From pv magazine India
Most of India’s 33 GW of coal-fired power capacity currently under construction – as well as another 29 GW in the pre-construction stage – will end up stranded, according to a new report by the Institute for Energy Economics and Financial Analysis (IEEFA).
“Coal-fired power simply cannot compete with the ongoing cost reductions of renewables. Solar tariffs in India are now below even the fuel costs of running most existing coal-fired power plants,” said author Kashish Shah, Research Analyst at IEEFA.
Compared to renewables with almost zero marginal generation costs, coal-fired generation with inflationary coal and coal transportation costs is a significantly expensive option for distribution companies. Financial distress in India’s power distribution sector makes thermal power purchase agreements (PPAs) even more unbankable.
Given these issues, investor interest in the coal sector is already waning.
“In the last 12 months, no new coal-fired power plants have been announced, and there has been no movement in the 29 GW of pre-construction capacity. This reflects the lack of financing available for new coal-fired power projects, and also the flattening of electricity demand growth,” Shah said.
Nonetheless, the Central Electricity Authority (CEA) still projects that India will reach 267 GW of coal-fired capacity by 2030. This will require 58 GW of new capacity additions, or about 6.4 GW per year.
However, IEEFA says it is “highly improbable” that the CEA’s projections will materialize, given the ongoing financial and operational stress in the thermal power sector. It argues that India’s coal capacity requirements should be urgently revised.
“Any projections for India’s future generation mix should take into account that new coal-fired power plants are likely to become stranded assets,” said Shah. “The new capacity would only be economically viable if it replaced end-of-life, polluting power plants with outdated combustion technology and locations remote to coal mines.”
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