The Indian private industry has kept away from the thermal power sector, which, experts say, is due to viability issues and competition from renewable energy. This is within a scenario where the overall interest in the thermal power sector is declining.

The last year when the private sector put up any noteworthy capacity was 2017-18 when it created 3,780 MW of capacity, shows a Ministry of Power’s ‘Review of Progress of Thermal Power Projects under execution in the Country’, released recently.

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Experts say that this is hardly surprising because while the cost of putting up new coal-fired power plants is increasing by the day (₹8.34 crore a MW, compared with roughly 4.88 crore a MW in 2015), renewable energy plus storage — a combination that can supply a steady stream of electricity as coal does, is falling.

To illustrate, Greenko has contracted to sell power from its upcoming pumped hydro storage near Kurnool for ₹4.23 a kWhr. Environmental concerns and the difficulty in raising finance are also reasons for the private sector’s apathy.

While the private sector has well-left thermal power, even the central and state sectors have consistently fallen way short of their targets, indicating an overall drop in interest in coal power plants. (In India, thermal power is almost entirely coal-fired, as there is very little gas or nuclear plants.)

As can be seen in the table below, in no year in the period under review (since 2017-18) has the country met its target for thermal power capacity additions.  

‘Modest interest’

“Overall interest in the thermal generation is reducing quite fast — whether it is public sector or private sector,” says Dr Ashok Sreenivas, Senior Fellow, Prayas Energy Group, a Pune-based energy think-tank.

“Private sector interest in thermal power has reduced rapidly mainly because they don’t see it as very viable anymore — the cost of electricity from a new coal-based plant would be prohibitively high compared with alternatives, and the disadvantage would only worsen over the lifetime of the plant,” he told businessline.

In addition, getting financing for new coal-based projects is also getting harder, making it even less attractive.

“The public sector continues to show modest interest in the space because they are reasonably assured of their returns, though even there, DISCOMs will be increasingly reluctant to sign new long-term PPAs for thermal power,” notes Dr Sreenivas.

As of March 31, 2023, India had a thermal power capacity of 2,36,680 MW, of which coal (and lignite) was 2,11,855 MW. According to a recently releasedReport on ‘Optimal Generation Capacity Mix for 2029-30’ of the Ministry of Power, India has 26,900 MW of coal-based plants under construction and the country would need still need more.

“The additional coal-based capacity required till 2030 may vary from 12,700 MW to around 19,100 MW across various scenarios,” the report says.

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