25%

50%

75%

100%

2012 2017 2030

Coal Oil Gas Hydro Renewable Nuclear

NTPC’S FORAY INTO RENEWABLE ENERGY

Figure 17: NTPC Into Renewable Energy

Wind Capacity (MW) Plant/Location

500 Karnataka

200 Kerala

200 Gujarat

Solar

15 NTPC- Anta in Rajasthan

5 Andaman & Nicobar

5 NTPC-Dadri (Uttar Pradesh)

5 NTPC-Faridabad (Haryana)

10 (Phase-1) NTPC-Ramagundam (Andhra Pradesh)

10 NTPC-Unchahar (Uttar Pradesh)

10 NTPC-Talcher Kaniha (Orissa)

50 Madhya Pradesh

15 (Phase-2) NTPC-Ramagundam (Andhra Pradesh)

25 NTPC-Singrauli (Uttar Pradesh)

Small Hydro

8 NTPC-Singrauli (Uttar Pradesh)

3 NTPC-Rihand (Uttar Pradesh)

Geothermal

- Tapovan (Uttarakhand)

- Tattapani (Chhattisgarh)

KEY PROBLEMS:

High initial investment cost

High tariff of generated energy

Grid connectivity and variable generation issue

Slow pace from installation to generation

SOLUTIONS

It is well recognized globally that early commercialization of Renewable Energy (RE)

technologies is highly dependent on support from the government through mix of policy

and regulatory instruments. Over the years, the Government of India has introduced a

number of policy and regulatory initiatives for promoting RE.

NAPCC provides guidance for promotion of renewable energy NAPCC provides

guidance on enhancements in the policy & regulatory regime to help mainstream

renewables based sources in the national power system.

Jawaharlal Nehru National Solar Mission (JNNSM): Targets 20,000 MW of

grid-connected solar power capacity and 2,000 MW of off-grid solar power

capacity by 2022.

National Tariff Policy: Directed SERCs to fix a minimum percentage of

purchase of energy consumption from RE sources (RPO). This created a

demand side stimulus for RE development.

Introduction of Generation Based Incentives (GBI) for solar and wind

energy: This scheme offers fiscal incentives along with tariff on power generation

from solar and wind. It shifted investment interest from installation to generation.

Creation of Department of Non-conventional Energy Sources: An

independent department for development, demonstration and application of RE.

RE sources were recognized as potential alternative energy sources and

received special consideration.

RECOMMENDATIONS & ANALYSIS

By looking at various approaches we will be opting a solution which will not only solve

NTPC’s fuel security problem but help NTPC develop as an integrated major. Being a

leader NTPC will also be showing path to other organizations also.

Few developments which are underway include:

FY14 would see two crucial developments on fuel security for NTPC –

(1) Commencement of production from its first captive mine, Pakri Barwadhi.

(2) Installation of jetty and in-land water transport system for Farakka and

Kahalgaon (F&K) project.

NTPC plans to commission 15GW of capacity in 12th plan (11.9GW remaining).

Similar capacity is planned for 13th plan at 14.7GW; total capacity under

construction is 20GW and balance under project award. This provides strong

visibility on growth option.

Our solution is integrated approach in which we will be focusing on:

Developing coal mines in INDIA with help of JV’s and man power training.

Forming an association for import of coal with other power producers.

Acquiring coal mines abroad and signing MOU’s.

Addition of capacity in Renewable resources and nuclear arena.

EXECUTIONAL FRAMEWORK Step 1: By Opting For Coal Based Development Only Approach 1 & 2

Figure 18: Scenario in 2017

Coal Demand Supply Scenario forecast FY 14 FY 15 FY 16 FY 17

Coal Demand 187 198 205 218

On date supply 119 119 119 119

LoA / New Supply 22 25 32 38

Total Linkages 141 144 151 157

%age Demand 75 74 73 72

Balance to be Met(B)

Captive Production 3 8.5 19.5 37

E-auction 3 3 3 3

Total Domestic(A+B) 147 155.5 173.5 197

%age of Demand 79 79 85 90

Imports (Domestic equiv.) 40 42.5 31.5 21

Actual Imports 23.5 25 18.5 12.4

The 12.4 million tons demand from foreign will be met by acquiring coal mines in

Nigeria or Indonesia and some by import from Australia etc.

To reduce formation of cartels and hike in prices by demand supply gap we will

form an association in India that will be importing total coal on countries behalf

for all by negotiation, will be important part of strategy.

Step 2: Adding 3rd Approach of Renewable sector.

In renewable sector NTPC is increasing its foray.

If we make a target of 1000 MW addition each year in combined area’s :

Solar(250 MW per year)

Wind (500MW per year)

Biomass(200 MW per year)

Small hydro(50 MW per year)

We will be accumulating further 5,000 MW by 2017.

Reducing domestic equiv. import to around 7 MT in place of 21 MT.

Step 3: Adding 4th Approach of Nuclear sector.

