Thermal power plants’ capacity utilisation to drop to 48% by 2022

All coal-based thermal power plants need to brace for a drastic fall in capacity utilisation to as low as 48% by 2022, as additional non-thermal electricity generation capacities come on stream, the Central Electricity Authority has warned.

At that level of utilisation, they may lose the ability to run at a technically viable level and might find it extremely difficult to service debts turning into non-preforming assets for lenders.

The CEA, in its Draft National Electricity Plan, has predicted that by 2022 many plants may get partial or no schedule of generation at all meaning that many of these thermal power plants may have to be kept idle for lack of demand.

According to the CEA, the expected installed capacity from different fuel types at the end of 2021-22 in base case works out to 523 gigawatts, including 50 GW of coal-based capacity currently under construction.

In order to accommodate high quantum of renewable energy into the grid, thermal plants are likely to run at low plant load factor (capacity utilisation) in future.

In fact, it suggested that a market mechanism through regulatory intervention needs to be evolved so that the owners of thermal plants are able to recoup the investment and, at the same time, customers are not unnecessarily burdened with high tariff.

Thermal power plants become technically un-viable if they run under 55% capacity utilisation — a fact which is recognised by the Central Electricity Regulatory Commission. Low capacity utilisation is detrimental for the plant boilers and leads to drastic reduction in plant life. The plants are designed to run at very high capacity utilisation, around 85%. When they run, much below the full load, it consumes more coal, leading to under-recovery of energy charges, as regulations do not provide for this.

Plants without power purchase agreement are in for trouble. Reduction in capacity utilisation leads to a decline in revenue income for the plant. At less than 60% capacity utilisation, the margin, which would otherwise provide for operating costs including interest cost, other than coal costs, would get wiped off. These plants are headed for trouble. As of October 2016, the national capacity utilisation for these units declined to 60% against 67% a year earlier. Utilisation of plants used to be around 80% in 2007-08.

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