According to CRISIL, coal power stations are thriving at 65% PLF despite record additions to RE capacity

Despite record capacity addition for renewable energy (RE), plant load factors (PLFs) of coal-based power plants in India are expected to improve to approximately 65% this fiscal year, according to a report by CRISIL Ratings. It also stated that strong PLFs, lower receivables, and a positive fuel supply will help private coal-based generating companies’ (gencos') credit profiles.

The report added that the post-pandemic economic recovery has been the primary driver of the 8-9% annual growth in electricity demand over the last two fiscal years. 90% of the 34 gigawatts (GW) of additional capacity added during this time came from RE. Because power plants operate at different PLFs, this represents a 9% growth in GW terms, but in normative terms, it is only a 4-5% growth. In this incremental supply, coal-based power plants continue to be a crucial component, accounting for 69-71% of total power generation due to the intermittent nature of RE with lower PLFs.

 According to the report, domestic coal production is expected to expand by 11-13% this fiscal year, building on its record high of 893 million tonnes (MT) last fiscal. This means that rising PLFs will continue to be supported by a favourable fuel supply.

Additionally, coal distribution through several e-auction modalities has significantly improved. The infrastructure for evacuation has also improved, with an 8% increase in railway rakes for the transfer of coal.

Furthermore, it stated that the discharge of receivables under the Late Payment Surcharge (LPS) plan, which was announced by the government in June 2022, will assist the cash flows. Receivables of private gencos rated by CRISIL Ratings are estimated to reduce from 82 days as of March 2022 to 55-60 days by the end of this fiscal.

As per Mr. Ankit Hakhu, Director at CRISIL ratings, “The trend will likely continue this fiscal. Power demand is seen growing 5-6%, and a part of the incremental requirement will be met by the newly added RE capacities — including 18 GW in wind and solar, the highest ever.” He added that this will help thermal PLFs, which are expected to increase by 100 basis points (bps) to more than 65% in fiscal 2024 because there are no major coal-based capacity additions anticipated for this fiscal year and only modest nuclear, biomass, and hydropower capacity additions.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.