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SCMHRD

The Future of the Power Sector


An Analysis

Tushar Alva
Roll No-2009A06
Executive Summary

 The electricity sector in India is predominantly controlled by Government of India's


public sector undertakings (PSUs) but the private sector is also catching up fast.

 India is world's 6th largest energy consumer, accounting for 3.4% of global energy
consumption. Due to India's economic rise, the demand for energy has grown at an
average of 3.6% per annum over the past 30 years. In March 2009, the installed power
generation capacity of India stood at 147,000 MW while the per capita power
consumption stood at 612 kWH. The country's annual power production increased
from about 190 billion kWH in 1986 to more than 680 billion kWH in 2006.

 India faces a serious shortfall in power generation. During the tenth plan, only 23,000
MW of capacity was added against the original target of 41,000 MW. During the 11th
plan, a target of 78,000 MW has been set.

 Anil Kakodkar, Chairman, Atomic Energy Commission, India had estimated that the
per capita electricity generation would reach about 5300 kWh per year in the year
2052 and total about 8000 TWh.

 The Government of India has an ambitious mission of „POWER FOR ALL‟ BY 2012.
This mission would require that the installed generation capacity should be at least
200,000 MW by 2012 from the present level of 144,564.97 MW. Power requirement
will double by 2020 to 400,000MW.

 The ratio of energy generation and GDP growth should be 1:1. The growth in
electricity consumption over the past decade has been slower than the GDP‟s growth.
This could be due to high growth of the services sector or it could reflect improving
efficiency of electricity use. Moreover, captive generation has also increased.
However, as growth in the manufacturing sector picks up, the demand for power is
also expected to increase at a faster rate.

 A new era of power on power competition will emerge by 2014 that will bring in at
least 80-85 GW of new capacity - 80- 90% of them thermal units targeting high PLF
of 80-95% - reducing the base load deficit to a low of 1-2%. Accordingly, we expect
pricing pressures in the generation space and a 40-50% decline in average short
term/merchant prices by 2014-15.

 Renewable sources of energy and nuclear energy which are clean sources of energy
usage is on the upswing and would contribute heavily in the times to come.

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Contents

1.Introduction ............................................................................................................................... 4
2.The metrics for the Power sector: ............................................................................................... 7
3.Government Initiatives ............................................................................................................... 8
3.1 Objectives ............................................................................................................................ 8
3.2 Strategies ............................................................................................................................. 8
4. Sector Specific Opportunities: .................................................................................................... 8
4.1 Coal ..................................................................................................................................... 8
4.2 Oil ........................................................................................................................................ 9
4.3 Natural Gas .......................................................................................................................... 9
4.4 Hydro Power ........................................................................................................................ 9
4.5 Wind Energy ...................................................................................................................... 10
4.6 Solar Energy ....................................................................................................................... 10
4.7 Nuclear Energy ................................................................................................................... 11
5.Funding Trends in the power sector .......................................................................................... 11
6.Forecast of sectorial electricity demand: Econometric models .................................................. 11
7. Conclusion ................................................................................................................................... 13
7.1 Power Sector SWOT Analysis.................................................................................................. 13
7.2 Predictions............................................................................................................................. 14
8. Annexure: ................................................................................................................................ 14
9.Bibliography: ............................................................................................................................ 23

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The Future of Power Sector in India
The Future of the Power Sector in India

1.Introduction
Power as such is not traded as a commodity and is the most essential ingredient to provide the
most critical infrastructure for all other sectors to work. The Power generation in India has
constantly grown to 150,323 mw as on June, 2009. But this is not even comparable in any
standard with per capita consumption of world average of 2,300 Kwh.

The growth in electricity consumption over the past decade has been slower than the GDP‟s
growth. This could be due to high growth of the services sector or it could reflect improving
efficiency of electricity use. Moreover, captive generation has also increased. However, as
growth in the manufacturing sector picks up, the demand for power is also expected to
increase at a faster rate. Demand will also increase along with electrification. The power
generation capacity has to grow by at least 10 percent to sustain the current GDP growth of 9
percent, say industry experts. Ideally, they say, the ratio of energy generation and GDP
growth should be 1:1.

