India firms look to bet big on coalfired power after long absence
Private Indian firms have expressed interest in building at least 10 gigawatts (GW) of coalfired power capacity over a decade, four sources familiar with the matter said, ending a sixyear drought in significant private involvement in the sector.
Adani Power, JSW Group and Essar Power are among the companies that have told India’s Power Ministry they would be keen to expand old plants or develop stalled projects facing financial stress, as per ccording to the sources and a government presentation seen by Reuters.
The potential investments, which have not been previously reported, could cumulatively cost billions of dollars and demonstrate renewed appetite in an industry seen by many as financially unattractive. But they also threaten to undermine progress made by the world’s No.3 greenhouse gas emitter in weaning its economy off carbon.
PM Narendra Modi’s government, which has cited energy security concerns and low percapita emissions to defend India’s coal dependence, has been trying to attract private investment to boost coalfired capacity by 80 GW by 2032.
Half the capacity
Coalfired power plants currently account for half, or about 215 GW of India’s total installed capacity of 430 GW, with renewables accounting for 135 GW and hydro making up 47 GW.
A spokesperson for the Power Ministry said the private sector had agreed to invest in the coalfired power sector “in line with the energy requirements of the nation,” adding India was ahead of international commitments to cut emissions.
“The private sector is now expressing interest because of financial viability and assurance that payments will be made on time,” he said. The companies did not respond to requests seeking comment.
India’s Association of Power Producers (APP), which represents coalfired power developers, told Power Minister R. K. Singh its members were eager to boost capacity, according to a December 4 letter reviewed by Reuters.
Among the new proposals, Adani Power plans to add 4.8 GW and JSW 1 GW, according to three sources and a government presentation dated November 21 reviewed by Reuters.
Essar Power plans 1.6 GW of new domestic coalbased power generation in Gujarat state by 2029, one of the sources said. Another source said Vedanta will add 1.9 GW of capacity.
The sources — two government officials and two industry executives — declined to be named as the discussions are not public.
The presentation, made by an arm of the Power Ministry in November, estimates the plants would be commissioned by 2032.
Funding drought
In the five years to March 2018, private investments drove 56 GW, or more than 60% of the new coalfired power, government data shows. That dwindled to 1.5 GW, or 5% of additions, in the next five years as projects faced financial stress, shifting the investment burden on State and Union governments.
A total of 24 private sector projects totalling over 23 GW, or over 10% of current Indian coalfired capacity, are on hold or unlikely to be commissioned due to financial stress, as per Power Ministry data.
However, higher coal dependence in the last three years on slower renewable installations, heavy power demand and new emergency laws enabling higher tariffs have made coalfired power attractive again, boosting profits and pushing shares of generators to record highs.
APP asked the government to provide more flexibility in coal and powersupply pacts and expansion of existing power plants, ease clearances, and ensure local credit availability to expedite investments. “It will be a big challenge for any private developer to raise funds,” APP wrote in the December 4 letter, adding state lenders Power Finance Corp. and Rural Electrification Corp. must be asked to take the lead.