India Ratings and Research (Ind-Ra) has revised the power sector outlook to negative for financial year 2020-21 (FY21) from stable
The average plant load factor (PLF) of thermal power generation units is on a decline in the country. At 57.61 per cent, the PLF in January touched a five-year low.
In 2019, the PLF witnessed double-digit slump in most months. The fall corresponds to a decline in electricity demand, which recorded just a 0.28 per cent growth in the year — the lowest since 2014.
India Ratings and Research (Ind-Ra) has revised the power sector outlook to negative for financial year 2020-21 (FY21) from stable. This is because of muted growth in demand and rising dues of distribution companies (discoms) as a result of limited improvement in their financial profile since the launch of the Financial Restructuring Plan and Ujwal DISCOM Assurance Yojana (UDAY).
Weakening consumer sentiment in the light of declining gross domestic product (GDP) growth could result in subdued power demand for FY21, an Ind-Ra report said.
The fall in PLF of thermal units over the years is also a result of the increasing share of renewable energy sources in the overall energy mix. The share of renewables in the total energy mix during the April-December 2019 period was 13 per cent.
Experts believe as the share of renewable energy sources increases, share of peak power such as hydro or base power coal should also increase to support intermittent renewables. However, the fall in PLF of thermal power indicates considerable impact of falling demand. Additionally, solar and wind do not run all year long and for 24 hours a day, like thermal.
If electricity demand continues to fall, it might hurt renewables the most. Given its seasonal nature, it is easier to replace. Most states backed out of renewable energy in the previous year and have not paid them on time. Andhra Pradesh is fighting a legal battle with renewable power producers over payment. Tamil Nadu, a wind-rich state, has been delaying payment to renewable units for years now.
In December 2019, ratings agency ICRA revised the year-end outlook for the power sector to negative from stable. It primarily cited slowdown in demand growth as the reason. Other reasons it said were sluggish progress in resolution of stressed thermal assets and less than expected improvement in finances of state-owned discoms.
ICRA said the slowdown in demand could be attributed to “lower demand from household and agriculture segments following higher than usual rains from August to October 2019, and moderation in demand from industrial segment.”
Acknowledging the role of non-thermal sources, it said, “The slowdown coupled with higher generation from hydro, nuclear and renewable sources led to a decline in thermal PLF.”
Source: business-standard
