Managing Power System Flexibility in India via Coal Plants

Abstract

The Government of India plans to install 175 GW of renewable energy projects by 2022, and 275 GW by 2027. In meeting these goals, the Indian power sector faces twin challenges: first, managing renewable energy will require increased flexibility in the system; second, there will be under-utilization of existing coal-based plants, which would stress the economics of not only individual plants but also the overall power sector. This creates a need to explore the conversion of existing base-load coal plants as flexible resources. Our analysis shows the following: first, the incremental costs for converting base-load coal plants to flexible ones would be only 5%-10% of the total costs of base-load plants in net present value terms or 8%-22% in levelized terms; second, flexible coal may be the most cost-effective flexible solution in the near-term, by a factor of 4-20, when compared to lithium ion batteries or pumped hydro. Finally, while we have provided an indicative analysis of additional costs of converting base-load coal plants into flexible ones, we recommend that flexible coal be procured cost-effectively using appropriate market mechanisms, such as capacity auctions.

Keywords: India, Coal Plants, Flexible Operation, Retrofits, Cost-Effective, Incremental Costs

JEL Classification: G38, Q48