Investments in thermal power capacities are expected to double to Rs 2.3 lakh crore in next three years compared to preceding three years, Crisil Ratings said on Wednesday. The rating firm said the doubling will happen because of renewed focus on the segment to help meet India’s growing demand for energy and base load power requirement.
In the preceding three financial years, private companies accounted for only 7-8% of the investments. On expanded investment levels over the next three years, private companies will contribute nearly a third, with central and state public sector undertakings accounting for the balance, Crisil said.
While Adani Power and JSW Energy have acquired thermal companies in the recent quarters, firms such as Tata Power, which is mostly focusing on green power, are looking at the space again.
The government has set a target of at least 80 GW of thermal capacity addition by FY32. At present, nearly 60 GW has either been announced, or in various phases of implementation, with private developers taking up nearly 19 GW.
“Majority of the private capacities will be operationalised only after FY28, given that these involve long construction periods. While the majority of these are brownfield expansions involving low implementation risks, timely delivery of equipment — mainly of boilers and turbines — remains monitorable, given limited supply capacity and substantial build-up orders at major manufacturers,” it said.
Other risks related to offtake, fuel and tariff adequacy remain low. “Energy demand is expected to log a compound annual growth rate of ~5.5% to ~2,000 billion units by FY28. Nearly 70% of the incremental demand will be met by renewable sources. However, with renewable energy being intermittent — solar is available only during daytime, while wind is concentrated from May to September — thermal power remains critical to meet the base load demand consistently,” said Manish Gupta, deputy chief ratings officer, Crisil Ratings.
After a hiatus of 9-10 years, distribution utilities of four states have rolled out 25-year thermal power purchase agreements (PPAs) to private sector generators. Of the ~19 GW of private projects under implementation, PPAs have been tied up for 6.1 GW and for the larger portion of the balance, these are in various stages of finalisation. This clearly indicates the intention of distribution utilities to sign up for thermal power on long-term basis, thereby mitigating offtake risk, it said.