King coal gets dethroned in India

There is no economic case for building new coal-based power plants in India, let alone environmental reasons for not doing so. The existing fleet is facing economic hardships and willing lenders for new projects are hard to come by. According to Greenpeace experts in India, “Coal is facing a perfect storm: economics have changed, finance is drying up, and public opposition has never been stronger.” Plant load factors (PLFs or capacity) for the nearly 190 gigawatt (GW) of coal already commissioned in the country are hovering around the 60 per cent average, as opposed to the Central Electricity Authority’s (CEA) normative 85 per cent goal. The reason for the low PLFs is lack of effective demand — cash-strapped distribution companies or discoms are curtailing purchase rather than trying to service their entire distribution areas.

Over the last five-year plan (2012-2017), before the Planning Commission was disbanded, India built more coal power plants than the plan called for. As a result, there is overcapacity in the sector. That is why the CEA’s new Draft National Electricity Plan now says no new coal power plants (other than those under construction) are needed for the next decade at least. The low PLFs are sub-optimal for the financial viability of many projects, and lenders and investors are already facing delayed payments. If banks are forced to restructure their loans, (a big if, for political reasons), we could see sell-offs or debt for equity trades. We are already seeing consolidation in the coal sector as companies (eg Jindal Steel and Power Ltd) try and offload their least productive assets.

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