Technological development can be seen as the source and the solution of the Global Climate Change (GCC) problem. The international community has recognized the potential of technology to cope with this problem, and has introduced the issue of technology transfer for climate change mitigation in the United Nations Framework Convention on Climate Change, as well as in the Kyoto Protocol through instruments such as the AIJ (Activities Implemented Jointly) and the CDM (Clean Development Mechanisms).
 
Although technologies that can help mitigate climate change exist, various factors have prevented their widespread utilization. Several countries, such as the United States, Germany and Japan have introduced environmentally sound technologies (ESTs) for coal based thermal power generation, yet the adoption of these in India has been limited. This article, in particular, discusses the barriers encountered by the Indian thermal power generators to acquire more efficient technologies that emit less GHGs (Green House Gases) per unit of electricity produced.
 
The Importance of Coal
In India, the power sector is a principal contributor of GHG emissions, accounting for around 40% of the carbon dioxide emissions derived from energy consumption. Emissions from this sector have grown considerably and are expected to continue growing in the future due to the increasing requirements of electricity. The power sector still has not been able to satisfy the country’s demand for electricity as power shortages of around 10 % and peak shortages of 20% afflict the country (ALGAS, 1998)¹ .
 
India’s high dependence on coal as an energy source is responsible for making the power sector one of the major contributors to the enhanced greenhouse effect. Thermal power stations account for the biggest share of the total power generation capacity of 72% (TEDDY 1999-2000)² .
 
Thermal power stations are fueled with coal or natural gas. Coal-based thermal power stations account for nearly two thirds of the total installed capacity (ALGAS, 1998) and they have a share of 71% of the total domestic coal consumption (Ninth five year plan: 1997-2002). A great majority of the thermal power stations fed on coal are owned by the state governments (through the state electricity boards-SEBs) or the Union, since most independent private producers have adopted the gas-fired power plant technology.
 
The Technological Status
Majority of the Indian thermal plants are old and their installed capacity is small. It is estimated that in India – 74 of the 175 boilers of 15-100 MW capacity are more than 25 years old; forty of the 82 boilers of 100-150 MW capacity are 10 to 24 years old; most of the 86 boilers of 200-210 MW are less than 15 years old; and most of the 9 boilers of 500 MW are less than 5 years old (TIFAC3 , 1995).
 
Over time, the scale and efficiency of the plants, have progressively increased. Yet, the poor performance of many of these plants persists, which can be highly attributed to the outdated equipment and the low quality of coal being used (Planning Commission, 1997).
 
The plants owned by the Union, such as NTPCs have shown a better performance than those owned by the states.
 
Efforts to Maintain the Installed Power Capacity
A Renovation and Modernization (R&M) plan for thermal utilities, sponsored by the Union and directed to increase the lifespan of old equipment at the SEBs’ plants, has helped improve the average Plant Load Factor4  (PLF) efficiency (from 45.3% to 65%). Although this programme has been successful in increasing the power generation capacities of the plant, it has not made a significant impact in GHG reduction, since the programme seems to focus more on increasing the PLF efficiency rather than increasing the thermal efficiency. Thermal efficiency measures the percentage of the potential heat that is actually extracted from a fixed amount of coal and is directly related with the amount of GHGs emitted (a higher thermal efficiency results in less GHGs per unit of electricity).
 
New Technological Options
Technologies used in Indian power plants based on coal are various, yet Pulverized Fuel (PF) combustion has dominated for more than 30 years (TIFAC, 1995). PF technology uses a type of sub-critical boiler, which has been superceded by the now commercially available supercritical boilers. It is estimated that supercritical boilers have economic and environmental advantages over conventional sub-critical boilers. For example, for a plant composed by four units of 500 MW, the adoption of supercritical boilers to replace conventional ones will increase efficiency while reducing CO2 and SO2 emissions by approximately 9.88% and 18.4%, respectively (Kemeny, Peter).
 
