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Saturday, 10 July 21
OVERESTIMATED LCOES OF COAL-FIRED POWER PLANTS CREATE A FINANCIAL BUBBLE - IEEFA
 Massive stranded asset risk detrimentally affects the financial and power distribution
India’s future coal-fired power project pipeline carries a massive stranded asset risk due to the collapse in the average utilisation rate of its coal-fired power fleet leading to an underestimation of financial risk for new projects, finds a new report from the Institute for Energy Economics and Financial Analysis (IEEFA).
There are currently 33 gigawatts (GW) of coal-fired power plants under construction and another 29GW of proposed projects under various stages of regulatory approval in India.
Author of the report, energy finance analyst Kashish Shah says the LCOE (levelised cost of energy) is the required tariff at which the net present value of the investment is zero.
“In other words, LCOE is the minimum required average tariff for a power asset to reach a breakeven return at the end of its life. Anything less than that suggests the asset is unviable.”
Shah found that the average utilisation rate of India’s coal-fired fleet has collapsed to a financially unsustainable low of 53% in financial year (FY) 2020/21 from a high of 78% a decade ago in FY2011/12.
For most coal plants in India, the LCOE is calculated with an assumption of utilisation factor of 85-90% throughout the life of the project. However, the LCOE turns out to be 64% higher with India’s average capacity utilisation factor sitting at ~55% for the last few years.
“The aspiration for further builds of coal capacity stems from the notion that coal is still ‘cheap’,” says Shah. “However, with tariffs now below Rs2/kilowatt hour (kWh) (US$27/MWh), solar power is cheaper than even the variable cost of coal-fired power and is ready to absorb incremental daytime demand.”
IEEFA’s report highlights that utilisation factors of coal-fired power plants have declined not just in India, but across major electricity markets including China, the United Kingdom (UK) and the United States (U.S.).
“With zero fuel costs, the marginal cost of generation for renewables is practically zero,” says Shah. “On the other hand, with increasing inflation in Indian domestic coal prices and railway transportation costs for coal, the gap between cost competitiveness of renewables versus coal is widening.
“This raises a serious concern about the viability of coal-fired power plants.
“Debt servicing for underutilised coal-fired power assets becomes extremely difficult and creates a liquidity crunch in the whole value chain. The financial stress then spills over to the power distribution sector as well as affecting India’s financial lending institutions. This further inhibits growth in other important segments of the power industry such as renewables and transmission infrastructure, which are extremely critical for India’s electricity sector transition.”
The report concludes that the financial viability of India’s proposed and under construction coal-fired power projects should be re-evaluated based on the right estimation of utilisation factors including LCOE and capacity factor to avoid further bloating of India’s non-performing assets.
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Wednesday, 28 April 21
MARKET INSIGHT - INTERMODAL
Despite the current challenges as a result of the global pandemic, 2021 is turning out to be a landmark year for the iron ore market with spot pric ...
Monday, 26 April 21
CHINA TO FURTHER CUT COAL USE IN 2021 - XINHUA
China aims to reduce the share of coal in its energy mix to less than 56% this year, according to a guideline released by the National Energy Admin ...
Wednesday, 21 April 21
COAL FINANCING COSTS HAVE SURGED IN PAST 10 YEARS - UNIVERSITY OF OXFORD - THE GUARDIAN
Coal financing costs have surged over the last decade as investors demand returns four times as high as the payoff required from renewable energy p ...
Tuesday, 20 April 21
US DOLLAR LIBOR TRANSITION IN ASSET FINANCE - WHERE ARE WE NOW? - WATSON FARLEY & WILLIAMS
Since our last article, there has been a raft of regulatory and market body announcements relating to the transition away from LIBOR and the follow ...
Sunday, 18 April 21
INDONESIA LIKELY TO WITNESS 119 OIL AND GAS PROJECTS STARTS ACROSS VALUE CHAIN BY 2025, SAYS GLOBALDATA
Indonesia is expected to witness 119 oil and gas projects commencing their operations across value chain during 2021-2025, accounting for 6% of the ...