NTPC is expected to invest around Rs. 1,000 crore for setting up nuclear power plants

of at least 2,000 MW capacities. If we come up by 2,000 MW addition with the help of

NPCIL for which we have set a up a JV with it.Then our Import will reduce to 2MT of

domestic equiv. coal.

This is equivalent to just 0.75 MT of imported coal.

Figure 19: NTPC’s revised target portfolio for 2017

49000

6000

2000

6000 2000

Coal

Renewable

Nuclear

Gas

Hydro

Indicative Data

INTEGRATED GASIFICATION COMBINED CYCLE (IGCC)

IGCC combines gasification technology with combined cycle technology. The first step

in the IGCC process is gasification. Gasification converts any hydrocarbon into a

synthesis gas comprised mainly of hydrogen (H2) and carbon monoxide (CO) at high

temperature and pressure. The gasification process allows the separation of the

pollutants from the synthetic gas. With CO2 capture option, syngas passes through a

Water Gas Shifter (WGS) and converts the syngas to primarily CO2 and H2. Next the

syngas is ―cleaned-up‖ by removing the acid gases (such as hydrogen sulphide),

particulate matter, Hg and other pollutants. After the CO2 separation unit, CO2 can be

stored and hydrogen is combusted in a combined cycle gas turbine that produces

electricity. Both the syngas production process and the gas turbine combustion

processes generate steam that is utilized to produce electricity.

Advantages of IGCC include the reduction of CO2 emissions, increased efficiency, and

flexible fuel supply. IGCC technology with CO2 capture also results in superior

environmental performance by reducing emission of pollutants (e.g., SO2, NOx,

particulate matter, and mercury). The collection of sulphur and gasification slag obtained

from the process has by-product value, which avoids the cost of by-product disposal,

and easier CO2 removal. The energy consumption for CO2 capture is lowest in

comparison with conventional power plant and NGCC plant.

The main disadvantage of IGCC is the capital cost. In addition, IGCC is a complex

process that requires a high degree of component integration.

Table 19: Calculation results of IGCC system combined with different CO2

capture technology

Feeds

IGCC without

CO2

capture

IGCC with post-

combustion CO2

capture

IGCC with pre-

combustion CO2

capture

Coal, 103

kg per day 3017 3843 4128

95% O2, 10

3 kg per day 3620 4612 4953

Performance

Gross Power, MWe 875 1115 799

Auxiliary Power, MWe 375 615 279

CO2

produced, 103

kg per day 9292 11838 10733

CO2

emission, 103

kg per day 9292 2368 ~0

Thermal-to-Electric Efficiency based on HHV 48.5% 38.1% 35.4%

Figure 20: IGCC Configuration

Figure 21: Baseline IGCC Configuration

Studies indicate that coal-based IGCC has the capability for combined reduction of CO2

emissions and increased efficiency compared to conventional power

\

CONCLUSIONS - THE WAY FORWARD

To achieve fuel security we have to devise certain options in domestic and international

front. Country’s power generation plans are at the cross roads of growth and poised for

a quantum leap. Matching progress required in the coal sector through creation of

enabling policy environment.

In the deficit scenario of coal, Government would have to create an enabling

policy environment to facilitate:

Greater domestic/captive production, IL/SCCL to ensure total coal requirement

(including import) for the power sector as per NCDP.

Encouragement of setting up new power plant at coastal area with imported coal.

Ports to be identified with power project for import/coastal cum riverine transport.

There must be some integrated clearance for both coal linkages as well as

movement clearance to power utilities.

Supply of sized coal to power utilities.

Incorporation of rapid loading system at each and every siding/mines of the coal

company.

From existing mines we can increase the production by:

Adaptation of modern technology to increase productivity.

To increase the availability of the major HEMM (Shovel, Dumper, Dragline, Dozer

etc.).

The rapid depletion of shallow reserves calls for exploitation of deep seated

reserves through efficient technology. This can be done by inviting international

players with state-of-the-art technologies.

From Upcoming Mining Project:

Time frame clearance of coal mining projects. Up front forest and environment

clearance

Allocation of more coal blocks to private players/ end users with strict deadlines

and steep penalties for failure.

A special purpose vehicle (SPV) may be set up initially to take care of all

regulatory clearances, which is then transferred to the Mine developer.

For fulfilling the dire necessity in short term we can for:

Import of coal

E-Auction

Tie up through MOU at premium price.

To take up with CIL for finalization of FSA for new units at 90% commitment level

Transportation of coal through Inland Waterways at Farakka/Kahalgaon/Barh

NTPC may contemplate handing over their own fleet of wagons to Railways for

increased coal movement

In long term we can go for:

Development of captive mines allotted.

Acquisition of assets (Domestic and abroad).

Go for port based plants.

Re designing the boilers for high GCV coal.

Enablers for coal solvency

Sourcing of coal by optimizing portfolio mix, Domestic /Import/Captive/Acquiring

Mines abroad etc.

Uninterrupted Transportation System (MGR/IR).

Well-equipped unloading system at station end with sufficient redundancy.

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