35% of India’s Total Thermal Power Capacity Lying Unused

Utilisation expected to fall further if more capacity is added as planned by govt

More than a third of India's 303 gigawatt thermal power capacity is lying unused while the rest is running at a shade over 55% utilisation owing to inadequate demand. Analysts said utilisation is expected to fall further if more capacity is added as planned by the government, portending losses for power firms.

About 35% of the total capacity, or 104 gigawatt, is lying idle at present. The government added about 24,000 MW of fresh conventional capacity last year and plans to add 86 gigawatt by 2022. In addition, 100 gigawatt of solar capacity is to be added by 2022.

“Falling capacity utilisation translates into losses and inability of new power plants to service interest costs, leading to non-performing assets at banks,” said a senior analyst, who did not wish to be identified.

The list of shut units includes a chunk of 31 gigawatt capacity that was set up after 2009. These include 6,360 MW capacity that does have power supply contracts with distribution companies but is lying shut due to non-availability of coal.

Another 5,650 MW have neither coal nor power supply contracts with any distribution company. The next set of 9,316 MW have coal supply contracts but does not have power supply agreements.

Yet another set of 2,940 MW have letter of coal supply assurance from Coal India and has managed to sign power purchase agreements but has not been receiving coal from the state-run miner. The last set includes 3,300 MW of plants that do not have power purchase agreements and despite Coal India's assurance of supplies, have not been receiving coal.

“While plants are shut due to unavailability of coal, Coal India is saddled with some 45 million tonnes of coal as of July 31. Its stock position has reached a level where the company is being forced to scale down productions, yet power plants are not receiving coal because the government is yet to change a policy that was framed when coal was in short supply,“ said Ashok Khurana, Director General of the Association of Power Producers.

If these new plants are allowed to receive coal they could have generated power and sold them at least at the power exchanges, Khurana said. “These could have reduced power prices further but these power companies could at least recover their interest cost and service their debt burden,“ he said.

Nonetheless, of the rest, about 72 gigawatt, some are shut due to water shortage, some due to equipment failure and yet another set has been shut because its operations have turned uneconomical due to age of equipment.

These include a set of plants with 11 gigawatt capacity that are shut as part of planned maintenance which is likely to come on stream within a fortnight.

Time To Get Clean

Fossil fuel based power plants, particularly coal-fired plants, are under pressure for a variety of reasons. Heightened concerns about pollution and climate change top this list. Companies that own power plants should diversify into clean energy to stem their losses, and invest in technologies that lower the quantum of emissions. These companies should also work with academic institutions and invest in R&D, focused on cleaner coal technologies. Business as usual will not do.

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