Tuesday, October 11, 2011

Thermal power clusters in the making

The geographic distribution of the new thermal power generation capacity under development is highly uneven showing clustering in certain districts and regions of the coal producing heartland. The governments at the center and in the states have forsaken the local communities - who will bear the adverse consequences of the large concentration of thermal plants - to favor the power producers. The thermal power clusters are detailed in the EPW piece "New thermal power clusters" that appeared in the October 1-7, 2011 issue. The article has been reproduced below.

Economic Times in a recent review of the progress of power plants in Chattisgarh has quoted from this article.

Thermal power – currently accounting for 65% of overall installed capacity[1] in India - will continue to be the mainstay for power in the coming years. The Central Electricity Authority (CEA) expects that about 80% of the new capacity addition during the 12th plan will be thermal.

The prevailing policy environment has led to an explosion of interest in thermal power generation in recent years. Evidence of this is available in the number of Memoranda of Understanding (MOU) that state governments have signed with private companies and in the number of new applications the Ministry of Environment and Forests (MoEF) gets every month for environmental clearance.

The list of companies planning or building thermal power plants is not limited to those belonging to large business houses such as Tata, Reliance, Vedanta and Adani. It also includes a number of unknown entrepreneurs with no experience of any large industrial enterprise, let alone power generation. Private investors clearly sense a great opportunity here.

How much thermal capacity is actually under development? In the past, the CEA, as the body responsible for planning and monitoring power generation in the country, would have provided the figures. With the private sector playing an increasing role in new generation capacity, the CEA has become cagey about figures. It is however possible to obtain estimates from a different source, the MoEF.

Estimating the thermal capacity under development

Setting up a thermal power plant based on the common fuels - coal, lignite and gas – with capacity equal to or greater than 500 Mega Watt (MW) requires a clearance from the MoEF. The clearance is broadly a two-stage process[2] and the ministry maintains a public record of projects clearing each stage.

Project promoters approach the ministry after reaching an understanding with the government of the state where they intend to set up a plant. On the successful conclusion of the first stage of scrutiny, they are provided the Terms of Reference (TOR), a list of environmental issues that have to be evaluated for the Environmental Impact Assessment (EIA) of the project.

During the second stage, the EIA is carried out and a “public consultation” held with the people affected by the project. Environmental clearance is subsequently granted after a detailed scrutiny of the EIA and other project documents. Environmental Clearance represents a significant milestone for a thermal project, for, at this stage the project site has been identified, agreements exist with the state government for provision of land and water, the formal consent of the people of the area has been obtained for the project and most importantly, the linkages for fuel are in place. Specifically, if the project intends to use domestic coal, it has either been allotted captive coalfields or been provided linkage with a coalmine. Construction activity can begin as soon as the land acquisition is complete.

Counting only projects that have a capacity of 500 MW or above, data from the MoEF[3] indicates that since 2006, environmental clearance has been given to nearly 200 projects for generating close to 220,000 MW of power. Thermal plants take a minimum of five years from the start of construction to get their first unit operational and two-three more years to get the additional units on stream. In the normal course, this capacity should become available for electricity generation between 2011 and 2019. To put this number in perspective, the total electricity generation capacity in the country – from thermal, nuclear, hydro, and other sources – is just over 176,990 MW at the end of June 2011 (CEA 2011). The thermal generation capacity expansion underway works out to 1.3 times the total generation capacity in the country.

How much additional electrical generation capacity does India need? While the exercise of the Planning Commission for the 12th plan is yet to conclude, reports suggest that the target will be around 100,000 MW from all power categories. Assuming that eighty percent of this new generation capacity is thermal and liberally extrapolating for the two years beyond the 12th plan, one arrives at a figure of 120,000 MW of new thermal capacity until 2019. Measured against this, the thermal capacity under development at 220,000 MW indeed seems on the high side.

Of course, not all of this capacity may materialize in this timeframe. There could be problems with land acquisition, financing, or project management delays. Promoters may even decide to go slow for other reasons. Nevertheless, the fact remains that the development activity has been unleashed for these projects.

Thermal power hubs

The thermal capacity addition underway across India is unevenly distributed. The top six coal mining states – Jharkhand, Orissa, Chhattisgarh, West Bengal, Madhya Pradesh, and Andhra Pradesh – account for close to half of the capacity addition. Tamil Nadu, Maharashtra and Gujarat account for a third. The remaining is spread across UP, Bihar, Haryana, Rajasthan, Karnataka, Punjab, Delhi and Tripura. The focus of the rest of this paper is on the features of thermal power development in the first group of states.

