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Thermal power capacity addition hits a speed bump

Jayajit Dash/Bhubaneswar 15 Mar 19 | 01:37 PM

Fresh capacity addition in the thermal power sector has fallen woefully short of targets. Of the 4,850 MW capacity envisioned for the fiscal year 2018-19, only 44 percent has been added.

No capacity was added by  Centre-owned utilities in the period under review. State-owned generators barely managed to accomplish half of their target of 3150 MW by adding 1529.75 MW, data collated by the Central Electricity Authority (CEA) showed. Overall capacity addition for thermal power has been pegged at 7266.15 MW for this financial year but the tardy pace of capacity additions has cast doubts on achieving even the halfway mark.

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An industry source attributed the phenomena to the glut in the availability of thermal power, the slide in demand and growing traction of renewable sources.

“In the current scenario, there is excess coal-based capacity and the supply trumps demand. Power offtake from new capacities is beset with uncertainty given the reluctance of many states to execute long-term power purchase agreements (PPAs). Also, the rise of renewable energy led by solar power as a viable energy source has slowed the tempo of thermal power growth", the source said.

A report by ratings firm CRISIL had forecast thermal power capacity additions to halve between 2019 and 2023 on truant PPAs, erratic coal supplies and growth in renewable power generation. CRISIL expected thermal power capacity addition to diminish to 35 Gw between FY19 and FY23 compared with 88 Gw added in the previous five years.

The grim forecast is a pointer to a large number of thermal power projects in the pipeline, especially those at an incipient stage to get deferred till demand looks up. Besides with a string of stressed assets available for acquisition, leading generators would prefer the inorganic route to expand instead of brownfield ramp-up.

Private sector producers are likely to take a profound hit as many under construction projects are stuck due to financial woes of the promoters. 

CRISIL Research, however, sees power demand to log 6.5-6.8 per cent compounded annual growth rate (CAGR) between FY 2019 and FY 2023, aided by rapid strides in urbanisation and the Union government's thrust on rural electrification.

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