Thermal power firms may transition to green energy faster than anticipated

In April and May this year, there have been two consequential news stories in the Indian energy sector. The first one is that NTPC Green Energy is set to be listed this year. The second news is that India will not approve any new coal plants beyond those already under construction. 

Reading both together means the investment plans of the energy companies in India have already pirouetted towards green. Given the huge preponderance of coal in the economy – it still accounts for 77 per cent of electricity generation -- this should be considered significant. Certainly, the changes are coming far faster than anticipated, given the stretched-out target set by India of net zero by 2070. State-owned NTPC is by far the largest to make the transition, but Tata Power and even Adani Power, despite the noises surrounding its coal business, are on the same trajectory. 

In fact, it is because of the preference shown by the leading power companies that it has become easy for the Centre to take this decision. As a Reuters story noted, the National Electricity Policy (NEP) written by the Central Electricity Authority has no place for new coal-fired power plants. Once the policy is approved by the government, it becomes the finishing line for coal-based projects. 

Instead, there is every indication that NTPC Green Energy, with plans to add 60 Gw of capacity in this decade, could become a larger entity by market cap than the mother entity. In March this year, the cabinet committee on economic affairs has given NTPC permission to invest more than the prescribed limit of what a state-owned company can do in its subsidiary.   

NTPC Chairman Gurdeep Singh has been saying repeatedly that the focus is now on green energy. If India’s largest thermal power company, with more than 24 per cent share in the annual electricity generation moves green, there isn’t much of a surprise as to what happens with coal. NTPC is the largest buyer of coal in India. 

Similarly, Tata Power CEO Praveer Sinha has said his company is not building any new coal-based capacity. The company with a total generation capacity of 13,068 Mw, of which coal is 8,860 Mw, will wind down existing plants once they reach the end of their power purchase agreements (PPAs) with the electricity distribution companies. Most of these PPAs run for 25 years and in the Tata Power portfolio, all of them have at least a decade more of generation capacity to serve. This is why Sinha is confident his company will hit net zero by 2045, even earlier than the usual 2050 goal line for most companies in the sector. 

Adani Power, on the other hand, remains invested in coal. The company has just commissioned its 1,600 Mw coal-fired plant at Godda in Jharkhand. The first of these has begun to supply 800 Mw of electricity to Bangladesh. Given that Bangladesh was buying 1,000 Mw of power from the Indian electricity market, the additional supply from Godda plant is enormously significant for Dhaka. But this, too, is already factored into the NEP. 

The total generation capacity of Adani Power at 13,650 Mw (eight plants) is almost entirely coal. Unlike Tata Power, which has no new plants being built on coal, Adani Power is on course to add another 1,600 Mw to its plant at Singrauli. The Mahan Energen Limited plant will add to the existing 1,200 Mw power plant at Singrauli using ultra-supercritical technology.

The group runs its renewable business under a separate company Adani Green Energy Limited. This company’s operating renewable portfolio reached 8024 Mw in March—the largest in India, with the opening of its fourth wind-solar hybrid power plant in Jaisalmer, Rajasthan. 

For FY24, the capex target for government-run coal companies is at Rs 21,030 crore, of which CIL, the largest producer, is Rs 16,500 crore. Considering that two years ago, in FY22, CIL had already reached Rs 14,834 crore, this amounts to walking pace.

Even if one adds the puny /numbers for Neyveli Lignite Corporation at Rs 2,880 crore and Singareni Collieries Company Ltd at Rs 1,650 crore, the equation does not change much. Instead the ministry plans to sell off some of the capacity built as asset monetisation in FY24 for Rs 50,118.61 crore. 

The coal ministry has set a target of total coal production of 1.01 billion tonnes for the year. The targets are 1.3 billion tonnes in FY25 and 1.5 in FY30. This includes the numbers from commercial coal mining. Compared to the level of 606.89 mt of production in FY19, CIL’s production has risen by 15.9 since then to 703.21 mt. In just one year, overall coal production in the economy has jumped 22.6 per cent.

In FY23, the coal ministry signed agreements for 23 coal mines with a cumulative peak rated capacity of 33.224 metric tonnes a year. Another bunch of agreements with 25 more miners will be signed in FY24. The ministry estimates a similar 30-33 metric tonnes of incremental capacity addition from them.

Taken together, what does the scorecard for the coal-based power capacity picture show for India? That coal still dominates but it has begun its downward movement from here. The heady days for all-round expansion of coal-based capacity is already over. The sector has 211.9 Gw of coal power that is running and another 29 Gw of planned investment. There is not much to see beyond that.

Mining issues

Coal capacity under construction and expected to be commissioned during 2022 -30 is around 26,900 Mw

Out of this, coal capacity of 6,920 Mw is under bidding, as on end February, 2023

Additional coal-based capacity of Central and state sector utilities, at 9,420 Mw (identified for future “only if required”)