Actually, there are no thermal power utilities in India that use supercritical boilers. Yet, according to Mr. Deo Sharma (DGM at CENPEEP), NTPC has decided to adopt supercritical boilers in its new plants due to the advantages of supercritical technology. It will be setting up a 660 MW plant that will be operational in the next 4 to 5 years.
 
Highly efficient and better technologies as compared to supercritical boilers exist. At present, there seems to be a consensus on two desirable clean coal technologies-5  Integrated Gasification Combined Cycle (IGCC), and Pressurized Fluidized Bed Combustion (PFBC). It is estimated that the utilisation of IGCC would result in an increase in efficiency, from 37% (when using conventional plants) to 43% (Singh, V. et al., 1999). The greater efficiency implies a greater reduction in GHG emissions than the one achieved with the supercritical technologies.
 
The Barriers
The lack of competition that still prevails in most of the power generation industry does not provide strong endogenous incentives for technological development. In the absence of an immediate threat to their survival, power suppliers do not have major incentives to search for new technologies. This situation hinders technological development and generates low efficiency.

 
Another problem that restricts the technological development of the state owned power plants is that the SEBs are subject to a high level of political influence. Political decisions influence the price structure of electricity by providing high subsidies to selected groups (ex: agricultural sector). This has resulted in the financial crisis of the SEBs. The poor financial conditions of SEBs, coupled with the monopsonic structure of the market (since SEBs are the only buyers of power in most states), generate high risks for those investing in power generation. And at the same time, the low participation in the sector has reduced the possibilities of generating more competition. This process is illustrated in the following figure.6 
 
The SEBs’ poor financial conditions have a double effect. The first is that the SEBs, as power generators, are unable to invest in better technologies for their own plants. The second effect is that other financial institutions are reluctant to lend money to the IPPs to invest in the risky power sector.

 
A change has started to take place as some states have started considering the implementation of measures to allow more competition and adequate revenue (where tariffs are higher than production costs). For example, a programme has been launched to unbundle the state monopolies (in power generation, distribution and transmission activities), with the idea of allowing more competition in some of these activities. Orissa started reforming its power sector earlier than other states (1995) with the aid of the World Bank. Haryana’s SEB has also initiated unbundling its power sector and some other states are in the process of evaluating and approving the proposed reforms.
 
Absence of Adequate Regulatory Framework
One important regulation, set by the Central Pollution Control Board, establishes that plants located at least 1000 km away form the mines are required to use washed coal. The utilization of washed coal promotes efficiency and reduces GHG emissions. This decision makes economic sense since washed coal is lighter than non-washed coal, thus resulting in reduced transport costs. The lower transport costs were found to compensate for the higher price of washed coal in plants that are at least 1000 km away. Actually, the government is carrying out further studies that aim to demonstrate that even for smaller distances, it still makes economic sense to utilize washed coal.
 
Though there are many economic and other types of incentives for investing in renewable energy technologies as well as for attracting investment to the power sector, a specific incentive scheme designed to foster ESTs in the thermal power sector (other than the utilization of washed coal) does not exist. Incentives such as 100% depreciation allowance, investment allowances and custom and excise duty exemptions for pollution control and monitoring equipment are present (Annual Report 1998/99). But, in practice, they do not address the climate change problem since there are no regulations that restrict the amount of Carbon dioxide emitted by power plants.
 
The absence of adequate environmental regulations in the country is being addressed by a couple of projects funded by the World Bank that aims to strengthen the implementation of environmental laws in India. Among their objectives are to strengthen: the environmental planning, policy formulation and implementation; environmental monitoring and compliance enforcement at the central, state and local government levels. They also aim to strengthen the support provided to communities and non-government organizations and develop guidelines for evolution of standards and strategies for their implementation.
 
