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Proposed Power Plant in Tamil Nadu, India, Is Too Expensive

May 20, 2015
Tom Sanzillo
Click to see full report.

Click to see full report.

We’ve published new research this morning that shows how a proposed 4,000-megawatt coal-fired plant in Tamil Nadu, India, would produce electricity that is too expensive.

Our report, “Cheyyurr UMPP: Financial Plan Will Make Electricity Unaffordable,” finds also that the project, classified as an Ultra Mega Power Plant, would undermine the Indian government’s public-policy goal of providing affordable electricity for all. It concludes, too, that the project is financially unsound.

Some of our core findings:

  • The ratepayer tariff required to build and operate the plant would be 4.9 rupees per kilowatt-hour in 2021, its first of year operation, and the plant would require an average tariff of 5.95 rupees per kilowatt hour over its 40-year life. By comparison, four other UMPP projects in India and several additional Indian power-generation projects have tariff costs of 1.15 rupee per kilowatt hour to 3.7 rupee per kilowatt hour.
  • While a recent reworking of bid documents around the project could make the project more attractive to investors, those adjustments would also make it even more financially fraught for consumers and utilities. Such changes would pass along greater costs to the residential, industrial and agricultural users or require greater governmental subsidies.
  • The project is being developed under the assumption that it would require an annual 12 to 14 million tons of imported coal, a business model that would put its coal costs at roughly twice what they would be if domestic coal were used.

Our takeaway is that the plant is too expensive. . A combination of current planned grid and transmission improvements, increasingly competitive wind and solar prices, an existing pipeline of regional power projects, and improved resource planning could be a practical alternative. .

It’s not a viable proposition. .

Tom Sanzillo is IEEFA’s director of finance.


Tom Sanzillo

Tom Sanzillo is Director of Financial Analysis for IEEFA. He has produced influential studies on the oil, gas, petrochemical and coal sectors in the U.S. and internationally, including company and credit analyses, facility development, oil and gas reserves, stock and commodity market analysis, and public and private financial structures. He also examines such areas as community and shareholder activism, institutional investment, public subsidies and Puerto Rico’s energy economics.

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