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Retail power prices not high enough to be profitable

According to reports, at a time when energy is one of the top priority sectors for the in-coming Modi government, US-based Institute for Energy Economics and Financial Analysis (IEEFA) has suggested that the retail electricity prices in India are considerably lower than the level required for the profitable generation of imported coal-fired power, particularly when that coal is sourced from isolated deposits with none of the required infrastructure.

“Many of India’s huge power plants have been unable to source discounted domestic Indian market supplies of coal. This leaves two equally unappealing options – operating well below designed utilisation rates, and/or sourcing significantly more expensive imported coal,” IEEFA said.

Significantly, IEEFA is of the view that wind, solar and hydro facilities can be built faster at lower PPAs. Additionally, the use of renewable energy incorporates a zero fuel cost, such that there is an inbuilt deflationary driver, that is, zero indexation.

Given the recent drive by the RBI to prioritise sustained reduction in inflation, renewables support a series of GoI/ RBI targets. Importing thermal coal achieves none of these goals, and more likely contradicts them, the report said.

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