India Factories' Demand to Generate Own Power to Help Thermax
(Bloomberg) -- Thermax Ltd., an Indian maker of electricity-generation equipment, expects demand for captive power plants, typically small units to meet the internal needs of a business, to rise in the next 4-5 years as investments in large power projects slow down and state utilities struggle to give reliable supplies.
Industries such as food processing, textiles, pharmaceuticals and automobiles are expanding capacities and will look at generating their own power rather than depending on the unreliable grid, Thermax’s Managing Director M.S. Unnikrishnan said in an interview.
The expected revival of captive power in India points to a chronic problem in the country’s power industry -- indebted state utilities are unable to ensure reliable supply because they’re financially hamstrung to purchase adequate power. In addition, India’s thermal power sector suffers from fuel shortages, delayed payments and underutilized capacities causing investors to shun it. The industry is among the biggest contributors of bad loans in the country and lenders have struggled to find new investors.
Equipment orders for large thermal plants shrank to about 4 gigawatts in the year ended March 31, leaving more than three-quarters of the equipment-making capacity unused and intensifying price wars among constructors, Unnikrishnan said.
“Lack of investment in power plants in the country is going to compel many new investors to go for captive power plants,” said Unnikrishnan in an interview. “It is our bread and butter.”
Generation capacity built for captive use has risen more than 26 percent through 2018 to 51.5 gigawatts, according to data from the Central Electricity Authority.
However, captive power is not without its problems. The plants are at a disadvantage compared with conventional power producers in summer months when power demand surges and supplies are prioritized to non-captive consumers. While getting coal from overseas to Indian shores is a solution, taking it from the port to plants, especially those in the hinterland, can take time as the majority of railway carriages are reserved for serving grid power stations.
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