Gujarat’s Electricity Sector Transformation

Tim Buckley, Director for Energy Finance Studies, Australasia Kashish Shah, Research Analyst August 2019

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Gujarat’s Electricity Sector Transformation A Role-model of India’s Electricity Transition

Executive Summary GUJARAT,LOCATEDONTHEWESTERNCOASTOFINDIA,ISANECONOMICPOWERHOUSEthatcontributedroughly8%ofIndia’stotalgrossdomesticproduct(GDP)between2011/12and2018/19.ItisoneofthemostindustriallyfocussedstatesinIndia,withthreequartersofGujarat’sstateGDPcomingfromtheindustrialsector.

IEEFAalsoidentifiesGujaratasoneofthefiveleadingIndianstatesforrenewableenergyintermsofbothexistinggenerationcapacityaswellasfuturepotential.Therewas2gigawatt(GW)ofsolarpowercapacity,6GWofwindpowercapacityand0.5GWofbiomasscapacityoperationalasofMarch2019.

India’sMinistryofNewandRenewableEnergy(MNRE)estimatesGujarat’srenewablespotentialtobe72.7GW,equallybalancedbetweensolarandwindenergypotential.Thisincludesthe5GWDholeraSolarPark,thelargestproposedsolardevelopmentintheworldto-date.August2019sawNTPCannounceplansforanother5GWofsolarparkatKutchinGujaratduringitsannualinvestormeetforFY2018/19.ThisannouncementputsGujarataheadintheraceforbuildingrenewablescapacitybetweenstatessuchasTamilNadu,Karnataka,Maharashtra,AndhraPradeshandRajasthanwithsimilarrenewableenergypotential.

GUJARAT’SCURRENTELECTRICITYMIXISDOMINATEDBYTHERMALPOWERSOURCES.The22.3GWofthermalcapacitycomprises15.8GWofcoal-firedand6.6GWofgas-firedcapacity.Thisintotalforms69%oftotalcapacityand81%ofgenerationinGujarat.

Duetothelackofmaterialin-state‘black’coalminingcapacity,morethan90%ofGujarat’scoal-firedpowerplantsuseeitherexpensiveimportedseabornethermalcoalordomesticcoalhauledviarailwaysfrommineslocatedatadistanceofmorethan1,200kmineasternIndianstatesofOdisha,JharkhandorWestBengal.Therearelocalmine-mouthlignite-firedpowerplantsinGujarat.

Some9.9GWofGujarat’scoal-firedcapacitycommissionedbetween2009and2013—includingthe4.6GWAdaniMundraPlant,4.1GWatTataMundraPowerandthe1.2GWEssarSalayaPowerPlant—wasunviableuntilrecentlybailedoutthroughamassiveupliftinthepass-throughofexpensiveimportedcoalcoststodistributioncompanies(discoms).

IEEFAestimatesthebailout,onrecommendationfromaspecialthree-personcommitteeappointedbythestategovernment,willcostGujaratdiscomsUS$8.9bnovera30-yearperiod.Suchalossisequivalenttothecapitalrequiredtobuild8-

Gujarat Electricity Sector Transformation

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10GWofrenewableenergyprojectswith25-yearpowerpurchaseagreements(PPA)withzeroindexationandzerofuelcosts.

THEINDIANGOVERNMENTHASRIGHTLYIDENTIFIEDTHENEEDTOREDUCEITSEXPOSURETOIMPORTEDFOSSILFUELS(oil,coalandgas).Over-relianceonimportedfuelsadverselyaffectsIndia’stradeaccountdeficitwhileputtingitsenergysecurityatrisk.

Inthelasttenmonths,Gujarathasawarded2.5GWofrenewableenergy(1.8GWofsolarand0.7GWofwind)inadeflationarytariffrangeofRs2.44-2.95/kWhwith25-yearcontracts.Additionally,thereis1.5GWofcapacityunderthetenderingprocesswhichwillsoonbeawarded,tobecommissionedwithinthe24monthdeadline.

Gujaratisapreferreddestinationfordevelopersvyingforrenewableenergycontractsduetoitsexcellentnaturalresources.Thecentralgovernment-backedauctionsareconductedbySolarEnergyCorporationofIndia(SECI)andNTPC.

INTHISREPORT,IEEFA’SMODELPROJECTSGUJARAT’STOTALELECTRICITYPRODUCTIONREQUIREMENTTOGROW74%INJUSTOVERTENYEARS,from116-terawatthour(TWh)infiscalyear(FY)2018/19to203TWhFY2029/30.

IEEFAexpectsGujarattoaddastaggering46GWofnewrenewablescapacitybyFY2029/30,inaracetobethetopstateinIndia.Renewablesadditionsof4-5GWannuallycouldensureallofGujarat’sincrementaldemandgoingforwardissuppliedbyrenewables.ThiswillbeadramaticshiftinGujarat’selectricitysectorcompositionasrenewableswillform70%ofitscapacityand48%ofgeneration.

Gujarat Electricity Sector Composition FY2029/30

Source: IEEFA estimates.

Utilisation Capacity Adds

Source (GW) % (TWh) % % (GW)Coal 14.0 17.8% 68.7 33.8% 56.1% -1.8Gas 6.6 8.4% 14.4 7.1% 25.0% 0.0Diesel 0.0 0.0% 0.0 0.0% 0.0% 0.0Nuclear 2.0 2.5% 13.7 6.8% 80.0% 1.4Hydro 0.8 1.0% 1.4 0.7% 20.0% 0.0Renewables 55.1 70.3% 97.7 48.1% 24.0% 46.5Net imports 7.2 3.6%Total 78.4 100.0% 203.1 100.0% 46.1

Electricity Sector Composition FY2029/30

Capacity Generation


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Forthermalpower,IEEFAexpectsgrossadditionsof2.1GWofcoal-firedcapacitycurrentlyunderconstructionandintheplanningphasetobecompleted.Thiswillpartiallyoffsetaretirementof3.9GWofend-of-life,outdatedsubcriticaltechnology-basedcoalcapacitybyFY2029/30—accountingforanetreductionof1.8GWoverthecomingdecade.Thermalpowerwillprogressivelylosemarketshare,halvingitsgenerationsharefrom81%inFY2018/19to41%byFY2029/30.

Theincorporationofnearly55GWofintermittentrenewableenergyonGujarat’selectricitynetworkbyFY2029/30willrequireveryactivemeasuresandinvestmentonthegridintegrationfront.IEEFArecommendsamulti-technologyapproachwithstoragesolutionsofpumpedhydroandbatterystorage,flexiblegaspeakers,demandresponsemanagement,fasterrampingcoalpower,solarthermalwithstorage,rooftopsolarplusbehindthemeterstorage,aswellasgridmodernisation.

