Coal-fired generation has borne the brunt of the erosion of electricity demand caused by the Covid 19 pandemic. In the first 33 days of this fiscal year (until 3 May), the coal-fired generation collapsed 33,000 Gw / h, suggesting that the coal-fired generation suffered a 100 per cent fall in power demand compared to its 71 per cent share in total production, according to a report by the US-based think tank Institute for Energy Economics & Financial Analysis (IEEFA).
Ten years ago, coal-fired power plants operated on average 70-80 per cent of their rated capacity. However, during 2019-20, the average Plant Load Factor (PLF) fell to 55.5 per cent due to a decline in power demand and an increase in traction from renewable energy sources.
In April 2020, coal-fired power stations could account for barely 40 % of the total load.
“Coal-fired power plants unable to operate at the expected utilisation rate are operationally less efficient and also have to amortise their fixed costs over a lower level of production, giving a higher than average cost of production. Financiers and promoters of coal-fired power plants clearly have to factor this in as another key financial risk giving rise to stranded assets in the thermal power sector”, the report by IEEFA reasoned.
The Covid-19 pandemic and the national lock-up are proving to be a concern for coal-fired power generation, both for existing and proposed power plants, but are yet to be financed.
“Renewables get priority over coal when power demand drops given their “must run” status, which is a reflection of their zero marginal cost of production. Coal-fired generation, the high marginal cost producer, is losing out,” said Tim Buckley, director of IEEFA’s Energy Finance Studies.
IEEFA notes that renewable energy supplied more than two-thirds or 9.39 Gigawatt (GW) of India's new generation capacity additions in FY20, while new thermal power plants delivered 4.3 GW, net of 2.5 GW removed due to end-of - life plant closures.
In addition, coal-fired power plants are now running at half the capacity rate assumed by the Central Electricity Authority (CEA) modeling guidelines used to evaluate the financial and operational performance of new coal-fired power plants.
The National Electricity Plan 2018 takes into account an additional 70 GW or more of the new coal-fired power plants installed by 2026-27 and the closure of another 39 GW, compared to the position as of March 31 , 2020.
“That assumes some $70 billion of new investment in coal-fired power. Yet, renewable energy installs nearly doubled traditional thermal power capacity installs during 2019-20, and the pricing trends for new electricity generation entirely favour renewable energy over coal, particularly when it comes to expensive non-mine mouth or import coal-fired power proposals. Instead of backing coal, new finance is getting behind renewable energy," said Buckley.
National Hydro Power Corporation (NHPC) won a groundbreaking 2 GW solar tender in April 2020 at a near-record low of Rs 2.55 per unit (flat) for a span of 25 years for new domestic and foreign financing. The bid was won by leading Indian renewable energy developers, most of whom have access to global capital backers, such as SoftBank of Japan, EQT Infrastructure of Sweden, Temasek of Singapore, EDF and Total of France and Brookfield of Canada, who are visionary global financial leaders.
In addition, in April 2020 the global private equity group KKR has joined the Indian green energy market, purchasing 317 MW of solar power from Shapoorji Pallonji Solar Holdings.
