Adapting to Change

Significant opportunities in the BTG industry, despite challenges

The power sector is reeling under the effects of the Covid-19 pandemic. The domestic boiler, turbine and generator (BTG) industry was already grappling with the challenges of under-utilisation and a shrinking order pipeline from thermal power plants (TPPs), and the pandemic has exacerbated the situation, contracting demand and disrupting manufacturing operations, supply chains, project execution and labour availability. This has impacted the order book for BTG original equipment manufacturers (OEMs), as generating companies have limited their capex. However, there are opportunities for flexibilisation, digital solutions and emission control equipment in TPPs.

Power Line takes a look at the key trends in the BTG market…

Market size

The Indian boiler industry has the capability to manufacture thermal boilers with supercritical parameters up to 1,000 MW in unit size, gas turbines and generators up to 297 MW, and nuclear steam generator and turbine generator sets up to 700 MWe. The boiler industry’s market size reached $12.8 billion in 2018 and is expected to reach $20 billion in 2026, as per the India Brand Equity Foundation. Boiler exports stood at $29.68 million in 2019-20.

The domestic BTG manufacturing capacity stands at 30 GW, with state-owned Bharat Heavy Electricals Limited (BHEL) accounting for the largest capacity at 20 GW. The company has a technological collaboration with GE for supercritical boilers and with Siemens for supercritical turbine generators. The other key players in the BTG market are joint ventures (JVs) set up by private companies and global OEMs, which have an aggregate capacity of about 9.2 GW for supercritical boilers and 11 GW for supercritical turbine generators. These JVs include L&T-MHPS Boilers Private Limited, Alstom-Bharat Forge, Toshiba-JSW, Doosan Power Systems India and Thermax-Babcock & Wilcox Energy Solutions.

Opportunities

While the current BTG equipment market looks highly discouraging for OEMs with respect to new BTG orders, there are opportunities for equipment providers to cater to the demand for air quality control systems (AQCSs) for TPPs. Owing to the 2015 notification by the Ministry of Environment, Forest and Climate Change (MoEFCC), flue gas desulphurisation (FGD) systems are to be deployed by 442 thermal units, aggregating nearly 169 GW, in a phased manner. To achieve this, the estimated investment required is over Rs 800 billion across India. Taking cognisance of developers’ concerns regarding limited availability of vendors, dependence on imports, financial constraints and supply chain issues due to the Covid-19 pandemic, the timeline for the installation of AQCSs has been extended. In April 2021, the MoEFCC extended the implementation timeline for emission control measures by one to three years. Additionally, the new rules will levy an environment penalty on non-retiring TPPs for non-compliant operation beyond the timelines. Progress on the installation of FGD systems, as of August 2021, has been tardy, with only six units totalling 2,160 MW having commissioned FGDs – just 1 per cent of the targeted capacity. However, tenders have been issued for 132.3 GW of capacity and bids have been awarded for nearly 69 GW.

BHEL is the market leader in the Indian BTG space. The total order book of BHEL, as of June 30, 2021, stood at Rs 1,020.98 billion, of which the power sector accounted for Rs 845.86 billion. It had a number of orders for FGDs and boiler modifications for emission control. BHEL has contracted FGD orders for 54 thermal units from various customers, including FGD systems for 40 thermal units of NTPC and its JVs. In January 2021, BHEL secured a Rs 4.5 billion order for a 1×300 TPH coal-fired boiler, an 18.5 MW steam turbine generator and associated auxiliaries, including FGD and SCR, from the National Aluminium Company (NALCO).

