Energetica India 89 - May 2020

POWER SECTOR And May 2020 has seen Renew Power win the entire 400MW tender to supply round-the-clock electricity for a price of Rs2.90/kWh (with 3% annual indexation), highlighting the growing innovation in government and industry to deliver hy- brid firmed renewable energy technology solutions at tariffs still well below the cost of new non-mine mouth coal fired pow - er plant proposals, with the added advantage of a construc- tion timeline less than half that of coal. So to IEEFA the question remains: Why would any debt or eq - uity capital providers fund a high emission, highly polluting new coal-fired power plant at double the cost of deflationary renewables? The Buyer and Funder of Last Resort? For all the competitive advantages of having the sovereign backing of the Government of India, and the economies of scale of running a 54GW power generation portfolio across India, and an excellent operating performance that sees its coal-fired power plants run at 10-20% higher capacity utiliza - tion rates than the national average, NTPC has the competitive disadvantage of having to provide the national service of sup- plying the expected power growth needs of India. Where private firms have stopped investing good money after bad, NTPC has continued to build some 3GW annually of new coal-fired power plants, even as it embraces the new technol - ogy opportunities of low cost, sustainable renewable energy in addition to opportunities in electrification (in terms of fast chargers and hydrogen buses). NTPC’s continued investment in coal comes at a significant cost to investors, with shares (red) down 25% over the last five years, against a rise of 18% across the Indian equity market (blue) in the same timeframe (see Figure 4). Figure 4: Share price performance of NTPC and PFC vs the Indian Market Source: Yahoo Finance Likewise, whereas foreign investors and most Indian private banks have learnt their lesson from repeatedly investing in stranded assets in the thermal power sector, the govern- ment controlled Power Finance Corporation (PFC) continues to commit to the financing of expensive new coal-fired power plants where no others will. PFC has been named as the sole US$1.5bn financier of Adani’s import coal-fired power plant at Godda, and for THDC India’s ligation-prone coal proposal at Khurja. PFC shares (black) are down 32% in the last five years. Given the very low cost of domestic renewable energy infra- structure, rather than building yet more inflexible, high cost, high emission coal-fired power plants, it is logical for NTPC in - stead to be lobbying for a time-of-day or peaking power price signal sufficient to underwrite investments in technologies that complement the intermittency of renewable energy. With decade low prices for gas (albeit these prices cannot be locked in), investing in peaking gas capacity might be one path forward. We note however that the U.S. utility leader Nex - tEra Energy has just shelved plans for two gas powered plants it had slated for a 2025 commissioning due to the likelihood of them being technologically challenged by low cost renew- ables firmed by battery storage. Conclusion Once India has mastered the coronavirus pandemic, it will be time to look to a green investment-led stimulus to kick start the Indian economy. IEEFA would note the right policies and structures are largely already in place, and private capital is entirely ready to invest. The announcement of yet another record low 1.5GW solar ten - der in Abu Dhabi in April 2020 at a brilliantly low US$13.50/ MWh (15% below the price of the winning tender seen only in January 2020) is a reminder of the ongoing deflationary nature of renewable energy infrastructure. And the new Californian tender for 770MW of battery storage in May 2020 to replace existing gas-fired power plants, highlights the opportunity for India to leverage new technologies to avoid locking in expen - sive imported LNG for balancing of low cost but intermittent renewables. The call is for the Government of India to lead the way on an innovative and sustainable economic recovery that builds In- dia’s resilience and energy security, whilst also introducing energy price deflation that can kick start India’s international competitiveness of key export industries to best leverage the exchange rate weakness. 46 energetica INDIA- May_2020