Indian electricity sector

Indian
Electricity
Sector:
Trends and
Future

Science and
Technology in
Independent India

Neha B Joseph
Shivraj Singh Negi

Indian Electricity Sector: Trends and Future

Contents
Introduction .................................................................................................................................................. 3
Projected Electricity Demand ....................................................................................................................... 3
Power Capacity and Generation Projects ..................................................................................................... 5
Investment Needs ......................................................................................................................................... 7
Twelfth Plan Features ................................................................................................................................... 9
Capacity Creation ...................................................................................................................................... 9
Transmission ........................................................................................................................................... 10
Distribution ............................................................................................................................................. 10
Rural Electrification ................................................................................................................................. 10
Major Programs .......................................................................................................................................... 10
Nuclear Power......................................................................................................................................... 11
Ultra Mega Power Plants and Coal ......................................................................................................... 11
Development of Renewables .................................................................................................................. 12
Hydro Power Development .................................................................................................................... 14
Conclusion ............................................................................................................................................... 15
Appendix ..................................................................................................................................................... 16

Science and Technology in Independent India Page 2


Introduction
Since Independence in 1947, the Indian Electricity sector has progressed in leaps and bounds. A rising
GDP, growing industry, rising income-levels and an ever-expanding population has both contributed to
this rise and has also put tremendous pressure on the Indian Electricity sector. The Indian economy will
continue to grow. And this will again necessitate massive expansions in the electricity sector. Are the
planners planning the necessary expansion? This paper will look into this important issue.

The paper will proceed in three parts. In the first section, we will look at some of the projected
electricity demand for 2050. We will also look at some of the capacity projects required and the
investments needed. This will primarily be based on the Energy Technology Perspectives 2010 (ETP
2010) prepared by the International Energy Agency. All figures, projections are based on this IEA report.
Here, it is important to note that the IEA identifies two different scenarios to analyse the power sector.
(read box). In the next section, we will look at some of the provisions relating to the Electricity sector in
the 12th Plan. In the 3rd section, we will again look at some of the major projects in the sector including
the Ultra Mega Power Projects. This will then be followed by a conclusion.

Projected Electricity Demand
Projections for future electricity demand in the country are very
In Energy Technology Perspectives 2010
uncertain, because of the expected continuation of India’s (ETP 2010) (IEA, 2010a), the IEA develops
dynamic economic growth and development. GDP development, two different scenarios to analyse the power
industry structure, population growth and income levels are sector:
important drivers for energy and electricity demand.  The Baseline Scenario reflects
expected developments on the
According to IEA analysis, the Indian economy is projected to basis of the energy policies that
grow at a much faster rate than those of Europe or the United have been implemented or
States during the coming four decades. A consequence of this approved for implementation.
 The BLUE Map Scenario is
growth will be a significant increase in energy use and
target‐driven and aims to halve
associated CO2 emissions. In the ETP 2010 Baseline Scenario for global energy‐related CO2
India (IEA, 2010a), between 2007 and 2050, GDP will increase emissions by 2050 compared to
eightfold, primary energy use quadruple and CO2 emissions 2005 levels. A global carbon price
of USD 175/tCO2 in 2050 is
increase almost fivefold. A fivefold increase in electricity needed to achieve this reduction
demand from 792 TWh in 2007 to 4069 TWh in 2050 is target. Worldwide CO2 emissions
projected in the IEA Baseline Scenario. Total electricity demand in the power sector are reduced by
74% in this scenario relative to
is reduced in BLUE Map to the level of 3769 TWh.
2005.


Figure 1 - Electricity demand projections 2007‐50

Total Indian electricity demand in 2007/08 stood at 717 kWh per capita (based on UN practice17) (CEA,
2009a); an increase of 6.7% over the previous year. For the residential sector, electrical energy sales to
domestic consumers amounted on average to 106 kWh in 2007/08, with a range from18 kWh/cap in
Bihar to 424 kWh/cap in Delhi.

Table 1 - Residential electricity demand in India and emerging economies with similar climate in Asia

Comparing Indian levels of electricity use to those of other countries in similar climate zones gives some
insight into future domestic demand development in India. Statistics from Singapore, Malaysia and
Thailand clearly suggest a relation between income levels and per‐capita residential electricity demand
Given a projected GDP per‐capita growth of a factor of 5.7 between 2007 and 2050 in India, one would
expect the growth of residential electricity demand per capita to rise by 800 kWh/cap per year in 2050.