A World Energy Council report has indicated that 44% of Indian household does not have
electricity connection at all and nearly 90% of rural habitations rely on forest woods for
primary energy.

The prime force of energy generation in India is through thermal generation including gas
which accounts for 70% of total generation. Nuclear energy constitutes only 2.4% and 26% is
through hydel power. India is highly dependent and relying on fossil fuels for power
generation and it has to concentrate in the coming years to focus on non-conventional
method. The government has signed the nuclear deal in 2008 with USA to increase it
production of energy through nuclear reactors, which are the most cleanest form of energy.
However, the impediment in this sector is the high cost involved in erection and maintenance
of the installation of nuclear reactors and availability of nuclear fuel. In this front, the most
important development achieved is the co-operation being extended by almost all major
nuclear fuel supply group of countries.

With the Indian government signing the nuclear deal with the US, the power sector is all set
to witness an explosion in the coming years in the country.

Signs of this were clear when Prime Minister Manmohan Singh said the deal will help India
tide over its energy crisis as the country needs a lot of investments in the energy sector.

India will need around $250 billion investments in the power sector over the next 8-9 years,
according to a CII-AT Kearney Study on „sustaining growth: future of Indian power sector‟.

The Indian power market is evolving rapidly from a „nascent‟ market phase to a „developing‟
phase. The power demand in the base case is expected to grow at a steady 7.5%-8% CAGR
till 2017. Further, the low “power penetration” levels indicate large demand. The power
markets will have to achieve consistent high growth rates to bring per capita consumption to
comparable levels of some of the other developing countries like China and Brazil.

The emerging dynamics of the Indian power market would require industry players to realign
their strategies and operating models to the changing sectoral trends. The focus would need to

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be both on project execution as well as efficient operations, in line with the „growth‟
characteristics of the sector.

A new era of power on power competition will emerge by 2014 that will bring in at least 80-
85 GW of new capacity - 80- 90% of them thermal units targeting high PLF of 80-95% -
reducing the base load deficit to a low of 1-2%. Accordingly, we expect pricing pressures in
the generation space and a 40-50% decline in average short term/merchant prices by 2014-15.

Wind energy will continue to grow at 15-20% pa with new opportunities in offshore
capacities and large capacity turbines. Government incentives will open up opportunities for
solar farms/distributed generation as well as PV manufacturing.

However, constrained fuel supplies present a major threat to the sector‟s growth: As per
current trajectory, India, in spite of substantial reserves, is expected to confront a supply
deficit of 25% (250 MTPA) of domestic coal by 2014. Similarly, there will be a seven fold
increase in uranium requirement for meeting nuclear power ambitions of India.

Distribution, financing and manpower are other concerns that require immediate attention:
High AT&C losses and slow rate of discom reforms will hurt the industry in the last mile.
Financing may also present a challenge to industry growth. About $ 250 Bn investments will
need to be undertaken in the power sector in the next 8-9 years to fuel the planned growth.
Similarly, over 150,000 additional skilled and semi skilled personnel required over the next 5
- 7 years.

Some critical success factors for the industry are: Strengthen project management &
execution capabilities, to ensure on-time, at cost execution. Secure fuel supplies through well
defined fuel sourcing plan especially coal (linkage, captive, imported) and its associated
costs. Fuel logistics planning and implementation is also critical and should be a focus for
project leadership.

Realign market & customer strategy, by striking the right balance between long term PPAs
and merchant trading. Reforms will also give rise to customer mix options (SEBs, traders,
bulk buyers, etc), which will open up different possibilities. Alternate market facing models
like power tolling, distributed generation, peaking power supplies should also be evaluated.

Develop Capital and Operational excellence through selection of right technology and
suppliers/manufacturers for the units. The asset availability and utilisation should be
maximized through O&M best practices.