AllfourofGujarat’sstate-owneddiscoms,undertheumbrellaofGujaratUrjaVikasNigam(GUVNL),havesuccessfullyachievedallofthetargetssetoutintheUjwalDISCOMAssuranceYojana(UDAY).AttheendofFY2018/19,GUVNLemergedasthetopperformingIndiandiscomwithanetincomeofRs464crore(US$65m).

GUJARATDISCOMSSHOULDAIMTOPROGRESSIVELYDOAWAYWITHRELIANCEONSTATESUBSIDIESandoperateanevenmoreprofitablepowerdistributionbusiness.

ThisreporthighlightsthecleartransitionofoneofIndia’sleadingstatesfromanunreliable,expensive,importedthermalpower-basedelectricitysectortoalow-cost,low-emission,deflationary,domesticrenewableenergydrivenelectricitysystem—perfectlyalignedwithIndia’snationalobjectivesofbuilding523GWofrenewableenergybyFY2029/30.


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Table of Contents

ExecutiveSummary.......................................................................................................................................11.AnOverviewofGujarat,“TheLandoftheLegends”...................................................................52.India’sElectricitySectorTransformation.......................................................................................7ForecastingtheEnergyMixinIndia’sElectricitySector.......................................................93.OverviewofGujarat’sElectricitySector........................................................................................11ElectricitySectorComposition........................................................................................................11ForecastingtheEnergyMixinGujarat’sElectricitySector.................................................124.Gujarat’sThermalPowerSector.......................................................................................................14LNGImportCapacity............................................................................................................................14Coal-firedPowerSector......................................................................................................................15GujaratStateElectricityCorporationLtd...................................................................................16Adani,TataandEssar..........................................................................................................................17StrandedCoalPowerAssets.............................................................................................................18ExpensivePublic-fundedBailOut..................................................................................................19FlexingofGas-basedCapacity.........................................................................................................22RisktoThermalSectorfromWaterStress.................................................................................245.RenewableEnergySector.....................................................................................................................26DemandandSupplyProfile..............................................................................................................26SolarPower..............................................................................................................................................28RooftopSolar...........................................................................................................................................30GroupCaptiveModel...........................................................................................................................31WindPower.............................................................................................................................................32India’sFirstOffshoreWindProject...............................................................................................32BatteryManufacturing........................................................................................................................33PolicyIssues—AuctionCancellations,TariffRenegotiations,andLandAcquisition...................................................................................................................................346.GujaratElectricitySectorModel2029/30....................................................................................36DecouplingElectricityvs.EconomicGrowth............................................................................38NewDemandtobeMetThroughRenewableEnergySources..........................................40FurtherCollapseofCoal-firedPowerUtilisationRates........................................................41IntegrationofRenewableEnergy..................................................................................................427.DISCOMs.......................................................................................................................................................43Conclusion........................................................................................................................................................45AbouttheAuthors........................................................................................................................................46


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1. An Overview of Gujarat, “The Land of the Legends” Gujarati: ગુજરાત Hindi: गुजरात ThestateofGujaratislocatedonthenorthwesterncoastofIndia,withtheArabianSeagivingthestateitsextensivecoastlineof1,600km.

Thehome-stateofIndianPrimeMinisterNarendraModi,GujaratisakeyeconomiccontributortoIndia’sgrossdomesticproduct(GDP).

Gujarat’sgrossstatedomesticproduct(GSDP)grewatacompoundaveragegrowthrate(CAGR)of9.9%betweenFY2010/11toFY2018/19andcontributed8%toIndia’stotalGDP.Thestate’spercapitaGSDPgrewataCAGRof8.6%fromRs87,481(US$1,715)toRs131,583(US$2,585)duringthesameperiod.

Foreigndirectinvestment(FDI)inflowsintoGujarattotalledUS$20.55bnfromApril2000–March2019,accordingtotheDepartmentforPromotionofIndustryandInternalTrade(DPIIT).Thiswas5%ofIndia’stotalFDIduringtheperiod.1

Figure 1.1: Gujarat’s GSDP – Industrial Sector’s Contribution

Source: Reserve Bank of India.

1DepartmentforPromotionofIndustryandInternalTrade,FactsheetonFDI,27May2019.

Gujarat is a key economic contributor to India’s gross

domestic product (GDP).


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Housingapopulationof68million,GujaratisoneofIndia’smostindustriallydevelopedstate.TheStateisaleaderinindustriessuchasagricultureandfoodprocessing,textilesandapparel,gemsandjewellery,oilandgas,pharmaceuticalsandbiotechnology,aswellaschemicals.

InadditiontobeingknownasTheLandoftheLegends,GujaratisalsoconsideredthePetroCapitalofIndiaforitsdominanceinpetrochemicals.Thestatehaseightindustrialclusters,18industrialestatesandthreespecialeconomiczones(SEZ)forpetrochemicals.2

AsillustratedinFigure1.1,GDPcontributionsfromGujarat’sindustrialsectorarefarmorethananyothersector,includingagriculture,manufacturing,construction,bankingandfinance,andservices.

Gujarathasstrivedtobuildimportantphysicalinfrastructure.AsofFebruary2018,thenationalhighwaylengthwas5,456km.Alongwithroadinfrastructure,theGovernmentofGujarathasfocusedongrowthofthetransportationsector.TheGujaratStateRoadTransportCorporation(GSRTC)deliverstransportationservicestosome2.4millionpeopleeveryday.

ThestatehasoneofthestrongestportinfrastructuresinIndia.Itwasthefirststatetotakeupportprivatisation.Gujarathas42portsincludingonemajorportatKandlaand41minorportsalongitscoastline.

Gujaratpossessesthelargestliquifiednaturalgas(LNG)handlingandregasificationterminalinIndiaatDahej.TherearetwooperationalLNGimportterminals,includingDahej,withatotalcapacityof22.5millionmetrictonneperannum(MMTPA)andanother10MMTPAofnewLNGcapacityunderdevelopment.

Mostimportantly,Gujarathasarichlabourpooldevelopedthroughgoodeducationalinfrastructurewithpremierinstitutesinmanagement,fashion,design,infrastructureplanningandpharmaceuticals.ThestatehasoneofthehighestincominglabourmigrationsfromotherstatesofIndia.

BeingoneofIndia’shighlydevelopedindustrialstates,anappraisalofitselectricitysectorisofgreatvalueinIEEFA’sopinion.Anefficient,modern,domesticenergysectoroffersbetteroutcomesforitsindustrialeconomy.