This implies that the average residential electricity consumption per capita in India would reach nearly
twice the current Delhi demand level in 2050. Assuming a 44% population growth between 2007 and
2050, this would result, excluding any efficiency improvements, in a residential electricity demand of
1311 TWh, some 12 times the demand level of 2006/07.



A breakdown for all demand categories in India in the BLUE Map Scenario is given in the Table below. In
total, the final electricity demand grows in the BLUE Map Scenario from 567 TWh in 2007 to 3168 TWh
in 2050. This is lower than the projected demand increase in the Baseline scenario. On the production
side (industry, commerce and agriculture), significant changes are expected as the economy grows
nearly eightfold. This implies a massive expansion of the commercial/services sector (by a factor of six),
a significant expansion of manufacturing activity, and more limited growth of activity in agriculture.

Table 2 - Final electricity demand breakdown and projection for BLUE Map Scenario

Power Capacity and Generation Projects
Assuming that the transmission and distribution losses can be reduced to 15% in 2050, about 3700 TWh
of electricity production is needed in the BLUE Map Scenario in 2050. At full load, 114 GW can generate
1 000 TWh per year. However, in practice plants operate on average far below the maximum load. This
is related partly to energy resource availability (e.g. for variable renewables) and partly to fluctuations in
demand during the year.

India had about 168 GW of total installed capacity in 2008, with an average load factor of 48%. Table 3.4
shows the power capacity in the ETP Baseline and BLUE Map Scenarios in 2050 (IEA, 2010a). The total
capacity in 2050 is between 3.8 and 4.5 times the installed capacity in 2008. However, the mix of
resources used is quite different.


Table 3 - India power generation capacity in the ETP 2010 Scenarios, 2050

In the BLUE Map Scenario, total power capacity would amount to 748 GW. The full potential of biomass,
geothermal, wind and tidal energy would be used. For hydro, 51% of the potential would be developed.
Total coal‐fired capacity would be roughly at the current level but almost all this capacity would be
equipped with Carbon Capture and Storage facilities in power plants (CCS). For solar a significant
expansion is assumed, from near zero now to 191 GW.

The figure below shows the BLUE Map Scenario projections which highlight the need for large capacity
additions in the regions of Delhi, Calcutta and Patna. Major installations of solar power plants are
projected for the regions of Bhopal, Calcutta and Delhi.


Figure 2 - Power capacities by region in the BLUE Map Scenario, 2050

Investment Needs
The table below gives an account of the new additional capacity needs and estimated investment
requirements for the Baseline and the Blue Map Scenarios between 2010 and 2050. It includes all
investments from fuel production to power generation, electricity T&D and electric end‐use equipment.


Table 4 - Power sector investment needs in India in Baseline and BLUE Map Scenarios

In the Baseline Scenario, between 2010 and 2050 the Indian power sector needs new cumulative
capacity additions of 746 GW. The cumulative requirement for new capacity is larger than the installed
capacity of 641 GW in 2050, since some technologies may require, depending on their technical
lifetimes, a reinvestment between 2010 and 2050. Total investment costs in the Baseline Scenario,
including power generation, T&D, electric end‐use equipment, and coal and gas supply, are USD 2.7
trillion. On the generation side, the additional investment is required to fund higher capacities for
nuclear, Carbon Capture and Storage facilities in power plants (CCS) and solar power. Also, capital is
needed for the expansion of the grid to connect solar plants in remote areas with demand centres, and
for more efficient electric equipment in the end‐use sectors. In the BLUE Map Scenario, these
investment needs increase to USD 4.0 trillion.



Comparing the investment needs for the Indian power sector with India’s cumulative gross domestic
product (PPP based in 2008 prices) of USD 855 trillion between 2010 and 2050, the total investment
needs related to power generation in the Baseline and BLUE Map scenario represent only a range of 0.3
to 0.5% of total cumulative GDP. The question is - Are the planners ready for this? We will proceed by
examining the 12th Five year plan of the Government of India.