Establish robust organizational enablers, across people - processes and systems. Many
organisations will have to manage concurrent “projects” and “operations” stages. -
Accordingly, a flexible organisation structure should to be designed and implemented.
Overall, the report is cautiously “optimistic” about the Indian power sector and its ability to
support India‟s growth aspirations.

Estimates by the Expert Committee on Integrated Energy Policy (Government of India


[2006a]), indicate that the national power requirement (in billions of units (Kwh) generated)
will triple over the next 15 years.

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India has the potential to show the fastest growth over the next 30 to 50 years. Growth rate
could be higher than 5 percent over the next 30 years and close to 5 percent as late as 2050 if
development proceeds successfully. Growth in capital stock together with growth in factor
productivity will yield output growth of 5.4 percent. Over the next 20 years, the working age
population is projected to grow at 1.9 percent per year. If educational attainment and
participation rates remain unchanged, labor growth will contribute another 1.3 percent,
yielding an aggregate growth rate of 6.7 percent per year, or a per capita growth rate of 5.3
percent. This is a lower bound estimate and, even so, would be significantly greater than the
per capita growth rate of 3.6 percent achieved in the 1980s and 1990s. Over a 40-year period,
a 5.3 percent growth rate would increase the income of the average person nearly 8-fold.

Energy intensity of GDP, defined as the ratio of the energy consumption to the GDP, has
been observed to follow a certain trend worldwide. Below a certain level of development,
growth results in increase in energy intensity. With further growth in economy, the energy
intensity starts declining. Based on data by International Energy Agency , overall energy
intensity of GDP in India is the same as in OECD countries, when GDP is calculated in terms
of the purchasing power parity (PPP). Energy-GDP elasticity, the ratio of the growth rates of
the two, remained around 1.3 from early fifties to mid-seventies. Since then it has been
continuously decreasing. Electricity is the most important component of the primary energy.
Electricity-GDP elasticity was 3.0 till the mid-sixties. It has also decreased since then.
Reasons for these energy–economy elasticity changes are: demographic shifts from rural to
urban areas, structural economic changes towards lighter industry, impressive growth of
services, increased use of energy efficient devices, increased efficiency of conversion
equipments and inter-fuel substitution with more efficient alternatives. Based on the CMIE
data , the average value of the Electricity-GDP elasticity during 1991-2000 has been
calculated to be 1.213 and that of the primary energy- GDP elasticity to be 0.907. Estimating
the future GDP growth rates of India from the projections taking the primary energy intensity
fall to be 1.2 percent per year , extrapolating the electricity intensity fall from past data till
2022 and subsequently a constant fall of 1.2 percent year, the growth rates of the primary
energy and electrical energy have been estimated as follows.

Period Primary Energy Electricity

Percent Annual Growth Percent Annual Growth

2002-2022 4.6 6.3

2022-2032 4.5 4.9

2032-2042 4.5 4.5

2042-2052 3.9 3.9

These rates are the basis of the projections reported. It may be recalled that historical primary
energy and electricity growth rates during 1981- 2000 were 6 percent per year and 7.8 percent
per year respectively.

Based on the growth rates given in the above table, per capita electricity generation would
reach about 5300 kWh per year in the year 2052 and total about 8000 TWh. This would

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correspond to an installed capacity of around 1300 GWe. Annual primary energy
consumption would increase from about 13.5 EJ in 2002-03 to about 117 EJ in 2052-53. By
then the cumulative energy expenditure will be about 2400 EJ.

2.The metrics for the Power sector:

Per Capita Consumption of Electricity

Per capita consumption of electricity is expected to rise to over 1000 kilowatt hours per
annum (kwh/ annum) in next 10 years (from present level of 580 kwh). Compare this against
over 10,000 kwh/ annum in the developed countries!

