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, according to a 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 29 GW of proposed projects under various stages of regulatory approval in India.
Energy finance analyst Kashish Shah says the levelised cost of energy (LCOE) is the required tariff at which the net present value of the investment is zero. 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 per cent in the financial year 2020-21 from a high of 78 per cent a decade ago in FY2011-12.