Endangered Waters - Greenpeace

Endangered Waters
Greenpeace India
55
06
Risks for investors and
national energy security
“Growing competition for scarce water resources is a growing business risk, a major economic
threat, and a challenge for the sustainability of communities and the ecosystems upon which
they rely.” 2030 Water Resources Group 57
“We strongly believe that investors can no longer ignore environmental and water related issues,
as they have tended to do in the past.” HSBC 58
Conflicts over water have already had a
material effect on the operations of several
coal-fired power plants in India. More instances
are likely to arise in the future as water
resources become increasingly valuable.
Financial impact to the operators of a coal-fired
power plant can arise through:
• Low water availability, reducing plant output
• Water allocation issues delaying or
stopping a plant
• Increased capital costs through water
supply and treatment systems and lowerwater-use
technologies (such as dry
cooling and increased water recycling)
• Increased operating costs, for example by
requiring treatment of low-quality water
sources and possibly higher water prices
• Reduced project operation or life due to
water conflict and regulatory intervention.
6.1 Physical water risk
In 2010, all units of the 2,340 MW Chandrapur
Super Thermal Power Station were forced to
close for three months due to a lack of water,
leading to increased power outages across
the state of Maharashtra. 59 HSBC concluded
that this was not a one-off issue, stating, “We
strongly believe that investors can no longer
ignore environmental and water related issues,
as they have tended to do in the past”. 60
The ongoing nature of the problem was
demonstrated in 2012 with further power
plant shutdowns due to water scarcity. In
April, four 210 MW units of the 1470 MW
Raichur Thermal Power Station in Northern
Karnataka was forced to shut down for several
days 61 while it waited for water to be provided
from reservoirs, leading to extended power
cuts. Police were deployed along the canals
to prevent farmers from drawing the water
intended for the power station. 62 In May, a 250
MW unit at the Paras Thermal Power Station in
Akola was shut down for several days due to
low water levels in the Mun River. 63
HSBC found that coal projects in several Indian
states faced significant earnings risks due to
water scarcity, with the risks highest during
summer months. 64 A 2010 analysis found that
each 5% drop in a coal-fired power plant’s load
factor will result in nearly a 75 basis point drop
in the project internal rate of return (IRR). 65
HSBC’s sensitivity analysis of water risks found
that these could knock up to 5% off earnings
in the 2013 financial year across the sector
of publicly-listed power companies. 66 Some
companies were found to be more at risk than
others, with NTPC and CESC significantly
exposed.
Modeling of the Wardha River Basin by IIT
Delhi, commissioned by Greenpeace, shows
water risks for power stations increasing in
this region (see section 4). The modeling
indicated that the annual mean flow of the
river Wardha will reduce to 1,419.42 MCM if
all planned reservoirs are put in place, even