Twelfth Plan Features
The twelfth plan makes adequate provisions for expansion in the electricity sector to meet the rapidly
rising demand. It plans to combine this with reform process in order to make the sector more efficient
and competitive. The generation capacities are to be expanded manifold by ensuring the completion of
a large number of projects quickly in an efficient and cost effective manner. The plan seeks to exploit
India’s technological capacities and natural endowments in the hydro-electric and the nuclear field (with
the development of Fast Breeder Reactors). In addition, it also wants to exploit the potential of
renewable with big investments in wind and solar power. Apart from generation major investments are
to be made in Transmission and Distribution networks and restructuring the Accelerated Power
Development and Reforms Programme (APDRP), using smart grid technologies in order to bring down
the high T&D losses. The plan also wants to achieve universal electricity coverage.

It intends to provide assured fuel supply to new power plants, provide long term finance, boost T&D
networks, improve Plant Load Factors in old thermal power plants, improve peak capacity at hydro
stations and use captive generation to meet power deficit.

Capacity Creation
Against the Eleventh Plan target of 78700 Megawatts of additional capacity addition less than 50000
megawatts have been achieved. It has largely been due to poor project implementation, inadequate
domestic manufacturing capacity, shortage of power equipment (which has forced large scale imports of
machinery from outside), and lack of adequate fuel supplies. Projects with power generation potential
of up to 80,000 MW are already under construction raising the hopes that the next plan target of adding
100000 MW to capacity would be met (Though this figure has recently been revised down to 75000 MW
due to slowdown in core sector of economy1).

The share of the private sector in capacity expansion has gone up substantially in the Eleventh Plan and
it is expected that 33.0 per cent of the total incremental capacity will come from the private sector. In
the Twelfth Plan, this share is expected to increase further to about 50.0 per cent. Since most of the new
power capacity will consist of thermal plants, it is essential to ensure that coal availability does not
become a constraint.

India has a substantial potential for creating hydropower capacity, especially in the North Eastern
region. The pace of capacity creation in this area has been slow and the plan emphasizes the urgency to
expedite environmental and other clearances, so that the pace of work on these hydro-electric power

1
http://www.dnaindia.com/india/report_dna-exclusive-power-ministry-scales-down-goal-for-12th-plan_1615251



projects can be stepped up. Early completion of these projects will also generate an income stream for
the North Eastern States which will enable them to accelerate the pace of development.

The plan also intends to take measures to increase the share of gas based power and also of nuclear
power. Safeguards in respect of the latter will be further reviewed and additional measures taken as
required.

Transmission
T&D networks need to be expanded and strengthened in order to support the big expansion in
production and consumption of electricity. The plan intends to put in a policy framework in place to
bring in more private sector investments into the sector. North-Eastern states need special projects for
power evacuation. Since, routes through Bangladesh can cut the costs significantly; the plan considers
the possibility of T&D lines passing through Bangladesh. Technological development for transmission
lines of 765 KV and over 1,000/1,200 KV is of great relevance in order to reduce land requirement and
also transmission losses.

Distribution
It is the weakest link in the chain and accounts for heavy unsustainable financial losses. Political pressure
restricts the regulator’s freedom to fix competitive tariffs, free power provided to farm sector and
power theft are principle reasons for this situation. Twelfth Plan wants to make the distribution system
financially viable by technological modernization and privatization. Since the distribution is largely
handled by states, the central government intends to provide adequate incentives to states to increase
the efficiency of their Distribution networks. It also intends to move towards freeing up the electricity
trading regime in India by giving freedom to customers with requirement of 1MVA and above to chose
their own sources of supply.

Rural Electrification
Electricity connections to all villages and Below Poverty Line (BPL) families were to be provided under
the Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY). There are, however, still a large number of
habitations left uncovered and a very large population that has no connectivity. Twelfth Plan will try to
universalize the access to power by restricting the RGGVY scheme. It will focus on agriculture as well as
strengthening the rural network.

Major Programs
Several high investment programs have been launched in order to boost generation capacity. These
require significant technological advancements. India is not only collaborating with nations and
corporations in order to import the equipment required but is also setting up a manufacturing base that
will boost the industrial capabilities of the country.