Table 1 (From EPW) shows the total power generation capacity currently available from all sources and the thermal capacity addition in various stages in the top coal mining states. The projects labelled ‘under development’ are those for which the MOEF has given environmental clearance while the projects labelled ‘in the pipeline’ only have the TOR for the EIA. The project statistics spans the different types of projects – public sector and government (state and central) promoted, private sector based on competitive bidding and the projects of Independent Power Producers (IPP’s) – and include both new and expansion projects. The ratio of the thermal generation capacity under development to the generation capacity from all sources currently available to the state is presented in the column headed ‘B/A’.

The coal rich states – with the exception of West Bengal - are adding between 2.2 and 4.7 times their existing generation capacity in thermal capacity alone, against the all India average of 1.3, a clear indication that capacity is being developed for exports outside this region.

Chhattisgarh for instance has a long stated policy of becoming a “power hub”, using its large coal deposits to competitive advantage. In line with this policy, the state government has signed MOU’s with 61 would-be IPP’s, to generate more than 50,000 MW of power. Most of the other coal rich states have also signed numerous MOU’s.

A typical MOU[4] promises an IPP help in acquiring land, meeting water requirements, conducting the public hearing mandated under the Environmental Protection Act, facilitating clearances from state and local bodies and pushing the case of the company with the central authorities for coal linkages and other central clearances. The companies with projects ‘in the pipeline’ have the backing of state governments (except in West Bengal & AP) through MOU’s.

The thermal capacity addition from the projects ‘in the pipeline’ at over 200,000 MW is humungous. However, the question arises if one should attach much significance to these projects. To get environmental clearance, these projects will need fuel linkages and that can be a major problem today.

With the exception of the coastal regions of AP (where imported coal and piped gas are options), the viability of projects in these states depends on the availability of the relatively inexpensive local coal for which they have to approach the central government. Given that the increase in coal production is not keeping pace with the increase in coal based thermal generation capacity, the Ministry of Power has sought to prioritize the allocation of coal linkages. For IPP’s seeking coal linkage, progress in acquisition of land for the plant will count towards higher priority[5]. Government policy is driving independent power producers to acquire land even before obtaining environment clearance.  

The projects in the pipeline, backed as they are by the state governments, therefore need to be taken seriously for the immediate footprint they will leave on the ground even if plant construction is some years away.

Thermal Clusters

Thermal projects in the coal mining states are concentrated in certain districts. Table 2 (From EPW) shows the generation capacity of thermal plants that are in operation, the capacity under development and capacity expansion and new projects that are in the pipeline for certain districts.  Past record suggests that expansion projects in the pipeline will get environmental clearance – so these have been clubbed with the projects under development.

Within these districts, the projects tend to cluster in locations that will presumably minimize operational costs. All the plants in Nellore district, for example, are located near Krishnapatnam port, which will berth the large cargo ships transporting the imported coal. They will meet their cooling water requirements from the sea or, in some cases, from inland creeks nearby. In Janjgir-Champa and Raigarh, all the plants are located along the Mahanadi (from where they will draw their cooling water) and the railway and national highway (which will be used to transport the coal) are close enough.

The effects of such a deadly concentration of coal based thermal power plants are likely to prove devastating to the communities in the midst of whom they are coming up.

The loss of farming land and commons will be felt first. The CEA estimates land requirements for pithead thermal plants to range from 0.6 to 1.1 acre per MW. Taking Janjgir-Champa as an example, and assuming 1 acre/MW, the land requirement for all the plants planned works out to 2.5% of the area of the district! Twenty-one of the 26 plants planned in the district do not have environmental clearance yet. However, land acquisition is already underway[6], with government policy linking progress in land acquisition with allotment of coal linkage.

Once the plants become operational, the surrounding communities will face threats to their health and, where they are agricultural, to their livelihood. Thermal power plants using coal are extremely polluting with environmental damage arising from the transport of coal to the plants, the emissions from the smoke stack, the storage and disposal of the ash from the burning of coal, the continuous withdrawal of a large quantity of water for cooling and the disposal of wastewater and effluents. Indian coal has high ash content and a practical solution is yet to be found for its safe disposal.[7]

Returning to the subject of clusters, if the preferred location for a thermal power plant is mainly to do with geography and connectivity, one should see clustering across district boundaries. Table 3 (From EPW) shows certain regions spanning districts and even state boundaries, which have a large concentration of thermal plants.