Plant Load Factor (PLF)

The actual all India PLF of Thermal Utilities during April 03- March 04 was 72.7% as
against the target of 72.0%.The Plant Load factor should be as high as possible.(Annexure
Room for productivity improvement)

16th Electric Power Survey (EPS) projections

By the year 2012, India‟s peak demand would be 157,107 MW with energy requirement of
975 BU. (Annexure Table 7: Source: Fig based on 17th Electric Power Survey (EPS))

Unbalanced Growth & Shortages

Along with this quantitative growth, the Indian electricity sector has also achieved qualitative
growth. This is reflected in the advanced technological capabilities and large number of
highly skilled personnel available in the country. While this must be appreciated, it must also
be realized that the growth of the sector has not been balanced. The availability of power has
increased but demand has consistently outstripped supply and substantial energy & peak
shortages of 7.1% & 11.2% prevail in India. Coupled with this is the urban-rural dichotomy
in supply- as per Census 2001, only about 56% of households have access to electricity, with
the rural access being 44% and urban access about 82%. In the case of those who do have
electricity, reliability and quality are matters of great concern. The annual per capita
consumption, at about 580 kWh is among the lowest in the world.

These problems emanate from:


- inadequate power generation capacity
- lack of optimum utilisation of the existing generation capacity
- inadequate inter-regional transmission links
- inadequate and ageing sub-transmission & distribution network leading to power cuts and
local failures/faults
- T&D losses, large scale theft and skewed tariff structure
- slow pace of rural electrification
- inefficient use of electricity by the end consumer
- lack of grid discipline

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3.Government Initiatives

The Government of India has an ambitious mission of POWER FOR ALL BY 2012. This
mission would require that the installed generation capacity should be at least 200,000 MW
by 2012 from the present level of 144,564.97 MW. Power requirement will double by 2020 to
400,000MW.

3.1 Objectives

 Sufficient power to achieve GDP growth rate of 8%


 Reliable power
 Quality power
 Optimum power cost
 Commercial viability of power industry
 Power for all

3.2 Strategies

 Power Generation Strategy with focus on low cost generation, optimization of


capacity utilization, controlling the input cost, optimisation of fuel mix, Technology
upgradation and utilization of Non Conventional energy sources

 Transmission Strategy with focus on development of National Grid including


Interstate connections, Technology upgradation & optimization of transmission cost.

 Distribution strategy to achieve Distribution Reforms with focus on System


upgradation, loss reduction, theft control, consumer service orientation, quality power
supply commercialization, Decentralized distributed generation and supply for rural
areas.

 Regulation Strategy aimed at protecting Consumer interests and making the sector
commercially viable.

 Financing Strategy to generate resources for required growth of the power sector.

 Conservation Strategy to optimise the utilization of electricity with focus on Demand


Side management, Load management and Technology upgradation to provide energy
efficient equipment / gadgets.

 Communication Strategy for political consensus with media support to enhance the
genera; public awareness.

4. Sector Specific Opportunities:

4.1 Coal

�At 51%, Coal is the single-largest source of energy at the disposal of the power sector.
(KPMG Report, November 2007)

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�By 2011– 12, demand for coal is expected to increase to 730 MMT p.a., creating a supply
shortage of over 50 MMT.

�India has the fourth largest proven coal reserves in the world, pegged at 96 billion tones,
creating an investment opportunity of US$ 10 – 15 billion over the next 5 years. (Investment
Commission of India)

4.2 Oil

�The demand for Oil – which is currently the second most important source of energy - is
expected to grow from 119 MTOE in 2004 to 250 MTOE in 2025 at an annual growth rate of
3.6%.(India Brand Equity Foundation)

�However, domestic production for the corresponding period is expected to increase at


approximately 2.6% only. (India Brand Equity Foundation)

�As a result, our reliance on oil imports is likely to increase from its present level of 72% to
90% by 2025. (Investment Commission of India)

�To combat this issue, the government has opened up the domestic oil sector for private
participation under the New Exploration Licensing Policy (NELP).

