June 19, 2020 Read More →

Lockdown easing does little to stem loss of Indian demand for power generation

Business Standard:

The easing of lockdown curbs has failed to buoy power generation. Nationwide, power generation from all sources fell 15 per cent between June 1 and June 15 when compared with the same period of 2019.

Data from Power System Operation Corporation Ltd (POSOCO) shows that coal-fired power generation alone dropped by a steeper 24 per cent.

During the pandemic, coal generation bore nearly all of the electricity demand drop, due to higher operating costs compared to renewables. The lockdowns underlined that demand for coal power had already been in a steady decline over the past five years.

According to research by US-based think tank Institute for Energy Economics & Financial Analysis (IEEFA), India’s coal expansion plan is based on an unrealistic economic modelling of coal plants that assumes utilisation rates of 70-80 per cent, double the rates observed in April 2020. 

Overcapacity in coal generation is creating a systemic problem of underutilisation for coal power plants in India. Due to the Covid-19 pandemic, the average plant load factor (PLF) fell to 42 per cent in April 2020, marking a 22 per cent reduction year-on-year (y-o-y). Load factors could drop to 35-40 per cent by 2022, according to global consultancy KPMG.

India’s fossil fuel power generation assets have upwards of $100 billion in non-performing assets (NPAs). While the Parliamentary Standing Committee identified a total of 34 coal power units as stranded assets, the drop in utilisation rates will hasten the timeline for further stranding of coal assets. 

[Jayajit Dash]

More: Power generation falls 15% even after easing of coronavirus lockdown norms

Posted in: IEEFA In the News

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