1. Home
  2. India
  3. Electrified response: Installed capacity expected to rise to 1,100 GW in 2040; brighter road ahead
Electrified response: Installed capacity expected to rise to 1,100 GW in 2040; brighter road ahead

Electrified response: Installed capacity expected to rise to 1,100 GW in 2040; brighter road ahead

38
0

Three years ago, the power ministry faced a sector that was grappling with multiple challenges: an acute shortage of domestic coal supplies, a perceived lack of transparency of their allocation and the deteriorating health of the State Electricity Distribution Companies (DISCOMs). Not addressing these issues on priority could have posed a big question-mark on the future viability of the existing and new investments in the sector. The different initiatives over the past three years have led to a significant transformation. The accelerated pace of generation capacity addition over the past few years has led to the electricity supply potential being greater than the economic demand, a scenario that has not been witnessed before. Enhanced policy focus on climate change, energy security concerns, etc, have also led to a changing energy mix due to which the penetration of renewable electricity has increased. At 57GW of installed capacity, share of renewable energy is at 18% and is expected to increase significantly in the coming years, with solar as the biggest driver. New capacity addition in the solar space is expected to touch 8.8 gigawatt (GW) in 2017, which will make India the third biggest solar market in the world. The total installed capacity in the space has more than quadrupled in the last three years from around 2.6GW to almost 12.3 GW currently. Private sector is a big participant in this transformation and there has been an impressive reduction in the bid tariffs as a result of careful structuring and transparency, for which the government deserves credit.
In addition, with over 1,800 circuit kilometers of transmission lines commissioned during 2017-18 (as of April 2017), the sector witnessed increase by nearly 36% in transmission capacity, from 5,30,546 MVA in March 2014 to 7,47,810 MVA in May 2017. In terms of rural electrification, 13,000 villages electrified out of a total of 18,452, which accounts for about 74%. The current government’s performance, thus, is a praiseworthy achievement in this regard. Simultaneously, domestic coal supplies have also improved resulting in a limited need for imported coal benefitting India’s current account deficit. This is a noteworthy achievement as no plant has reported generation losses due to non-availability of coal in 2016. As per the International Energy Agency (IEA), coal will continue to be mainstay for power generation in India till 2040. It is estimated that India will be one of the main drivers for global coal demand. Earlier this year, global rating agency Moody’s changed the rating for India’s power sector from negative to stable. The primary reason for this was improved coal production which was estimated to ease fuel supply constraints. Coal availability for the power sector under e-auction has also improved significantly; the relative price gap between linkage and e-auction coal has narrowed down and has become more affordable. The e-auction process started by the government has streamlined government contracts and following a digitised mechanism has created an accountability trail. The most pressing challenge in the sector continues to be the financial stress in distribution companies, which creates a stress in the system that goes all the way up the value chain. The UDAY scheme in this aspect has been progressing well. The weak health of discoms and lower economic activity has resulted in a steep fall in the plant utilisation levels from the mid 70% levels in year 2011-12 to almost 60% levels in the year 2016-17.
The PLF of the private sector—which took a lead role in capacity addition—is dangerously close to the techno-economic viability threshold. Additionally, the stranded capacities for thermal assets have reached 46,000 MW, which is alarming and a threat to future investments. However, the recent steps taken by the government in this direction seem promising. Moreover, industry reports suggest that UDAY scheme has already managed to yield a savings of nearly Rs 12,000 crore with a sharp reduction noted in revenue losses up to 60% in some cases. As per Rural Electrification Corp., bonds worth Rs 2.3 trillion have been issued to refinance 85% of the total distribution utility debt to be restructured (as on September 30, 2015) leading to less rate of interest for discoms. The power ministry has set a target of 1,229.4 BU to be generated in FY18. It is important to note that energy shortages have reduced from 2,428 million units (4.2%) in 2014 to 7,459 MU in 2017 (0.7%), while peak energy shortage have reduced from 4.5% to 1.6% in 2017. With the installed capacity expected to surge to nearly 1,100 GW in 2040, which is the same as that of Europe’s present capacity, the roadway ahead seems brighter and greener for India.

Source:FinancialExpress
Anand Gupta Editor - EQ Int'l Media Network

LEAVE YOUR COMMENT

Your email address will not be published. Required fields are marked *