Ind-Ra: Improvement in Thermal Generation with Improved PLF and Coal Availability

In January 2018, all India electricity generation (excluding renewable sources) grew 6.0% y-o-y to 101.4 billion units (BUs), as per the credit news digest on India's power sector published by India Ratings and Research (Ind-Ra). The report highlights the trends in the power sector, with a focus on capacity addition, generation, transmission, merchant power, deficit, regulatory changes and the recent rating actions.

Improvement in electricity generation is largely attributed to improved generation from coal based thermal power which improved by 5.2% y-o-y. Increase in coal based thermal power was accompanied by a y-o-y improvement in the thermal plant load factor (PLF) to 62.47% in January 2018 from 60.14% in January 2017. The improvement was driven by an increase in demand and better availability of coal.

In January 2018, all India energy requirements increased 8.3% y-o-y to 100.2BUs. Available energy also increased 8.4% y-o-y to 99.6BUs. As a result, the power deficit remained low at 0.6% in January 2018 (January 2017: 0.7%). In January 2018, all India electricity peak demand increased 6.9% y-o-y to 158.5 Giga Watt (GW). Meanwhile, the peak supply improved 6.5% y-o-y to 156.7GW, leaving a peak deficit of about 1.8GW during January 2018.

Coal India Limited's monthly coal production has been on an increasing trend since August 2017 after falling to 37 million tonnes (mt) in July 2017. In January 2018, coal production by Coal India Limited rose 1.25% y-o-y to 56.7mt to meet the increasing demand from the thermal sector. With the increasing coal production, coal stock at 113 power plants saw an upward movement at end-January 2018. Coal stock improved to 14.5mt (97% domestic and 3% imported), up 10% m-o-m in January 2018.

The increasing power demand is also being met through increasing the generation from renewables. Total renewable generation improved substantially by 48.7% y-o-y to 8.1BUs in December 2017 on account of improved generation from wind and solar sectors due to higher capacities and marginal improvement in PLFs. While growth in the wind capacity addition remained weak at 0.6GW during 9MFY18 owing to unwillingness of the state distribution companies to sign long term power purchase agreements at a higher feed in tariffs, solar sector has seen a significant capacity addition of 8.0GW during 9MFY18 due to the competitive bidding prevailing in the sector.

Due to an increase in the power demand, the short term prices increased to INR3.2/kWh in January 2018. The difference in the total buy (4,450 million units (MUs)) and sell bids (6,642MUs) at Indian Energy Exchange also declined in January 2018, indicating an improvement in demand for short term power.

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