ThisreportwillfocusonGujarat’selectricitysectorwhichhasenormouspotentialtotransitiontoalow-cost,low-emissionelectricitysystembasedonrenewableenergysources.

2IndiaBrandEquityFoundation,Gujarat—theGrowthEngineofIndia,June2019.

Gujarat’s electricity sector has enormous potential

to transition to a low-cost, low-emission electricity system.


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2. India’s Electricity Sector Transformation India,withaGDPgrowthrateof7-8%,istheworld’sthirdlargestelectricitymarketbehindtheU.S.andChina.However,itspercapitaelectricityconsumptionat1,149-kilowatthour(kWh)perannumislessthanone-fourthofChinaat4,905kWhandjustone-fourteenthofU.S.at14,091kWh.

ThegrowingeconomyofIndiahasamultitudeofchallenges.TheseincludeadheringtointernationalclimatecommitmentsofdramaticallyreducingcarbonemissionsintensityrelativetoGDPby33-35%by2030fromthe2005level,3andreducingitsunsustainablerelianceonenergyimports,whilstincreasinglysupportingitssocialandeconomicgrowthbykeepingthe‘lightson’.

IEEFAnotessuchchallengesdemandanacceleratedtransitiontoadomesticallyfuelled,lower-cost,low-emission,lesswaterintensiveenergyeconomy,startingwiththegreeningitselectricitysectorandmovingontoprogressivelyelectrifytransportandotherenergy-intensiveindustries.

Indiahassetanambitiousnear-termtargetof175GWofrenewableenergygenerationcapacitybyFY2021/22and275GWbyFY2027/28,whichwasrecentlyevenfurtherincreasedto523GW(including73GWofhydro)byFY2029/30.4

AsofMarch2019,Indiahad200.7GWofcoal-firedcapacitycontributing56.3%ofitstotalcapacityandanunsustainablyhigh74.3%oftotalgeneration.Renewableswereproviding77.8GWofcapacity,delivering21.8%ofgenerationcapacityandonly9.2%oftotalgeneration.

3India’sintendednationallydeterminedcontributions(NDCs)undertheParisClimateAgreementalsoincludehaving40%oftotalgenerationcapacityfromnon-fossilfuelsourcesby2030.4CentralElectricityAuthorityofIndia,Draftreportonoptimalgenerationcapacitymixfor2029-30,February2019.

India has set an ambitious target of 523GW of renewable energy

generation capacity by FY2029/30.


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Figure 2.1: India’s Electricity Sector Composition FY2018/19

Source: CEA, IEEFA estimates.

FromFY2017/18onwards,India’srenewableenergysectorsawadramaticdeflationinrenewableenergytariffsachievedthroughtransparent,reversebiddingauctions.TheambitiontoacceleratecapacitybuildingwasreinforcedbysolarpowertariffsaslowasRs2.44/kWh(~US$35/kWh).Ofthe21GWofrenewablecapacityinstalledsincethebeginningofFY2017/18andanadditional35GWauctionedtilldate,morethan90%ofithasbeencontractedfortariffsbetweenRs2.43-2.80/kWhwithzeroindexationfor25years—20-30%lessthanaveragedomesticthermaltariffsfromNTPCofRs3.63/kWhforFY2018/19.5

Ontheotherhand,India’sthermalpowersectorhasseentremendousfinancialdistresswith34GWofprojectsremainingstranded,plaguingbothIndia’spowergenerationsectoranditsbankingsystem.6Thethermalpowersectorfacesstructuralissuesincludingalackofappropriatefuel-linkages,aninabilitytoaccessPPAsduetolowerthanexpectedelectricitydemand,anunsustainablerelianceonconcessionalfinancing,andlastbutnotleast,competitionfromlowerrisk,cheaper,domesticrenewableenergysources.

Thethermalpowersector’sunderperformanceisexemplifiedbyunsustainablylowcapacityutilisationratesoflessthan60%overthepasttwoyearscombinedwithexcessivefinancialleveragethatmakesdebtservicingproblematic.Distressisexacerbatedbyloss-makingdiscomsthathaveoftenfailedtomaketimelypaymentsorhavesoughttorenegotiatetariffsonPPAs.

5NTPC,KeyPerformanceHighlightsFY2018/19.6IEEFA,RisktoIndia’sbankingsectorinrisingtideofstrandedassets,21stAugust,2018.

Capacity IncreaseGW % TWh % Utilisation GW yoy

Coal-fired 200.7 56.3% 1,022.3 74.3% 58.7% 3.5

Gas-fired 24.9 7.0% 49.8 3.6% 22.8% 0.0

Diesel-fired 0.6 0.2% 0.1 0.0% 1.9% -0.2

Large Hydro 45.4 12.7% 134.9 9.8% 34.0% 0.1

Nuclear 6.8 1.9% 37.8 2.7% 63.7% 0.0

Renewables 77.8 21.8% 126.8 9.2% 19.7% 8.6

Bhutan (Import) n.a n.a 4.4 0.3% n.a.

Total 356.3 100% 1,376.1 12.1Capitve power 51.4

Total 407.7 114.4%

Capacity Generation

India’s thermal power sector has seen tremendous

financial distress.


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ThermalcapacityadditionshitadecadelowinFY2018/19.Fromthehighsof(anaverage)20GWofnewcoal-firedpowerplantscommissionedeveryyearbetweenFY13-FY16,netcapacityadditionsfromcoaloverthepastthreeyearshavebeen7GW,5GWand3.4GW,respectively.

Factorssuchasrapidimprovementsinrenewableenergytechnologies,economiesofscale,innovativedebtandequityfinancing,andstronggovernmentendorsementshaveprovidedagreatdeflationaryimpetustorenewableenergytariffs.

InIEEFA’sopinion,IndiaiswellonthewaytoachievingitsenergygoalsgiventheclearambitionoftheIndiangovernmentandanUS$500-700bninvestmentopportunityby2030underlyingthemegatransition.

Forecasting the Energy Mix in India’s Electricity Sector IEEFAmodelstheenergymixinIndia’selectricitysectorwithreferencetotheCentralElectricityAuthority’s(CEA’s)draftreportontheoptimalenergymixby2029/30.However,weattenuateourestimatesbasedonourreadingofcurrentmarket,financeandpolicyconditions.

IEEFAforecastsIndia’srenewableenergycapacitytogrowrapidlywith25-30GWofnewcapacityadditionsannuallythroughtoFY2029/30.IEEFAprojectsrenewableenergycapacitytobeat405GW(excludinghydro)byFY2029/30whichforms54.4%ofIndia’stotalgenerationcapacityand33.7%oftotalgeneration.