The Pricing Structure of Coal
An important institution, which influences the amount of GHGs emitted by the coal based thermal power plants, is the pricing structure for coal. Coal prices are based on the unit heat value. With this price structure, plants only pay for the heat value and are not interested in other parameters such as the volume or the level of impurities that must be transported (including ash). For the promotion of greater utilization of washed coal, its price should be based on the gross calorific value so that its cost is linked to the level of combustible material in a given volume of coal time (Singh, V. and Bretz E., 1999). This way, the greater utilization of a better quality coal would result in higher efficiencies and the reduction of GHGs.
 
Desirable Clean Coal Technologies
Lack of appropriate demonstration plants, that provide investors with important information on local operational conditions of the latest clean coal technologies, is considered a key impediment in adoption of these technologies. A high quantum of resources is needed to invest in a new plant. Its highly specialized nature implies that once the investment has been made it has to work, otherwise there is hardly any possibility of recovering these resources. Therefore, the investors would like to be absolutely certain about the technological feasibility of the technologies in the local environment. The lack of this certainty is an important factor preventing the adoption of technologies such as IGCC and PFBC.
 
In India, there is a small IGCC plant with a capacity of 6.2 MW built by BHEL, one of the centrally owned companies. Yet this plant is considered too small to be representative of the problems faced by a "real" IGCC plant. The establishment of a larger demonstration plant that will provide important information to investors on the local operational conditions of the IGCC technology is being actually discussed by the government.
 
An additional barrier that has been faced by IGCC technology is its high cost as compared to that of conventional technologies. It is estimated that the IGCC capital costs are around US$1300 per kilowatt installed, while the gas/turbine combined cycle’s capital analogous cost is approximately (US$ 500). It is possible that an increase in the efficiency that comes along with the new technology could compensate for the higher costs, although no evidence of this was found. In the past, one of the barriers has been the static cost-benefit evaluation made of this technology, which discourages the investment as it does not include the economical benefits of the increase in efficiency over time (Singh, V. and Bretz E., 1999).

Conclusion
The launching of a programme to unbundle the state monopolies and several other measures to make the power industry more competitive is a positive initiative of the government to cope with the sector’s problems. This structural change by itself could unchain many reactions that will help lift many of the existing barriers in the path of technology-transfer for climate change mitigation. Once the financial conditions of the SEBs improve, the private sector would be more willing to invest in the sector, which could generate even more competition, according to the new and more competitive regulations.
 
A higher investment in technological development (and in the expansion of the power sector), would expand the demand for new technologies and generate economies of scale, culminating into the price reduction of new technologies. The demand expansion would promote the establishment of demonstration plants that will suit Indian requirements by the providers of these technologies. In this scenario, the demonstration plants for new technology will not depend on government funds and its willingness to establish a demonstration plant.
 
Yet, liberalizing the power sector could generate some other problems, especially in the case of power shortages. In this situation, even if there are numerous suppliers of electricity, they could still set very high prices that result in depriving many of the poorer consumers of electricity services. The government should address this kind of failure of the market through different mechanisms. Direct subsidies to these groups could be a possibility. In a liberalized market, certain regulation schemes should be put into place to avoid the monopolistic behaviour of some of the producers, especially when the power supply is inadequate.
 
Regulations that address climate change and other environmental problems should also be established. Actually, the regulatory framework concerning environmental issues is being addressed in some of the capacity building programmes funded by the World Bank.
 
We have yet to deal with the problems of the availability of information on the thermal efficiency and improvement of the price structure of coal.
 
The actual structural measures which are either being implemented or considered in some states have a great potential for improving the general conditions of the power industry which will influence its level of technological development. Furthermore, if the Kyoto Protocol enters into effect, the mechanisms for technology transfer for climate change mitigation would multiply and the soft loans for clean technologies would be easily available. This constitutes a great opportunity for the Indian power sector to acquire the desired technologies and to advance significantly in the climate change mitigation efforts.

Author was a guest researcher from Costa Rica working with the Global Environment Systems Group (GESG), Development Alternatives. The research was guided by K. Chatterjee of GESG, DA. Full report of the research work is available at DA Library.