Nuclear Power
Ten new nuclear power projects are planned during the 12th Five Year Plan (2012-17) period2. Besides
these seven nuclear power reactors with a capacity of 5,300 MW are under construction (See Appendix).
It is expected that India will have 20,000 MW nuclear capacities on line by 2020, 63,000 MW by 2032
and 25% of electricity will be supplied from nuclear power by 20503. India is slowly moving towards
development of indigenous Pressurized Heavy Water Reactors and first prototype Fast Breeder Reactor
will be commissioned in 20124. PHWR reactors will be 700 MW gross (640 MW net). The first four are
being built at Kakrapar and Rajasthan. They are due on line by 2017 after 60 months construction from
first concrete to criticality.

Russia's Atomstroyexport is building the country's first large nuclear power plant, comprising two VVER-
1000 (V-392) reactors, under a Russian-financed US$ 3 billion contract in Kudankulam. The turbines are
made by Leningrad Metal Works. Russia is supplying all the enriched fuel through the life of the plant,
though India will reprocess it and keep the plutonium. The commissioning of this project has been hit
due to protests and faults in project implementation.

Figure 3 Nuclear Power Plants under construction

Ultra Mega Power Plants and Coal
Under the Eleventh Plan it was realized that the use of super critical and ultra-super critical technologies
in power generation can reduce the coal requirement of electricity production. Domestic capacities for
building such power plants are being established. The twelfth plan will ensure that much larger part of
the capacities initiated will be of the super critical variety and from the Thirteenth Plan onwards all new
capacities will be super critical or ultra-super critical.

In the pre-reform era, the generation companies were not free to sell the power produced as they
wanted. They were often forced to sell the power to the electricity boards of the home states, where
the power plant was located. These loss making electricity boards were often unable to pay back the

2
http://articles.economictimes.indiatimes.com/2011-11-23/news/30433349_1_nuclear-power-india-plans-
kudankulam-nuclear-plant
3
http://www.world-nuclear.org/info/inf53.html
4
http://www.thehindu.com/sci-tech/technology/article1981270.ece



costs of the electricity produced. The generation companies also faced chronic land acquirement issues
which affected many projects leading to delays.

Under a new set of legal and institutional framework, the government has decided to create a
supportive environment for the establishment of the UMPPs (Ultra Mega Power Plants)5. The Electricity
Act of 2003 enabled free trading of produced power, where power bought on the markets through free
bidding was not subject to regulatory controls. This has been combined with assured payment
mechanism to the producers of electricity. Effort has been made to provide dedicated coal mines to
each power plant with secure and short supply routes. The government has also created shell
companies for each UMPP project, which acquires all the necessary environment clearances, land, coal
linkages, transport permissions, regulatory approvals and water supply arrangements so that the private
investors are saved from the bureaucratic struggles6. FDI caps have been removed from these projects
so as to allow foreign investors to invest money in these projects. These large projects require large
investments ranging in 4-5 billion US$ which no single domestic lender can risk exposing itself to. Most
of the UMPPs under construction have been financed by a consortium of domestic lenders. In some
cases, they are being financed by debts from outside investors. Many of the UMPPs have been financed
under a 75:25 debt equity condition.

As of now, contracts for 7 UMPPs have been awarded7 and 5 of them are being constructed by Reliance
Power Limited and Two by Tata Power8. The average plant size is 4000 MW with investment of 20000
crores9.

Development of Renewables
The 12th Plan envisages that the share of new and renewable energy in electricity could go up to 15.0
per cent by 2020. It is hopeful that the rising costs of the conventional fuels will spur technological
developments that will reduce the current high costs of renewable generation.

While the National Solar Mission (NSM) under National Action Plan on Climate Change has planned a
capacity of 22,000 MW by 202210, the Centre for Wind Energy Technology has estimated a technically
feasible wind potential of 49,000 MW11. NSM also plans to add 2,000MW of off-grid solar power. Out of
this, 1,100MW grid-connected solar power capacity is to be installed in the first phase ending in March
2013. Nearly 800MW of this has already been allocated and is currently under execution12.

