India's power production to grow 5-6% in FY20 on new household demand

Power production in India is expected to grow by five to six per cent during FY 2019-20, riding on improved demand from newly connected households. Fresh demand from the new grid connected households will kick in during this fiscal.

The country's total power production grew by 5.1 per cent to 1,375 billion units in FY19 against 5.3 per cent rise in FY18. The power produced by renewable sources surged by 25 per cent in the last fiscal compared to 21 per cent growth in FY18.

The key improvement in fundamentals for the sector has been achievement of 100 per cent electrification of households across India in FY19 under Pradhan Mantri Sahaj Bijli Har Ghar Yojana or Saubhagya scheme.

“Target of electrifying over 24.8 million households under Saubhagya Scheme was announced in September 2017. The scheme was successfully completed in early January 2019 by providing metered electricity connections to wiling households across rural and urban areas. This has addressed the supply-side constraint for generation and distribution companies,” a report of Care Ratings said.

For thermal power (both coal and gas) plants across India, PLF (plant load factor) improved from 59.9 per cent in FY18 to 61.1 per cent in FY19. The growth of power produced by thermal plants slowed down to 3.4 per cent in FY19 versus 4.3 per cent in FY18.

“This was slower than the overall power production growth of 5.1 per cent during FY19. PLF of coal-fired plants was 66 per cent and remained stable during FY18 and FY19. PLF of gas based plants remained stable at 22.9 percent for FY18 and FY19. Coal shortage and constrained gas-supply to respective thermal power segments limited the potential of improvement in PLF,” the ratings agency said in its report titled Energy Outlook FY20.

The total capacity addition during FY19 was 12.1 Gw. The thermal energy (coal-fired plants) accounted for a net addition of 3.4 Gw of capacity in FY19 against 4.6 Gw addition in FY18. Similarly, the installed solar power capacity increased by 6.5 Gw and wind power capacity increased by about 1.5 Gw in FY19. However the overall renewable energy capacity addition slowed down in FY19 at 8.5 Gw against 11.8 addition during FY18. Other sources namely hydro-power and small-hydro projects accounted for about 225 Mw of capacity additions. Biomass and waste to energy too witnessed an addition of about 400 Mw capacity during FY19.

“We also expect auctions for medium terms PPAs to increase during FY20 in addition to the 5 Gw capacity already auctioned in FY19.The measure expected to offer respite to some of stressed thermal power capacity,” Care Ratings added.