Developing countries with sizeable coal capacities, such as South Africa, Chile, and India, are exploring retirement of coal plants by repurposing them for productive uses including renewable energy generation, storage and ancillary services. However, a framework to establish the economic rationale for repurposing does not currently exist.
This report presents a detailed cost-benefit framework for examining the value proposition of repurposing for three applications – solar energy generation, battery energy storage, and synchronous condenser (that produces fast reactive power essential for maintaining system security)– and applies it to a representative 1,000 Mega Watt coal plant in India. With the important caveat that this complex issue requires wider consideration of a range of economic and sociopolitical issues, including impacts on the workforce and local communities, the report’s findings reveal a strong economic rationale for repurposing.
First, the present value of repurposing benefits outweighs corresponding decommissioning costs – while the direct (mainly demolition and environmental compliance), indirect (contingency costs associated with any unusual environmental issues that may arise), and total decommissioning costs are $58 million, $46 million, and $104 million, respectively, the corresponding gross benefits from repurposing are up to $123 million, $468 million, and $591 million, respectively.
Second, decommissioning costs are about 50% for coal plants in India (i.e., at $58 million) vis-à-vis plants in the United States (i.e., at $117 million).
Finally, the report provides a methodology for selecting plants for repurposing, based on vintage, energy charges, and qualitative factors.