India’s peak power demand remained unaffected by Covid-19 lockdowns and increased by 6.74 per cent in FY22 with CareEdge projecting it to grow by 6.4 per cent in FY23, 6 per cent in FY24, and 5 per cent in FY25.
Base energy demand increased by 8.1 per cent in FY22 and is estimated to grow by 9.5 per cent in FY23 due to the rebound of economic activities after Covid-19 lockdowns eased, leading to increased consumption, the ratings agency said in a statement.
“While CareEdge Ratings expects a moderation in the growth rate for FY24 and FY25 due to the base effect, it is still expected to surpass the Compound Annual Growth Rate (CAGR) witnessed in the ten-year period of FY12 to FY22, which was 3.9 per cent,” it added..
The peak deficit sharply increased in FY23 to 4 per cent, attributable to the early onset of summer and sizeable thermal capacity undergoing scheduled maintenance in Q1 FY23. Furthermore, higher imported coal prices, lower coal availability, and transportation-related constraints also contributed to the deficit.
Thermal PLF
Over the years, coal and lignite fired capacity has played a central role in meeting energy demand in India. In FY17, 78 per cent of total power was sourced from coal/lignite fired capacity, which moderated to 73 per cent in FY22.
CareEdge expects this trend to continue, with coal/lignite fired capacity accounting for 73 per cent and 72 per cent of total power sourced during FY23 and FY24, respectively. This is significant considering the rapidly increasing capacity of renewable sources over the years and the projected additions going forward, it said.
In terms of Plant Load Factor (PLF), the all-India thermal PLF was 58.9 per cent in FY22 and is estimated to rise to 63.8 per cent in FY23 and 64.8 per cent in FY24. However, the PLF may moderate to the level of 62 per cent in FY25 due to a significant increase in renewable, hydro and nuclear capacity, it added.
Coal supply is key
CareEdge pointed out that to ensure a high plant load factor (PLF), uninterrupted coal supplies to thermal power stations are essential. However, coal production has not kept pace with the increase in power demand over the last two years in India.
As a result, the government has taken supportive measures to ensure a higher availability of coal for thermal plants. Consequently, the allocation of coal production to the sector has steadily increased.
In FY18, the allocation for the power sector was 78 per cent of the total coal dispatched. This allocation increased to around 83 per cent in FY22 and is estimated to reach around 85 per cent in FY23.
CareEdge Ratings predicts that coal allocation to the power sector will remain high in FY24, as the sector’s requirement has not peaked yet. While CIL/SCCL production has risen in FY23, it remains to be seen whether a healthy dispatch rate can be maintained.
Furthermore, the production of coal from captive mines will also be critical. Higher CIL/SCCL and captive production going forward will help to reduce dependence on high-cost imported coal.