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Tata Ultra Mega Mistake: The IFC Should Not Get Burned by Coal


[This post originally appeared on the Center for Global Development’s "Views from the Center" blog.]
During the last week of March, the Board of the World Bank Group’s International Finance Corporation (IFC) will consider the proposed Tata Ultra Mega project, which will construct a huge (4,000 MW) coal-fired power plant at Mundra in India’s Gujarat State. According to the IFC’s own estimate, this plant will emit 25.7 million tons of CO2 per year for at least 25 years, adding another 643 million tons to an atmospheric carbon load that is already driving us toward an environmental catastrophe.

This project no longer makes any sense. In fact, it is obsolete by the IFC’s own standards. Here’s the rationale provided by the IFC, along with the current reality.

1. Claim: The IFC should use scarce international resources for the Mundra project because its efficient, supercritical coal-combustion technology will provide a model for India. According to the IFC: “The project is the first private sector power project in India to be based on the energy efficient supercritical technology.”

Reality: Wrong on both counts. No model is needed, because several other private- and public-sector supercritical plants are already under construction or planned. These include Sipat and Akaltara (Chattisgarh State), Sasan (Madhya Pradesh), and Shahapur (Maharashtra). Figure 1, drawn from our CARMA database, shows the percentage of planned Indian power capacity other than Mundra that will employ supercritical technology during the next five years. For the public and private sectors combined, supercritical capacity without Mundra will be around 60% of new capacity in 2013. For the private sector, it will be over 70%.

Conclusion: The rationale for Mundra is obsolete. India’s public and private sectors are moving to supercritical technology anyway, without IFC subsidies. A big driver is the rapidly-rising price of coal, which puts a premium on combustion efficiency.

2. Claim: The IFC must support Mundra, because India has no scalable, economically-feasible alternative for baseload power. And in any case, India has a lot of cheap coal and should exploit it.

Reality: Wrong again. India does have a scalable, economically feasible alternative to coal. As Figure 2 shows, the region near Mundra has huge solar potential and is one of the most sparsely-settled areas in India. Baseload solar power with thermal storage for 24-hour operation is now technically feasible, as I have noted in a recent paper and blog. As for exploiting Indian coal, Mundra will use coal imported from Indonesia and other countries at rapidly-rising cost.

For the IFC, solar thermal power is also financially feasible for two major reasons.

  • Coal’s previous cost advantage has largely vanished. Fuel and construction costs for supercritical coal-fired power plants have been escalating rapidly. Both costs have at least doubled since 2005, nearly eliminating coal’s cost advantage over solar thermal power. Since completing my previously-cited paper, I have incorporated these changes into new production cost estimates for supercritical coal and solar thermal power. The gap is now less than one penny per kilowatt hour (8.23 cents for solar thermal vs. 7.65 cents for supercritical coal (up from 4.20 cents two years ago). Power from Mundra will never be sold at the rate advertised on IFC’s website (5.6 cents/kWh), because this would guarantee bankruptcy in short order.
  • Financing from international clean technology funds can fill the remaining cost gap. Since a solar thermal plant emits no carbon, it qualifies for European Union offset payments under the Clean Development Mechanism (CDM). The current CDM payment rate is about $15 per ton of CO2 averted, and solar thermal capacity equivalent to Mundra’s (4,000 MW) would annually avert 29.7 million tons of CO2 produced by the CDM’s “baseline case” (a low-efficiency subcritical plant). This would qualify the solar thermal plant for $445 million/year in CDM payments — enough to recover most of the total cost difference between solar thermal and supercritical coal before the current CDM arrangement expires in 2012. The rest can easily be covered by the World Bank Group’s new Clean Technology Fund, financed by donor-country taxpayers.

In short, IFC’s proposed Tata Ultra Mega project is obsolete, unnecessary, ultra-dangerous for the planet, and mega-dangerous for the environmental reputations of the IFC and the World Bank Group. Does anyone really believe that donor-country taxpayers will continue supporting the Bank Group if it takes billions for the Clean Technology Fund with one hand and invests billions in coal-fired monsters with the other? Let’s get serious here. The IFC’s Board should take Ban Ki-Moon’s Bali declaration of a planetary emergency seriously, vote no on Tata Ultra Mega, leave coal-fired power behind, and commit to renewable power. They will find a willing partner in the Indian Government, which has already begun piloting solar thermal power and would undoubtedly welcome a big push on renewables.

Figure 1: Planned Supercritical Coal Capacity in India Without Tata Mundra

(% of Total Planned Annual Capacity Installation, Private and Total)
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Planned Supercritical Coal Capacity Without Tata Mundra

Figure 2: Solar Power Potential in the Region Near Mundra

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Solar Power Potential in the Region Near Mundra

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Thanks for your help in fighting the indiscriminate and short-sighted decisons of India’s political class to establish Coal Fired Thermal Power Plants. Many such power plants, some of them clothed not even with a figleaf of “supercritical” label are being planned. One such is the coal fired power plant at Chamalapura, near Mysore, in the State of Karnataka, India. In this country, Aspect Impact Study and Stakeholder Consultation Process are carried out merely as an eyewash. Inspite of public anguish opposing the establishment of power plant, the Government is determined to proceed with its plans.

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This is an outrageous project. Only through the most ridiculous distortion of logic can any pulverized coal technology be considered a “Clean Development Mechanism.” By this thinking, the more coal plants we build, the better for the planet. Thanks David. I’ll post this on coalSwarm.org and try to spread the word.

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[...] for Global Development, has spelled out an argument against the World Bank’s rationale. Wheeler points out that the project is essentially obsolete on the part of the World Bank because su… This investment is not worth international resources. He also points to the potential for solar [...]

Perenial low efficiency of power generation in thermal plants in India is due to high ash (upto to 45%) in coal which also causes heavy consequential losses due to damage to boilers and coal handling plants.
In hydros in the northern region,high silt (due to deforestation) cause heavy damag to turbinese due to erosion, require frequent repairs.
Solutions to these twin problems available but not acceptable to authorities due to reasons best known to them.
Ref:-1.R.Chattopadhyay:Surface Wear, Analysis, Treatment, and Prevention,published by ASM International, 20001,OH,USA, best selling reference book
2.R.Chattopadhyay:Advanced Thermally Assisted Surface Engineering Processes, Kluwer Academic Publishers,2004,NY, USA (now Springer)

[Reply]

[...] the International Finance Corporation (IFC), the World Bank’s private sector arm, approved a $450 million loan for a 4000 megawatt coal-fired power plant in India. Though the IFC claimed that “cheap and [...]