Rising power demand following the post-covid opening up of the economy has brought thermal power generators into focus. While renewable capacities are growing at a fast pace, the dependence on thermal and hydropower will continue, considering that renewables contribute in low double digits, and may not be able to meet peak seasonal demand, said analysts.
Hydropower generation is seasonal and gas-based generation has been impacted by rising natural gas prices. Hence, thermal power capacity addition is likely to continue, and even some stressed assets may find takers.
Demand for thermal power is likely to stay for at least 3-4 years, Anuj Upadhyay, institutional research analyst at HDFC Securities, said. Till battery storage capacities become viable, renewables may not be able to meet peak season demand, Upadhyay added.
Power-generation data reflects the significance of thermal power plants in the current scenario. While the overall power generation in India surged 11.9% from a year ago so far in FY23, coal-based power generation was up 12.8%, according to Elara Securities data. In September, coal-based thermal power generation rose 13.4% from a year ago against the 0.3% rise in September 2021.
Hydropower generation grew at a faster pace of 22.1% from the year earlier in September, against 11.8% in August, after falling 13% from a year ago in June. Gas-based generation did bear the brunt of rising gas prices, dipping 40.4% from a year ago in September. The sharp increase in spot gas prices remains a key concern and can impact gas-based production.
Though renewable power generation grew at the fastest pace of 20.6% from a year ago in September, renewables just contributed about 12% to overall power generation, said analysts at Elara Securities.
India’s renewable energy capacities stand at 118.0GW (60.8GW solar and 41.6GW wind), while thermal capacities dominate with 236GW, and hydro is at 46.8GW as of September.
The government’s focus on increasing hydropower capacity and expanding the renewables portfolio can help reduce India’s carbon footprint, but the dependence on thermal assets is still critical and necessitates a further expansion of capacity. Over 1,00GW of generation capacity (ex-nuclear) is under construction or is being implemented, according to analysts. As of August-end, 27.6GW thermal capacity is under construction at a cumulative cost of ₹2.3 trillion (out of which ₹1.5 trillion has been spent), said analysts at ICICI Securities. However, most of it is being developed by central public sector undertakings and state PSUs. About 11.9GW is being developed by CPSUs, and the balance of 15.6GW is by state PSUs.
Thermal capacities can increase by 15-20 GW over and above those under implementation, said Upadhyay.
On Thursday, REC Ltd and Power Finance Corp announced the signing of a memorandum of association with SJVN Thermal Pvt. Ltd for financing two 660MW coal-based Buxar Thermal Power Plant. However, no thermal capacity is currently being developed by the private sector. Several large private conglomerates have recently shown interest in acquiring stressed thermal plants, said analysts at ICICI Securities Ltd.
Analysts said some large groups could also show interest in stressed assets to meet their captive requirements, but it is yet to take off.
Rupesh Sankhe, vice president at Elara Securities India Pvt. Ltd said out of the 40GW stressed assets, around 20GW is before the National Company Law Tribunal (NCLT) and may be revived. Coal linkages or power purchase agreements, nevertheless, will remain crucial and those without PPAs or linkages are likely to find it difficult to get buyers.
