Lockdown heightens risks for India's coal power sector

New thermal power delivered less than half of renewables in new capacity additions.

The pandemic and subsequent lockdown has heightened financial risks to India’s coal-fired power plant sector as it is overshadowed by renewable energy in new investments, according to a briefing note by the Institute for Energy Economics and Financial Analysis (IEEFA).

The note found that renewable energy delivered more than two-thirds or 9.39GW of India’s new generating capacity additions in FY 2019-20, whilst new thermal power plants delivered 4.3GW, net of the 2.5GW removed due to end-of-life plant closures.

Coal has been the hardest hit by the reduced power demand amidst lockdown. In the first 33 days of FY 2020-21, coal power generation fell nearly 30 TWh, eclipsing the total electricity consumed in Ireland in 2018.

“Renewables get priority over coal when power demand drops given their ‘must run’ status, which is a reflection of their zero marginal cost of production,” according to IEEFA’s director of energy finance studies Tim Buckley.

Further, coal plants have been running at half the capacity rate assumed in the Central Electricity Authority’s guidelines, which is used to evaluate the performance of new coal plants. The National Electricity Plan of 2018 is predicated on an additional 70GW new coal-fired power plants installed by 2026-27, and the closure of another 39GW.

This assumes some $70b of new investment in coal power, Buckley noted. However, renewable installations surpassed thermal power installs nearly twofold in 2019-20.