IEEFArecommendsaprogressiveretirementofIndia’sold,end-of-lifeandoutdatedsubcriticaltechnologycoal-firedpowerplants,andforthecompletioninconstructionofmoderncoal-firedcapacitysufficienttoreplacetheretiredpowerplants.

Duetotheunrelentingandlikelyevercheapercompetitionfromvariablerenewableenergysources,thermalpowerwillprogressivelylosemarketshare,takingitsgenerationsharefrom74.3%inFY2018/19tojust51.7%inFY2029/30.IEEFAprojectsnetnewcapacityadditionstobesome39.1GW,takingcoal-firedcapacityto239.8GWbyFY2029/30,alikelypeakforIndia.

Thermal power will progressively lose

market share.


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Figure 2.2: India’s Electricity Sector Composition FY2029/30

Source: CEA, IEEFA.

Additionally,theIndianpowersectorfacesamassivestructuralchallengeintheformofloss-makingstate-owneddiscomsandunsustainable,largelyunfundedcross-subsidiesinitselectricitytariffstructure.

Thetransitiontoanelectricitysystemwithmassiveamountsofrenewableenergywillrequireevenfastergridtransmissionanddistributionexpansion,aswellastheincorporationofstoragetechnologies,demandresponsemanagement,flexibleon-demandpeakingpowercapacity(bothgaspeakersandfaster-rampingcoaltechnologies),andotherreformssuchastime-of-daypricingtoincentivisecontinuedinvestmentintheconcurrentexpansionandmodernisationofIndia’selectricitysystem.7

7IEEFA&ENERFRA,FlexingIndia’sEnergySystem,8January,2019.

Capacity IncreaseGW % TWh % Utilisation GW vs. FY19

Coal-fired 239.8 32.2% 1211.5 51.7% 57.7% 39.1

Gas-fired 24.4 3.3% 53.3 2.3% 25.0% -0.6

Diesel-fired 0.0 0.0% 0.0 0.0% 0.0% -0.6

Hydro 63.4 8.5% 183.4 7.8% 33.0% 18.0

Nuclear 11.9 1.6% 74.1 3.2% 71.2% 5.1

Renewables 405.0 54.4% 789.6 33.7% 22.3% 327.2

Bhutan/Nepal n.a. n.a. 31.2 n.a

Total 744.5 100.0% 2,343 98.7% 388.2Battery Storage 34.0

Capitve power 51.4

Total 795.9

Capacity Generation


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3. Overview of Gujarat’s Electricity Sector BeingoneofthemostindustrialstatesinIndia,Gujarat’selectricitydemandhasgrownrapidlyataCAGRof6.1%annuallybetweenFY2008/09andFY2018/19.

InFY2018/19,Gujaratconsumedatotalof116.3TWhofelectricitymakingitthesecondlargestelectricitymarketbehindthestateofMaharashtra.Itistheleadingstateintermsofpercapitaelectricityconsumptionwith1,733kWhperpersoninFY2018/19.

Figure 3.1: Gujarat Electricity Sector Total and Per Capita Consumption, Growth FY2018/19

Source: CEA, India census data, IEEFA estimates. Note 1: The size of the bubble depicts total electricity consumption for the states. Note 2: Note: The Andhra Pradesh and Telangana split in FY2014/15 reflects in the reduced size of the Andhra Pradesh’s electricity market.

Electricity Sector Composition AsofMarch2019,Gujarathadthermalgenerationcapacityof22.3GWcomprising15.8GWofcoal-firedcapacityand6.6GWofgas-firedcapacity.Thisformed69.1%oftotalgenerationcapacityand81.1%ofthetotalgenerationinGujarat.

Intermsofrenewableenergy,Gujaratisoneofthetopstatesforwindwith6GWinstalledasofFY2018/19.Another2GWofsolarand0.5GWofbiomasscapacitymakesthetotalrenewablecapacity8.6GW.Renewablesmake26.8%ofgenerationcapacityand11.8%oftotalconsumptioninGujarat.8Newrenewablecapacityof1.3GWwasaddedduringFY2018/19.

8Renewableswere12.5%oftotalgenerationinGujaratinFY2018/19and11.8%ofconsumptionwhichincludesnetinterstateimportsof6.2TWhduringthesameperiod.


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Figure 3.2: Gujarat Electricity Sector Composition FY2018/19

Source: CEA, Western Load Dispatch Centre (India), IEEFA estimates. Note: Net 6.2TWh of electricity was imported into the state in 2018/19.

Additionally,Gujarathas0.8GWoflargehydroand0.6GWofnuclearcapacity.Commissionedin1993,KakraparAtomicPowerStationat440MW(twox220MWpressurisedwaterreactors)formsthemajorityofGujarat’snuclearpowercapacity.9Units3and4at1.4GW(2X700MW)attheStationareunderconstructionandscheduledtobecompletedbyFY2024/25.10

Thestatehasaddednetzeroornegativecoal-firedcapacitybetweenFY2012/13andFY2018/19.Ontheotherhand,itsrenewablecapacityhasmorethandoubledduringthesameperiod—anindicationofthestate’stransitiontowardsarenewableenergy-basedelectricitysystem.

Gujarat’scoal-firedfleetoperatedataprohibitivelylowcapacityutilisationrateof59.5%in2018/19.Atsuchlowutilisationrates,itbecomeshardertoservicedebtsleadingtoanincreaseinstrandedassetrisk.

Forecasting the Energy Mix in Gujarat’s Electricity Sector IEEFAmodelsalong-termelectricitysectormixforGujarattoFY2029/30,takingintoaccountitshistoricelectricitydemandgrowth,economicgrowthandresultingpowerintensity,plustherelativecosttrajectoriesforvariouspowersystems.

9TheCEAreportsGujarat’snuclearcapacitytobe600MW.However,IEEFAhasnotbeenabletoidentifytheadditional160MWofnuclearcapacityinGujarat.10PressInformationBureau,GovernmentofIndia,DepartmentofAtomicEnergy,ProposalofNewAtomicPlants,3January2019.

Gujarat is one of the top states for wind with 6GW installed as of FY2018/19.

UtilisationCapacity

AddsSource (GW) % (TWh) % % (GW)Coal 15.8 48.8% 81.7 70.1% 59.5% 0.2

Gas 6.6 20.3% 12.8 11.0% 22.3% 0.0

Diesel 0.0 0.0% 0.0 0.0% 0.0% 0.0

Nuclear 0.6 1.7% 1.0 0.9% 20.4% 0.0

Hydro 0.8 2.4% 1.0 0.9% 15.4% 0.0

Renewables 8.6 26.8% 13.8 11.8% 19.7% 1.3

Net imports 6.2 5.3%

Total 32.3 100.0% 116.6 100.0% 1.5Off-grid 2.3


Capacity Generation


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IEEFAprojectsGujarat’scoal-firedcapacitywillreach14GWbyFY2029/30.Netnegativeadditionsof1.8GWcapacityaccountsforthecommissioningof1.3GWof‘currentlyunderconstruction’capacityand0.8GWofcapacityunderadvancedstagesofregulatoryapprovals,topartiallyreplace3.9GWofend-of-lifepowerplantstoberetiredbeforeFY2029/30.

