India's Power Sector: Trends and Future Outlook II UPSC

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Context:

India is currently the third-largest power market in the world, with a GDP growth rate of 7% and power demand rising by over 8% this year. Its energy need is expected to triple by 2050, making it an important place to invest.

The Power Industry in India

As of June 30, 2024, India ranked third in the world both in terms of electricity production and consumption, with an installed power capacity of 446.18 GW.

Coal

Over half of India's basic energy needs are met by coal, making it a vital component of the country's energy basket. Approximately 75% of the power generated in India comes from coal, making it the primary source of power.

Renewable Energy

India had 203.19 GW of installed renewable energy capacity (including hydro) as of June 30, 2024, accounting for 45.5% of the country's total installed power capacity.

Solar energy accounted for 85.47 GW of total energy as of June 30, 2024. Wind power accounted for 46.65 GW, biomass for 10.35 GW, small hydropower for 5.00 GW, waste-to-energy for 0.59 GW, and hydropower for 46.93 GW.

The increase in non-hydro renewable energy capacity was 15.27 GW in FY23 compared to 14.07 GW in FY22.

Renewable energy is growing quickly; by 2030, over 200 GW of solar and wind power are anticipated.

India is now the world's second-biggest producer of solar modules.

For more study in renewable energy status refer:

Status of Renewable Energy in India

Growth

India's power generation witnessed its highest growth rate in over 30 years in FY23. Power generation in India increased by 6.80% to 1,452.43 billion kilowatt-hours (kWh) as of January 2024.

According to data from the Ministry of Power, India's power consumption stood at 1,503.65 BU in April 2023.

The coal plants registered a PLF of 73.7% for the first nine-month period in FY23 compared to 68.5% in FY22 for the same period.

Foreign Direct Investment (FDI):

Between April 2000 and March 2024, the cumulative FDI investment into the electricity sector was US$ 18.28 billion.

In India, FDI equity investment in the renewable energy sector totalled US$ 6.1 billion between April 2020 and September 2023.

Foreign direct investment (FDI) in the solar energy sector has reached India totalling US$ 3.8 billion during the last three fiscal years and the current fiscal year that ends in September 2023.

At US$ 77.7 billion, India came in fourth place among nations that made large investments in renewable energy between 2015 and 2022.

Demand for Power

In June 2024, the nation's peak power demand was 249.85 GW.

Thermal power plant load is estimated to improve by 63% in FY24, fuelled by strong demand growth along with subdued capacity addition in the sector.

Issues In India’s Power Sector:

Transmission and Distribution Losses: The process of transmitting and distributing power results in significant losses. According to the Economic Survey for 2020–21, transmission and distribution losses in India can reach 20%, significantly more than the 10% average for the world.
Discoms' financial situation: Distribution firms, or "Discoms," frequently face financial difficulties due to heavy debt loads and the weight of subsidies. As of 2022, Discoms owed about ₹4 lakh crore (US$ 50 billion) in debt, according to the Ministry of Power. Their capacity to maintain infrastructure and make investments in new technology is impacted by this financial uncertainty.
- - In order to assist Discoms in lowering their debt and strengthening their financial position, the Ujwal DISCOM Assurance Yojana (UDAY) program was launched; however, because of implementation issues and a lack of finance, the program's outcomes have been uneven.
Reliance on Fossil Fuels: Despite efforts to increase renewable energy capacity, fossil fuels still account for a large share of India's power generation. This reliance contributes to air pollution and greenhouse gas emissions.
- - In 2023, thermal power plants produced more than 75% of India's electricity, which has raised concerns about environmental sustainability and health impacts on local communities.
Renewable Energy Integration: Integrating renewable energy sources like solar and wind into the grid presents challenges due to their isolated nature. Managing grid stability while including these variable sources requires advanced technology and infrastructure.
Regulatory and Policy Issues: Inconsistent policies and frequent changes in regulations can create uncertainty for investors and hinder long-term planning. This can impact the implementation of renewable energy projects and infrastructure upgrades.
- - Changes in solar tariff regulations have affected the profitability of solar projects, causing delays and reducing investor confidence.

Way ahead

Strengthen Distribution Networks: Distribution companies' (DISCOMs) financial situation needs to be improved to provide a consistent supply of power. Through the implementation of the UDAY system, the resolution of inefficiencies, the promotion of timely bill payments, and the implementation of reforms, DISCOMs have the potential to become more reliable suppliers of services and buyers.

Boost Renewable Energy: India must put in a lot of effort to accomplish its goals for renewable energy, particularly solar and wind energy. Investments in infrastructure, research, and technology will help reach the 2030 goal of 450 GW of renewable energy. With a planned capacity of 280 GW, solar energy will be important.

Encourage Decentralization and Energy Storage: Decentralized power generation—producing energy closer to places of consumption—is the way of the future. Microgrids, smart metering, and battery storage are some of the technologies that will enable improved energy management and higher efficiency.

Tackle Dependency on Fossil Fuels: In order to meet India's climate pledges, the percentage of energy derived from fossil fuels must be decreased, even though coal will continue to play a significant role in the country's energy mix. Emissions can be decreased and efficiency increased by implementing supercritical technology into outdated coal-fired power facilities.

Increasing Access to Energy in Rural Areas: Despite significant electrification projects, it is still challenging to provide rural people with dependable, high-quality energy. Expanding access to modern energy services for small businesses and agriculture is necessary to boost production and growth in rural areas.

Adapt to Sustainability and Climate Change Goals: India must align its energy policy with its commitments to combating climate change. A long-term strategy focusing on low-carbon technology, improving energy efficiency, and reducing greenhouse gas emissions will be needed to reach carbon neutrality by 2070.

Adapt to Sustainability and Climate Change Goals: India must align its energy policy with its commitments to combating climate change. It will be necessary to create a long-term strategy focused on cutting greenhouse gas emissions, improving energy efficiency, and creating low-carbon technology.