Providing power at affordable rates and gearing up for a life with renewables are some of the biggest challenges that power producers are facing today, says Gurdeep Singh, chairman and managing director of India’s largest power generation company, NTPC Limited. In an interview with Power Line, he talks about the power demand outlook, the UDAY scheme, NTPC’s capacity addition plans and other priorities for the company. Excerpts…
How would you assess the performance of the power sector in the past two decades? What, in your view, have been the sector’s three most-noteworthy achievements?
The power sector has seen significant changes over the past two decades. The enactment of the Electricity Act, 2003 led to the delicensing of generation, setting up of regulatory commissions, allowed trading as a distinct activity and provided a clear role definition of various stakeholders. The generation sector has moved from a nomination-based model to a bid-based model. This has led to the participation of multiple players in the generation segment.
In the past two decades, our generation capacity has almost tripled, from about 85 GW to 320 GW, and annual generation has crossed the 1 trillion unit mark. Per capita consumption has also increased from 406 kWh to 1,075 kWh, an increase of almost two and a half times. A market place for real-time trading of power has emerged. There is also greater focus of large-scale renewables in the power mix.
This period has seen sustained efforts by the central and state governments to stabilise the distribution segment, starting with the tripartite agreements in 2003 to the launch of the Ujwal Discom Assurance Yojana (UDAY) in 2015. Moreover, in the past two decades, the discoms have been able to reduce their aggregate technical and commercial (AT&C) losses, though not on the expected trajectory.
The power deficit has also reduced to all-time lows. The availability of domestic coal has increased, leading to a reduction in the dependence on imported coal. So, all in all, there has been a significant forward movement in the sector.
The three most noteworthy achievements are the establishment of strong regulatory authorities, rapid growth of power generation capacity and a focus on the cost of power.
What are the biggest challenges impacting power producers today?
The biggest challenges being faced by power producers today are providing power at affordable rates, moving towards a greener generation era and preparing for life with large-scale renewables, which could lead to lower plant load factors and cyclic operations.
What are your views on the current state of the power generation segment?
We are optimistic about the sector’s outlook. We expect demand growth to accelerate. The current annual generation growth is around 6 per cent, which is slated to increase with the implementation of various initiatives like Make in India, the Deendayal Upadhyaya Gram Jyoti Yojana and the Integrated Power Development Scheme.
Generation capacity addition is taking place at a much faster rate, with more than 45 GW added in the past two years. With the availability of cheaper domestic coal, coal swapping, flexibility in the usage of coal through various policy initiatives by the government, we expect fuel charges to come down. At NTPC alone, we could reduce fuel charges by 14 paise in the first quarter of 2016-17 as compared to the same period in 2015-16.
Do you think UDAY will help the state discoms achieve a turnaround?
We have a positive outlook on UDAY as it appears to be a sustainable scheme. It has brought the centre and states in a collaborative mode. So far, 22 states have given their consent and 16 have signed MoUs for implementing the scheme. Bonds of Rs 1,660 billion have been issued. With cleaner balance sheets, the discoms are better placed to undertake various initiatives. This will bring improvements in the total value chain, in generation, transmission and distribution.
What have been NTPC’s most significant achievements during the past year?
NTPC has been growing at a brisk pace. With the Koldam hydropower project coming online and with the commissioning of a 250 MW solar project in Andhra Pradesh, the company has been able to diversify its generation base. It has recorded a growth of almost 10 per cent in generation in the first quarter of 2016-17 as compared to the same period in 2015-16. Building blocks have been put in place for rapid capacity addition. We expect to cross the 50,000 MW capacity mark by the end of this fiscal. In addition, NTPC issued green masala bonds worth Rs 20 billion, the first time by an Indian corporate.
What are the company’s key priorities for the next few years? What will be the major areas of focus?
We are working on various initiatives. For fuel cost reduction, a company-wide exercise is being taken up for coal freight rationalisation. We are also working on faster project execution in order to squeeze the investment-revenue generation cycle. Our focus is on aggressive solar capacity addition, to ensure a significant share from renewable energy in the overall power mix. We now have 360 MW of commissioned solar projects, while another 510 MW is under construction and almost 1,500 MW is at the tendering stage. We are also exploring opportunities with states for putting up more projects. NTPC is committed to water conservation. We have prepared a plan to reduce our water consumption levels and reach the zero discharge stage.
What are the company’s plans with regard to the acquisition of stressed assets?
The company is open to the acquisition of assets which offer potential value. We undertook a detailed exercise on this and invited expressions of interest from developers who are willing to offer their power projects. Unfortunately, we did not find any suitable asset that was exciting. As a philosophy, we are not looking at acquiring any new asset that has subcritical units. However, we acquired the Patratu (Jharkhand) project in April 2016, as it provides us an option to set up efficient ultra-supercritical units.
Different blocks are at various stages of development. NTPC has been allotted nine coal blocks independently and one on a sharing basis with Jammu and Kashmir State Power Development Corporation Limited. Mining operations have commenced at the Pakri Barwadih block with the removal of the topsoil and overburden. We expect to produce coal from this block shortly. In addition, we are at an advanced stage of appointing a mine developer-cum-operator at a few other blocks.
What is your outlook for the power sector over the next few years?
I believe the future augurs well for the sector. With rising accessibility through a deepening of the transmission and distribution networks and a reduction in the cost of power, demand is expected to grow at a healthy rate. Certainty in policy initiatives and significant improvements in ease of doing business in the country will keep investors interested in the sector.