Power sector see no summer outrages, with enough coal stocks

The electricity demand growth is expected to grow at an average of 6-7% in the upcoming fiscal 2024-25. Increased capacity additions across segments is expected to narrow the supply deficit and meet the rising demand.

“If you see the availability of coal stocks, they are better this fiscal than what they were in this period last year. Last year, the coal stocks in March were about 13 days, now it has increased to over 15 days at an all India level and even the prices of imported coal have come down from the peak we saw in FY22,” said Vikram V, vice-president & sector head, corporate ratings, Icra. “The ability of the sector to utilize the imported coal based plant is also in a good situation.”

Moreover, new gas capacity additions owing to the softening gas prices is further expected to meet any shortfall in the demand.

“During the upcoming summer season, we do not see any significant gap between demand and supply that will impact dynamic prices. There has been a surge in sell-side liquidity due to sizeable capacity additions in renewable and thermal power while gas based power plants are coming back due to sharp fall in gas prices,” said an official industry source who did not wish to be identified.

However, any spurt in the demand owing to increase in the number of heatwave days or weak monsoon may create challenges and would require measures to augment coal supplies.

Earlier this month, the India Meteorological Department (IMD) had predicted a hot summer, with above-normal temperatures and an above-normal number of heatwave days from March to May owing to the El Nino conditions.

“If there is sudden spurt in demand owing to heatwave or El Nino, then there could be some challenges and we will have to look to augment coal supplies,” Vikram said.

“There are ample coal stocks available in the country and more capacity can come online to address any surge in power demand in case of prolonged heat waves in the ensuing summer,” said the industry player.

Even as the strong capacity additions across segments and ample coal stocks provide a healthy scenario for the country to meet its power demand, the transmission segment may pose some challenge, if not much, as any RE capacity to become online and address the issue of intermittency will require a robust transmission network.

“India has implemented a robust bidding system of TBCB (Tariff Based Competitive Bidding) for procurement of transmission capacity. Yet, many projects are delayed by 1-3 years due to on-ground issues. Immense government support is required to complete these projects,” said Pratik Agarwal, Managing Director, Sterlite Power.

During the current financial year, the country saw a series of supply constraints in order to meet the peak demand including low coal inventories and lower reservoir levels resulting in poor hydel power generation.

In 2023-24, hydel power generation has declined by 17%. “Going by the current reservoir level, hydel generation could remain subdued,” Vikram said. “It also depends on how the monsoon plays. Due to El Nino, either the demand could be higher because of heatwaves or the hydel generation could be lower.”

The country added 1400 MW of nuclear capacity this fiscal and is expected to add a total of 5-6 GW of thermal capacity before March 1. “All these projects, along with an improved coal situation, should be able to meet the demand,” Vikram noted.

The coal ministry had said that the country’s coal stock with the coal-based thermal power plants is expected to go up to 45 million tonne by the end of March. Additionally, it expects the total coal stock available at all locations – including coal companies and power plants – to increase to 155 million tonne by the end of this fiscal year from the current available stock of 135 million tonne. The coal stock available with the country’s coal companies presently stands at around 85 million tonne.