India’s Questionable Ultra Mega Power Plans: Viability issues continue to complicate new coal fired projects.

Screen Shot 2016-08-29 at 10.50.45 amBy the Institute for Energy, Economics and Financial Analysis, August 2016

This report details the growing risk around India’s expensive coal-fired Ultra Mega Power Plant (UMPP) program. The report argues that while India has made important energy-policy strides over the past few years, it would be well-advised to consider suspending the UMPP program.

The report details how these UMPP projects stand in contrast to better-advised initiatives that include a huge renewable-generation expansion program that has shown much promise. Private investors have pulled out of the government’s UMPP current projects, at Bhedabahal, Odisha and Cheyyur, Tamil Nadu, owing in part to doubts about bidding restrictions imposed by the Design, Build, Finance, Operate and Transfer (DBFOT) model attached to the plants. Rules on how much developers can pass on costs to consumers have also stirred doubts about how investors would hedge against fuel-price and exchange-rate risk. The report describes numerous other shortcomings in the UMPP model in India.

Download the full report here.