Further, renovation and modernisation (R&M) and subsequent life extension (LE) of coal-based power plants are another area of opportunity for equipment companies. R&M has become especially significant as retrofits are required by existing plants to meet the demand for increasing flexibilisation and digitalisation. During 2017-22, R&M/LE works for 71 units of 14,929 MW TPPs have been identified. Out of these, R&M/LE works of six TPPs for an aggregate capacity of 887 MW (two central sector units – Units 3 and 6 of the Kathalguri combined cycle gas turbines, and four state sector units –  Unit 4 of Ukai, Unit 3 of Wanakbori, Unit 6 of Koradi and Unit 12 of the Obra TPP) have been completed. R&M/LE works for the remaining units are at various stages such as preparation of detailed project report, remnant life assessment, feasibility study and bid/tendering. Currently, R&M/LE works are under way for 410 MW of capacity at three TPPs (Units 7 and 13 of the Obra TPP and Unit 6 of the Barauni TPP). Flexibilisation of thermal units may require the installation of condition monitoring systems, upgradation of control and instrumentation systems, combustion optimisation, steam/ flue gas management systems, condensate throttling, mill schedulers, etc. Further, TPPs may be modified for co-firing with alternative fuels such as biomass, or for converting coal-fired plants to biomass-firing power plants. R&M interventions may also be carried out to reduce the water consumption of TPPs.

Effective operations and maintenance (O&M) of TPPs is critical to guarantee their efficient and uninterrupted operation. To this end, new and innovative solutions are gaining traction, offering great opportunities for equipment companies. Similarly, the digitalisation of BTG operations can help reduce emissions, enhance plant efficiency, optimise O&M costs, enhance reliability and maintain plant performance under flexible operations. For this, developers are actively deploying advanced digitalisation solutions such as digital twins, industrial internet of things, artificial intelligence and machine learning.

The Central Electricity Authority (CEA) has also called for the retirement of old units with a rating of 100 MW or less and operating at very low plant load factors (PLFs) of less than 50 per cent. Larger-sized units can also be considered for retirement, on a case-by-case basis, if their performance is uneconomical. Since the MoEFCC notification in 2015, till January 2021, 120 units with a capacity of 11,620.38 MW were retired based on techno-commercial reasons such as age, efficiency and compliance with emission norms. Further, as per the CEA, 34 units of 5,139 MW capacity have been identified that have not submitted any plan for compliance with emission control norms and may be retired/shut down as per the phasing plan. The retirement of old units may create a demand for setting up of new supercritical units, and subsequently lead to equipment supply opportunities for BTG providers.

Nuclear power is another emerging area for equipment providers, as the country is moving to increase the share of non-fossil fuel-based sources in the energy mix. In 2020-21, Larsen & Toubro Heavy Engineering despatched the first of four 700 MWe steam generators for the Gorakhpur Haryana Anu Vidyut Pariyojana 1 and 2 project of NPCIL. Further, Rosatom State Atomic Energy Corporation has started manufacturing a set of steam generators for the fifth 1,000 MW unit to be set up in the Kudankulam nuclear plant of NPCIL in Tamil Nadu. More recently, in July 2021, BHEL secured an order worth Rs 14.05 billion from NPCIL for the supply of 12 nuclear steam generators, which will be used for India’s highest rated indigenously developed 700 MWe pressurised heavy water reactors, to be set up at four different locations.

Challenges and the way forward

The outlook for the BTG market is directly linked with the thermal power industry, which has been witnessing subdued capacity additions and PLFs in the recent past. During 2020-21, coal- and lignite-based capacity addition stood at about 4,890 MW, one of the lowest figures in the past 10 years. The PLF of coal-based capacity has declined due to the decline in demand from commercial and industrial consumers, and to accommodate renewable energy, which has must-run status. Coal- and lignite-based PLFs declined from 77.5 per cent in 2009-10 to 53.37 per cent in 2020-21. The situation has now started to improve and the PLF for the April to July 2021 period was recorded at 58.15 per cent.

It is clear that upcoming opportunities for BTG manufacturers in the coal-based power space are few and far between. However, the market retrofits for flexibilisation and digitalisation of TPPs are expected to provide significant business to BTG OEMs. There is a huge opportunity in the AQCS equipment market, as notices inviting tenders have been issued for installation of FGDs at 327 units totalling 132 GW of capacity. Import restrictions, and the government’s initiatives under the Atmanirbhar Bharat Abhiyan to boost manufacturing in the country are expected to provide the right impetus for the development of this segment, going forward.

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