In recent years, the Indian power sector has been considerably empowering the Indian economy in achieving the rank of the fastest growing economy globally. Sustained economic growth continues to drive electricity demand in India and the industry outlook has been undergoing a significant change in its outlook. Besides, the focus of the Government of India on attaining ‘Power for all’ has accelerated capacity addition in the country and the total installed capacity of power stations in India has been estimated at 343,789 Megawatt at the end of April 2018. This has been possible because of ambitious targets set by the Ministry of Power and accomplished by the industry. The target of 1,230 billion units (BU) of electricity to be generated in the financial year 2017-18 set by the Ministry of Power was thus has 50 BU’s higher than the target for 2016-17.
Through the timely initiatives taken by the Government of India, the power sector now enjoys a good balance of conventional energy and renewable energy. Against the installed capacity of 343,789 MW, the thermal sector holds the major share of 222,693 MW, of which, the coal based units account for 196,958 MW. The oil based units represent only 838 MW and hydropower is at 45,293 MW. Renewable energy accounts for 69,022 and nuclear power make up the remaining 6780 MW. In fact, the annual growth rate in renewable energy generation has been estimated to be 27% and 18% for conventional energy in 2017-18 and the cumulative installed capacity of solar power has reached 7,149 MW in the first nine months of 2017, covering more than one-third of total new power capacity addition.
In the context of the progress made in the capacity addition power sector there has, however, been a set back in the generation of power by the coal based units due to non availability of coal and this needs to be urgently sorted out by the Ministry of Coal, Ministry of Railways and the Ministry of power. Besides in respect of generation of hydroelectricity there has been a shortfall from the target.
There is no doubt that our country is leapfrogging in its targets for energy development, beyond installed capacity and generation, the perspectives for the industry is not as bright because of the cost of energy in India. There is an urgent need to arm our manufacturing sector with competitive strength by supply of power as per global bench marks of costs. This will significantly catalyse FDI. Clean energy cess charged on coal purchase for power consumption has doubled year-on-year since 2015, thereby increasing the cost of thermal power generation. Government’s policy directly and indirectly subsidises renewable generation. This is in turn decreasing the relative competitiveness of conventional generation.
Besides, massive finance still needs to be provided to meet the high targets installed capacity of renewable energy. Similarly, electricity distribution companies will have to rise to the occasion by introducing reforms to support renewable energy. Grid stability and changes in infrastructure, as well as forecasting and scheduling for renewables, will also be important factors in determining the pace of India’s transition in the power sector.
Bharat Chamber of Commerce would like to emphasise that while support for renewable generation is critical to ensure that India meets its 2022 renewable targets, policy support is also required for conventional generation assets that would potentially be impacted by the push for renewables so that both contribute simultaneously in ensuring the stability of the grid.