�Under the competitive bidding process prescribed under the NELP, investment
commitments of US$ 8 billion towards oil exploration projects have already been received.
Bidding for more such projects is currently in progress and is expected to result in further
investment inflows into this sector.

4.3 Natural Gas

�India has vast reserves of natural gas. More than 700 billion cubic meters of natural gas
have been discovered in the last decade alone. (KPMG Report, November 2007)

�Demand for Natural Gas is expected to grow at a CAGR of 12% over the next 5 years to
reach 279 MMSCMD by 2012.

�The importance of natural gas as an energy source has witnessed a significant increase over
the past decade on account of the following two reasons:
�Rising popularity of compressed natural gas (CNG) as an alternative source of automotive
fuel;
�Increased penetration through availability of “piped gas” at residences; and
�Imminent depletion of traditional energy sources such as coal and oil.

4.4 Hydro Power

�With it intricate network of rivers, substantial opportunities for generation of hydro-power


exist in India.

�Only 22% of the 150 GW hydroelectric potential in the country has been harnessed so far.
(Economic Times 2008)

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�Private participation will play a key role in meeting the target requirement of an additional
45 GW over the next 10 years.

4.5 Wind Energy

�India is the 4th largest country in the world in terms of installed wind energy. (KPMG
Report, November 2007)

�India‟s potential of wind power is pegged at 45,000 MW while its current capacity stands
at only 7,660MW. (Economic Times 2008)

�Tax incentives, including availability of accelerated depreciation @ 80% under WDV


method on cost incurred on setting up of wind turbine generators have resulted in significant
private investment in this area.

�It is estimated that 6,000 MW of additional wind power capacity will be installed in India by 2012.
Wind power accounts for 6% of India's total installed power capacity, and it generates 1.6% of the
country's power.

�The Ministry of New and Renewable Energy (MNRE) has fixed a target of 10,500 MW between
2007-12, but an additional generation capacity of only about 6,000 MW might be available for
commercial use by 2012.

4.6 Solar Energy

�Despite the prevalence of an inherent advantage in the form of solar insulation, the
potential for solar energy is virtually untapped in India.

�India‟s installed solar – based capacity stands at a mere 100MW compared to its present
potential of 50,000MW.

�Based on the substantial investment opportunities that exist in this sector, it is estimated
that by 2031 – 32, solar power would be the single largest source of energy, contributing
1,200 MTOE i.e. more than 30% of our total expected requirements. (India Brand Equity
Foundation)

�High capital investment has kept solar power away from mass applications. However,
capex has been steadily declining and is likely to touch $2 per watt by 2010 and,
perhaps, hit $1.5 per watt by 2012 on account of high efficiency solar cells.
By 2012, solar power could become more attractive than non-pithead coal and gas. Only
hydro and nuclear will have lower delivered costs.

�In July 2009, India unveiled a $19 billion plan to produce 20 GW of solar power by
2020.Under the plan, solar-powered equipment and applications would be mandatory in all
government buildings including hospitals and hotels.

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4.7 Nuclear Energy

�By 2032, the government plans to raise the contribution of nuclear energy from the current
level of less than 3% to around 10% of the country's installed capacity (Angel Broking
report)

�The signing of the Indo – US nuclear deal has created significant opportunities for several
players across the entire power supply chain, with an estimated investment opportunity of
US$ 10 billion over the next five years. (JP Morgan estimate)

�Further, India has among the world‟s largest reserves of alternative nuclear fuel – thorium.
Accordingly, substantial investment opportunities are also likely to arise once commercial
production based on thorium becomes feasible.

�When the Indo-US nuclear deal goes through, India is expected to generate an additional 25,000
MW of nuclear power by 2020, bringing total estimated nuclear power generation to 45,000 MW.

