Delaying New Thermal Power Projects May Lead To Black-Out, Says CLSA
The power generation sector grew at 7 percent in May, which was at six-month-high.
India may face a peak power deficit in three years if the government sticks to its policy of not awarding thermal power projects for a decade, global brokerage house CLSA has warned.
The Central Electricity Authority of India, an arm of the Ministry of Power, said earlier this week that India may become power surplus, justifying the delay in awarding new thermal capacity for the next 10 years, according to a CLSA research note. While power generation touched a six-month high in May, many Indians still don’t have access to electricity, CLSA said, stressing the need for more power capacity.
Analysts at CLSA believe that states are “under-reporting demand” and planners are ignoring it, curtailing additional thermal power generation. A delay in awarding capacities could lead to a black-out, it warned.
Given that India is an evening peak-power country (when there won’t be Sun) and it takes 5 years to build a thermal plant, we fear that the country could face peak-power deficit post-FY20. However, if the government wakes up then, it may be too late.CLSA Report
Similarly, hydro power plants take anywhere between seven and eight years to build if there are no regulatory hurdles along the way, the brokerage said. While gas is too volatile a power source, nuclear power plants have their own set of challenges ranging from long gestation period, fuel scarcity and resistance from local population, CLSA said.
Power, Coal and New and Renewable Energy Minister Piyush Goyal said earlier this week that the power ministry is working on a comprehensive policy to revive the ailing hydro-power sector.
CLSA also sees structural changes in the wind power market. States such as Gujarat, Andhra Pradesh, Maharashtra and Tamil Nadu have stopped signing wind power purchasing agreements. Companies like Inox Wind Ltd. and Suzlon Energy Ltd. could be hurt by order cancellations, the report said.
CLSA remains bullish on Power Grid Corporation of India citing that the stock is the best-performing mid cap. However, it maintains a ‘sell’ call on NTPC Ltd., Adani Power Ltd. and JSW Energy Ltd.