Wednesday, 17 August 2016

Nearly half the country’s coal fired power capacity remains unutilised this monsoon season

Nearly half the country's coal fired power capacity have remained unutilised this monsoon season as hydel plants generated close to 22,000 mw of cheap power every day in the last one month.

At this level of capacity utilisation, new thermal power plants can hardly recover their interest cost needed to service bank debts, while older ones struggle to make profits. "If capacity utilisation of plants fall further, power generators may be forced to back down a large number of units and a lot more power stations may come up for sale under stressed asset category," said a senior analyst who requested not to be named.

According to analysts, 70% of most thermal power projects' costs are financed through long-term loans. As a result, interest cost components are one of the largest expenditures in any power stations' books.

During the planning phase project developers assume that the plant can run at least at 75% capacity utilisation and provide for decent returns. However, if utilisation dwindles to around 50% plants are in for trouble. Expenditures far outstrip income at this level.

Data released by the government shows thermal power plants totaling 87,000 megawatts in Western India ran at 49% of their full capacity in July. Nationally, 46% of 211 gigawatt of coal-fueled power plants' capacities remained unutilised during the month.

Between July this year and last, South India's total installed capacity increased nearly 21% to 42,000 megawatt, but capacity utilisation fell 11% during the same period to 65% last month.

With a decent monsoon leading to hydel plants generating and injecting close to 22,000 mw of cheap power every day demand for coal fueled electricity has declined. Also, power demand has not been growing at the pace it was anticipated, leading to a mismatch between demand growth and capacity addition.

My View:

The coal fired plant will surely work with more efficiency in winter and summer session. However they can also try and sell in power exchanges. With cheap hydro and increasing renewable energy is possessing threat to thermal power plants.

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