Gujarat,withgreatsolarandwindpowerpotential,isoneofthepreferreddestinationsinIndiaforrenewableenergydevelopersandinvestors.

Gujaratrecentlysetanambitioustargettoinstall30GWofrenewableenergybyFY2021/22whichwillrequireadditionsof7GWofcapacityannuallyfromFY2019/20onwards.GiventhesluggishnessincapacitycommissioninginIndia’srenewablesector,Gujaratisunlikelytoachievethisnear-termtarget.

IEEFAprojectsGujarat’srenewableenergytoreach55.1GWbyFY2029/30.11Theincorporationoflargeamountsofrenewableswillhighlighttheneedforaddressinggridstabilityissuesandwillrequireadoptionofenergystoragesystemsaswelldemandresponsemanagement,inadditiontoasignificantexpansionofinterstategridtransmissioncapacity.

Wedetailourmodelwithproductionanddemandgrowthprojections,transmissionlosses,andresultingcapacitygrowthrequirements,inSection6.

11RefertoSections5and6inthisreportforadetailedanalysis.

IEEFA projects Gujarat’s renewable energy to reach

55.1GW by FY2029.

UtilisationCapacity

AddsSource (GW) % (TWh) % % (GW)Coal 14.0 17.8% 68.7 33.8% 56.1% -1.8Gas 6.6 8.4% 14.4 7.1% 25.0% 0.0Diesel 0.0 0.0% 0.0 0.0% 0.0% 0.0Nuclear 2.0 2.5% 13.7 6.8% 80.0% 1.4Hydro 0.8 1.0% 1.4 0.7% 20.0% 0.0Renewables 55.1 2.0% 97.7 48.1% 24.0% 46.5Net imports 7.2 3.6%Total 78.4 31.7% 203.1 100.0% 46.1


Capacity Generation


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4. Gujarat’s Thermal Power Sector Thermalpowercapacityformed69.1%ofGujarat’stotalgenerationcapacityasofJune2019.12The15.8GWofcoal-firedcapacityincludes1.5GWoflignite-firedpowerplants.

GujaratisoneoftheveryfewstatesinIndiawithligniteproduction.AsofMarch2018,Gujaratwasestimatedtohave2.72billionmetrictonnes(MT)oflignitereserves,whichis6.1%ofIndia’stotalreserve.13Incontrast,thestatedoesnothaveanymaterialin-state‘black’coalminingcapacity.

Coal-firedcapacityinGujaratiseitherbasedonimportedseabornecoalordomesticcoalhauledbyrailfromdistantcoalminesfromtheeasternstatesofIndia,suchasOdisha,WestBengalandJharkhand.

IEEFAestimatestransportationofcoalover1,200kmviarailwaysincreasesthefinaltariffofelectricityproducedbyRs1.66/kWhcomparedtotariffsofmine-mouthcoal-firedpowerplants.

Gujarat’scoal-firedfleetoperatedat59.5%in2018/19,wellbelowdesignedutilisationratesof80-85%.Suchlowutilisationratesreduceoperationalefficiencyandhencecommercialviability,inturnmakingdebtservicingmoredifficultandincreasingtheriskforprojectstobeastrandedasset.

LNG Import Capacity Gujarathas22.5MMTPAofoperationalLNGhandlingcapacityandanother10MMTPAinthepipeline.ThetwooperationalLNGterminalsinDahej(byPetronetLNG)andHazira(byRoyalDutchShell)form60%ofIndia’sexistingLNGhandlingcapacity.14

Figure 4.1: LNG Handling Infrastructure in Gujarat

Source: Petronet.

12TherehasbeennothermalcapacityadditionduringtheQ1FY2019/20(April-JuneQuarter).13GovernmentofIndia,EnergyStatistics2019,March2019.14PetronetLNG,CorporateProfile,June2019.

Terminal Developers Capacity (MMTPA)

Status

Dahej Petronet 17.5 OperationalHazira Royal Dutch Shell 5.0 OperationalMundra GSPC, Adani 5.0 Fully constructedJafrabad (FSRU) Swan 5.0 Planned

32.5Total


15

Gujarat’sgas-firedpowergenerationfleetsuffersasimilarunderutilisationasitscoal-firedfleet.Thegas-firedfleetinGujaratoperatedatanunsustainablylowutilisationfactorof22.3%inFY2018/19.

LowerthanexpecteddomesticproductionandhighercostsofimportedLNGaretwokeyfactorskeepingmorethanhalfofIndia’sgas-firedcapacityidleinrecenttimes,saysthespecialparliamentarycommitteeonenergyinitsJanuary2019report.15Additionally,gas-firedpowertariffsloseoutoncompetitivenessastheyneedtoincorporatecostsoffueltransportationfromexpensiveinter-statepipelines.Theinter-dependabilityofgas-firedpowerplants,LNGimport,regasificationunitsandpipelinesraisesoverallstrandedassetriskinthesector,especiallygivenlowercostdomesticgasproductionisunabletomatchthedemandofthesector.

Coal-fired Power Sector Gujarat’scoal-firedpowersectorisdominatedbyprivateplayerswithtwo-thirdsofitsexistingoperationalcapacitybelongingtotopIndianpowersectorinvestorssuchasAdaniPowerandTataPower,withstategovernmenttheothermajoroperator.

Figure 4.2: Coal-fired Power Generation Players

Source: Global Energy Monitor. Note: The above list excludes plants below 100MW.

15MinistryofPower,Standingcommitteeonenergy(2018-19),January2019.

Proponent Capacity (MW)

Adani Power Ltd 4,620Essar Power Ltd 1,470Gujarat Industries Power Co Ltd 500Gujarat State Electricity Corp Ltd 4,200Tata Power Co Ltd 4,000Torrent Power Ltd 515Total 15,305


16

Gujarat State Electricity Corporation Ltd GujaratStateElectricityCorporationLtd(GSECL)isawhollyownedsubsidiaryoftheGujaratElectricityBoardandislargestpublicsectorpowergenerationplayerinGujarat.

Figure 4.3: GSECL Coal-fired Power Plants

Source: GSECL, Global Energy Monitor, CEA.