The Singrauli region centred on the reservoir of the Rihand dam and composed of parts of Singrauli district of MP and Sonebhadra district of UP will be the largest thermal cluster in India in the near future, hosting 14 thermal plants with total capacity of about 33,000 MW. Incidentally, this area with its six operational plants and 12,000 MW capacity is already marked as critically polluted.

The geography of the regions with large thermal plant concentration provides pointers into potential large-scale environmental effects. The plants in Raigarh and Janjgir-Champa districts of Chhattisgarh are located along the Mahanadi. The Chhattisgarh government has announced plans to construct a chain of seven barrages on the river upstream of Hirakud dam to ensure supply to these plants. Several thermal projects in Jharsuguda district of Orissa are also slated to withdraw water from the Hirakud reservoir. Studies are yet to be carried out on the sustainability of using Mahanadi waters for so many power plants and the effects it may have on other water users downstream.


The current electricity policy has turned thermal power generation into a lucrative proposition. The generation capacity is coming up in dense clusters in the main coal mining states in locations chosen to minimize running costs. While many of these planned plants may not deliver on the promise of power because of non-availability of domestic coal, they are already leaving their imprint on the ground. Given the drastic negative fallout from coal based thermal power plants for the health and livelihood of communities where the plants will be located, one would expect government to intervene on behalf of the communities.

These clusters are however coming up with the full support of the state governments. The central government’s efforts to regulate the location of power plants are limited to ensuring that the rules and procedures laid down for obtaining environmental clearance are followed. It has refrained from taking any decisive action to stop clustering of thermal plants. One can only conclude that the government – both in the states and at the centre – has forsaken the communities who will bear the brunt of these thermal clusters in favour of power producers.


Sethi, A (2011): Power plants insulated from protestsThe Hindu, 7 Feb, Viewed on 5 Sept 2011

Sharma, S (2011): Chhattisgarh Minister's son buys farmland for Videocon, Times of India, 23 June, Viewed on 5 Sept 2011


[1] Inferred from CEA (2011)
[2] The environmental clearance process is described in the Environmental Impact Assessment Notification, 2006 available at the MoEF website
[3] These numbers have been arrived at by aggregating data from the MoEF Environmental Clearance Database which can be accessed from (http://moef.nic.in/modules/project-clearances/environment-clearances/)
[4] The model for the MOU that Chhattisgarh signs with companies is available at (http://cg.gov.in/departments/sipb/Model%20Mou.pdf), last accessed on 5 Sept 2011
[5] The coal linkage policy for 12th plan projects is laid out in a 2009 office memorandum of the Ministry of Power. IPP’s wanting coal linkage are assigned priority based on the points they score on several criteria. Progress with land acquisition is the most important criteria with 50% weight. (http://www.powermin.nic.in/whats_new/pdf/Coal_linkage_policy_for_12th_plan_projects.pdf), last accessed on 4 Sept 2011
[6] See Sharma (2011) for a report on land acquisition for a thermal project that has not yet got environmental clearance.
[7] See Sethi (2011) for the problems faced by India’s largest power producer, NTPC, in handling fly ash.


Kannan said...

"With the enactment of Electricity Act 2003, techno-economic clearance of CEA is not required for setting up of Thermal Power Plants. As such no thermal power plant has been cleared by CEA during the last 3 years and the current year till date.

Setting up of Thermal Power Plants depends upon the availability of various necessary inputs such as land, water, fuel and other infrastructural facilities. No maximum limit has been specified for setting up of thermal power plants at a particular location/state in the country including Chhattisgarh."

This information was given by the Minister of State for Power Shri K.C.Venugopal in a written reply to a question in Lok Sabha today (2 Dec 2011).

Kannan said...

Indian Express reports that 32000 MW of thermal power generation capacity - 50% of the estimated capacity addition for the 12th plan - has either been shelved or put on hold due to problems originating in the non availability of cheap local coal. (http://www.indianexpress.com/news/coal-supply-low-power-projects-of-over-32-000-mw-shelved-delayed/964196/)....
"Most projects are being set up by first-time private sector developers.The surge in projects being abandoned comes at a time when investor interest in the power sector is petering out fast, with lenders now starting to apply brakes on funding of new private generation projects." The report notes that "the developers for most of these projects have already acquired the land or are in the process of acquiring it"

So the land has been alienated from the farmers while the promised power will remain an illusion.