BTG Equipment Industry India – A Review

CEA does not foresee any immediate requirement for new coal power plants till 2027. If indeed things pan out as per the forecast, it can spell trouble for equipment suppliers in the capital goods sector, especially in the industry-boiler, turbine generator and related segments.

The electrical equipment industry plays a key role in the Indian economy, providing direct employment to more than half a million persons and indirect employment to over a million. In the recent years, the electrical equipment sector has witnessed sluggish growth owing to the decline in domestic demand and increase in imported products.

Boilers, turbines and generator (BTG), a part of heavy electrical equipment market, are primarily used for generating electricity in thermal power plants. Few years back, Bhel was the only domestic BTG manufacturer, but now there are five private companies which have joined hands with foreign companies, while more than two dozen companies are operating in the EPC segment.

As country, shifts its portfolio from thermal to renewable in terms of capacity generation, the shift is also observed in terms of investment in the thermal and renewable space respectively. With India, completely witnessing drying up of orders from private project developers, the thermal power generation looks to be a dicey proposition for OEMs in the country. In this regard, it was quite essential to spot the silver lining in the current dynamics of thermal power generation for the OEMs to sustain and develop their respective business model.

India’s current installed capacity of around 315 GW has still a fair share of thermal power plants based on coal which accounts for sufficing the base load of the country. Although, India is cognitive of the global trend of gradually wishing away with polluting source of coal based electricity generation, but completely stripping of these capacities shall not be possible for one of the fastest growing economies of the world.

Looking at the demand and planned infrastructure and industrial growth in India, coal will continue to be the prime source of capacity generation supporting the base load power requirements of the country. However the new emission norms, for coal-based thermal power plants in India, introduced limits on oxides of nitrogen emissions. This move has made Indian emission norms one of the most stringent in the world. The new norms have called for mandatory installation of SCR systems in upcoming power plants, including those currently under construction and many existing power plants.  Fortunately, to deal with the emission issues the government is working in line to make coal a cleaner fuel by replacing the old power plants with new ones, hence high efficiency on the generation front.

Further, in order to encourage the domestic manufacturing, government mandates state-run generators to insist on phased domestic manufacturing plan from supercritical equipment suppliers. In addition, the (CEA) advisory on indigenous manufacturing of supercritical equipment could lift profitability of domestic boiler turbine generator manufacturers. Also the government is working on a plan to shut down 25-40 GW of old highly polluting thermal power plants and set up new coal based super-efficient power projects.

The draft national electricity plan of the Central Electricity Authority (CEA) sounds like beginning of the end for thermal power capacity addition in India. Given the massive capacity addition plans in the renewable sector, CEA estimates there is no requirement for new coal plants in 2017-22.

Based on demand projections, CEA estimates new coal-based capacity requirement of 44,085 megawatts (MW) in 2022-27. But with 50,025MW of coal power projects already in different stages of construction and likely to yield benefits in 2017-22, the agency does not foresee any immediate requirement for new coal power plants.

If indeed things pan out as per the forecast, it can spell trouble for equipment suppliers in the capital goods sector, especially in the industry-boiler, turbine generator and related segments.

Bharat Heavy Electricals Ltd (Bhel) is estimated to have manufacturing capacity for power equipment of 20,000MW a year. Apart from this, several domestic firms have joint ventures (L&T-MHI, Alstom-Bharat Forge, Toshiba-JSW, Gammon-Ansaldo, Thermax-Babcock and Wilcox, BGR Hitachi) with indigenous manufacturing capacity for supercritical boilers at 16,200MW and supercritical turbine generators at 14,000MW, CEA says.

With most firms already strapped for orders, a dearth of new coal power plants can have an adverse impact on equipment suppliers. However, some of the industry experts feel that with a substantial number of thermal plants getting old and recommended for retirement or modernization, refurbishment and efficiency improvement orders will come to the rescue of some of them.

As per estimates around 30,000MW of thermal plants in the country are old and require refurbishment or modernization. The opportunity can generate an annual business of around Rs. 25,000 crore for five years. However, industry analysts are of view that firm like BHEL which has historical ties with state utilities, may be better placed for this business opportunity while other firms, with only manufacturing capability and limited access to technology, may be forced to look overseas for business.

Conclusion:

Coal based thermal power generation is quite essential for India, especially amidst the growing energy demand of the country. Undoubtedly with the impetus on greener source of generation, India as a country is poised to witness magnanimous changes in power capacity additions through RE sources. However, the fact that India needs massive power and through big capacities of individual power plants puts the thermal power generation through coal as a lead contributor for coming decade safely. Having said that arguably, by 2020  experts believes that thermal power is destined to roll back into generation mix of the country and in all possibilities fresh UMPPs which have hit a road block may witness announcements sooner than later. Hence, preparedness for OEMs shall be of pinnacle importance.

Although, the need for a growing economy like India is to curb the carbon emissions coupled with increased efficiencies of the thermal generation. This will not be achieved unless there is a migration observed from sub-critical power generation to supercritical power generation technology facilitating better plant efficiency and lower emissions with higher capacity addition (as SuPC plant is in excess of 660 MW per unit). Hence, despite country’s Paris commitment to reduce carbon influx, India has to be dependent on coal till 2030 for meeting of its consistent base load.

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