Power Sector Analysis

Introduction:-
With India looking rapidly at Industrialization and urbanization over the next
decades, the demand for power in the country is definitely going to
increase. There has been improvement power generation in the country in the
last few years. In June 2017, the Minister of Power announced that India has
become a power surplus country, with no shortage of electricity or coal.
Currently, India produces a majority of energy from thermal sources. With
solar and wind power becoming cheaper, cleaner sources of energy have also
become affordable.
India is currently the 4th largest consumer of energy, whereas in terms of
electricity generation it ranks no. 5th in the world. Power sector is the
backbone of industrial, commercial and agricultural sector and as Indian
industries across sectors ramped up their capacities in the decade gone by,
generation of power as well as its distribution gained immediate attention
from the authorities to support India’s growth story. The Power sector in India
is categorized into three major segments that is Generation, Transmission and
Distribution.

Current Scenario:-
Indian power sector developments is not only from generation and
transmission capacity addition, but also from the distribution reforms. The
total installed power generation capacity of India as on 31 March 2018 was 344
GW, of which 45% is contributed by the private sector. The major growth has
been witnessed in renewable source with capacity reaching to 69,022 MW.
During FY18, renewable capacity surpassed conventional sector addition to the
total generation capacity. The energy generation observed 6.1% growth to
reach at 1,203 Bn Units as compared to previous year’s generation of 1134 Bn
Units. Transmission capacity addition was 23,119 ckms as against a target of
23,086 ckms. However, despite the capacity addition in generation and
transmission there was a slight increase in the peak deficit situation from 1.6%
to 2.0% during FY18. The Energy deficit remained constant at 0.7% during FY17
and FY18. The market witnessed higher liquidity and greater depth, with more
participants than previous years.
In FY20 (as of Sept’19), total thermal installed capacity in the country stood at
228.60 GW, while renewable, hydro and nuclear energy installed capacity
totalled to 81.33 GW, 45.39 GW and 6.78 GW, respectively. By 2022, India has
set a target to achieve total production 175 GW from renewable resources out
of which 100 GW will be produced from solar power. As a part of the green
corridor project, the power lines would transmit 20 giga watts of power
capacity from 34 solar parks across 21 states. In August 2018, KfW a German
based financial institution signed a US$ 228.15 million loan agreement with
India’s Rural Electrification Corporation Limited (REC) to provide low interest
loans to renewable energy project developers.

Government Schemes:-
On the policy and regulatory front, the Government and Regulatory bodies
continued the reform process for improvement in efficiency in various aspects
of power supply. Government of India launched “Pradhan Mantri Sahaj Bijli
Har Ghar Yojana (SAUBHAGYA)” to achieve universal household electrification
in the country. Under UDAY scheme for financial and operational improvement
of Discoms, bonds have been issued by various States for a total amount of Rs
2,321.6 billion. Ministry of New and Renewable Energy (MNRE) launched
competitive bidding for procurement of power from wind projects and so far
bidding for more than 6,000 MW has taken place in four phases.

