Changing Trend in India’s Power Sector: Excess Power, but No Buyers

By Sharada Prahladrao

Industry Trends

Till about three years ago there was scarce availability of coal for thermal power producers in India.  But today, the scenario has changed – while coal supply is abundant, power demand has dwindled. The plant load factor (PLF) or per unit output of the thermal power plants was down to 58.36 percent in July 2015 - a decade’s low.  The situation improved marginally with PLF climbing above 60 percent at the close of 2015, but it seems to have declined again. For the period April-December 2016, PLF of the thermal power stations slid back to 59.64 percent.  This indicates that there is enough coal, there is power generation capacity, but the demand for power is lackluster.  A low PLF would lead to lower operating parameters for station heat rate and secondary fuel consumption.

Presently, the state electricity boards (SEBs) do not have enough resources to purchase power from the generators. Hence, there is excess of power but no buyers for the same. Financially weak distribution companies have opted for load shedding rather than supplying power, as they are incurring losses on every unit of power supplied. The sick status of the distributing companies is now hurting the whole supply chain.  Generating companies say that power demand is not picking up; and as their plants are running at low capacity, they are sourcing less coal.  Coal availability at power plants is at a record high of +20 days.

Thermal power plants account for about 70 percent of the country’s installed capacity of 3.10 lakh MW.  Capital goods companies, such as BHEL and L&T, catering to the thermal power segment, will be affected as orders from thermal power producers are drying. This will create a ripple effect and impact the automation industry.

However, the government claims that several energy efficiency measures have led to demand not increasing.  The government has increased the target for coal production for Coal India Limited to 1 billion tons by 2019; the coal production target for CIL this financial year is 615 million tons.  From April to August 2016, the coal production by CIL & its subsidiaries was 194 million tons. 

The government, however, expects PLF of thermal plants to come down further at around 55 percent in five years. An official from the power ministry said that if renewable capacity comes up as projected, a PLF of around 50 percent would suffice.  In its draft National Electricity Plan, the Central Electricity Authority (CEA) has envisaged peak power demand to be half of the installed generation capacity by 2022.

Keywords: Coal, Fuel, Power, CEA, Thermal Power Producers, ARC Advisory Group


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