5.Funding Trends in the power sector

Source 2006-07 2007-08 2008-09 2011-12


Bank credit 126.59 219.09 293.80 918
Rs(billion)
External 1346.00 865.00 1518.00 4765
commercial
borrowing($
million)
Private 52.75 34.68 127.38 410
placement(only
debt) Rs billion
Public and rights 0.30 137.09 9.58 265
issue(Rs billion)
FDI 157.50 968.00 984.80 1200

Source: Powerline Magazine September 09

6.Forecast of sectorial electricity demand: Econometric models

Sectorial electrical energy demand can be represented by a logarithmic linear econometric


model i.e.,

ln Eti = ai + bi ln Ati+ci ln Lti+pi ln Pt+ eti

where Eti is the electricity consumption (GWh) of sector i in year t. The Ati represents
sectorial GDP (Rs.crore), i.e. agriculture, industry and service, for agricultural, industrial and
other electrical energy sectors and GDP per capita (Rs.) for domestic, commercial and
transport sectors. The Lti represents sectorial electricity consumption in year t-1 for
agricultural and industrial sectors and number of consumers for domestic, commercial and

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other sectors. Pt represents price indices (1993-94=100) of electricity for agricultural,
industrial, domestic, commercial and transport sectors. eti represents error or residual term of
sector i in year t. The coefficients ai, bi, ci and pi have to be estimated for respective sectors
by regression models.SPSS 14.0 has been used for regression by taking data from the year
1970-71 to 2004-05(CMIE,2007)

The time series estimate of the various sector of GDP, number of consumers in various
sectors have been tested by using autoregressive time series methods and the result was
compared with the original time series and the result was pretty good. The statistics of
residual i.e. autocorrelation function and partial autocorrelation function was given good
results. While a number of statistics are reported, we have focused on two: MAPE (mean
absolute percentage error) and MaxAPE (maximum absolute percentage error). Absolute
percentage error is a measure of how much a dependent series varies from its model-
predicted level and provides an indication of the uncertainty in the predictions. We have
tested the various series for the MAPE and MaxAPE and the result shows the good
agreement with the theory.

The time series forecast of various sectors of GDP contribution are shown in Fig.2 up to
2044-45. Since the data from 1970-71 to 2004-05 were used to forecast the time series and
compared with the original series they matched with great accuracy so the forecasted horizon
in Fig 2 is also expected a good agreement with the actual electricity demand in future.As
from the figure we see that the service sector has largest value in 2005-06 as compared to
other two sectors but in the Forecasted horizon after 20034-35 the industry sector becomes
largest component and shows faster growth as compared to other two sectors. It may be
possible that service sector experience recession after forecast horizon.

The time series forecasting of the natural logarithmic value of various consuming sector
(number of consumers) is as shown in Fig.3.The same treatment have been repeated for the
time series forecasting as in Fig.2.The forecasted result shows the good agreement with the
original time series. As from the figure it is clear that the number of consumers in other sector
increases rapidly as compared to commercial and domestic sectors.The number of
commercial consumer curve has lowest slope. So in future number of commercial consumer
may be stagnated.

The Fig.4 shows the time series projection of natural logarithmic value of GDP per capita and
the price indices of electricity. The forecast also shows the good agreement with the original
time series. Price indices and GDP per capita increases with constant growth rate from 2005-
06 to 2044-45. The correctness of the predicted data can be examined from the values of
statistical parameters.The R2 and adjusted R2 value for all the sectors shows very high
predictive power of the developed models. The Durbin-Watson (D-W) statistics, which is
widely used for testing the serial correlation is estimated and shows very small positive
autocorrelation for some of the sectors and in some sectors almost absence of autocorrelation.
The value of D-W statistics in agricultural sector, industrial sector and other sectors are 1.91,
1.74 and 1.76 respectively which gives conclusive result for the absence of autocorrelation.
The D-W statistics in commercial sector, domestic sector and transport sectors are 1.62, 1.4
and 1.4 respectively which gives a moderate absence of autocorrelation. According to
econometric regression theory, if the residuals are not independent (or in other words the
errors are serially correlated), the use of the F-and t-tests and confidence

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intervals is not strictly valid and the estimate of the coefficients may be unstable (Makridakis
et al, 1998).The t-statistics also shows almost satisfactory result for each variable in all
sectors.

