POWER SECTOR IN INDIA

Energy is central to our needs across the globe, and the balance among
haves and have-nots, availability of clean economical energy for all,
energy efficiency and innovation demand urgent attention.
There is also a need to ensure the long-term sustainability, affordability
and embracing of energy systems. The energy transition involves public to
private collaboration, intra-state and inter-state partnership. There is no
need to say that achieving these goals requires supporting policies,
technological innovation, large volumes of investment and a platform that
encourages multi-stakeholder collaboration. Now a days Leaders across
the world also understand that the challenges that the energy system is
facing cannot be addressed by a single entity. Rather than that a common
understanding is required among all stakeholders on a long-term vision for
energy transition and the near-term priorities. For a sector which is
influenced with several global factors and other related issues, it is
interesting to know that energy systems working across countries are
unique to local circumstances, economic structure and socioeconomic
priorities, so multiple pathways are required to pursue an effective energy
system that is local as has its impact globally. Over the past few years,
after knowing the cycle of economic development & its growth, security
in energy and access, and environmental sustainability, government
officials have committed themselves towards greater cooperation.
Considering a large nation like India having its own unique challenges
and a verified responsibility among its corporates and citizens, a holistic
approach (which engages all partners and has clear vision of short, mid-
and long term priorities and goals is essential) is needed for energy
production, consumption and saving.

Introduction:
Power is one of the most important components of infrastructure which is
very crucial for the economic growth and welfare of nation The existence
and development of infrastructure of adequate amount is very essential for
sustained growth of the Indian economy.
India’s power sector is among one of the most diversified in whole world.
Sources of power generation range from conventional sources which
includes coal, lignite, natural gas, oil, hydro and nuclear power to viable
non-conventional sources including solar, wind energy and agricultural
and domestic wastes. Electricity demand in the country has increased
significantly and is expected to rise in future years also. In order to meet
the increasing demand for electricity in the country, massive addition to
the installed generating capacity is required.
In 2018 May ,India ranked 4th in the Asia Pacific region out of 25 nations
on an index who had measured their overall power. India’s ranking was
fourth in wind power, fifth in solar power and fifth in renewable power
installed capacity as of 2018. India’s ranking is sixth in the list of countries
to make significant investments in clean energy at 90 billion USD. India is
the only country among the G20 nations that is on track to achieve the
targets under the Paris Agreement. (www.ibef.org, n.d.)

1.1 Market size:

India is the third-largest producer and second-largest consumer of

electricity in the world and had an installed power capacity of 390.80GW
as of October 2020.
India is placed on sixth rank in the list of countries to make significant
investment in clean energy by allotting 90 billion USD between 2010-
2019.
Although it has been seen that there is adequate increase in power
generation capacity, In countries like India which still faces challenge to
meet growing demand for power as well as reliable supply remains low.

Source (www.ibef.org, n.d.)

Total installed capacity:

Source: (ministry of power)

1.2 Growth rate:

According to the data released by Department for Promotion of Industry

and Internal Trade (DPIIT), In Indian non-conventional energy sector FDI
inflows stood at 10.28 billion USD between 2000April and 2021 June.
More than 42 billion USD has been invested in India’s renewable energy
sector since 2014. 11.1 billion USD is the new investment in clean energy
in 2018.According to British Business Energy, India is ranked 3rd globally
in terms of renewable energy investments and plans in the year 2020.

Some major investments and growth that happened in Indian renewable

energy sector are as:
 In October 2021, Reliance new energy solar ltd(RNSEL) announced
two acquisitions to increase its capabilities. Both are expected to
contribute to Reliance target of achieving the capacity of 100 GW of
solar energy at Jamnagar by 2030.
 In August 2021, Copenhagen infra partners (CIP) signed an
investment agreement with Amp energy India pvt ltd to facilitate
joint equity investment of more than 200 billion USD across Indian
renewable energy projects.
 The NTPC is expected to commission India’s largest floating solar
power plant in Ramagundam, Telangana by June2022.The expected
total installed capacity of it is447 MW
Source:. (www.ibef.org)

Total Generation

(Including
Year % of growth
Renewable Sources)
(BU)

2009-10 808.498 7.56

2010-11 850.387 5.59

2011-12 928.113 9.14

2012-13 969.506 4.46

2013-14 1,020.200 5.23

2014-15 1,110.392 8.84

2015-16 1,173.603 5.69

2016-17 1,241.689 5.80

2017-18 1,308.146 5.35

2018-19 1,376.095 5.19

 Total Generation

(Including
Year % of growth
Renewable Sources)
(BU)

2019-20 1,389.102 0.95

2020-21 1,381.827 -2.49

2021-22 * 886.362 11.27

Source: (ministry of power, n.d.)

