State govts falling back on thermal power as electricity demand surges

After more than a decade, the opening up of new coal-based power plants and rising power demand were the central points of a discussion at the state power ministers’ meeting in New Delhi earlier this month hosted by the Union power ministry.

Faced with record-high power demand, states are falling back on coal-run power plants. Some are tendering new mega-size plants and some are expanding existing units. This year, India’s power demand nationwide crossed 240 Gw and since August, there has been a 20 per cent increase in electricity demand every month.

For the past several years, the focus of the annual meeting of energy/power ministers of states was power distribution woes and improving electricity supply infrastructure.

In 2014, it was coal supply. Between 2016 and 2018, it was central schemes on rural and urban electrification and reforms of power distribution companies (discoms).

In 2019 the discussion shifted towards reducing the electricity price for consumers and better technologies such as smart prepaid meters. After Covid, as discoms recovered from the financial hit, the viability of discoms took centre stage. Adding more renewable energy has been the running theme for a decade.

But it is this year that the tables turned.

High demand pushes states towards coal

Madhya Pradesh recently published two tenders for setting up two supercritical units of 660 Mw at Annupur and Betul. Gujarat in the state ministers’ conference indicated setting up 500 Mw to 1 Gw coal-based capacity.

Uttar Pradesh has put in motion plans of creating around 6 Gw of thermal power capacity at various locations.

Officials said even Karnataka, which had vowed to not set up any new coal-based power plant, was looking to set up power plants at its mines in Odisha.

Tamil Nadu is planning to add 4.1 Gw of thermal capacity in the next two years.

“Coal is here to stay till the 2040s. We are putting up three more plants. Unless battery technology is evolved, we will not be able to completely shift to solar or wind. Availability and cost are issues with batteries, and it is as high as Rs 10 per unit,” Rajesh Lakhoni, chairman and managing director, Tamil Nadu Generation and Distribution Corporation Ltd (Tangedco), told Business Standard. 

He added Tamil Nadu was entering into long-term power purchase agreements (PPA) with companies setting up coal-based units. It recently signed a PPA with NLC India for procuring 1.5 Gw from its Talabira thermal unit.

It has also contracted 450 Mw from the NTPC unit at Talcher.

Is the sector on board?

Sector experts point out two entities which would make the most out of this new coal wave are India’s largest power generator, NTPC, and state-owned manufacturing major Bharat Heavy Electricals Ltd (Bhel). Most states, especially Uttar Pradesh, are relying on NTPC and its joint ventures to set up new coal units. In July, NTPC said in an investor presentation it added 4 Gw in FY23 and currently 17 Gw was under construction and 18 Gw was under planning. 

However, most private players have left coal and moved to the green side.

Praveer Sinha, chief executive officer and managing director, Tata Power, said: “The company will continue to remain focused on renewable energy. “We do not have any plans at the moment to take up any coal-based power projects.”

Tata Power aims to have 70 per cent of its power portfolio as green by 2030.

JSW Energy had announced earlier it would not invest in coal any more. There has been no stated change in its stance.

Adani Power is the only one that continues to bet on coal. It has a 1.6 Gw thermal unit coming up in Singrauli, Madhya Pradesh. 

Email queries sent to Adani Power and JSW Energy remained unanswered. 

Bhel, the supplier of equipment in power supply, which was facing a lull in its business due to slowdown in thermal power, is looking at a revival of its fortunes. It has a 5 Gw project pipeline and over the next two years it is looking at 10-12 Gw -- mostly coming from NTPC.

R Shankar Raman, chief financial officer and whole-time director, Larsen & Toubro (L&T), said: “We want to be extremely selective. We don’t want to be hard-pressed to compete with very aggressive bidders who participate in that area. We can use our time and resources more effectively.”

Email queries to Thermax, another key player in thermal EPC (engineering, procurement, construction), remained unanswered. However, Thermax executives on call with analysts noted there was a rise in inquiries from this segment.

Officials at General Electric refused to comment on the matter. However, the company has a global stated policy to pursue an exit from the newly built coal power market.