The capacity utilisation of thermal power plants will increase by a percentage point to 69 percent in 2024-25, led by the growth in electricity demand and limited thermal capacity addition, says rating agency ICRA.
ICRA's outlook for the thermal power segment is 'Stable', supported by the healthy improvement in the thermal plant load factor (PLF), coupled with the reduction in dues from state distribution utilities (discoms) following the implementation of the Late Payment Surcharge (LPS) scheme since August 2022, a statement said.
"The current under-construction thermal capacity is about 30 GW, which is predominantly in the Central and the state-owned generation segment and is expected to be commissioned over the next two to four-year period," Girishkumar Kadam, Senior Vice President & Group Head – Corporate Ratings, ICRA, said in the statement. In our view, there is a clear need for incremental capacity beyond this pipeline if the annual electricity demand growth continues to exceed 6.0 percent till 2030, after factoring in the renewable capacity addition, he added.
He stated that if annual demand growth is stronger at 7.5 per cent till 2030, to meet the same, the incremental thermal capacity requirement will need to be as large as 70 GW. Coal has remained a dominant fuel source to meet the base load power demand in the country, and its share in the overall energy generation mix is estimated to decline from 73 percent in FY2023 to about 58-60 per cent in FY2030, assuming the renewable capacity addition scenario of 200 GW between FY2024 and FY2030, as per ICRA estimates.
Nonetheless, the share of coal in the generation mix is expected to remain significant till 2030, it stated. The average spot power tariffs in the day-ahead market (DAM) of the Indian Energy Exchange remained high at Rs 5.4 per unit in YTD FY2024, owing to the sharp demand growth.
The spot tariffs are likely to remain elevated at around Rs 4.5-5.0/unit in the near-term against a long-term average of Rs 3.0-3.5/unit. Further, the coal stock level for the domestic power plants remained modest at around 12 days as of December 2023, lower than the normative requirement. Nonetheless, this remains similar to the corresponding period of the previous year, it stated.
For the renewable energy segment, ICRA's outlook remains 'Stable', led by strong policy support, healthy demand prospects, and superior tariff competitiveness. Further, the realisation of past dues and regular payment of ongoing bills by discoms following the LPS scheme remain positives for the sector.
Kadam said in the statement, "the sharp decline in solar PV cell and module prices, abeyance of the order on Approved List of Models and Module Manufacturers (ALMM) till March 2024, and the timeline extension approved for solar and hybrid projects, are expected to lead to an improvement in RE capacity addition to 18-20 GW in FY2024 from 15 GW in FY2023." This, he said, along with the growing project pipeline, is likely to support the scale-up in capacity addition to about 25 GW in FY2025, mainly driven by the solar power segment.
However, he stated that challenges remain on the execution front with respect to delays in land acquisition and transmission connectivity, which could hamper the capacity addition prospects.
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