1.3 Future trends:

India has seen extraordinary successes in its recent energy development,

but many challenges remain, and the covid pandemic has been a major
disruption in all these.
In recent years, India has brought electricity connections to hundreds of
millions of its citizens; promoted the adoption of highly efficient LED
lighting by most households, India also promoted massive expansion in
renewable sources of energy, led by solar energy.
As per the industry estimates, India is expected to add nearly 10 per cent
renewable energy capacity addition in 2021.The sector has seen around Rs
5 lakh crores or over 64 billion dollars investment in India in last 6 years.
Source: (goo3)

Demand for electricity is on the rise as India’s economy gains in global

importance. Various factors contributing to the rising per capita
consumption, which include the importance of electrification in villages,
GDP growth of the country and general economic activity, and growth in
consumer electronic device penetration.

Source: (newspaper)

KEY POINTS FOR THE ANNALYSIS OF POWER

SECTOR:

Like many commodities, the markets for Power sector which includes
electricity, natural gas, oil and renewable energy are complex and
constantly changing. In fact, prices change hourly for most fuels.
Fundamental economic factors – like supply, demand and changes in fuel
used for generation – are relatively predictable, but when you add political
and regulatory factors to the mix, as well as financial speculation,
forecasting energy prices becomes more challenging.
Here are the Top 10 Factors affecting the daily price of energy:

1. Supply: Energy from nuclear, coal, gas, oil and renewable

sources reacts quickly in response to demand. Prices fluctuates
hourly as a result.

2. Demand :Demand for heating, cooling, light and processes varies

with activity in the US economy, technology and efficiency
measures.

3. Gas Storage : It Represents energy “inventory” (since we can’t

store electricity), the difference between supply and demand
increases.

4. Weather Forecasts :weather forecast is also a major factor

affecting spot market prices and short-term futures contracts. It is
not sure that the forecasts become reality is less critical to longer-
term prices.

5. Generation Changes:
1. Nuclear :Retirement of the older plants as they require
re-licensing is the need of hour.
2. Coal: Coal plant is being converted to natural gas to
avoid scrubbing-technology cost.

6. Global Factors: Despite the massive growth in shale gas

production, major changes in global oil supplies can affect U.S.
domestic energy costs.

7. Imports and Exports :Global oil and gas prices determines

relative profits that suppliers can make selling fuels domestically
or overseas. All of which energy prices are connected to some
degree.
8. Government Regulation :Federal (FERC) and State (PUCs)
regulations can significantly change both supply and demand
costs very quickly.
 9. Financial Speculation :Like most other traded commodities,
energy prices can be affected significantly by financial
speculation, which is the least transparent factor of all.

If a market doesn’t follow the direction indicated by fundamental factors,

it’s always a financial speculation that is largely invisible, which is
causing unexpected movements in this sector.
Source: (energy industry insights, n.d.)

Source: (bridgetoindia.com, n.d.)

Some non-price determinants in power sector:

1.Barriers to entry:
Barriers to entry are high, especially in the transmission and
distribution segment, as these sectors are mostly state monopolies. It
include high fixed cost, fuel linkage and offers guarantee to payment
that buys power and retail distribution license.

2.Bargaining power of suppliers:

Small number of suppliers enjoy monopoly, leads to the
contribution to supplier power. However, bargaining power is not
very high since the tariff structure is mainly regulated.

3.Barganing power of Buyers:

 Even though switching cost (of shifting from one source to another
to meet the daily requirement ) are low and electricity is an
undifferentiated product, customers generally don’t tend to change
their source of electricity.

4. Competition:
As there are very small number of players in the
market ,competition in the power sector is low. Shortage of inputs
such as natural gas and regulatory hurdles has prevented the new
entries.

5.Threats of substitutes:
As the cost of switching to substitutes like solar, wind energy e.is
high. So the threats of substitutes is very less in the power sector.
Source: (equitymaster.com, n.d.)