GSECLoperates4.2GWofcoal/lignite-firedcapacityinthestate.Apartfromitslignite-based290MWKutchPowerStation,allitscoal-firedcapacityiscontractedatnowuncompetitivelyexpensivetariffsintherangeofRs4.05-8.85/kWh—uptodoubletheaverageofrenewableenergytariffsatRs2.80/kWhinrecenttimes.

Roughly80%ofGSECL’soperationalcoal-firedcapacityisbasedonout-datedsubcriticalcombustiontechnologythatisreachingitsend-of-life.InIEEFA’sview,thehighlypolluting,expensive,out-datedcoal-firedcapacitywillhavetobeprogressivelyretiredandreplacedbymuchlower-costbutvariablerenewableenergysources.

ThecompanyhadplannedtoretrofititsUkai,GandhinagarandSikkapowerplantscommissionedmorethan35yearsago.16However,GESCLrealisedthiswasanextremelysub-optimalinvestmentdecisionandinsteadretiredatotalof720MWofoldunitsfromthesethreepowerplantsin2017,andreplaceditwithnewcapacitybasedonslightlymoreup-to-datesupercriticalcombustiontechnology.

16TimesofIndia,Gujaratthermalpowerplantssetformajoroverhaul,1June2015.

Plants Capacity (MW)

Year of Commissioning

Fuel Source Technology Tariff (Rs/kWh)

OperationalDhuvaran Power Station 220 1972 Coal SubcriticalGandhinagar Power Station 610 1990-1998 Coal Subcritical 6.05/3.98 for unit 5Kutch GSECL Power Station 290 1990-2009 Lignite Subcritical 3.38/3.87Sikka Thermal Power Station 500 2015 Coal Subcritical 8.85/5.29 for unit 3&4Ukai Thermal Power Station 1,110 1979-2013 Coal Subcritical 4.11/4.95Wanakbori Thermal Power Station 1,470 1982-1998 Coal Subcritical 4.49/4.05

4,200Under Construction

Bhavnagar Lignite Power Station 500 2019 Lignite CFBWanakbori Thermal Power Station 800 2019 Coal Supercritical

1,300Pre-permitted

Ukai Thermal Power Station 800 Supercritical


17

GSECLcurrentlyhastwocoal-firedpowerplantsunderconstruction—WanakboriThermalandBhavnagarLignitepowerstations—andanotheroneinplanning.IEEFAexpectsallthreetobeextremelychallengedfinanciallyinthefaceoflow-costrenewableenergy.Gujaratwouldbefarbetterservedinstallingflexible,on-demandpeakingpowercapacitytohastenandbalanceleastcostrenewableenergygeneration.

Bhavnagar Lignite Power Station, 500MW, Under-construction

BhavnagarLignitePowerStationwithtwounitsof250MW(2X250MW)islocatedatPadvavillagenearGhoghatowninBhavnagardistrict,Gujarat.ThepowerstationisbasedonCirculatingFluidisedBed(CFB)combustiontechnology.

ThestationplannedtosourcelignitelocalmineblocksfromGhogha-SurkaandKhadsaliyaIandII.However,inMay2014,theprojectfacedhugecivilunrestwithlocalvillagersopposingtheirforcefuldisplacement.17

India’sMinistryofPowerreportsthepowerplantasfullycommissioned,however,itiseithernotyetsynchronisedintothegrid,orstillinitstestingphase.

Wanakbori Thermal Power Station, 800MW, Under-construction

Unit8oftheWanakboriThermalPowerStationisbasedonsupercriticaltechnology,unlikepreviousunitsbasedonentirelyout-datedsubcriticaltechnology.ThestationislocatedonthebanksoftheMahiriverinKhedadistrict,Gujarat.

WithafinalcommissioningdateofFebruary2019,18GSECLsuggeststheprojectisrunningbehindschedule.Absentin-statecoalminingcapacityinGujarat,IEEFAestimatestariffswillbehigherthantheplant’sexistingunittariffsofRs4.05-4.49/kWh.

Ukai Thermal Power Station, 800MW, in Planning

InFebruary2018,GSECLappliedtoconstructanew800MWsupercriticalunitatthesiteoftheUkaiThermalPowerStation.GSECLplanstoreplaceUkai’s440MWofoldunits(1,2and3)withthenewextension.

Adani, Tata and Essar Two-thirdsofGujarat’scoal-firedcapacitybuiltbetween2009and2013wasunviableuntilbailedoutrecentlywithamassiveincreaseintheagreedpass-throughofexpensiveimportedcoalcoststodiscoms.Atotalof9.9GWofimportedcoalbasedplantsincludesAdaniPower’s4.6GWMundraThermalPowerStation,

17TheTimesofIndia,62teargasshellslobbedasfarmersclashwithpolice,14May2018. 18GSECL,Projects

Gujarat would be far better served installing

flexible, on-demand peaking power capacity.


18

TataPower’s4.1GWMundraPowerPlant—ownedthroughaspecialpurposevehiclenamedCoastalGujaratPowerLtd(CGPL)—andthe1.2GWEssarSalayaPowerPlant.

Adani Power’s Mundra Thermal Power Station, 4.6GW

AdaniPower’sMundraThermalPowerStationislocatedintheMundratalukofKutchdistrictinGujarat.TheplanthasPPAswithdiscomsinGujaratandHaryana.

Tata Power’s Mundra Power Plant, 4.1GW

TataPower’ssubsidiaryCGPLoperatesthe4.1GWcoal-firedpowerplantatMundra,Gujarat.Theplantisfuelledbyimportedcoal.IthasPPAswithdiscomsoffivestates:Gujarat,Maharashtra,Haryana,RajasthanandPunjab.Theplant’sfundersincludetheExport-ImportBankofKorea,theAsianDevelopmentBank(ADB)andtheInternationalFinanceCorporation(IFC),theprivate-sectorarmoftheWorldBank.

Essar Salaya Power Plant, 1.2GW

TheEssarSalayaPowerplantisownedbytheLondon-basedEssarGroup,madeupofthebillionaireRuiabrothersofIndia.TheplanthasaPPAwithGujaratUrjaVikasNigam(GUVNL)tosupplytheentiretyofitsproduction.

Stranded Coal Power Assets Some9.9GWofcoastalpowerplantsbuiltduringIndia’sthermalpowercapacityboomareverticallyintegratedwithpromotershavingstakesinIndonesiancoalmines.Before2011,captiveIndonesiancoalwastradedatasignificantdiscountcomparedtotheinternationallytradedmarketpriceofcoal.However,in2011,theIndonesiangovernmentbenchmarkedIndonesianexportcoalpricesagainstinternationalcoalprices,additionallyapplyinga13%royaltytothemarketpricetoensuresomereturntothepeopleofIndonesiafromuseoftheirpublicresources.19

Intheabsenceofpass-throughfromhigherthanexpectedfuelcostmarketprices—resultingfrompriceincreasesinseaborneIndonesiancoal—thepowerplantsbecameunviableatpreviouslycontractedtariffsintherangeofRs2.26-2.89/kWh.

