As per the country’s National Electricity Plan of 2018, 94,000 Mw of new coal-fired capacity was to be added between 2017-18 and 2026-27
India’s pool of coal-fired power projects at the pre-construction stage has shrunk by 25 per cent, or 24,000 Mw, over the last six months, data by Global Coal Plant Tracker (GCPT) showed.
NTPC Ltd, the country’s biggest producer, is understood to have shelved 10,500 Mw of its planned coal-based generation projects. Project cancellations of coal-fired stations are happening swifter than expected, as doubts cloud their financial viability. Also, the country’s efforts to step up renewable energy installations have queered the pitch for coal-based expansion of power.
As per the country’s National Electricity Plan of 2018, 94,000 Mw of new coal-fired capacity was to be added between 2017-18 and 2026-27. But as renewable energy gains traction, supported by tumbling tariffs at solar auctions, the target for new coal-based capacities seem ambitious.
US-based Institute for Energy Economics & Financial Analysis (IEEFA) views this as too high an estimate. “Many of these project proposals, based on outdated sub-critical technology, will become stranded assets even before they are built, resulting in a waste of land, capital and political effort. The coal-fired power sector also accounts for a significant share of Non-Performing Assets (NPAs) that continue to trouble the Indian banking sector,” Tim Buckley, director of energy finance studies (Australasia), and Kashish Shah, research associate, IEEFA, observed in a report.
GCPT data shows that 573,000 Mw of coal-fired power projects in India have been cancelled or shelved between 2010 and 2018. GCPT deems a project as cancelled if there is no development progress on the project for four years and shelved after two years. Projects vanishing from company documents is another sign of companies quietly walking away from the projects.
While coal sector lenders are trying to restructure and resolve some $40 billion in stranded assets, an accelerating number of developers are walking away from their planned but now long-stranded coal power plans.
NTPC has displayed prudence by deciding to turn away from a growing number of stalled coal-fired power project proposals that have not moved in years in the wake of record low coal utilisation rates and rising demand for cheaper renewables, the IEEFA report pointed out. In June 2018, NTPC decided to drop its 4000 Mw greenfield coal-fired Pudimadaka Ultra Mega Power Project (UMPP). The plant was planned in 2011 with a PPA (power purchase agreement) signed with the Andhra Pradesh government. A month later, the maharatna utility confirmed it had no intention to pursue two other planned coal power plant developments – the 1,980 MW Nabinagar-2 and 1,600 MW Katwa thermal power generating units in Bihar and West Bengal, respectively.
According to IEEFA, coal-fired power sector woes reflect the combination of excessive financial leverage, operational inefficiencies and the competition arising from accelerated deflation in renewable energy tariffs, all of which make investors skeptical of the sector.
The government estimates that there are about 40,100 Mw of stranded coal-fired power assets, out of which 15,700 Mw are not yet commissioned. Some of these projects had signed PPAs at aggressively low tariffs that make debt servicing difficult.
Source: business-standard
