Entitled ‘Who Would Still Fund a New Coal Power Plant in India?’, the note said renewable energy delivered more than two thirds or 9.39 gigawatts (GW) of India’s new generating capacity additions in the fiscal 2019/20, while new thermal power plants delivered 4.3GW, net of the 2.5GW removed due to end-of-life plant closures.
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Further, coal-fired plants today are running at half their capacity assumed in the Central Electricity Authority‘s modelling guidelines used to evaluate the financial and operating performance of new coal-fired plants.
Note author Tim Buckley, director of energy finance studies, Institute for Energy Economics and Financial Analysis (IEEFA), said the National Electricity Plan of 2018 is predicated on an additional 70GW or more of new coal-fired power plants installed by 2026-27, and the closure of another 39GW, relative to the position as on March 31.
« That assumes some US$70bn of new investment in coal-fired power, » said Buckley.
« Yet, renewable energy installs nearly doubled traditional thermal power capacity installs during 2019-20, and the pricing trends for new electricity generation entirely favour renewable energy over coal, particularly when it comes to expensive non-minemouth or import coal-fired power proposals.
« Instead of backing coal, new finance is getting behind renewable energy. »
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The COVID-19 pandemic and national lockdown has reduced power demand, with the casualty being coal-fired power generation.
In the first 25 days of the 2020-21 fiscal year, coal-fired power generation was down 22,300 gigawatt hours (GWh), amounting to 600GWh more than the total decline in demand during lockdown.
« Coal-fired power generation has worn more than 100 per cent of the COVID-19 power demand loss, » said Buckley.
« 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. Coal-fired generation, the high marginal cost producer, is losing out. »
The note finds new domestic and international finance is backing solar, with a landmark 2GW solar tender awarded by NHPC in April 2020 priced at a near record low of Rs2.55/kWh, fixed flat for 25 years.
This tender was won by leading Indian renewable energy developers, most of whom have access to global capital backers like SoftBank of Japan, EQT Infrastructure of Sweden, Temasek of Singapore, EDF and Total of France and Brookfield of Canada; a who’s who of innovative global financial leaders.
Further, April 2020 also saw global private equity leader KKR enter the Indian renewable infrastructure sector, acquiring 317MW of solar from Shapoorji Pallonji Solar Holdings.
« Why would any debt or equity capital providers fund a high emission, highly polluting new coal-fired power plant at double the cost of deflationary, domestic renewables? » the note questioned.
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