ThepromotersofthepowerplantsappliedtoIndia’sCentralElectricityRegulatoryCommission(CERC)forcompensatorytariffstoallowpass-throughofthehighercoalcosts.Theoverturningofbindingcontractswasinitiallygranted,butthenchallengedbyStatediscomswhohad25-yearPPAstobuythepoweratveryfavourabletariffs.In2017,theIndianSupremeCourteffectivelydisallowedthecompensatorytariffs,leaving9.9GWofcoal-firedpowercapacityinextremefinancialdistress.

19DNA,IndonesiannightmareforTata,Adani,JSW,Lanco,13June2011.


19

Sincetheplantshadbeendesignedtooperateonimportedcoalwithlowashcontent,operatingtheplantsondomesticcoalwouldrequireadditionalcapitalexpenditureforaretrofit.

InJune2017,AdaniandTataofferedtosella51%equitystakeineachoftheseassetstoGUVNL—themainprocureroftheirelectricity—foranominalpriceofRs1inreturnforitsagreementtopayahigherrateforthepowerproduced.GUVNLcounteredtheofferbyaskingfor100%ownershipofthetroubledplants.

DuringFY2017/18andFY2018/19,AdaniandTata’sMundrapowerplantsoperatedatprohibitivelylowutilisationratesoflessthan60%.2021AttheendofFY2018/19,debtsforAdaniMundraandTataMundrawereRs11,552crore(US$1.6bn)22andRs6,954crore(US$0.98bn)respectively.23

Expensive Public-funded Bail Out AsTataPowerandAdaniPowerfailedintheirofferstooffloada51%stakeintheirMundraplantsforonerupeeeach,recommendationsfromaGujaratgovernmentappointedspecialcommitteepavedthewayforahighlyfavourablebail-out.

InJuly2018,theGujaratstategovernmentsetupathree-personpaneltoconsideroptionsfortheunviableMundrapowerplantsofTataPower,AdaniPowerandEssarPower,totalling9.9GW.Thepanel’srecommendationsincludedamendmentstotheplant’sPPA’stoallowpass-throughofhighcoalcostsontoconsumersandtheoptiontoextendPPAsbyuptotenyears.Lenderstotheprojectswouldalsoberequiredtotakeahaircut.24ThecommitteerecommendedreductionsinfixedchargesbyRs0.20/kWh,whichwouldnecessitatebanksreducingdebtsbyRs4,240crore(US$600m)forTataPower,Rs3,821crore(US$540m)forAdaniPower,andRs2,324crore(US$327m)forEssarPower.25

GUVNL,theGujaratstatedistributioncompany,appliedtoCERCtoapproveanamendmenttoitsPPAsalongtheselineswiththeMundraplantsand,inOctober2018,theSupremeCourtallowedCERCtoapprovesuchameasure.

InApril2019,CERCofficiallyapprovedatariffupliftforPPAscovering2,000MWofAdaniPower’sMundraplant,settingaprecedentfortherestoftheMundracoal-firedpowercapacityofAdaniPower,TataPowerandEssarPower.26Inadditiontoallowingpass-throughofthecostofimportedcoaluptoUS$110/tasapartialoffset,AdaniwillneedtosharetheprofitsfromitsIndonesiancoalminingoperation.

20TataPower,AnalystCallPresentations21AdaniPower,AnalystCallTranscripts22ICICISecuritiesbrokerreport,6June2019.23CoastalGujaratPowerLimited,AnnualReport,FY2018/19.24FinancialExpress,SCreliefforGujaratpowerplants:CERCmayconsiderPPArevisiononlyafterallfivestatesseekit,4December2018.25FinancialExpress,CERCdirectsTataPowerarmtogetdiscoms’consentforMundraPPArevision,30May2019.26ETEnergyworld,Fuelcostpass-throughforAdaniplantpositivesignforimportedcoal-basedIPPs,15April2019.


20

TheGUVNLPPAupliftdecisionispotentiallymostbeneficialtoEssarPower’s1,200MWMundraplantwhoseentirepoweroutputiscoveredbyaPPAfromthatdiscom.WiththeTataPowerandAdaniPowerplantsalsosupplyingvariousotherstatediscomsinadditiontoGujarat,thosecompaniesarenownegotiatingsimilarPPAstocovertheirentireelectricityoutput.

Thetariffhikesbasedonpass-throughofescalatedfuelcostsarereportedtobeRs0.4/kWhofTata,Rs0.8/kWhforAdaniandRs0.6/kWhforEssar’sSalayaplant.

Althoughthearrangementishighlyfavourabletoplantowners,inIEEFA’sviewitplacesamassiveadditional30-yearburdenonconsumers(includinga10yearextensionrecommendedbythecommittee).

Figure 4.4: Losses for Discoms as a Result of Fuel Cost Pass-through

Source: Media reports, IEEFA estimates.

IEEFAnotesthisUS$8.5bnburdenisequivalenttothecapitalinvestmentsrequiredtobuild8-10GWofrenewableenergycapacitywithzerovariablecostsoffuel.

Yetevenso,thebailoutwillnotbeenoughtomaketheMundraassetsviable.TataPower’sManagingDirectorPraveerSinhahasstatedthePPAupliftswouldonlyhalveCGPL’slossesfromthecurrentlevelofUS$225-240mperyear.27

27EconomicTimes,Aftertariffrelief,ourMundralosseswouldcomedownby50%:PraveerSinha,TataPower,6December2018.

Losses for State-owned Discoms (Gujarat, Maharashtra, Haryana, Punjab, Rajasthan)CERC approved higher fuel cost pass-through in

Tata Adani Essar

Estimated revised tariff hikes granted (Rs/kWh) 0.4 0.8 0.6 Rs/kWh

New tariff (Rs/kWh) 3.10 3.40 3.50 Rs/kWhTotal capacity of the three projects 4.1 4.62 1.2 GWGeneration at full capacity 35.9 40.5 10.5 TWhAt 70% PLF 25.1 28.3 7.4 TWhTotal generation for the period of 30 years 754.2 849.9 220.8 TWh

Losses for discoms through fuel cost passthrough for the period of 30 years

301.7 679.9 132.5Rs bn

4.3 9.7 1.9 US$bn

Minus benefit through reduction of 0.2/kWh on fixed charges

215.5 242.8 63.1Rs bn

3.1 3.5 0.9 US$bn

Net losses for discoms 1.2 6.2 1.0 US$bn

Cumulative loss to state-owned discoms US$bn8.5


21

Mota Layja Power Station, ~4GW, Proposed

InfrastructureLeasing&FinancialServicesCompany(IL&FS)wasfoundedin1987withequityfromtheCentralBankofIndia(CBI),theUnitTrustofIndia(UTI)andtheHousingDevelopmentFinanceCo(HDFC)—organisedtofundinfrastructureprojectsinIndia.TheLifeInsuranceCompany(LIC)ofIndia,theORIXCorporationofJapan,theAbuDhabiInvestmentAuthority(ADIA)andtheStateBankofIndia(SBI)areamongtheothermajorinstitutionalinvestorsinIL&FS.