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- Iligan Light & Power Inc, Philippines
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- Energy Development Corp, Philippines
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- Attock Cement Pakistan Limited
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- Grasim Industreis Ltd - India
- The State Trading Corporation of India Ltd
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- Wood Mackenzie - Singapore
- Formosa Plastics Group - Taiwan
- Renaissance Capital - South Africa
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- Indonesian Coal Mining Association
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- Coal and Oil Company - UAE
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- Australian Coal Association
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- European Bulk Services B.V. - Netherlands
- Samtan Co., Ltd - South Korea
- Economic Council, Georgia
- White Energy Company Limited
- Bulk Trading Sa - Switzerland
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- Bukit Baiduri Energy - Indonesia
- Star Paper Mills Limited - India
- Metalloyd Limited - United Kingdom
- Orica Australia Pty. Ltd.
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- Indian Oil Corporation Limited
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- Ministry of Mines - Canada
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- SMG Consultants - Indonesia
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- Petrochimia International Co. Ltd.- Taiwan
- Australian Commodity Traders Exchange
- Medco Energi Mining Internasional
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- Central Electricity Authority - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- IHS Mccloskey Coal Group - USA
- Sindya Power Generating Company Private Ltd
- Energy Link Ltd, New Zealand
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- Leighton Contractors Pty Ltd - Australia
- Orica Mining Services - Indonesia
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- Directorate General of MIneral and Coal - Indonesia
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- Xindia Steels Limited - India
- Jaiprakash Power Ventures ltd
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- Commonwealth Bank - Australia
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- Asmin Koalindo Tuhup - Indonesia
- SMC Global Power, Philippines
- Maharashtra Electricity Regulatory Commission - India
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- The University of Queensland
- International Coal Ventures Pvt Ltd - India
- ICICI Bank Limited - India
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- Indian Energy Exchange, India
- Bhushan Steel Limited - India
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- Gujarat Mineral Development Corp Ltd - India
- IEA Clean Coal Centre - UK
- LBH Netherlands Bv - Netherlands
- Africa Commodities Group - South Africa
- Billiton Holdings Pty Ltd - Australia
- Makarim & Taira - Indonesia
- Antam Resourcindo - Indonesia
- Dalmia Cement Bharat India
- Rashtriya Ispat Nigam Limited - India
- Cement Manufacturers Association - India
- Coalindo Energy - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Semirara Mining and Power Corporation, Philippines
- Directorate Of Revenue Intelligence - India
- Kapuas Tunggal Persada - Indonesia
- Posco Energy - South Korea
- Tamil Nadu electricity Board
- MS Steel International - UAE
- Alfred C Toepfer International GmbH - Germany
- Bayan Resources Tbk. - Indonesia
- Sical Logistics Limited - India
- Ministry of Transport, Egypt
- Ind-Barath Power Infra Limited - India
- Parliament of New Zealand
- San Jose City I Power Corp, Philippines
- Standard Chartered Bank - UAE
- Altura Mining Limited, Indonesia
- Central Java Power - Indonesia
- Lanco Infratech Ltd - India
- Indika Energy - Indonesia
- Savvy Resources Ltd - HongKong
- Thiess Contractors Indonesia
- Planning Commission, India
- CIMB Investment Bank - Malaysia
- Kaltim Prima Coal - Indonesia
- London Commodity Brokers - England
- Intertek Mineral Services - Indonesia
- GVK Power & Infra Limited - India
- TeaM Sual Corporation - Philippines
- Price Waterhouse Coopers - Russia
- Merrill Lynch Commodities Europe
- Ministry of Finance - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Timah Investasi Mineral - Indoneisa
- CNBM International Corporation - China
- Meralco Power Generation, Philippines
- Electricity Authority, New Zealand
- The Treasury - Australian Government
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- TNB Fuel Sdn Bhd - Malaysia
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- AsiaOL BioFuels Corp., Philippines
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- Gujarat Sidhee Cement - India
- Ceylon Electricity Board - Sri Lanka
- Bukit Makmur.PT - Indonesia
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- Banpu Public Company Limited - Thailand
- Vijayanagar Sugar Pvt Ltd - India
- Chamber of Mines of South Africa
- Siam City Cement - Thailand
- Coastal Gujarat Power Limited - India
- Kohat Cement Company Ltd. - Pakistan
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