Understanding India’s Power Sector Surge and Investments!

In India, the summer season often brings about significant power cuts, driven by the surge in demand as citizens turn on air conditioners and coolers to combat the scorching heat. In recent years, the power supply has struggled to meet this heightened demand during the summer months.

However, it appears that the government has learned from past challenges and is taking proactive measures to meet the country’s power demand in the upcoming summer of 2024 by building substantial coal stocks.

This article delves into the government’s action plan to address the potential demand-supply gap in power during the approaching summer and explores investment opportunities in the power sector.

What’s Happening?

India experienced a peak power demand of 239.9 GW on September 1, 2023, fueled by extended summers and delayed monsoons. The increasing power demand, coupled with impending general elections, has motivated the government to ensure a reliable power supply.

While renewable energy sources gain traction, thermal power continues to play a significant role in the country’s overall power generation. To coexist with renewable sources and meet the growing power demand, the government aims to ensure an adequate supply of coal for thermal power generation.

What’s the Action Plan?

Coal Secretary Amrit Lal Meena reveals that coal stocks, as of April 1, 2024, will reach 125 million tonnes, a 9% increase from the previous year. Coal stocks at power plants alone are projected to be 40 million tonnes by the end of FY24, an 18% increase from FY23 figures.

In anticipation of rising power demand, domestic coal-based power plants are mandated to blend 10% imported coal until March 2024, with imported coal-based plants operating at full capacity until June 2024. Increased rake availability for coal transport is reducing the need for coal imports for blending.

What’s in it for Investors?

Investors may consider tracking companies like Coal India, NLC India and thermal power generators/transmitters such as NTPC and PowerGrid Corporation.?

Coal India is ambitiously chasing its production and offtake targets. For April-December 2023, the company’s production grew 11%, and offtake grew 9% versus the same period last year. For FY24 and FY25, the company has a production target of 780 MT and 850 MT, respectively, which indicates confidence in the demand prospects.

Coal India is aggressively pursuing production and offtake targets, showing confidence in demand prospects. NLC India focuses on lignite mining and power generation, while NTPC serves as a proxy play for both thermal and renewable power generation. PowerGrid Corporation could benefit from the one-nation, one-grid policy, requiring storage and transmission infrastructure.

What’s Next?

The Central Electricity Authority (CEA) predicts a peak power demand of 256 GW in 2024-25. State-run coal companies have increased production, with cumulative coal production reaching 684.31 million tonnes this fiscal year, a 12.47% increase from the previous year. The government aims to surpass the 1 billion tonne mark in coal production this fiscal year.

In conclusion, balancing both thermal and renewable energy sources is crucial in the medium term. Investors should keep a close eye on both sub-segments within the power sector for potential opportunities.

That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!

*The companies mentioned in the article are for information purposes only. This is not an investment advice.

*Disclaimer:?Teji Mandi Disclaimer