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India is home to about 350 million people who lack access to electricity. Lack of reliable power continues to be a major constraint to sustained industrial growth, investment, and economic competitiveness for the country. Electricity shortages are estimated to cost the country around 7% of its Gross Domestic Product (GDP). Electricity generation has grown at an average of 5.3% per year.

India has made great steps in raising access to electricity. More than 13 crore people have joined the power grid since 2013. Government initiatives like 24x7 power, power to all households by March 2019 and Ujjwal DISCOM Assurance Yojana (UDAY) along with initiatives that include linking of Deviation Settlement Mechanism (DSM) prices to DAM prices have helped the sector witness robust growth.

In 2018, power demand increased by 8% to reach 177GW. However, the coal supply chain has tightened up. While addressing a press conference in June, 2018, R.K Singh, Union Minister of State for Power and Renewable Energy said, “India’s current renewable-based power capacity stands at 70GW and we will cross the 175GW target well before 2022. We have new schemes that involve offshore wind and floating solar mechanisms which will help us to over-achieve the current target.”

On complaints of coal shortage by power plants, Singh said that there was pressure on coal-based power generation as other sources were not operating at the optimum level. He added, “Hydro-capacity is not up to the mark as snow melting has been slow. So, wind is the resource that is helping us during peak demand. Power demand has increased and that is a good sign.”

Electricity demand in the country has increased rapidly and is expected to rise further in the years to come. Electrification is increasing with the support of the government schemes like Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY) and Integrated Power Development Scheme (IPDS). The government has also delicensed the electrical machinery industry and allowed 100% Foreign Direct Investment (FDI) in the sector. India’s power sector is placed to attract investments worth Rs. 11.56 trillion between 2017 and 2022 in thermal, hydro, nuclear and renewable segments.

A report said that private power producer Tata Power will lead the nation’s renewable energy transition with gradual withdrawal from building new coal fired power plants. The report’s author, Simon Nicholas, an Energy Finance Analyst at Institute for Energy Economics and Financial Analysis (IEEFA), said in a statement that Tata Power’s focus on renewable makes sense, given the major energy transformation occurring in India at present. He said referring to Tata Power, “The company’s ‘Strategic Intent 2025’ plan calls for up to 70% of new capacity additions to come from solar, wind and hydro through to 2025.” He also added, “This represents a significant departure from the accepted wisdom of just a few years ago that a major expansion of coal-fired power would be required to serve India’s growing electricity demand.”

The government’s thrust on renewable energy with core focus on solar power dominated the power sector in the 2018 fiscal. The government has planned to add 175GW of renewable energy by 2022 and increase the share of renewable energy to power to 40% by 2030. 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. Hence, 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. Solar power offtake is already seeing curtailment in the state of Rajasthan and Tamil Nadu.

India’s rapid growth over the past decade increased power demand and much of this has remained underachieved. With the robust outlook of the sector, it is expected that India will see foreign participation in the development and financing of generation and transmission assets, engineering services, equipment supply, and technology partnership in nuclear and coal technologies going forward.