The capacity addition on a net basis — the difference between the plants commissioned and retired — stood at 6,160 MW at February-end.
If India’s power sector has seen a spate of loan defaults and insolvencies in recent years on ambitious demand projections going awry, the current financial year has witnessed the lowest rate of addition in net generation capacity in at least the past two decades (see chart). According to data reviewed by FE, the capacity addition on a net basis — the difference between the plants commissioned and retired — stood at 6,160 MW at February-end, a meagre 1.8% increase from the level of installed capacity at the start of the fiscal.
In the thermal power sector, the capacity added in the first 11 months of this fiscal has been a minuscule 21 MW, a sharp fall from the 1,227 MW in the same period in FY18. Given that no major unit is scheduled to be commissioned in March, clearly the annual capacity increase this year would be one of the lowest in history.
The sharp deceleration in commissioning of new capacities over the past few years would alter the demand-supply dynamic in the short run, analysts said, with some of them predicting a supply shortage scenario by FY23.
Had the renewable segment not seen a big jump in capacity addition in recent years, the slowdown in new capacity creation in the power sector would have been sharper.
With the average availability factor of coal and nuclear power plants being around 70%, only about 55% of country’s current installed capacity is ‘available’ to meet its peak demand reliably, experts point out. Since the peak demand comes during the evening hours, the existing and upcoming solar plants would be useless in catering to the emerging needs because they are not equipped with storage facilities that are expensive.
As much as 6,033 MW of renewable capacity has been added in the first ten months of FY19, a representing a growth of 8.7%. However, even this sector is witnessing a slowdown in capacity growth (the growth rates were 25% and 21% respectively in FY17 and FY18). To attain the target of having 175 giga watt of installed renewable power capacity by FY22, required CAGR during FY17-22 is a massive 25%. (It is another matter that hydro power plants, according to a recent Cabinet decision, would be counted as renewable energy and this might make it possible to reach the target).
State-run NTPC’s 705 MW Badarpur station is among the major plants shut down this fiscal. Essar Power’s 600 MW unit at its Mahan facility is the only private-sector capacity added till February this fiscal.
Sector analysts warn that the slew of steps taken to improve electricity access might lead to a supply shortage scenario in a few years, warranting an immediate need to restart the capex cycle in generation. “Our existing capacity and pipeline can at best meet projected peak demand till FY23, post which we will start running peak deficit,” ICICI Securities said in a recent note.
Currently, the stressed thermal generation industry is finding it difficult to get fresh funds for capital expenditure. The inflow of funds could further diminish with the ongoing merger of PFC and REC, given the merged entity would be more constrained than two separate firms in extending adcances to certain projects given the RBI’s prudential norms.
Currently, nearly 70,000 MW generation capacity is under construction in the country. The Central Electricity Authority’s (CEA) national electricity plan for FY17-22 envisages only 6,445 MW of coal-based plants, if 3,300 MW capacity comes up in the nuclear sector, 6,823 MW is added in the hydro segment and 1,18,000 MW of renewable capacity is created, subject to retirement of 22,716 MW of coal plants.
Source: financialexpress
