The power sector has witnessed supply chain disruptions even as the liquidity crisis has adversely affected its cash flows. That said, as the effects of the pandemic start to wane and the industry begins to recover, the outlook for equipment manufacturers is likely to change with the focus expected to shift towards plant efficiency improvements, compliance with emission norms and local supply chain resilience. In an interview with Power Line, Prashant Jain, regional general manager, GE Steam Power – South Asia and managing director, GE Power India Limited, spoke about the impact of Covid on the sector, GE’s response to the pandemic, its key achievements and focus areas as well as the outlook for the sector. Excerpts…
What has been the impact of Covid-19 on the power sector?
The power sector was already under pressure in pre-Covid times as a result of legacy payment issues, amounting to more than Rs 1.2 trillion. This translated into cash flow difficulties for original equipment manufacturers (OEMs). Further, thermal power plants (TPPs) were operating at part loads with plant load factors not higher than the pre-Covid range of 65-70 per cent. We also had 30-40 GW of stressed assets in the system. There has been a near absence of fresh tenders, with only one tender for a 660 MW unit. The Covid-19 situation has brought about a liquidity crunch in the sector. There has been a reduction in power demand to the tune of 15-20 per cent from the high-paying commercial and industrial (C&I) segment. There has been a slight improvement in power demand from the retail segment due to work-from-home, although this is a subsidised segment and the increase in consumption has not been enough to account for the dip in demand from the C&I segment. The slowdown in demand is expected to continue in the near term; however, demand for coal-based power is slowly returning to last year’s level.
The Atmanirbhar Bharat scheme has been launched to strengthen local procurement laws and regulations. Earlier, there was a 10-12 per cent participation by Chinese companies in various tenders; this has now changed. Overall, the industry is seen adapting to new ways of working remotely in these challenging times as well as creating a new supply chain following the Atmanirbhar Bharat Abhiyan. Further, various consequences of the Covid crisis such as the absence of migrant labour availability, quarantine requirements and social distancing norms have impacted the way we work. Even critical resources required for project site activities such as oxygen cylinders are in short supply as they have been diverted to other sectors. The ordering for tenders has also been delayed, having been pushed out by several weeks due to Covid.
What has been the impact of the Covid crisis on GE Steam Power India?
At GE Steam Power India, our number one priority is the health and safety of our employees. Since the beginning of the pandemic, we have been working closely with the World Health Organization, MHA and local government health authorities to actively monitor the situation and take necessary precautions. We had initially closed down operations of our factory. We restarted operations once the lockdown was lifted with part-load operations and are slowly ramping it up. It gives me immense pride that despite the lockdown, the GE Steam Power staff has been on site preventing critical outages for customers as well as achieving erection milestones for projects. Each of our sites has put in place processes for their production sites and field operations to evaluate their schedules and assess which employees are critical for the deliveries and schedules we’ve promised to customers. Broadly speaking, priority has been given to repairs and spare parts linked to ongoing outages. The next level of priority has been given to new build project milestones, prioritised on the basis of project schedule and customer requirements.
What are some of the new equipment-related requirements for which gencos are seeking help from GE Steam Power?
The biggest demand by far is for flue-gas desulphurisation (FGD) systems as TPPs have to be compliant with environmental norms by 2022. Roughly, 76 GW of emission equipment has been ordered. GE Steam Power has a $600 million order backlog for FGDs. Nitrogen oxide (NOx) emission is another area where we have a strong order pipeline.
Further, GE has deep knowledge and competence in the area of reverse engineering of equipment parts of Chinese and other OEMs in several areas. This is an area in which generators are asking us for support. Another area in which generators are seeking support from us is imported coal substitution, finding the right balance of coal mix, providing optimum solutions for them to fire their boilers optimally in these different conditions. Also, now with plants operating at forced flexible operations, gencos require support on dealing with flexible operations, with additional O&M to run the plants efficiently. Another area of support is providing digital solutions, engineering and value-added services for residual life assessment, efficiency improvements and energy audits at plants for existing projects. For new plants, we see very little demand. However, there too, gencos are looking for solutions for blending renewable energy in the future to meet their flexible operation requirements. Further, with renewables coming in, grid stability is an area where we could offer solutions.
What are the technologies that TPPs can adopt to improve their plant flexibility?
One of the areas is ramp rate changes to compensate for the change in demand. Gencos are doing this today with their knowledge and experience. However, ramp rate changes have an impact on the lifecycle and safety of equipment. Another area is reducing the technical minimum loading to help them avoid two-shift operations and stay longer in operation in the grid. The third area is stabilising the grid given the various degrees of renewables coming into it and managing grid frequency, voltage, MVAR’s, short circuit current, inertia etc.
What is the thermal equipment industry’s preparedness for meeting the Atmanirbhar Abhiyan requirements?
In India, GE Steam Power has a local presence with units located in Noida, Sanand and Durgapur, offering a comprehensive and robust portfolio of power generation solutions with a focus on emissions control, and a services portfolio providing sustainable, affordable and reliable electricity. Atmanirbhar Abhiyan will bring a change in the mindset of local players as to how we can move towards indigenisation. There is immense scope of collaboration among different players. The limitation is the volume scale in the market due to limited demand in the market that justifies the investment needed to localise activities. There may, however, be a small share of components that will still need to be imported as the volumes locally available do not support the industry.
What have been the key areas of growth for GE Steam Power in the past year?
Two important areas for us have been FGD and NOx. GE has booked an FGD order, which has been the biggest in the past year. We have also won a bid from NTPC for NOx solutions for the Unchahar and Sipat plants in Lot 4 and Lot 5. On the services side, we have been able to provide a lot of support to our customers on the substitution of imported content with local supply, primarily the Chinese-make ones, as a credible partner. This is an area of continuous growth as we are now serving more and more non-GE customers in the market. However, an area where we have not seen growth is demand for new coal units. There are few tenders on the new-build coal side in the market.
What are GE Steam Power’s growth plans and outlook for the coal-based power generation segment in India?
The investments that we see today in emission control are regulatory driven. These are investments both from utility and industrial consumers and the demand will come from them over the next two to three years. That apart, we do not see any capex today. Not many new-build coal projects are expected. However, we are selective about bidding for projects in the market.
Services is an area that we have to consider for further expansion. If we look looking at service changing in coal-fired power plants, the operating regime is getting tougher. We are seeing a lot of stressed assets being acquired by the top two to three independent power producers. Therefore, existing plants will come through but the O&M regime will be tougher. GE Steam Power has technologies and we believe that we can work with them in being able to run these plants better. We have an offline asset management tool that does benchmarking with other units of the same plant or plants in the country or best-in-class plants in India. We are talking to customers about these tools. Not many new players are interested in continuing to service the sector. As the power sector transforms into a more technology-driven industry, the market will see a major shift and will be very different in the next few years.
What should be the sector’s priorities in the post-Covid world?
The first priority is cash so that liquidity issues of the sector are resolved, ensuring that its ratings are normalised. The government is working to resolve these issues and we have to see how these benefits trickle into the sector. Another area would be improving existing assets. We see that until 2030-40, at least 50-60 per cent of power would continue to come from thermal assets. So, these assets would need to continue to provide baseload, backup and ramp rate, so that renewables can provide cleaner fuel to the grid. Assets need to be upgraded to bring in new technology. However, how investments in the new regime will be financed remains to be seen. We have to see how the government drives investments in the sector to make it future ready for the grid.