Clash intensifies over cost, impacts of giant Indian coal-fired power plant

Published by MAC on 2012-06-05
Source: Climate Wire

Clash intensifies over cost, impacts of giant Indian coal-fired power plant

By Lisa Friedman

Climate Wire (E&Enews)

30 May 2012

Environmental groups are increasing pressure on the International Finance Corp. (IFC) to pull its money from a 4,000-megawatt, coal-fired power plant in India.

In Washington, D.C., recently to lobby the World Bank's private finance arm as well as Congress and the U.S. Treasury, Indian activists say the plant near Mundra Port in Gujarat state on the country's western coast is destroying the livelihoods of local fishermen. Meanwhile, they and their U.S. counterparts argue, developers are pressing the Indian government to raise electricity rates in the face of rising coal prices. The likely result: power that is out of reach to those who need it most.

"Big shopping malls might be able to buy this electricity, but ordinary people in whose name this was pushed won't be able to buy this electricity," said Soumya Dutta of the India People's Science Forum in New Delhi.

When the IFC voted in 2008 to approve a $450 million loan to India's Tata Power group for its proposed $4.2 billion plant, the battle over coal at the World Bank had barely begun. In the years since, debates over whether scarce public money should be used to fund coal -- and how to balance development and energy needs in poor nations with concerns about climate change -- have taken center stage at the multilateral development banks.

With that fight now in full swing, the specific complaint against the Tata Ultra Mega coal plant is in the hands of the World Bank ombudsman, where a dispute resolution process could determine the fate of the project. The local communities charge that the project developers violated IFC standards by failing to account for the impact on local communities, pollution and community health and safety.

Activists say their ultimate coal -- getting the IFC to withdraw its loan from the plant -- is a long shot. But they also argue that rising coal prices are changing the equation for phoinstitutions that call coal the cheapest option for poor countries. At minimum, they say a full audit is called for to explore whether the project was approved under a false set of promises.

"Tata Mundra is the first domino that could fall in what would be a much wider systematic problem here in India," said Justin Guay of the Sierra Club's international climate program. "If they are not even willing to look at the project and say, 'OK, at the bare minimum this requires a full audit, let's dig into this and see if we screwed up,' that would be a pretty big problem."

First in supercritical technology

The Tata Mundra plant was designed to be the first in India to use supercritical technology, making it the most energy-efficient plant in the country. By creating 5,000 construction jobs and 700 operations jobs while providing electricity access for some 16 million people, IFC officials said the plant is critical to the country's development while setting a precedent for efficient coal use in a country still deeply dependent upon fossil fuels.

In addition to the IFC loan, its financing included another $450 million loan from the Asian Development Bank, about $800 million from Korea's development bank and about $1.5 billion from local banks.

The first unit of 800 megawatts was commissioned in March, and the second unit is expected to be on-stream soon. When completed, the plant will serve the states of Gujarat, Maharashtra, Rajasthan, Haryana and Punjab.

"This is part of the government of India's big push to try to bridge the huge gap that exists between demand and supply in India, and it has in fact only gotten worse," said Anita George, director of infrastructure for Asia at the IFC. She described the lack of access to modern energy services to some 400 million people in India as one of the country's top bottlenecks to macroeconomic growth.

She acknowledged that activists have a point when they say energy from plants like Tata Mundra does not go to the very poorest, namely the fishermen who live in shacks in the shadow of the plants. But, George argued, in a country where outages are common even in the most elite communities and 12 percent of industry has access to reliable power, electricity going into the grid for domestic, industrial and commercial use helps people of all income levels throughout the region.

'Electricity for all by 2014'?

She noted that the IFC funds several decentralized renewable energy projects and, in fact, recently underwrote a $5 million loan to provide solar stoves and lanterns in Gujarat state. Yet even a project like that can only reach about 200,000 people in its first stage and 1.1 million thereafter, compared to the 16 million who are expected to be served by Tata, she said.

"It's not to say we don't do targeted access for the very poor. We do that again and again," George said. But, she added, "India has a goal of meeting electricity for all by 2014. There's no way we that you can reach that goal unless you're willing to accept very many different levels, and that was the thinking behind the Tata Mundra power plant."

Activists say they have a long road ahead of them and are facing resistance from all corners. They complain of being branded by the Indian government as having a foreign-influenced agenda to block the country's growth when they are trying to protect the natural resource base of communities in danger of losing it forever.

The 700 jobs Tata created, they argue, are overshadowed by the estimated 10,000 livelihoods of fishermen and their families destroyed by the plant, which has fenced out large areas of the coast, and by the ash falling on areas they have traditionally used to lay out fish for drying.

Their top concern, though, is that power that Tata promised would sell for 5.65 cents per kilowatt-hour will rise to 10 or 11 cents if the government approves a rate increase. That seriously undercuts the IFC's initial projections of cheap power that could be provided to local communities. By comparison, Washington, D.C., residents pay about 9.6 cents per kilowatt-hour. Citing mounting losses due to rising coal prices, the company has threatened to halt the project unless the government approves the rate increase.

Guay said the question for the IFC -- and the Obama administration -- is whether the institution wants to "pour hundreds of millions more good money after bad" by supporting a project that can only go forward with a government bailout.

A U.S. Treasury spokeswoman said the administration has not taken a position on the controversy. George, meanwhile, said the proposed rate hike in India is out of the IFC's hands, calling it "really a prerogative of the government. She said the IFC will follow whatever findings come out of the World Bank's Compliance Advisor Ombudsman's investigation but said broad energy access from all sources needs to remain an option for India.

"In my view, that's the biggest issue and the biggest challenge, and we see it every day on the ground here," she said. "It has a crippling effect on growth, and it actually has a crippling effect on pollution."