Editorial February 2017

The coal-based power generation segment has been facing hard times in the past few years. Recent developments indicate that a reversal of fortunes may be a long time away.

All bets for meeting India’s future power requirements are on clean energy for now. A report released by the Central Electricity Authority in December noted that India may not need new coal-based plants. It states that the current coal-based capacity and the plants under construction are expected to suffice for meeting India’s future power demand. Another report released recently by think tank TERI has reiterated these findings. TERI, in its report, has stated that the energy that would be available from renewable sources, nuclear and gas plants, both existing and planned, would be enough to meet India’s energy demand for the next seven to eight years.

Meanwhile, existing plants continue to suffer from poor utilisation levels. PLFs of coal-based stations dipped to 59.5 per cent in January 2017 from 60.2 per cent in the previous month. While initiatives such as UDAY would help in reviving power demand and reducing the recievables cycle, industry analysts are of the view that there is likely to be a modest improvement in PLFs in the next 18 months. This year’s budget also has no provisions for relief measures for stressed assets.

Also, giving a hard time to the already idling coal-based plants are renewable power plants offering record low tariffs. The results of the bidding for the Rewa solar project in Madhya Pradesh held in February showed that solar has now become the cheapest source of power. The winning tariff bid in the project’s auction was just Rs 2.97 per unit.

A positive development for the segment though is the likelihood of postponement of the environmental regulations. These were issued by the environment ministry for tightening emission standards and water consumption by coal plants; however, they were expected to have significant ramifications on capex. As opposed to becoming effective from the end of this year, media reports now suggest that the environment ministry may postpone the deadline and relax certain norms as well.

In this issue of Power Line, we look at these challenges in detail, analyse their impact and discuss the strategies and solutions that power producers are using to cope with these hard times.

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