The pandemic coronavirus and subsequent national lockdown have highlighted the increasing financial risks for the Indian coal fired power station sector, which will replace a technology with new, cheaper and cleaner renewables, according to IEEFA on Monday.
Title 'Who really wants to finance an Indian New Coal Power Plant? 'Renewable energy supplied by India's new generating capacity in the fiscal year 2019/20 more than two thirds or 9.39 gigawatts (GW), while new thermal power stations provided a 4.3GW net of 2.5GW removed due to plant closures.
In addition, coal-powered plants today operate to the half of their capacity as provided for in the guidelines for the simulation of new coal-powered power plants used to evaluate financial and operational efficiency.
The National Electricity Plan 2018 has been supported by an additional 70GW or more of new, coal-fired power stations installed by 2026-2027, and a closure of another 39GW compared with the position of 31 March. Tim Buckley, Director of Studies on Energy Finance, Institute for Energy Economics and financial analysis (IEEFA) said.
"That assumes some US$70bn of new investment in coal-fired power," said Buckley.
"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-minemouth or import coal-fired power proposals.
"Instead of backing coal, new finance is getting behind renewable energy."
The COVID-19 pandemic and domestic lockout has reduced the need for electricity by burning coal.
In the first 25 days of the fiscal year 2020-21, coal-fired electricity generation was down by 22.300 GWh, which represents 600GWh higher than the overall decrease in lockout demand.
"Coal-fired power generation has worn more than 100 per cent of the COVID-19 power demand loss," said Buckley.
"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."
The note found that domestic and foreign financing has been funded by solar and the landmark NHPC 2GW solar tender awarded in April2020, which was priced at an almost record low of Rs2.55 / kWh, 25 years flat.
This competition has been won by leading Indian renewable energy companies, most of whom are accessible by global financial backers such as the Soft Bank in Japan, the Swedish EQT Network, Temasek in Singapore, EDF and Total in France and Brookfield of Canada.
In April 2020, the global private equity pioneer KKR also entered Shapoorji Pallonji Solar Holdings in the Indian renewable infrastructure market.
"Why would any debt or equity capital providers fund a high emission, highly polluting new coal-fired power plant at double the cost of deflationary, domestic renewables?" the note questioned.
