Executive Summary
A chemical company in South India, already at 85.7% renewable energy, ran a 37 MW coal captive power plant at ₹6.93 a unit. A developer offered a Wind-Solar Hybrid at ₹5.17 a unit and showed nearly ₹18 Crore in annual savings. But the plant's 10 MVA grid connection was already full, and delivering another 12 Crore units meant a much higher contract demand: around ₹15 Crore once and around ₹6.3 Crore every year. Once those were counted, the case showed negative savings of around ₹3.96 Crore. The advice was to keep burning coal.
The Mandate: The Last Stretch to 100% Renewable
The company was not starting from zero. It was already at 85.7% renewable energy, and the Managing Director wanted to close the gap.
The remaining load was served by the company's own 37 MW coal captive power plant, at ₹6.93 a unit.
The Illusion: A Cheaper Tariff Looks Like a No-Brainer
A developer offered a Wind-Solar Hybrid solution at ₹5.17 a unit. Against ₹6.93 coal, the proposal showed nearly ₹18 Crore in annual savings.
Cheaper power, cleaner power, and a large number. It looked like the easiest approval of the year.
But a tariff comparison answers one question: what does a unit cost? It does not answer the question a Board has to answer: what does the whole decision cost?
The Reality Check: Three Steps Before the Board
We followed three steps, in order:
- Validate the developer's proposal. Could the plant actually procure another 12 Crore units, and was the ₹18 Crore saving real?
- Check the contract-demand cost. What would the company pay once, and keep paying every year, to open the grid connection?
- Check whether the equity comes back. Would the investment turn positive in any of the next 15 years?
The Forensic Audit: The Grid Pipe Was Already Full
The plant's 10 MVA grid connection was already full. Open Access renewable energy is delivered through the grid, so procuring another 12 Crore units needed a higher sanctioned contract demand, and contract demand is paid for whether or not it is used.
| Line | Figure | What it is |
|---|---|---|
| Coal CPP running cost | ₹6.93 / unit | The existing captive plant |
| Wind-Solar Hybrid tariff | ₹5.17 / unit | The developer's offer |
| Projected annual saving | nearly ₹18 Crore | The developer's tariff arithmetic |
| Additional units required | 12 Crore units | The renewable energy the proposal needed |
| Contract demand, one-time | around ₹15 Crore | To raise the sanctioned demand |
| Contract demand, recurring | around ₹6.3 Crore / year | Paid every year thereafter |
| Result after these costs | negative savings of around ₹3.96 Crore | The case as analysed |
The numbers in the proposal were real. The saving was not. The tariff comparison was correct; what it left out was the cost of the pipe.
The Verdict: Keep Burning Coal, For Now
With savings negative, the equity would not turn positive in any of the 15 years. Our advice was simple: keep the coal plant running, at least until coal prices rise or the company can procure more renewable energy within its existing contract demand.
That is not an argument against Wind-Solar Hybrid, and it is not a general verdict on coal. It is what this plant's cash flow said, under this plant's grid constraint, at these prices.
Next Steps for the Boardroom
Before approving a switch from a captive plant to Open Access renewable energy:
- Confirm whether your existing contract demand has headroom for the new units.
- Put the one-time and recurring contract-demand cost into the savings model before the tariff comparison, not after.
- Ask whether the equity turns positive within the investment horizon, year by year.
- Re-run the case when coal prices move or your load changes. The answer here was right for today, not for ever.
Frequently Asked Questions
Can a coal captive power plant be cheaper than renewable energy?
In specific conditions, yes. In this case a 37 MW coal CPP at ₹6.93 a unit beat a Wind-Solar Hybrid offer at ₹5.17, because procuring the additional renewable units required a much larger contract demand with the grid, which added a one-time cost of around ₹15 Crore and around ₹6.3 Crore every year.
What is contract demand and why does it affect Open Access savings?
Contract demand is the maximum load a consumer is sanctioned to draw from the grid, and it is paid for whether or not it is used. When a plant's existing contract demand is already full, bringing in more Open Access power means raising it, and those charges must be deducted from the tariff saving before the saving is real.
Why did ₹18 Crore of projected savings turn negative?
The developer's proposal showed nearly ₹18 Crore a year from the tariff difference alone. It did not include the one-time and recurring cost of the higher contract demand needed to deliver another 12 Crore units. Once those were added, the case showed negative savings of around ₹3.96 Crore.
Should a company with a coal CPP switch to renewable energy?
Not automatically. Compare the complete cash flow, including contract demand, against the CPP's running cost. In this case the advice was to keep burning coal until coal prices rise or the company can procure more renewable energy within its existing contract demand.
What should a CFO check in a developer's savings projection?
Three things: whether the plant can physically absorb the additional units, what it costs once and every year to open the grid connection for them, and whether the equity turns positive within the investment horizon.
Sources
- Gaurav Kawatra, LinkedIn post, 8 September 2026. www.linkedin.com
- Infinia Solar, "₹18 Crore in Wind-Solar Savings, Yet the MD Kept Burning Coal" (video), YouTube, 8 September 2026. www.youtube.com
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