Mapping Costs for Early Coal Decommissioning in India


The study maps the costs of an early decommissioning of coal-based power plants in India. The assessment based on the availability of the data pertains to individual cost contributors for an early decommissioning for 130 plants representing a total of 45 per cent of India’s current installed 208 GW capacity. The study further categorises the plants based on age, variable cost, efficiency, and combinations to help understand their impact on the eventual costs for retirement.

In India, the electricity sector accounts for 40 per cent of all greenhouse gas emissions. It thus has been the preferred pathway, with the country setting a 450 GW installed renewable energy (RE) target by 2030. However, the country also has around 10 per cent of the installed global capacity of coal-based power plants. India’s coal-powered assets with a large share of inefficient plants are underutilised due to lower than anticipated growth in energy demand, minimal retirement of assets despite steep targets under NEP,2018 and late increasing RE contribution in the system. This also leads to stress for the financiers with NPAs at 11 per cent of loans towards in September 2020. And thus, a decommissioning of surplus, old, inefficient assets could help reduce the GHG emissions, improve financial viability, and release capital to support future RE growth.

Key Highlights

  • Based on the criteria of age, i.e. for plants above 25 years, the costs related to decommissioning would be low at INR 1 vs 4.3 crores/MW (USD 0.13 vs 0.59 million/MW)  for the entire sample of plants analysed to pay off the equity, debt and workforce for early closure.
  • For the set of 47 old plants with a 35 GW cumulative capacity, the payouts would total INR 33,170 crore (USD 4.5billion). The payouts towards the debt and equity holders total INR 21,470 crore ( USD 2.9 billion), and the workforce will add another INR 11,700 crore ( USD 1.6 billion).
  • However, the avoided portion of the annual payouts worth INR 7,550 crore (USD 1.02 billion) to these assets, primarily operations and maintenance, and working capital amount to INR 37,750 crore (USD 5.2 billion). An early decommissioning could be paid for itself over the next five to six years for these sets of plants.
  • Decommissioning may not be a viable option for most of the new plants but make sense for a number of the older plants above 20 years.
  • When age is combined with the variable cost factor, around 16 GW of the 95GW could be feasibly retired at almost 40 per cent of the yearly costs at INR 0.15 crore/MW/year (USD 19,960 / MW/year) vs INR 0.37 crore/MW/year (USD 50,550/MW/ year) of the sample analysed could help reduce the decommissioning costs by another 25 per cent.
  • Though a large scale decommissioning is not recommended, if the process is adopted for the entire set of analysed plants, the average yearly cost of an early decommissioning for the entire set a year early is INR 0.37 crore/MW/year (USD 50,550 MW/year).
  • The process, on average, could result in an average savings of 23 per cent in capacity charges over the life of assets and thus reduce the electricity bill for end consumers.
  • Decommissioning the 130 plants today would cost between INR 2.31 lakh crore (USD 32 billion) and INR 3.50 lakh crore (USD 48 billion), including payouts to promoters and debt holders. These costs, on average, are between INR 2.3 crore/MW (USD 0.33 million/MW) and INR 3.7 crore/MW (USD 0.51 million/MW).
  • Payouts to the workforce contribute another INR 57,490 crore (USD 7.8 billion) to the cost. On average, workforce-related payouts for early decommissioning add INR 0.61 crore/MW (USD 0.08 million/MW).
  • The reduced payouts towards capacity charges, especially under the cost heads of ‘O&M (operation and maintenance)’ and ‘other’ charges in the event of early decommissioning, could help save INR 1.24 lakh crore (USD 17 billion) for the 130 plants.
  • Equity with a 29 per cent contribution to the costs of decommissioning will drive the lowering of eventual decommissioning costs. This component could also help compensate the 14 per cent of total costs related to the workforce-related payouts for a just transition.


Moving further the country would need a mapping of the options, fallouts and processes to mitigate such instances to drive the eventual uptake of decommissioning. Adopting a prioritised approach for decommissioning pathway that manages the potential fallouts, significantlly impacting the workforce would be essential. It could help reduce the bill of transition while releasing capital for future RE buildup and reducing the power sector’s existing financial stress.

    July 2021 | Report
    Vaibhav Pratap Singh, Nikhil Sharma
  • share
Download Publication