Since we have used a logarithmic linear equation (5) to forecast sectorial electricity
demand,the coefficients directly measures the elasticity.As in Table 1 the coefficients in
forecasting industrial sector demand are very small than one.So these are inelastic in nature.
For agricultural sector the long term price elasticity is -1.04 and elasticity with respect to
GDP contribution by agriculture is 2.06 which show a strong elastic behavior.All other
sectors shows inelastic behavior except number of consumer in domestic sector where the
long term elasticity is 1.003.

The forecasted electricity demand using econometric model (using the equation) for various
sectors is shown in Fig.5.From the figure it is clear that the electricity demand by industrial
sector is largest over the years and will be the dominating sector in the electricity
consumption. As per the time series of sectorial consumption of electricity agriculture sector
was dominating sector before 2003-04 as compared to the domestic sector but after that the
domestic sector electric energy demand increases with high growth rate. The commercial
sector electricity demand also shows substantial growth over time but less than in absolute
with respect to industrial, agricultural and domestic sector demand. The transport sector and
other sector shows very slow growth in the forecasting horizon. The industrial sector
electricity demand in base year 2004-05 was 138 billion kWh which increases to 588 billion
kWh with an average growth rate of about 8%.The Agricultural and domestic sector electric
consumption were 89 and 96 billion kWh in year 2004-05 and increases up to 287 and 397
billion kWh with an average growth of 6% and 8% respectively. So each sector consumes
electricity with different growth rate.

The curve shows a constant slope over the forecasted period. The total electricity
demand increases with an average growth rate of about 7% and becomes 1.52 PWh in 2044-
45 which is four fold from 2004-05.

7. Conclusion

7.1 Power Sector SWOT Analysis

Strengths
India has the fifth largest electricity generation capacity in the world
Transmission & Distribution network of 6.6 million circuit km - the third largest in the
world
Potential for growth in this sector (demand exceeding supply)
Increasing focus on renewable sources of energy
Government presence in the sector (encouraging entry of foreign players)
No barriers to entry

Weaknesses
Public sector players are only into generation of power
Large demand-supply gap: All India average energy shortfall of 9% and peak demand
shortfall

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of 14%
Lack of exposure of entrepreneurs to handle international contracts
Inexperience of SEBs to handle changing market environment in addition to their weak
financial condition
Unavailability of fuel and unwillingness of fuel suppliers to enter into bankable contarcts
Lack of necessary infrastructure to transport and store fuel, high cost risk involved in
transporting fuel

Opportunities
huge population base
Opportunities in Generation
Ultra Mega Power Plants (UMPP) – 9 projects of 4000 MW each.
Coal based plants at pithead or coastal locations which are untapped.
Hydel power potential of 150,000 MW is untapped as assessed by the Government of
India.
Renovation, modernisation, up-rating and life extension of old thermal and hydro power
plants.

Threats
Competition to domestic players from foreign Pvt. players as 100% FDI permitted by
government in Generation, Transmission & Distribution
Not a lucrative option for investors(ROE )
Rise in price of raw materials
Tariffs are distorted and do not cover cost

7.2 Predictions

India requires an additional 90,000 MW of generation capacity by 2012.


Opportunities in Transmission network ventures - additional 60,000 circuit
km of Transmission network expected by 2012.
Total investment opportunity of about US$ 150 billion over a 5 year.
By end March 2008, India will achieve Commercial Operation Date (COD)
on about 10,000 MW, marking the best first year in any Plan period.
As per recent budget, Govt to will provide Rs.800 Crore for the Power
Development and Reforms Project.
Govt. propose to create a national fund for transmission and distribution
reform in order to improve the poor state of transmission and distribution
(T&D) that has been a drag on the sector.
The fourth Ultra Mega Power Project (UMPP) at Tilaiya to be awarded
shortly.
Possibility of bring up five more UMPPs in Chhattisgarh, Karnataka,
Maharashtra, Orissa and Tamilnadu.
In Hydro projects, 77 schemes have been identified with a total of 33,000
MW capacity additions.

