The Indian boiler, turbine and generator (BTG) industry has been grappling with the challenges of under-utilisation of manufacturing capacity and a shrinking order pipeline from thermal power plants (TPPs) in view of the shifting focus of the economy towards energy transition and net zero emissions. This has impacted the order book of BTG original equipment manufacturers (OEMs), as generating companies have limited their capex.
Against this backdrop, new areas of opportunities have emerged for BTG suppliers in recent years. The installation of emission control equipment such as flue gas desulphurisation (FGD) systems for meeting the new emission norms, upgradation and modification of plants to meet the flexible operation requirements with growing renewable energy generation, and deployment of digital solutions at TPPs to modernise plants have emerged as key focus areas for gencos.
Notably, the Central Electricity Authority, in its draft National Electricity Plan (NEP), has projected a pipeline of 43 GW of thermal capacity addition in the next 10 years. This is expected to provide a major fillip to the BTG industry as tendering activity by central and state power utilities picks up pace.
Market size and current capacity
The Indian boiler industry has the capability to manufacture thermal boilers with supercritical units up to 1,000 MW; and steam generators ranging from 30 MW to 800 MW capacity, using coal, lignite, oil, natural gas or a combination of these fuels.
Steam turbines up to 1,000 MW rating are available for thermal sets, and up to 700 MW ratings for nuclear power plants. Fuel-flexible boilers capable of all combinations of blending/co-firing diverse qualities of imported/indigenised coals, blending of lignite, pet coke, among others, are also prevalent in the Indian market.
The current domestic BTG manufacturing capacity stands at 22-25 GW, with the state-owned Bharat Heavy Electricals Limited (BHEL) accounting for the largest capacity at 13.5 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-MHI Power Boilers Private Limited, L&T-MHI Power Turbine Generators Private Limited, Toshiba-JSW Power Systems Private Limited, Doosan Power Systems Private Limited, GE Power Systems India Private Limited and Thermax-Babcock & Wilcox Energy Solutions.
Opportunities in the BTG segment
After a long hiatus, the BTG tendering pipeline is showing signs of revival. As per the recently floated draft NEP, 43 GW of thermal power generation capacity is expected to be added in the next 10 years, that is, 4.3 GW is expected to be added every year. This will give a fillip to the BTG industry. As the central and state power utilities place their orders, 16 GW of orders can be expected over the next two to three years.
Further, according to the draft plan, a capacity of over 10,044 MW has been retired during 2017-22 and 4,629 MW is planned to be retired during 2022-27. The retirement of old subcritical units is expected to create a demand for new supercritical units and subsequently lead to equipment supply opportunities for BTG providers. According to BHEL’s, estimates by around 28,000 MW of capacity is over 30 years old and based on subcritical technology.
There is also a significant opportunity for equipment providers to cater to the demand for air quality control systems for TPPs. In light of the 2015 notification by the Ministry of Environment, Forest and Climate Change, FGD systems are to be deployed in 525 thermal units, aggregating nearly 199 GW, in a phased manner. Further, about 38 units under construction, aggregating 27 GW, are required to install FGD systems. As of November 2022, there are only 21 thermal units totalling 8,780 MW that have commissioned FGDs, that is, 4 per cent of the targeted capacity. Apart from this, there is a significant pipeline of projects for which tenders have already been issued (35 GW) and bids awarded (89 GW).
BHEL has a number of orders for FGDs and boiler modifications for emission control. Its outstanding order book, as of September 30, 2022, stood at Rs 1,063.76 billion. During 2021-22, its portfolio comprised 66 FGD sets and 11 selective catalytic reduction sets. Recently, in the second quarter of 2022-23, BHEL secured an order for the 2×660 MW Talcher TPP Stage III on an engineering, procurement and construction basis from NTPC Limited; flexibilisation orders from West Bengal Power Development Corporation Limited for one 500 MW unit at the 2×500 MW Sagardighi TPP (Phase II) and one 250 MW unit of the 2×250 MW Santaldih super TPP; and for the supply and supervision of erection and commissioning of a 42 MW steam turbine generator in West Bengal.
Another key segment for the growth of BTG suppliers would be flexibilisation solutions. The flexible operation of existing TPPs has been identified as a promising measure for balancing the fluctuating renewable power. The flexibilisation of thermal units requires the installation of condition monitoring systems, upgradation of control and instrumentation systems, combustion optimisation, deployment of steam/flue gas management systems, condensate throttling, mill schedulers, etc. TPPs are also being modified for co-firing with alternative fuels such as biomass, and for converting coal-fired plants to biomass-firing power plants to meet the government’s mandate on biomass co-firing. Flexibilisation leads to increased variable costs owing to deterioration in efficiency, increased operations and maintenance (O&M) expenses, increased wear and tear, extra oil consumption for co-firing, higher start-up and shutdown costs, among others. The TPPs situated close to the pithead are ideal for flexibilisation operations at sub-40 per cent load as they have low fuel costs and can therefore achieve breakeven despite lower loads. Most of the newer plants in India operate at peak loads of above 75 per cent compared to ageing assets that operate at less than 70 per cent plant loads. Hence, flexibilising newer plants will entail a huge expenditure on installing flexibilisation equipment needed for fast ramping. It will be less capital intensive to deploy flexibilising equipment in ageing plants although flexibilising ageing plants will lead to substantially higher operational costs as compared to newer TPPs. Therefore, flexibilisation needs to be conducted on a case-to-case basis after thorough consideration of the commercial viability of the retrofit.
The O&M of TPPs is also critical to ensure efficient and uninterrupted operation. To this end, new and innovative solutions are gaining traction, offering several opportunities for equipment companies to offer digital solutions such as digital twins, industrial internet of things, artificial intelligence and machine learning. Utilities can deploy data analytics tools for the improvement of cyclic efficiency through the detection of energy losses. These tools can also help optimise the maintenance strategy by restricting unscheduled outages and eliminating unnecessary preventive maintenance.
Nuclear power is another expected area of growth for BTG equipment providers, with the focus shifting to small modular reactors (SMRs). NTPC Limited has recently announced its plan of setting up 20-30 GW of nuclear capacity by 2040. NTPC is considering deploying SMRs of 100-300 MW capacity, as part of the strategy. Overall, around 11 reactors (8,700 MW) are under construction, and recently, the government has accorded administrative approval and financial sanction for the construction of 10 indigenous 700 MW pressurised heavy water reactors to be set up in fleet mode. The government has also accorded in-principle approval for five new sites for setting up nuclear power plants in the future.
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 plant load factors (PLFs) in the recent past. During 2021-22, thermal capacity addition stood at about 4,485 MW, as compared to 4,926 MW in the previous fiscal year. The PLF of thermal plants was recorded at 58.87 per cent in 2021-22, as compared to 54.57 per cent in the previous year. Thermal PLFs declined from 73.3 per cent in 2011-12 to 58.87 per cent in 2021-22. The situation has started to improve and the PLF for the April-October 2022 period was recorded at 63.23 per cent.
Going forward, the growth of the industry is expected to pick up pace on the back of the replacement of old thermal sets, new BTG tenders as projected by the draft NEP pipeline, flexibilisation and digitalisation orders of TPPs, as well as increased demand for FGD equipment.