While the country is taking measures to take renewable energy capacity to 175 GW by 2022, the Economic Survey published by the finance ministry on Friday noted that the transition is likely to adversely affect conventional energy-generation assets. With renewable energy addition, a part of such plants would be left idle or running at low utilisation levels, the survey said.
Industry estimates appraise the current total capacity of stressed and stalled thermal power-generation projects to be between 25,000 MW–40, 000 MW. Investments in these projects are estimated to be around Rs 1,50,000 crore to Rs 2,40,000 crore. “In our estimates, these stranded assets are estimated as the lost revenues due to the sub-optimal utilisation of coal based power generation assets as a result of shift to renewables,” said the survey.
Acknowledging that stranding of power-generation assets can have implications for the banking system, the survey noted that the social cost of renewables was around three times that of coal at Rs 11 per unit in FY17. The NPA ratio pertaining to electricity generation was around 5.9% from total advances (outstanding) of Rs 4,73,815 crore. The total advances to coal sector was Rs 5,732 crores with a NPA ratio of 19.8%.
“The low renewable energy tariffs discovered recently have been partly a result of government subsidies/tax holidays and other incentives,” the survey said. Solar and wind tariffs plummeting to Rs 2.44 per unit and Rs 3.46 per unit, respectively, in recent reverse auctions had fuelled foreboding among a certain section of the coal-based thermal power industry.
Budget estimates for FY18 indicate an allocation of Rs 420 crore towards subsidies for solar and wind power. However, the survey said that subsidies to solar power has declined to Rs 15 crore in FY18.
A report released by power minister Piyush Goyal in June had found that adding 175 GW of renewable energy would lead to the plant load factor (PLF) of coal-based power plants dropping by 13 percentage points to 50%, with 65,000 MW plants running at PLFs below 30%. To normalise PLFs of coal-based plants in such a situation, 205 generation units, with a capacity of 46,000 MW and investments of more than Rs 2,30,000 crore, would have to be retired. “There is a contradiction in terms of coal-based plant growth, renewable energy integration and grid balance,” Goyal had said while releasing the report.
Private thermal power plants have been running at utilisation levels which makes it difficult for them to service debts, mainly due to tepid growth in power demand. Average PLF for thermal power plants across the country was 62.5% in the first quarter of FY18. PLF for private sector plants was 57.3%.