Centre's Captive Coal Push May Add 5-7 GW, Fall Short Of Peak Demand Surge

The Centre's move to push 112 captive coal-fired power plants to maximise generation may add only 5-7 gigawatts to the grid, well short of the 15-20 GW rise in peak power demand expected during October-December, according to analysts.

That means the captive power push could provide an additional supply cushion next quarter but may not fully bridge the potential demand gap.

September demand spike is "unusual and serious", according to Tonmit Talukdar, analyst (coal and thermal) at commodity analytics firm Kpler.

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Electricity demand in September has remained close to the summer peak instead of easing with the retreat of summer. Peak demand touched 269 GW on Sept. 10, just below the year's record of 270 GW in May and the highest ever for September. 

With demand expected to rise further in the coming months, the Ministry of Power has recently directed 112 captive plants, mainly in aluminium, steel and refining, to maximise output. The move marks the first invocation of Section 11 of the Electricity Act, 2003, for captive plants.

These units must meet their own requirements first and offer surplus electricity on power exchanges. They have also been ordered to maintain adequate coal stocks and report generation, captive consumption, sales and fuel inventories to the Central Electricity Authority every week.

"The additional capacity may not be more than 5-7 GW while peak demand is likely to improve by 15-20 GW," Rupesh Sankhe, vice president at Elara Capital, told NDTV Profit.

India has about 80.9 GW of installed captive capacity, of which coal-fired plants account for an estimated 35-40 GW, Sankhe said. Assuming half of the identified capacity is above 50 MW, around 20 GW could be available. But with plants running at about 60% load factor to meet their own needs, only incremental generation would be available for sale to the grid. That could yield 5-7 GW of additional supply, based on an assumed 85% operating level.

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Coal Constraint 

The push for higher generation comes at a time when coal inventories are already under pressure. "We seem to be entering October with summer-like peak demand and declining coal inventories, putting the power system under increasing stress," said Talukdar.  

At least 41.2% of coal-fired power plants were operating with critically low stocks as of Sept. 26, with 77 plants having less than 25% of their required inventory or less than three days of generation cover, the CEA data shows.

Coal supplies have been disrupted by erratic monsoon even as higher electricity consumption has lifted coal burn. Analysts, however, have described the immediate problem as partly logistical rather than a structural shortage of coal. Imports, meanwhile, have begun filling part of the gap.

Coal imports by power sector jumped 86% year-on-year to 5.5 MT in Aug, hitting a 15-month high, as per iEnergy Natural Resources. Lower hydropower generation is further increasing reliance on coal. Hydro generation fell 12% year-on-year in the first three weeks of September, marking a fifth straight monthly decline amid weaker monsoon.

Talukdar expects coal imports to go up in the remainder of the year.

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