Maharashtra Can Save 75,000 Cr Through Energy Transition Over the Decade

Surplus electricity generation capacity, air pollution regulations, and cheap renewable energy offer Maharashtra an opportunity to save Rs.16,000 crore in 5 years, and over Rs.75,000 crore in the coming decade, says a report released by Climate Risk Horizons. 

According to the report entitled, ‘Maharashtra’s Energy Transition-A 75,000 cr. savings opportunity’, as one of India’s most advanced industrial states, Maharashtra has been making steady progress towards a clean energy transition through solar agricultural feeders, solarisation of diesel pumps, and procurement of new solar power through competitive bidding processes. However, the report shows several win-win measures that the state government and the state discom MSEDCL can take to accelerate the energy transition while delivering public benefits in terms of lower-priced electricity and reduced air pollution. 

The report suggests three win-win solutions that can deliver ambitious outcomes on several fronts: reducing the cost of power purchase (resulting in a reduced subsidy burden on the state government), improving MSEDCL’s financial situation, reducing air pollution, and setting up the state to be a national and international leader in the energy transition. These solutions arise due to the convergence of three factors:

• Surplus coal power capacity 
• Extremely cheap renewables coupled with the declining costs of battery storage systems 
• The deadline by which all coal plants have to be retrofitted to meet air pollution standards

These three solutions can be achieved by taking several steps towards energy transition in Maharashtra and these are;

Retiring 4,020 MW of coal power units over 20 years of age and replacing their scheduled generation with new renewable energy would save over Rs. 10,000 crores over five years. this can be achieved in two ways suggested in the report:

• Rs.2,000 cr. in withdrawn retrofit costs that would otherwise be required to meet the emission norms 
• An additional Rs.1,600 crore of savings per year, assuming an average replacement tariff of Rs.3/kWh.

Retiring these old units provides Mahagenco with the flexibility to rationalize coal supplies, by replacing coal from distant mines with supplies from mines closer to the remaining operational coal fleet. We estimate that this rationalization can yield further savings of approximately Rs. 627 crores and possibly as much as Rs. 967 crores annually.

Halting construction of the 660 MW Bhusawal Unit 6 will save Rs. 3,158 crores of projected expenditure. This unit is at a relatively early stage of construction and as we show later in the report, is neither required nor competitive with alternative electricity sources. Mahagenco also has regulatory approval to build two more units at Koradi, which would cost approximately Rs. 11,000 crores if sanctioned by the state government.

A 10-year project to phase out the most expensive coal power plants (irrespective of age) and replace them with renewable energy can yield significant savings. If scheduled generation from all plants with tariffs at Rs. 4/kWh or higher were to be gradually replaced with power from renewables at an average of Rs. 3/kWh, there would be a potential savings of over Rs. 60,000 crores over five years (based on projected FY 2025 power tariffs) in terms of reduced power purchase costs by Maharashtra State Electricity Distribution Company Limited. Tapping into these potential savings should be part of longer-term planning, through a gradual phase-out of expensive coal contracts on a case-by-case basis.

This is how Maharashtra would be able to save up to 75,000 crores which would enough to cover Maha’s current fiscal deficit, which was Rs.78,617 crores in FY2020.