Thermal power capacity addition slows in April-August

Stress in thermal power showed up in the lacklustre capacity addition in the sector in April-August. During this period, only 3790 Mw fresh capacity was added despite the targeted addition of 14,956 Mw for 2017-18, states a report by the Central Electricity Authority (CEA).

No new thermal power capacity was added for the month of August by the central or state power utilities or even the private developers. This was despite the target of 2,720 Mw set for August.

Given the sluggish pace of capacity addition, creation of the balance capacity of 11,166 Mw to meet the target looks a challenge.

The country met its 12th Plan target in thermal power expansion, achieving 99,209.47 Mw, overshooting the stipulated 88,537 Mw. Beyond the 12th Plan, with the growing appeal of renewable power triggered by tumbling solar tariff and drying up of long-term power purchase agreements (PPAs), the outlook for thermal power capacities looks bleak.

A report by ratings firm CRISIL says about 21,000 Mw of commissioned private-sector coal-based capacities (as on August 2017) were under stress for lack of long-term power purchase agreements (PPAs) or because of poor or no offtake. With demand growth expected to remain tepid, the outlook for these capacities is bleak for at least the next few years.

That apart, other thermal power projects with capacities adding up to 35,000 Mw are smarting under issues such as lack of fuel supply agreement or coal linkage, unviable tariffs due to increase in cost of imported coal, project cost overrun due to delay in commissioning, and high receivables due to weak financial condition of procurers (state power distribution companies or discoms).

Though government schemes like UDAY (Ujjwal Discom Assurance Yojana) are expected to alleviate stress related to fuel supply and delayed payments, finding offtake will be a huge challenge, the report stated.

Prasad Koparkar, senior director, CRISIL Research, "Getting discoms to sign new long-term PPAs that ensure stable offtake is going to be challenging. Adequate quantum of power tied-up under already signed PPAs, expected tepid power demand growth, likely migration of high tariff paying industrial and commercial consumers to open access and availability of low-priced power in short-term market would imply few new PPAs in the near term. We do not expect discoms of major states such as Maharashtra, Gujarat, Tamil Nadu and Madhya Pradesh to sign fresh long-term PPAs before 2020 based on demand projections in tariff filings."

Commissioning of renewable energy capacities at a scorching pace has also taken its toll on new capacity addition in thermal power. As renewable capacity adds up leading to glut in power availability, this is expected to result in higher operating costs for coal-based plants.