Directions (1-5): Read the following passage and answer the following questions.
Today, thermal generation capacity accounts for about two-thirds of the installed generation capacity in the country. This shows that though there is increasing awareness about the environmental impact of fossil fuels, the reliance on thermal plants is unlikely to end any time soon. Thermal plant capacities are large and therefore targeted capacity additions can be achieved by constructing fewer such plants. On average, it would take 18 solar or wind projects to generate the same quantity of power as one thermal plant. For the same reason, switching from fossil fuel to renewables will remain challenging as the administrative overheads that would have to be incurred in setting up the multiple projects could significantly add to the cost.
Not surprisingly, infrastructure projects have an inverse relationship between size and unit cost, indicating economies of scale. As the capacity of power plants increases, the average cost of power per MW reduces. The average cost per MW for a thermal plant is about 25% lower than that of a solar plant. In order to surmount the cost advantages that large thermal plants enjoy today, we must focus on developing larger solar and wind power plants that can also exploit similar economies of scale. The next point is that of ownership. Over the last two decades, 63% of the total planned generation capacity has come from the private sector. Private investment has been even more pronounced in renewables, accounting for almost 90% of investment in wind and solar projects.
Lower capacity cost has a direct impact on electricity tariffs. Electricity tariffs broadly consist of two components: fixed capacity costs and operation and maintenance costs, which include fuel expenses. In general, capacity costs account for more than 90% of the levelised cost of electricity, irrespective of the fuel type. If we are able to create additional capacity at a lower cost, then it will play a big role in keeping electricity tariffs low. Private investment in the power sector has not only helped in augmenting capacity but has also helped in lowering cost.
Even as total capacity in a generation has been growing, the cost of installing additional capacity has fallen. The reasons for the decline could be as follows: First, advances in technology have resulted in the construction of larger power plants. Compared to the 15-year period before 2013, power plants installed in the past six years have on average been significantly bigger, even twice as large in the case of hydel power. The economies of scale in power generation appear to have been dramatic. The second point could be the increasing share of private sector investment. The share of the private sector in capacity creation has been 70% in the last decade as compared to 46% in the decade before that. And, as indicated previously, private sector capacity has lower costs. Falling marginal costs suggest that retiring some existing high-cost capacity plants with newer plants could be explored. With economic growth, the demand for power in India is only going to increase further. To put things in perspective, China added generation capacity that was equal to a third of India’s total installed capacity in 2018. As India continues to ramp up capacity, it is imperative to create generation assets with the lowest unit cost by optimizing plant capacities and encouraging private sector investment.
The declining marginal cost for capacity provides opportunities for replacing existing capacity with newer capacity that are more efficient. However, the challenge of replacing fossil fuel-fired plants with renewables prevails.
Q1. Why won’t the renewable energy source replace the existing Thermal plants in the country?
A. The Infrastructure project costs needed for fossil fuels is very less that makes it reasonable to be set up by different entities.
B. The Administrative overheads for setting up the fossil fuels is precise which leads to more thermal plants in the country.
C. The targeted capacity of the Thermal Plants is profuse along with the overhead costs involved in setting up renewables sources that make it difficult.
D. Power Quality Issues of renewable energy sources are not up to the mark as compared to fossil fuels.
E. None of these.
Answer - Option C
Explanation -Referring to the lines of the first paragraph, “Thermal plant capacities are large and therefore targeted capacity additions can be achieved by constructing fewer such plants. On average, it would take 18 solar or wind projects to generate the same quantity of power as one thermal plant. For the same reason, switching from fossil fuel to renewables will remain challenging as the administrative overheads that would have to be incurred in setting up the multiple projects could significantly add to the cost”
Q2. What economies of scale do thermal plants enjoy compared to those of Solar plant?
A. Findings of a virtuous cycle between public policies and technological improvement is key to the further development of solar across all markets.
B. The average cost per MW of Solar plants is lower as compared to that of thermal plants due to the voluminous capacity of the thermal plants.
C. The Solar plants generates 25% lower than that of other renewable energy sources.
D. India’s solar story through its compelling business case is maximizing the falling renewable technology costs as the key to future energy decarbonization.
E. None of these.
Answer - Option B
Explanation -Referring to the lines mentioned in the second paragraph . “As the capacity of power plants increases, the average cost of power per MW reduces. The average cost per MW for a thermal plant is about 25% lower than that of a solar plant.
Q3. How could we make the electricity tariffs under control?
A. By creating the extra electricity with minimum costs involved in it
B. Looking to the other viable options healthier for the environment.
C. Looking to the other viable options healthier for the environment.
D. Minimising the share of private sector investment.
E. None of these.
Answer - Option A
Explanation -Referring to the lines of the third paragraph “If we are able to create additional capacity at lower cost, then it will play a big role in keeping electricity tariffs low. Private investment in the power sector has not only helped in augmenting capacity but has also helped in lowering cost”
Q4. How could the generation of power be achieved to meet the energy supply in India?
A. Thinking proactively about plant missions can also create opportunities to suspend or shut down operations at plants that may no longer be needed.
B. Leaders may need to create new incentives to consider the costs involved in the generation
C. The costs involved in the
D. Owners of power plants need to reduce costs in response to flattening load growth, the rise of renewables, and changes in the competitiveness of coal to gas.
E. Creating generation assets with the lowest unit cost is linked to optimising plant capacities and using private investment
Answer - Option E
Explanation -Referring to the lines in the paragraph “As India continues to ramp up capacity, it is imperative to create generation assets with the lowest unit cost by optimising plant capacities and encouraging private sector investment”.
Q5. What are the factors responsible for the decline in the cost of installing against the total capacity generation grown in few decades?
A. Economies of scale in power plants have improved across the globe.
B. Construction of the few and larger power plants compared to earlier power plants.
C. Private sector investment has been significant in the few decades.
D. Only B
E. Both B & C
Answer - Option E
Explanation -Referring to the lines of the fourth passage it is pretty clear that both option B & C holds true. This can be inferred from that paragraph.