Private investment dips in conventional power
In its draft National Electricity Plan, the Central Electricity Authority (CEA) makes an interesting observation on peak power demand to be half of the installed generation capacity by 2022. Low demand now marks every part of the power supply chain – generation, equipment, transmission, accessibility. Since this government came to power in mid-2014, there has been no call for investment in conventional generation.
The government expects the plant load factor (PLF or operating ratio) of thermal power units to come down to 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.
Close to 50,000 Mw of coal-based capacity is under construction, of which 20,000 Mw is being built by NTPC alone. The project pipeline for the private sector is almost empty after 2017. There is likely to be considerable slippage in the capacity addition target in respect of hydro and nuclear power in the 12th Plan period (2012-17), as per the National Electricity Plan of CEA.
During the first three years of the 12th plan, the private sector contributed 63 per cent to the record total thermal power capacity addition of 57,719 Mw. With no state coming forward to sign long-term power purchase agreements (PPAS), these investments are likely to be hit. The latest PPA signed was by Uttar Pradesh in 2016, when rates touched `5 a unit, from `3.9 a unit in 2014. Debt-ridden state power distribution companies lack the funds to buy surplus power.
“My current capacity is not finding takers and PLF continues to fall. So, how can I invest more? There is no positive projection on power demand and distribution reforms are yet to fructify. I am assuming a three-year down cycle, at least,” said the chief executive of a leading private generating company.
The increasing risk in long-term power sale is pushing developers to sell in the spot market at half the rate they quote in bidding for PPAS. This has led to spot power prices spiralling down to `2 a unit. To turn around the ailing distribution sector, the Centre announced an Ujwal Discoms Assurance Yojana. So far, 18 states have joined, agreeing to improve their entities, financial and commercial status. Rating agency CRISIL says the discoms require capital investment of `3 lakh crore between 2015-16 and 2018-19, of which half is tied up.
“The discoms have to bring down AT&C (aggregate technical