8. Annexure:

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1200

1000

800
Energy
600 demanded(MW)
Peak Energy(kWh)
400

200

0
2006-07 2009-09 2011-12

Table 7: Source: Fig based on 17th Electric Power Survey (EPS)

Renewable energy(Wind Energy):Source- Powerline Magazine Sept 2009

Country Total installed New capacity-Top 10


capacity-Top 10 countries
countries
India 8.0 6.70
Italy 3.1 3.70
France 2.8 3.5
UK 2.7 3.1
Denmark 2.6
Portugal 2.4 2.6
Rest of the World 13.8 12.2
China 10.1 23.3
Spain 13.9 5.9
Germany 19.8 6.2
US 20.8 30.9
Canada 1.9
Total 120798 MW 27051 MW

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Top Installed capacity

Total installed capacity-Top 10


countries
India
3.1 2.7
8 2.8
Italy
20.8 2.6
France
2.4
UK
13.8 Denmark
19.8
Portugal
10.1
13.9 Rest of the World
China

New capacity

New capacity-Top 10 countries


1.9 India
3.7
6.7 3.5 Italy
3.1
2.6 France
30.9
UK

12.2 Denmark
Portugal
6.2 Rest of the World
5.9 23.3 China
Spain

Tentative shelf of projects for the Twelfth Plan

Source- Base Paper:International Conclave on Key Inputs for Accelerated Development of


Indian Power Sector for the 12th Plan and Beyond

Sector Coal Lignite Nuclear Hydro Total


Central 16470 2500 3400 7034 29404
State 14057 5539 19596
Private 81873 7761 89634
Total 124400 2500 3400 20334 138634

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The Future of Power Sector in India
Room for productivity improvement:

The plant load factor of thermal plants has risen from 72% in 2003 to over 77% in 2009.

Plant load factor

Year All-India Central Sector State Sector Private Sector


2006-07 76.80 84.80 70.60 86.40
2007-08 78.61 86.74 71.89 90.77
2008-09 77.22 84.34 71.20 91.04

Installed Generating Capacity(Utilities) MW

Year Electric Hydro Thermal Coal Oil based Gas Nuclear


ity electrici electricit based thermal based electricit
energy ty y thermal electricit thermal y
electricit y electricit
y y
1970-71 14709 6383 7906 7508 230 168 420
1975-76 20117 8464 11013 10579 226 208 640
1980-81 30214 11791 17562 17122 166 274 860
1985-86 46769 15472 29967 28809 180 979 1330
1990-91 66086 18753 45768 43004 212 2552 1565
1995-96 83294 20986 60083 53479 335 6268 2225
2000-01 101626 25153 73613 61011 2141 10642 2860
2005-06 124287 32326 82411 68519 1202* 12690 3360
2006-07 132329 34654 86015 71121 1202* 13692 3900

Note: * Renewable energy sources excluded, but it is included in total energy.

Source-Economic intelligence service CMIE Magazine November 2008

21
The Future of Power Sector in India
140000
Electricity energy
120000

100000 Oil based thermal


electricity
80000
Gas based thermal
60000 electricity

40000 Nuclear electricity

20000
Hydro electricity
0
Thermal electricity

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The Future of Power Sector in India
9.Bibliography:

Powerline Magazine September 09

http://www.ignou.ac.in

http://www.econ.ucsb.edu

http://www.business-standard.com

Dominic Wilson and Roopa Purushothaman, “Dreaming with BRICs: the path to 2050”
Global Economics Paper No 99, Goldmann Sachs, 1 st October 2003.

http://en.wikipedia.org

http://www.scribd.com

http://www.indiaenergyportal.org

www.cygnusindia.com

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The Future of Power Sector in India