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Tata Ultra Mega Mistake: The IFC Should Not Get Burned by Coal
March 12, 2008
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 In fact, it is obsolete by the IFC’s own standards.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Conclusion: The rationale for Mundra is obsolete.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
Figure 2: Solar Power Potential in the Region Near Mundra
9 Responses to “Tata Ultra Mega Mistake: The IFC Should Not Get Burned by Coal”
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March 18th, 2008 at 11:44 am
This is a usual ploy to distract from the need for India’s power supply to grow. Mr. Wheeler, let us talk when you have experienced poverty in India because of lack of power. You have a very Western outlook and not surprisingly so. Climate change is a huge problem and India’s salvation is in adaptation, not mitigation, which should be the OECD’s problem because they created it. It is time you looked up some graphs on per capita emissions and maybe calculated your own emissions before you ask India to spend more on low PLF solar over coal. Let’s talk about shutting down the Vegas strip which uses the same power in a day as 2 Indian towns of 2.5 million people each. Let’s talk about your Best Buys running huge LCDs (avg energy intensity twice that of regular TVs) all day before you talk about India going solar while the US puts up 73 coal plants from 2008-2012. Sitting in Washington, try and clean up your own country before you come to try and take away our time and place in Destiny.
March 18th, 2008 at 9:29 pm
Mr. Wheeler – Your arguments are totally misplaced. For some reason, the statistics I sent you earlier that put things in context regarding the disparity between the US and Indian power generation never got posted on your blog. I wonder why?? India has about 3 times the population of the US and its current generating capacity is roughly 1/8 (142,000 MW in India vs approximately 1.25 MILLION MWs in the US). Coal based generation in India is roughly 80,000 MW compared to the US’ 500,000 MW plus. I worry about folks perched in fancy offices in DC, enjoying all the comforts that life can offer, trying to deprive other countries the opportunity to grow and prosper. I thought the US was a democratic country. Wish you would abstain from such an indignant letter writing campaign to the World Bank and instead try to correct the situation in the US.
March 19th, 2008 at 9:07 am
India has a right to grow as fast as it can without being dependent on anyone. It has an inexhaustible reserve of coal, a resource it has a right to use for ensuring a better future for its people. The current climate change problem was created by the Industrial Revolution from which we in the West have benefited enormously. It is a problem that we in the West created, not India. All we have given India are the wounds of colonialism. Even today, on a per capita basis, India does not generate even a fraction of harmful gases that the United States and other Western Economies are generating. It does not need anyone to lecture it regarding clean energy, particularly not anyone based in the West. If we in the West cannot help it to develop into a strong industrialised nation within a generation, and I believe it can achieve that goal without our help, we should at least stop blackmailing it.
March 20th, 2008 at 12:18 pm
Dear Mudit Narain, I agree with your concern about power for India, and I have in fact lived for two years with very sporadic power in a very poor country, the Democratic Republic of the Congo. I also understand your frustration with the US, which is profligate and has so far refused to mend its CO2-spewing ways. The sooner the US moves to serious carbon charges and support for renewables the better. I would urge you to look again at the blog, which does not ask India to pay one cent more for power than it would anyway. I am simply urging the IFC to use its resources and clean technology mandate to cover the cost gap between coal-fired and solar thermal power. The same argument would hold for carbon capture and storage (please see my paper on CCS and solar thermal). Perhaps you are the same Mudit Narain who has analyzed the CCS option at MIT, in which case you may well support the idea of Northern support for clean power development in poor countries. If the North moves quickly to cover this cost gap, then India can match its intended growth in power, but on a clean path that will benefit the people of India.
Sincerely, David Wheeler
March 21st, 2008 at 1:01 pm
Yet again, pro environment with the mask removed is cruelly anti human.
So, you lived for two years with very sporadic power in a very poor country? How special. The people you left behind still live with sporaadic power in a poor country.
Go India! India is a great country with a great future. I think they have the wisdom and vision to ignore you.
March 25th, 2008 at 8:18 pm
Mr. Wheeler,
So nice to see your response. Thanks for looking up my MIT thesis! Makes me feel my time on it was worth it.
Now, as for the issue of quick power over clean power, I know that you and I are mostly on the same page but the fact that there is so much talk of climate change at a time when we as a people and India as a country are just taking off, creates pressure. I was in meetings with very senior folks at the GoI and we talked about how much pressure this intervention from places like DfID etc creates. We don’t need it!
As for my thesis, if you care to read it, you would see that I lay out a way for CCS IF India WANTS to go down that path, not if it is FORCED down it’s throat, with or without external funding. I feel what I said here is consistent with what I wrote in my thesis. I am glad to know that you are amongst the sane few in Washington and US of your age who recognize the pain of living in a poor country, even if for just two years, as Mark so kindly pointed out.
How about IFC just helps India put in more power capacity and the US uses its own resources to clean up it’s own muck? Why divert precious IFC and Bank resources? And again, how about you trying to clean up Vegas than focus on India or IFC? I looked up the net and I didn’t see you protesting the Vegas Strip’s energy consumption (using vegas as a focus here, an example only)
How about we make a deal. I try my best to put in CCS in India at one plant and you reduce the energy consumption at Vegas or comparable places, by half by 2012? By comparative advantage, I am better off working with India and you with US, right?
Would you care to take up the challenge Mr. Wheeler? I am in Washington if you would like to drink a beer over this issue.
Sincerely,
Mudit Narain
ps: Who betrayed me, my email or my computer? Would love to know. thx. mns
April 9th, 2008 at 8:00 pm
This comment was originally posted to the same blog entry on CARMA on March 17, 2008.
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.
April 9th, 2008 at 8:07 pm
This comment was originally posted to the same blog entry on CARMA on March 18, 2008
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.
April 14th, 2008 at 12:06 pm
Can we please get past the knee-jerk strident belligerence? David has produced an excellent analysis, showing that solar thermal is economically competitive, and arguing that the coal-fired alternative being proposed is economically and environmentally foolish. He follows it up with the argument that OECD governments and the relevant IGOs should be paying the incremental difference in costs for clean energy infrastructure development in India.
What is the response? A demand for Western ex-colonial powers to stop their hypocritical lecturing, and implied arguments that because David is American he has no legitimacy.
Let us argue the issues, not the personality. David’s analysis is solid, and is in no respect ignorant of the imperatives of economic development and poverty alleviation. The sign of a nation’s maturity is its citizens’ willingness to take good advice no matter what the provenance.