A few questions aside, the many bright spots in India's energy sector

The performance of India's power sector in the past year has many pluses. But, it also presents a few troubling questions on capacity utilisation and peak deficit. Coal availability has touched a new high, so much so that Power Minister Piyush Goyal recently said more coal than needed might have been produced. Electricity generation saw a small increase, but the plant load factor, or the capacity at which thermal power plants run, saw a decline. At the same time, new capacity addition kept on happening last year despite no equivalent or corresponding increase in demand. Here's a threadbare analysis of the trends in the Indian power sector:

Coal supply: Crisis to excess
Three years ago, the Indian power sector was reeling under low fuel supply with coal availability posing a big problem. Cut to the present. The average coal availability at thermal power plants across the country now is 25 days - up from 11 days in January last year.

Coal India Ltd, which along with its subsidiaries produced 494.24 million tonnes (mt) during 2015 and 462.42 mt the year before, aims to enhance the output to 600 mt by March this year, according to coal ministry officials. Central Coalfields Ltd opened a new mine every month last year and it would continue to do so for another year.

India Ratings (Ind-Ra), in its recent report, said coal output would increase 10 per cent in FY17 to 594 mt.

Where has all the power gone?
The good news is that in spite of two successive years of drought - in 2014 and 2015 - electricity generation has improved slightly to 1,049 million units in 2015 from 967 million units in 2014. In 2013, power generation was 912.05 million units.

Yet, capacity utilisation in the power-producing plants has gone down, owing to low demand for power in the country. The national average plant load factor (PLF) - thermal power plants per-unit output - at present 61.75 per cent, five percentage points lower than a year-ago. In July 2015, the average PLF had declined to 58.36 per cent, the lowest in three years.

Industry insiders, though, said the slide in PLF was more on account of a lower demand and an increase in installed capacity than coal supply.

The increase in power generation might well result in an improvement in the peak power availability situation during the year. The Central Electricity Authority expects the peak power deficit to improve to two per cent by the end of the current financial year. In 2014-15, it was 3.5 per cent and 4.5 per cent in 2013-14.

Paradigm shift?
Meanwhile, there seems to be a tectonic shift in the power sector and the various resources. Hydropower has taken a backseat both in policies and capacity addition, while solar power is at the forefront of all policy discussions. After five years of tepid growth, solar power touched 5,000 Mw in January 2016.

Between January and December 2015, coal installed capacity grew 10.77 per cent against renewable energy growing by 18 per cent. In 2014, during the same period, coal grew 10.9 per cent and renewable by 7.5 per cent. On the other hand, hydro was stagnant at 15 per cent annual growth.

As long-term power agreements become costlier owing to costly inputs as well as delay, the spot market witnessed power prices touching as low as 90 paise during peak summer months in 2015. In the spot market, the power price was Rs 2.45 a unit, last month. The average power price in 2015 was Rs 2.81 a unit, a reduction of 22 per cent from the previous year.

The volumes, though, have remained subdued, as there are more sellers than buyers. Against the total sell bids of 4.98 billion units, the buy bids were 3.40 billion units in December 2015.

Ind-Ra has maintained a stable to negative outlook on the power sector, despite improving fuel supply, which has not resulted in improvement in PLFs, as the demand growth has remained muted.

Some bright spots
State-owned thermal power generation giant NTPC recently said its average energy charge came down 13.6 per cent in September-December 2015, against the same period a year-ago, thanks to improved domestic coal supply.

The company's energy cost - the cost of procuring coal - was Rs 2.06 a unit in September 2014. During 2015, it came down to Rs 1.8 a unit in November and Rs 1.78 a unit in December. As a result, the states which would procure power from it would now save an average Rs 300 crore a month, as the cost was pass-through.