5
http://pfc.gov.in/brief_umpp.pdf
6
http://powermin.gov.in/whats_new/pdf/ultra%20mega%20project.pdf
7
http://www.pfc.gov.in/Content/UltraMegaPower.aspx
8
http://www.projectsinfo.in/News.aspx?nId=jgM68d88Dvhj6Q25HniRng
9
http://www.reliancepower.co.in/business_areas/power_projects/coal_based_projects.htm
10
http://articles.timesofindia.indiatimes.com/2009-11-18/india/28064964_1_solar-power-solar-mission-solar-
lighting-systems
11
http://www.projectsmonitor.com/ELECTRICITY/impetus-for-renewable-energy-in-12th-plan
12
http://www.tata.com/article.aspx?artid=pfG3q5JjhJU=



Many new projects have been planned to add capacity in Grid Interactive Renewable Power which
would comprise power generation from mainly the following resources:

(i) Solar power

(ii) Wind power

(iii) Biomass power /Bagasse Cogeneration

(iv) Small hydro power (SHP)

Decentralised Renewable Energy Applications involving multiple off grid renewable energy production
units like family solar lanterns, family bio-gas plants, solar cookers, green buildings which produce part
of the electricity that they consume and will reduce the grid dependence are also planned. Far flung
villages which cannot be connected to the grid will be provided with solar power generation systems.



Hydro Power Development
As per “Hydro Development Plan for the Twelfth Five year plan,” a shelf of 109 Hydro Electric schemes
aggregating to 30,920 MW has been identified, which includes 46 schemes under the private sector with
an installed capacity of 12,007 MW. CEA expects 25,316 MW of Hydro capacity additions to be feasible
for commissioning during the above mentioned plan with a funding requirement of Rs.82, 972 crores.

Development of Hydro Power has also been constrained due to land acquisition issues, shortage of
manpower, lack of long term power purchase agreements, lack of capital, lack of environmental
clearances and lack of infrastructural facilities like bridges, roads, efficient and reliable
telecommunication links required for dam construction in areas where maximum hydro-potential is
located.

As per assessment made by CEA, India is endowed with economically exploitable hydro-power potential
to the tune of 1 48 700 MW of installed capacity. The basin wise assessed potential is as under:-

In addition, 56 number of pumped storage projects have also been identified with probable installed
capacity of 94 000 MW. In addition to this, hydro-potential from small, mini & micro schemes has been



estimated as 6782 MW from 1512 sites. Thus, in totality India is endowed with hydro-potential of about
2 50 000 MW.

Conclusion
There are many characteristics of the Indian electricity sector that makes its future a compelling study.
First, the demand growth is bound to be much higher. This necessitates that the whole power sector be
re‐planned from scratch, which opens up interesting. Second, while coal is an important indigenous
energy resource, the coal quality is much lower than elsewhere which results in coal not being the most
economic option: coal imports or other power supply options might be more cost‐effective. Third,
renewable resources, with the exception of solar, are limited in India, particularly when this possible
supply is juxtaposed with demand growth forecast for the coming decades.

Nuclear and coal with CCS represent two alternative, carbon‐free supply options. Clearly, nuclear power
must play a crucial role in a CO2‐free electricity supply in India. The prospects for nuclear have improved
dramatically in recent years thanks to two factors: the agreement between India and the United States
in 2005 lifting a three‐decade US moratorium on nuclear trade with India and allowing the IAEA to
inspect civilian nuclear facilities, and in 2008 the consent of the Nuclear Suppliers Group to India’s trade
with non‐members of the Non-Proliferation Treaty. With the growing concern for environmental
protection and sustainable growth, the urgency of reducing CO2 emissions is increasing: if full
decarbonisation is to be achieved, coal with CCS must be part of the solution. CCS is a relatively new
concept in CO2‐free electricity supply, and development of a technology suited for Indian coal will
require special attention. Solar is the only option with a large technical potential, and must be included
in the decarbonisation strategy for India.

Expanding electricity access to poor rural villages also requires immediate attention. Continuing
programmes to develop decentralised solar systems and other types of decentralised renewable
electricityy strategies, could help in the achievement of this important goal. Apart from these goals,
maximising transmission and distribution efficiency, together with end‐use efficiency, should be our top
priority.



Appendix
Figure 1. BWR/PWR (Boiling Water Reactors/Pressurized Water Reactors); PHWR (Pressurized Heavy
Water Reactors), FBR (Fast Breeder Reactors)



Figure 2.



Figure 3.



Figure 4. Projected State wise addition of Large Hydro Capacity during 12th Plan (Ref – CEA/Aug 2010).



Figure 5. Major Hydro Plants in India


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