Covid-19 may impact India's coal-fuelled power plants using Chinese equipment International,  Thermal Power 2020-03-26 08:54:48

The Covid-19 outbreak has now cast doubts over a part of India's conventional electricity generation space, with around 90 GW of coal-fuelled capacity based on Chinese power generation equipment.

With supply chains being disrupted, this installed and under-construction capacity has been placed with Chinese manufacturers such as Dongfang Electric, Shanghai Electric and Harbin Power. Mint earlier reported about concerns over Chinese equipment and their operation and maintenance, given the strategic importance of such power projects.

This comes in the backdrop of India's domestic power demand, expected to go up with more people staying indoors, given the three-week nationwide lockdown from midnight on March 24, in the world's largest such exercise aimed at stemming the spread of coronavirus.

According to Mint research, of around 62 GW of under-construction coal fuelled capacity, orders for 30% or 18.6 GW has been placed with Chinese manufacturers. Apart from competitive prices, the developers were attracted by aggressive financing options, which involved not only low interest rates, but also relaxed covenants.

To be sure, commercial and industrial electricity demand is likely to come down given the expected shift in electricity load patterns that also comes in the backdrop of the onset of summer. Also, given India' installed power-generation capacity of 368.69 GW, the disruption in supply chain may not have an immediate impact on the Indian power markets.

India's peak electricity demand came down to 145,495 MW on 23 March from 163,729 MW on 20 March. India's peak demand in FY19 was 168,745 MW and touched an all-time high of 176,724 MW in April last year.

According to data collated by the Indian Energy Exchange (IEX), the demand for electricity has also came down resulting in an average price of Rs1.95 per unit for electricity traded on 25 March on the exchange market. The all-time high for electricity in the spot market was ₹18.2 per unit for 4 October 2018. Of the estimated 1,200 billion units (BU) of electricity generated in India, the short-term market comprises 130-150BU.

The coronavirus outbreak that started in China may also impact India's green energy trajectory, with around 3 GW of solar projects, worth ₹16,000 crore. Mint reported on 6 February that power project developers in India, who source solar modules from China, plan to declare force majeure on meeting project completion deadlines because of supply disruptions caused by the coronavirus outbreak.

The government later clarified that the disruption of the supply chains due to spread of corona virus in China or any other country will be covered in the Force Majeure Clause (FMC).

"In conventional generation, especially power plants owned by private sector, Chinese firms such as Dongfang Electric Machinery Company, Shanghai Electric Company, and Harbin have a large market share in India. And while Indian power industry has done extremely well to internationalize low end operations and maintenance and keep healthy stocks of critical spares, they still have to rely on these OEMs (original equipment manufacturers) for major overhauls, and supply of critical spares," said Mohapatra.

Mint reported on 16 October, 2008 about an audit that found several problems with such Chinese machinery but stopped short of preventing power plants here from using them. The report had raised questions about the operation and maintenance of such equipment and the lack of a comprehensive quality plan.

According to Mohapatra, with energy and peak deficits at 0.5% and 0.7%, respectively, between 1 April 2019 and 31 January 2020, the average capacity utilization, during the same period, was pegged at 56%. There is also 20 GW of stranded capacities that can be made operational, should the need arise.

India's peak electricity demand has been low due to issues such as precarious finances of some state-owned electricity distribution companies, which prevents them from power procurement of the required quantum.

(Writing by Tammy Yang  Editing by Harry Huo)
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