Indian Power Sector : Snapshot

Introduction

Power is one of the most critical components of infrastructure crucial for the economic growth and welfare of nations. The existence and development of adequate infrastructure is essential for sustained growth of the Indian economy.

India’s power sector is one of the most diversified in the world. Sources of power generation range from conventional sources such as coal, lignite, natural gas, oil, hydro and nuclear power to viable non-conventional sources such as wind, solar, and agricultural and domestic waste. Electricity demand in the country has increased rapidly and is expected to rise further in the years to come. In order to meet the increasing demand for electricity in the country, massive addition to the installed generating capacity is required.

Market Size

Indian power sector is undergoing a significant change that has redefined the industry outlook. Sustained economic growth continues to drive electricity demand in India. The Government of India’s focus on attaining ‘Power For All’ has accelerated capacity addition in the country. At the same time, the competitive intensity is increasing at both the market and supply sides (fuel, logistics, finances, and manpower).

The Planning Commission’s 12th Five-Year Plan estimates total domestic energy production to reach 669.6 million tonnes of oil equivalent (MTOE) by 2016–17 and 844 MTOE by 2021–22. By 2030–35, energy demand in India is projected to be the highest among all countries according to the 2014 energy outlook report by British oil giant, BP.

As of July 2015, total thermal installed capacity stood at 191.6 gigawatt (GW), while hydro and renewable energy installed capacity totalled 41.9 GW and 36.5 GW, respectively. At 5.8 GW, nuclear energy capacity remained broadly constant compared with the previous year.
Indian solar installations are forecasted to be approximately 2,200 megawatt (MW) in 2015, according to Mercom Capital Group, a global clean energy communications and consulting firm.

India’s wind energy market is expected to attract investments totalling Rs 1,00,000 crore (US$ 15.7 billion) by 2020, and wind power capacity is estimated to almost double by 2020 from over 23,000 MW in June 2015, with an addition of about 4,000 MW per annum in the next five years.

Investment Scenario

Around 293 global and domestic companies have committed to generate 266 GW of solar, wind, mini-hydel and biomass-based power in India over the next 5–10 years. The initiative would entail an investment of about US$ 310–350 billion.

Between April 2000 and May 2015, the industry attracted US$ 9.7 billion in FDI.

Some major investments and developments in the Indian power sector are as follows:

  • Inox Wind Ltd, a subsidiary of Gujarat Fluorochemicals, a wind energy solutions provider, plans to double its manufacturing capacity to 1,600 MW at a total investment of Rs 200 crore (US$ 31.6 million) by the end of the next financial year.
  • The Dilip Shanghvi family, founders of Sun Pharma, acquired 23 per cent stake in Suzlon Energy, with a preferential issue of fresh equity for Rs 1,800 crore (US$ 284.8 million).
  • Reliance Power Ltd signed an accord with the Government of Rajasthan for developing 6,000 MW of solar power projects in the state over the next 10 years.
  • Hilliard Energy plans to invest Rs 3,600 crore (US$ 600 million) in Ananthapur district of Andhra Pradesh in the solar and wind power sector for the generation of 650 MW of power.
  • Solar technology provider SunEdison signed a definitive agreement to acquire Continuum Wind Energy, Singapore, with assets in India. The company, headquartered in Belmont, California, would take over 242 MW of operating wind assets that Continuum owns and operates in Maharashtra and Gujarat as well as 170 MW of assets under construction.
  • Japanese internet and telecommunications giant SoftBank, along with Bharti Enterprises (of Sunil Mittal) and Taiwanese manufacturing giant Foxconn, plan to invest US$ 20 billion in solar energy projects in India.

Government Initiatives

The Government of India has identified power sector as a key sector of focus so as to promote sustained industrial growth. Some initiatives by the Government of India to boost the Indian power sector:

  • A Joint Indo-US PACE Setter Fund has been established, with a contribution of US$ 4 million from each side to enhance clean energy cooperation.
  • The Government of India announced a massive renewable power production target of 175,000 MW by 2022; this comprises generation of 100,000 MW from solar power, 60,000 MW from wind energy, 10,000 MW from biomass, and 5,000 MW from small hydro power projects.
  • The Union Cabinet of India approved 15,000 MW of grid-connected solar power projects of National Thermal Power Corp Ltd (NTPC).
  • The Indian Railways signed a bilateral power procurement agreement with the Damodar Valley Corporation (DVC). The agreement was signed between North Central Railway and DVC. This is the first time the Railways will directly buy power from a supplier.
  • US Federal Agencies committed a total of US$ 4 billion for projects and equipment sourcing, one of the biggest deals for the growing renewable energy sector in India.
  • On 20 January 2015, a Memorandum of Collaboration (MoC) was signed in New Delhi between all Indian Institute of Technology (IITs) and Oil & Natural Gas Corporation (ONGC) to work towards a collective research and development (R&D) programme for developing indigenous technologies to enhance exploration and exploitation of hydrocarbons and alternative sources of energy.
  • The Reserve Bank of India (RBI) has notified to include renewable energy under priority sector lending (PSL). Therefore, banks can provide loans up to a limit of US$ 2.36 million to borrowers for renewable energy projects.
  • The Andhra Pradesh Government plans to establish an ‘Energy University’, which would focus on research orientation and development of energy efficiency, energy conservation, and renewable sources.

The Road Ahead

The Indian power sector has an investment potential of Rs 15 trillion (US$ 237 billion) in the next 4–5 years, thereby providing immense opportunities in power generation, distribution, transmission, and equipment, according to Union Minister Mr Piyush Goyal.

The government’s immediate goal is to generate two trillion units (kilowatt hours) of energy by 2019. This means doubling the current production capacity to provide 24×7 electricity for residential, industrial, commercial and agriculture use.

The government had revised the National Solar Mission with the electricity production target of 100,000 MW by 2022. The government has also sought to restart the stalled hydro power projects and increase the wind energy production target to 60 GW by 2022 from the current 20 GW.

Exchange Rate Used: INR 1 = US$ 0.016 as on July 14, 2015

References: Ministry of Power, Press Information Bureau, Media Reports, BP Energy Outlook 2035 

Source : Indian Brand Equity Foundation, August 2015

URL : http://www.ibef.org/industry/power-sector-india.aspx

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