India’s coal-based power generation is likely to see subdued growth for at least the next two financial years, amid oversupplies and phasing out of old capacities, according to India Ratings and Research.
Capacity addition, which had fallen to a low of 3.6 Giga Watts in the fiscal year ended March, will add between 5 Giga Watts to 6 Giga Watts in each of the next two years.
Around 85% of the coal-based generation capacity is under construction in the private sector which remains stressed due to funds crunch and unviable power purchase agreements. There is also a decline in fresh project starts across both private and state-run companies. The coal fleet utilization has also dropped from 77.5% in fiscal 2010 to 60.6% in 2019, due to excessive capacity build out and slower-than-expected growth in power demand.
To put a perspective on coal based power plants, India has continued adding coal capacity at a gradual pace and had reached 71 gigawatts of coal power generation capacity by 2007. Then, over the subsequent 11 years, an explosion of capacity additions resulted in more than 130 gigawatts of new coal plants coming online. Today, 196 gigawatts of grid-connected coal-fired power stations supply about three quarters of the total electricity requirement in the country.
The last peak annual capacity additions were in 2015, when 19 gigawatts of coal power plants were added in India. Since then, annual net additions have been declining. In 2017, India added more renewable power generation capacity than coal fired capacity for the first time ever.
The dismal scenario is not too surprising considering that there is currently excess capacity of above 40℅ amid lower-than-expected power demand growth, with some capacity close to being phased out. However, power demand is expected to pick up again from the current fiscal year till another 4 years, which should reduce excess capacity, says India Ratings.