The true cost of producing thermal power in India

Abstract

This primary objective of this study is to quantify the real cost of thermal power generation by factoring in externalities of production. The externalities include air pollution (health impacts and cost of loss in productivity), water pollution, environmental damage due to coal mining, cultural losses, losses due to migration/displacement and many more factors. This analysis predicts the real cost of power generation if all the negative externalities were internalised. The scope of this study is limited to the largest source of energy and pollution in the Indian power sector; thermal power generation using coal.This study also evaluates the spread of externalities of power production in India by states and by cities. Due to the uneven distribution of natural resources and wealth in the country, states having lower per capita electricity consumption are the ones that implicitly pay higher costs for negative externalities. The study also tries to map the change in the level of externalities with time. We also generated a district level spatial externality cost distribution estimation and a plant level engineering cost estimation of alternative abatement technologies. The study attempted to quantify negative externalities of power generation, explore mechanisms to factor them in pricing, and study its impact on the Indian power industry structure and dynamics. An attempt was made to compare the numbers with the cost of producing green power to validate the hypothesis that true cost of producing thermal power exceeds the true cost of producing renewable energy. In the end, the study attempts to explore mechanisms to factor some of the externalities in the current electricity pricing. The study also tries to analyse the expected changes in industry structure with the government regulators becoming increasingly concerned about environmental impacts of power production.