Thermal Power Eyes Rs 6.7 Lakh Crore Capex To Cover Green Energy Shortfall

Amid growing power needs, India will need an additional 80,000 MW of coal and lignite-based thermal power capacity by 2032 despite the increased focus on renewable energy, according to a state-run power sector advisor.

In order to meet the demand, the country's thermal power sector could see a capital expenditure of at least Rs 6.67 lakh crore by fiscal ending March 2032, according to the Ministry of Power.

The intermittent nature of renewable source of energy makes a case for this capital expenditure. Power Ministry has pointed out in the past that India's energy security cannot be achieved with green power alone and dependence on coal-based electricity is likely to continue till cost-effective energy storage solutions are available.

The country's peak demand during the financial year 2013–14 was at 135 gigawatts. The projected peak demand will be 277.2 GW in fiscal 2026–27 and 366.4 GW in fiscal 2031–32, according to the Electric Power Survey.

On May 30, the power sector met a record maximum power demand of 250 GW. The all-India non-solar demand met also touched an all-time high of 234.3 GW on May 29, according to the Ministry of Power.

The installed capacity requirement for 2031–32 is likely to be a little over 9 lakh MW, including 2.84 lakh MW of fossil-based capacity, out of which coal and lignite would account for a thermal capacity of approximately 2.6 lakh MW, according to the National Electricity Plan.

The required coal-based installed capacity will be at 2.83 lakh MW by fiscal 2032 as against the present installed capacity of 2.17 lakh MW, according to NITI Aayog data.

In order to achieve the projected requirement, an additional 80,000 MW of coal and lignite-based capacity is planned, according to the generation planning studies carried out by Central Electricity Authority.

India will start operating new coal-fired power plants with a combined capacity of 13.9 GW in 2024, the highest annual increase in at least six years, according to a report by Reuters.

"In the next 18 months, about 19,600 MW of capacity is likely to be commissioned," the Ministry of Power had said in a statement In January.

The 2024 capacity increase will be more than four times the annual average in the last five years. India added 4 GW of coal-fired power capacity in 2023, the most since 2019.

The estimated capital cost for setting up a new coal-based thermal capacity, as considered in National Electricity Plan, is Rs 8.34 crore per megawatt, according to the 2021–22 price level.

Hence, the thermal capacity addition is expected to entail a capital expenditure of minimum Rs 6.67 lakh crore by 2031–32, the Ministry of Power had said.

It is hard to estimate the capital expenditure on under-construction capacities. However, based on the per-megawatt expenditure rate, the coal capacities under advanced stages of planning as well as identified for development translates to Rs 5.07 lakh crore in expenditure.

Ordering and tendering of new thermal capacities has already started since renewable energy has not been able to keep up with the demand, according to Rupesh Sankhe, senior analyst of the power utilities at Elara Capital.

NTPC Ltd. stands to benefit from the thermal capacity additions and has close to 15 GW of thermal capacities in the tendering stage, he said.

The company plans to award thermal capacities of 15.2 GW in the near future. This is in addition to the 9.6 GW of thermal capacities it already has under construction.

Adani Power Ltd. is India's largest private thermal power producer with a planned thermal capacity of 24 GW. In its investor presentation for the fourth quarter of the last fiscal, the company has recognised the need for expansion of thermal power capacities.

Thermal power plants have better plant capacity utilisation due to fuel availability and affordability, according to Adani Power.

The company is currently executing a 1,600-MW expansion project at its Mahan plant at Singrauli, Madhya Pradesh. It has also initiated the development process for expansion of its Raigarh power plant in Chhattisgarh, where it also plans to set up a 1,600-MW thermal power plant.

Currently, Tata Power Ltd. has installed thermal capacity of 8.8 GW, which is 60% of its total capacity. While the company does plan to increase its renewable energy portfolio, 40% of its total capacity will still be thermal after completion of its order book.

In the last financial year, JSW Energy Ltd. had a total thermal operational capacity of 3,508 MW, with a 350 MW thermal unit under construction. Out of its total capacity, 72% is tied-up under long-term power purchase agreements, according to the company.