Coal-fired plant load factor  in India falls by 2.1 percent point in the first half of 2017

Newsroom24x7 Network

  • About 24% of households in India are yet to be electrified.
  • Sporadic outages continue to plague the country.

New Delhi: Though the overall coal-fired plant load factor (PLF) in India fell by 2.1 percentage point (pp) year over year (yoy) to 60% in the first half of 2017, with the gas based PLF dropping by 1.9 pp to 22%, Fitch Ratings believes that India could actually produce a power surplus in the financial year ending March 2018 (FY18), with an energy deficit of just 0.6% in the first three months of FY18 – a period of usually high seasonal electricity demand.

The optimism expressed by Fitch is in sharp contrast with the reality in terms of sporadic outages that continue to plague the country. At the same, time, about 24% of households in India are yet to be electrified.

Addressing Affordability and Accessibility is Key

Fitch feels that the inability of financially stressed power-distribution companies to purchase power, along with the absence of adequate network coverage, exerts significant downward pressure on India’s thermal power utilisation.

About 86% of total potential bond issuance from the sector has provided some immediate relief for distribution companies in 16 states from a penalising high interest cost. However, the cost-revenue gap remains at INR0.42/kilowatt hour (kWh) along with aggregate technical and commercial (AT&C) losses of 20.6% (for 24 Indian states, as per updates available in August 2017). Improving these operational inefficiencies will drive any sustainable improvement. On the other hand, the government exceeded its target of setting up transmission lines again in 1H17.

Continued momentum in this regard will address the country’s electrification woes to an extent.

Renewables – Falling Tariffs, Rising Capacity

The new tariff-based auction for wind power yielded prices of INR3.5/kWh in February 2017, down from the lowest regulatory tariff of INR4.2/kWh. Solar tariffs also hit a new low of under INR3.0/kWh in May 2017 – making solar the cheapest source of electricity in the country.

However, any near-term variations will be driven by changes in Chinese solar module prices. India added 25GW of capacity in FY17, of which 58% was renewable – a record-breaking contribution.

Electricity Prices, New PPAs under Pressure

Electricity prices at exchanges in India dropped by another 11% yoy to INR2.4/kWh in FY17. Tariffs are taking a hit mainly from the prevailing electricity demand-supply dynamics, lower coal costs and a decline in renewable tariffs. Distribution utilities are shying away from signing new long-term power purchase agreements (PPAs) for both thermal and wind capacity – while awaiting clarity on the auction route for wind power, supported by the availability of cheaper spot electricity.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.