Power generation falls 15% even after easing of coronavirus lockdown norms

Overcapacity in coal generation is creating a systemic problem of underutilisation for coal power plants in India
The easing of lockdown curbs has failed to buoy power generation. Nationwide, power generation from all sources fell 15 per cent between June 1 and June 15 when compared with the same period of 2019.

Data from Power System Operation Corporation Ltd (POSOCO) shows that coal-fired power generation alone dropped by a steeper 24 per cent.

During the pandemic, coal generation bore nearly all of the electricity demand drop, due to higher operating costs compared to renewables. The lockdowns underlined that demand for coal power had already been in a steady decline over the past five years.

According to research by US-based think tank Institute for Energy Economics & Financial Analysis (IEEFA), India’s coal expansion plan is based on an unrealistic economic modelling of coal plants that assumes utilisation rates of 70-80 per cent, double the rates observed in April 2020.


Overcapacity in coal generation is creating a systemic problem of underutilisation for coal power plants in India. Due to the Covid-19 pandemic, the average plant load factor (PLF) fell to 42 per cent in April 2020, marking a 22 per cent reduction year-on-year (y-o-y). Load factors could drop to 35-40 per cent by 2022, according to global consultancy KPMG.

India’s fossil fuel power generation assets have upwards of $100 billion in non-performing assets (NPAs). While the Parliamentary Standing Committee identified a total of 34 coal power units as stranded assets, the drop in utilisation rates will hasten the timeline for further stranding of coal assets.

On the coal demand side, the outlook seems uncertain as the government puts public funds to expand cheaper solar power instead of coal, due to a 30 per cent decline in electricity demand since March 25. India’s renewable energy target includes a near term goal of 175 GW of renewable capacity by 2022, up from 87 GW of installed capacity today. In September 2019, Prime Minister Narendra Modi pledged to double India’s renewable target to 450 GW by 2030.

Renewables accounted for more than two-thirds of India’s new generation capacity additions wit 9.39 GW installed in 2019-20, while thermal coal power additions were 4.43 GW, according to IEEFA analysis. India has the world’s largest renewable auction market, and brought down the solar tariffs by 20 per cent y-o-y with 2 GW of utility-scale solar projects auctioned during the lockdown. More than 90 per cent of renewable capacity installed have tariff rates ranging Rs 2.43-2.80/kWh, 60-70 per cent lower than the first-year tariffs set for proposed coal plants, IEEFA noted.

Analysis by Carbon Tracker illustrates that 60 per cent of global coal power plants were operating at a loss even before the Covid pandemic surfaced. Building new solar and wind energy is already cheaper than 51 per cent of operating coal power in India, and new solar will cost less than all operating coal in 2020. India’s thermal coal assets valued at $76 billion are at the risk of being stranded by 2040 under a Paris compliant scenario.


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