Indian power sector goes in reverse gear with more fuel but less demand

There is enough coal, and power generation capacity but no surplus demand for power

Just three years back, thermal power producers used to cry foul over the scarce availability of fuel. But, while coal supply is abundant, power demand has gone dry.

In July 2015, the plant load factor (PLF) or per unit output of the thermal power plants was down to 58.36 per cent — a decade’s low. The situation improved slightly with PLF climbing above 60 per cent at the close of 2015 but it has worsened again. For the April-December 2016, PLF of the thermal power stations has slid back to 59.64 per cent.

In simple terms it translates to — there is enough coal, there is power generation capacity but there is no surplus demand for power. The sick status of the discoms is now hurting the whole supply chain.

Gencos rue the fact that power demand is not picking up and as their plants are running at low capacity, they can’t help but source less coal, said an executive requesting anonymity. “In medium term, this is likely to continue, I fear,” said the executive. Coal availability at power plants sites is at a record high of +20 days.

Thermal power plants account for about 70 per cent of the country’s installed capacity of 3.10 lakh MW. While the government claims that several energy efficiency measures have led to demand not increasing. 

The NDA government has scaled up plan for coal production for Coal India Limited to 1 billion tonne by 2019. The coal production target for CIL is 615 million tonne this financial year. During April to August 2016, the coal production by CIL & its subsidiaries was 194 million tonne. 

The government, however, expects PLF of thermal plants to come down further at around 55 per cent in five years from the current 69 per cent. “If renewable capacity comes up as envisaged, I think we are comfortable with a PLF around 50 per cent,” said a senior power ministry official.

In its draft National Electricity Plan, the Central Electricity Authority (CEA) has envisaged peak power demand to be half of the installed generation capacity by 2022.