Power outlook gloomy amid coal and solar woes

India Ratings and Research has maintained a stable-to-negative outlook on India’s power sector for FY2019-20 owing to issues such as slower resolution of the stressed [coal based thermal] capacity, domestic coal unavailability, and reluctance of DISCOMs to sign long-term power purchase agreements. The outlook is not sunny for solar either.

January 25, 2019 Uma Gupta

Solar capacity addition would remain flat in FY20, given the tariff ceiling proposed by Solar Energy Corporation of India Ltd (SECI) for solar in a rising costs scenario, according to India Ratings and Research.

Image: Nikhil Verma/Flickr

India Ratings and Research maintains a negative outlook for India’s power sector even as it expects a healthy 6%-7% growth in power demand and 62-63% improvement in coal-based plant load factor (PLF).

“The draft Central Electricity Regulatory Commission (CERC) guidelines have come as a relief to generators. However, the overhang of the stressed capacity would continue to prevent fresh thermal capacity addition from the private sector. The renewable sector would continue to account for bulk of the incremental capacity addition in the coming years,” the agency said.

India Ratings expects the coal-based thermal capacity PLFs to improve further to around 63.5% in FY20, driven by healthy electricity demand. However, the rise in coal-based capacity PLFs is contingent upon coal availability and, India Ratings and Research believes, continued production growth rate of 7%-8% could be difficult to achieve in FY20. This would result in increased reliance on imported coal.

Flat growth in solar

Solar capacity addition would remain flat in FY20, given the tariff ceiling proposed by Solar Energy Corporation of India Ltd (SECI) for solar in a rising costs scenario.

Costs have been rising over the last year due to the implementation of the safeguard duty on solar modules, rupee depreciation, hardening cost of capital and higher land prices. Against this backdrop, India Ratings does not expect solar tariffs to decline below Rs 2.44 per unit.

Around 2.4 GW of central and 1.5 GW of state sector bids were scrapped in 2018 due to higher tariffs. On the wind side, capacity addition remained low at only 600 MW in the six months ended September 2018.

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