India’s thermal power generation plants are working at sub-optimal capacity, and it has nothing to do with inadequate coal supply. India Ratings and Research says in a recent report that electricity demand has not kept pace with capacity addition in coal-based power generation in the past five years.
The report says growth in power demand has also moderated to five percent, from earlier projections of 8-9 percent, leaving upcoming power projects in the dark.
This comes at a time when renewable energy, especially solar power, is slowly finding its space under the sun. The renewable sector’s total contribution to energy generation in India has risen from 4.59 percent to 5.7 percent, year-on-year over the past eight months, says India Ratings. Majority of the capacity addition has been in the solar power space, which grew by 155 percent to an installed capacity of 2.1 gigawatt (GW).
Shift In Investment From Thermal To Solar
The ratings agency, while highlighting the fact that India’s power demand will eventually go up once production activity picks up, argues the future capacity addition may not be coal-based.
What’s also changed is the financial viability of solar power projects, the report says. The more comprehensive power purchase agreements for the 750 MW power projects at Rewa Solar Park, Madhya Pradesh makes it easier for power producers to get financial aid at competitive rates. This is despite lower tariffs for power. According to India Ratings, lower rates will also incentivise purchasers to pay the due.
“…a lot of investor interest has shifted towards solar and other forms of renewable energy. Thus, coal-based power plants may not be a preferred investment in the future.
India Ratings Report