November 2019

Coal-based power is the source of almost 72 per cent of power generation in India. Various estimates show that even though renewables may grow, they would not be able to displace coal-based power, which will continue to remain a source of low-cost power for the next few years.

The CEA, in a recent report, has projected that coal-based power would constitute around 50 per cent of the total generation and 32 per cent of installed capacity by 2029-30. BP Energy Outlook 2019 projects the share of coal in India’s primary energy consumption to be nearly half of the energy mix (and larger than any other source of energy), reaching 48 per cent by 2040.

However, even though coal-based power is expected to dominate supply, the industry faces considerable challenges. There is substantial capacity lying idle with PLFs of coal-based power plants being depressed for many years, impacting their profitability. Coal-based power plants make up a significant proportion of NPAs in the banking sector.

Also, falling electricity demand in recent months (demand fell for the third straight month in October) has added to the industry’s PLF pressure, which declined to 54.96 per cent (for private IPPs) in April-October 2019 from 56 per cent during the same period last year. A new KPMG study has predicted that for many coal-based power plants, PLFs will drop to 35-40 per cent by 2022 as renewable power generation rises, even in a 130 GW of renewables scenario (if the 175 GW target is not met).

Increased penetration of renewable energy in the electricity system will lead to duck curve effects, requiring flexibilisation of coal-based power plants, the study notes. While it is possible to reduce the minimum technical limits to 40 per cent in Indian conditions, it would require some amount of retrofitting of plant equipment along with extensive changes to operating practices and human competencies to safely manage cycling operations that feature frequent start-stops and ramping up and down of plants.

Then, there are challenges of outstanding payment dues from bankrupt discoms and fund constraints in meeting new environmental norms (the finance commission recently rejected the power ministry’s proposal to award utilities $11.6 billion in incentives to install equipment to curb emissions).

Interestingly, the segment faces challenges not just in India, but globally too. After decades of near-uninterrupted growth, a recent industry analysis suggests that global electricity production from coal would post a record fall in 2019. Generation for 2019 is projected to be 3 per cent lower than in 2018, a reduction of some 300 TWh.

Power Line’s Infocus section this month takes an in-depth look at the state of the coal-based power generation segment.



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