Even before demonetisation struck it, the economy was barely starting to fire on all cylinders but at least one sector — electricity — was indeed looking up after long lull.
Even before demonetisation struck it, the economy was barely starting to fire on all cylinders but at least one sector — electricity — was indeed looking up after long lull. After plunging to a multi-year low of 52% in August, the capacity utilisation or plant load factor of thermal power stations improved consistently. The PLF was 60% in October, and despite demonetisation, it rose to 61% in November.
Industrial production data (IIP) released last week for October also confirmed the electricity sector’s recovery — generation saw a decent expansion of 10% in the month. Coal output, too, grew 5.5% in October, reflecting the improved electricity demand outlook. But there is an another side to the story. Even as the PLF remained at low levels for the past year or so, relatively better numbers came in from the generation front. One reason for this has been the rapidly increasing share of renewable energy segment in generation.
In April-November, generation from the sector, which includes wind power, solar and small hydro plants, jumped 28% to 54 billion units (BU) from the year-ago period. This was primarily on the account of rapid solar capacity installation, which has increased from 2,500 mega watt (MW) last year to over 8,000 MW now.
Solar power capacity is expected to reach 12,000 MW by the end of this fiscal. Additionally, since renewable-sector plants come under ‘must-run’ status under the Modi government’s tariff policy, their higher generation has impacted procurement of power from thermal plants.
As far as overall generation is concerned, it grew at an impressive rate of 15% in April 2016. But it has been on a slide since then. The growth became flat in August after falling steadily through the year. However, after clocking sub-3% growth in the subsequent months of September and October, it grew by 8% in November, led by a 6% increase in the coal-based power generation.