 In further development for making coal allocation more transparent,

Scheme for Harnessing and Allocating Koyala (Coal) (SHAKTI) was
launched through which allocation of linkages for power sector shall be
based on auction of linkages or through Power Purchase Agreement (PPA)
based on competitive bidding of tariffs except for the State and the Central
Power Generating companies, and the exceptions provided in Tariff Policy,
2016. Coal drawal will be permitted against valid Long Term PPAs and to
be concluded Medium Term PPAs. The sector also witnessed emphasis on
transparency through various web/mobile applications and digitization of
competitive bidding through MSTC platform for short and medium term
power procurement.
 Government’s thrust on renewable energy with core focus on solar power
dominated the power sector in the fiscal year 2018. The government has
planned to add 175 GW of renewable energy by 2022 and increase the
 share of renewable energy to power at 40% by 2030. It is also anticipated
that India’s peak demand for power will increase from current level of 153
GW to 226 GW by 2021-22 and 299 GW by 2026-27. Considering the
demand projections and likely retirement of 22.7 GW of capacity, total
capacity addition of 175 GW, including 47.8 GW of coal-based power
projects currently under construction is envisaged in the period 2017 to
2022. Similarly, for the period 2022 to 2027, another 175 GW of capacity
addition and retirement of 25 GW have been envisaged.
 However, solar power tariffs continue to trade at levels higher than
thermal power tariffs. Tariffs in some of the agreements that State
Electricity Boards (SEBs) have signed with renewable developers are as high
as Rs 7 per unit. Burdened with a huge pile of losses, the SEBs are
increasingly shifting to purchase cheaper power from the power exchanges
wherein the spot price is hovering somewhere around Rs 2.68 per unit. This
puts into jeopardy the massive renewable projects that are scheduled to
come up going forward. Solar power offtake is already seeing curtailment
in the state of Rajasthan and Tamil Nadu.
 Average transmission and distribution losses (T&D) exceed 22% of total
power generation. India’s T&D losses are almost 2.5 times the world
average. The T&D losses are due to variety of reasons viz., substantial energy
sold at low voltage, sparsely distributed loads over large rural areas,
inadequate investment in distribution system, improper billing, and high
pilferage.
 Lack of coal supply was a major hurdle in the power sector till some time
back. Majority of power generation takes place through thermal power
plants which uses coal as its raw material. However, with e-coal auctions
coming in the picture, this problem seems to have been resolved
considerably. Major players in the generation space were sitting on
sufficient inventories of coal as at the end of the previous fiscal year.
 Presently, major concern for the power generators is the off-take of
electricity. Power generators sell power to SEBs or DISCOMs. SEBs are facing
financial crisis and are suffering losses to the extent of Rs 700 billion
annually. The SEBs do not have enough resources to purchase power from
the generators. Hence a situation has risen wherein there is excess of power
but no takers for the same.
Key Trends:-
The power Industry is constantly transforming due to the adoption of latest
technologies, which make power supply even more convenient and easily
accessible for customers. Here are a few revolutionary trends in the energy
industry that you need to gear up for:
 Distributed Generation
Generating power through own sources such as roof-mounted solar panels,
gas-fired combined heat, power plants, and conventional diesel-based
generators are becoming popular among industrial, commercial, and even
residential consumers. These users have the option to sell power to the
electric supply grid. Distributed generation utilizes small-scale technologies to
produce electricity. Each of these sources might contribute lesser power when
compared to the energy generated by centralized power plants, but combining
energy from these sources will be a game changer in the energy industry.
 Natural Gas and Coal:-
Coal and other hydrocarbon fuels were considered the go-to-fuel for power
generation in the past. However, in countries like the US, there was a rise in
the demand for gas over coal in the power sector owing to the fall in the prices
of natural gas in the recent past. The dependence on natural gas is expected to
grow. However, the demand for coal is likely to reduce in the energy industry
due to sustainability challenges.
 Renewable Energy
The prices for renewable sources are gradually falling; this would help to
accelerate the growth and demand for renewable sources. The wind and solar
industries are the prominent contributors of renewable energy. In the US,
California and New York state policies incentivize renewables; due to which,
the use of renewable energy will continue to grow.
 Going Digital
The role of technology in the energy industry cannot be underestimated.
Digitization has made power generation, transmission, and distribution
increasingly simple. As power plant managers have recognized the role of
digitization in optimizing operations and reducing unplanned outages, the
demand and popularity of digital technology in the energy industry is growing
exponentially.
 Tentative Return Of Nuclear
Though nuclear disasters in several parts of the world had stalled
developments in the nuclear power plants, countries like US and Japan are re-
looking at opportunities in nuclear power. The power generation technology
through nuclear sources is unique and popular among environmentalists
because they generate an enormous amount of power around the clock with
minimum carbon emissions.