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Thursday, July 19, 2018

Uptick in demand: First time in 10 years, power plants show load factor rising

The Plant Load Factor has topped the 65 per cent mark this fiscal (April-October data) for the first time since 2013-14.

Written by Anil Sasi | New Delhi | Updated: December 27, 2017 7:19:38 am
Uptick in demand: First time in 10 years, power plants show load factor rising A high PLF means a higher output and a more efficient plant.

THE average capacity utilisation of the country’s coal and lignite-fired thermal power plants, the mainstay of India’s electricity grid, has seen a rebound during the first seven months of this fiscal, bucking a steady declining trend visible over the last 10 years.

The Plant Load Factor (PLF) — the total energy produced corresponding to scheduled generation during the period, expressed as a percentage of energy sent out vis-à-vis the plant’s installed capacity — has topped the 65 per cent mark this fiscal (April-October data) for the first time since 2013-14.

The uptrend is visible across Central, state and private generation capacities and is being seen as a harbinger of increased demand which has been on a steady downward slide since 2007-08 — when the PLF of coal and lignite based power plants peaked at 78.5 per cent.

A high PLF means a higher output and a more efficient plant.

One reason for the improvement, official sources said, is because the power system linking the rest of the country to the southern region, which was facing power shortages due to transmission bottlenecks for a length of time and had been strengthened late last year, is seeing free flow of power on a round-the-clock basis now.

An improvement in restocking activity in the quarter after the Goods and Services Tax rollout is also seen as having an impact — something that was reflected in the latest growth numbers as well.

Real Gross Value Added growth accelerated to 6.1 per cent in the quarter ended September 2017 from the 5.6 per cent registered in the preceding quarter while the Gross Domestic Product growth accelerated to 6.3 per cent from 5.7 per cent — a reversal in the declining trend seen in the preceding five quarters. Growth picked up across all three major sectors of the industrial sector — manufacturing, mining and utilities.

Thermal projects, including gas-based projects, account for over 66 per cent of the country’s installed power capacity of 3,30,860 MW.

The optimism, though, has to be tempered to a certain degree given that the uptick in coal-fired generation comes when gas-based capacity of about 25,000 MW (mega watt) is operating below 20 per cent PLF.

Given the power projects under construction and in various stages of pre-construction, the Central Electricity Authority (CEA) has forecast a further dip in the PLF of thermal power plants as the generation capacity addition continues to outstrip demand growth. The secular trend of low-capacity utilisation has led to extreme financial strain on the entire power value chain — right from lenders to power-distribution companies.

Even as there is sizeable power capacity in the country, there are large pockets of unmet power demand. So while the demand is sluggish, there are 4.29 crore (24 per cent) households in the country deprived of access to electricity.

Power cuts in small towns and villages continue despite the “surplus power” situation. India’s per capita consumption is just about 1100 kWh/year, which is one third of the global average and way behind China’s, with systemic and regulatory shortcomings, largely legacy issues, responsible for this situation.

Apart from the paradox of large electricity-deprived households coexisting with surplus unsold power; there is another irony — of new, cost-efficient, lesser polluting thermal plants not getting customers or coal, while inefficient highly polluting and aging plants are continue to sell costly power under long-term PPAs (power purchase agreements).

During the last decade, the operating parameters of coal and lignite thermal power plants had seen a steady slide that resulted in the PLF dipping under the 60 per cent mark in 2016-17— a 10-year low. This was attributed to a sluggish industrial load resulting in the projected demand for electricity trailing the pace of commissioning of new power projects, alongside a pick-up in the addition of renewable projects to the country’s energy mix.

While a consumption-led rebound in the economy is widely expected around the corner, given that the trailing impact of demonetisation and initial hiccups in GST rollout are over, the problem that is widely recognized is that private sector investment activity has failed to pick up. Concerns on this front continue. Recent data from the Centre for Monitoring Indian Economy shows that the value of stalled projects increased to Rs 13.22 trillion in the quarter ended September 2017, the fifth consecutive quarter of such an increase.

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