IL&FSproposedasupercritical3,960MWcoal-firedpowerplantatMotaLayjavillageintheKutchdistrictinGujarat(theplantisalsoknownastheNanaLayjaPowerStation).

Theplantwasproposedtobeaccompaniedbyanother2GWofgas-basedcombinedcyclepowerplant(CCPP)withacaptiveportforunloadingof17MTPAofcoal,anda60millionlitresperday(MLD)desalinationplanttomeettheplant'swaterrequirements.Theplanforanimportedgas-basedCCPPcomprisesgasturbineswitha5MTPALNGterminalandcaptivejettyforunloadingLNG.28IL&FSsoughtalong-termdomesticfuelsupplycontractandadditionally30%oftherequiredfueltobesourcedthroughinternationalmarkets.

In2015,IL&FSsoughtUS$1bnoffinancingfromtheIndustrialandCommercialBankofChina(ICBC)aspartofaprojectdevelopmentpartnershipwithChinaHuanengGroup.ThiswouldhavebeenthefirstinstanceofdirectfundingsupportfromChinacomingtoathermal-basedpowerprojectinIndia.29

AsofSeptember2018thegroup’stotaldebtstoodatRs99,354crore(US$14bn)withanentirelyunsustainabledebttoequityratioof10:1.30

InDecember2018,IL&FSdeclared90%ofitsloanassetstobenon-performingassets(NPAs).

IL&FS’lendingofnearlyRs60,000crore(US$8.6bn)toinfrastructureprojectsofmainlyroads,powerandwaterranintolandacquisitionissuesandwerehitbycostoverruns.IL&FS’severefinancialdistressclearlydepictsthefinancialstressandpromotorincompetenceinIndia’sthermalpowersector.31

WithnoprogressontheMotaLayjaPowerStationandotherprojectssince2015,IEEFAassumestheyhavebeenshelved.

28IL&FS,NanaLayjaPowerProject29LiveMint,IL&FSsignsfundingMOU;ICICIopensabranchinChina,16May201530LiveMint,IL&FSFinancialServices’GrossNPAat90%:UdayKotak,04April201931TheEconomicTimes,IL&FS:ThecrisisthathasIndiainpanicmode,03October2018

IL&FS’ severe financial distress clearly depicts the financial stress

and promotor incompetence in India’s thermal power sector.


22

InIEEFA’sview,thenowstranded4GWofcoal-firedcapacityand2GWofadditionalgas-basedcapacitycoupledwithLNGimporthandlinginfrastructureisnotinthebestinterestofGujaratgivenitsexpense,whichiscompoundedbythelackofin-statecoalcapacity,thevolatilityofimportedcoalprices,andforeigncurrencyexposure.

IEEFAdeemstheMotaLayjaPowerStationprojecttobeextremelyriskyandalikelyloss-makingpropositionfortheproponents,lenders,discomsandGujarat’seconomy.

Expensive,import-based,largethermalcapacityhasforceddiscomstorelyonexpensivepowerfromthespotmarket.Assuggestedearlier,thefavourablepublic-fundedbail-outwillcontinuetoburdendiscoms,andeventuallyconsumers,withexpensivetariffs.

Additionally,theseprojectshaveseverelyimpactedthebooksofsomeofIndia’stopinfrastructureconglomerates,potentiallyblockadingtheirabilitytorecyclecapitalintonewprojects,andparticularlytheirrenewableenergybusinesses.Atthesametime,theyhaveputtremendousfinancialpressureonlendersandtheoverallfinancialsystemofIndia.

InIEEFA’sview,Gujaratdoesnotneedanyfurtherbaseloadthermalcapacityadditionsapartfromreplacingitsend-of-life,outdatedtechnology-basedcoal-firedcapacity.ThisincludesGSECL’s1.3GWofcapacityalreadyunder-construction(500MWBhavnagarLignitePlantand800MWWanakboriPlant)andtheproposed800MWbrownfieldexpansionoftheUkaiThermalPowerStation.

IEEFA’smodelfortheGujaratElectricitySectorby2029/30(RefertoSection6)projects2.1GWofgrossthermalcapacityadditionsand3.9GWofgrossretirements,resultinginnet-1.8GWofadditions.

InIEEFA’sopinion,giventheadditionsareabrownfieldexpansionofalreadyexistingprojectswhereland,domesticfuelsupplyandPPAsarealreadyinplace,theyarelessriskythangreenfieldprojectsbasedonimportedcoal.

Flexing of Gas-based Capacity Gujaratpossessesone-fourthofIndia’sgas-firedpowercapacityandthreequartersofIndia’soperational/fullyconstructedLNGregasificationcapacity.However,Gujarat’sgas-firedcapacityoperatedatalowutilisationfactorof22.3%inFY2018/19,inlinewithIndia’soverallgas-firedfleet.

Gujarat does not need any further baseload

thermal capacity additions.


23

Roughly1.3GWofthegas-firedcapacityinGujaratiscontractedatunsustainablyhightariffsofRs6.22toRs7.11/kWh(refertoFigure4.5)32incomparisontothestate’saveragepurchasepriceofRs3.49/kWh,33whileallofitsrecentrenewableenergytariffswerecontractedintherangeofRs2.44toRs2.95/kWh.

AslistedinFigure4.5,hightariffsforDhuvaranCCPP(595MW)andPipavavCCPP(702MW)reflectprohibitivelylowutilisationratesof13.4%and8.0%respectively.

Figure 4.5: Gujarat’s Gas-fired Power Fleet

Source: CEA, IEEFA estimates.

InAugust2018,CEAsuggestedaplantotestitsgas-firedfleetas‘peakers’byoperatingonlyintheeveningforsupplysmoothingandtodealwithgridfluctuations.TheplanenvisagedtestingofNTPC’s2.3GWofgas-firedcapacitytobeginwith,thengraduallyoperating20GWofnationalgas-firedcapacityasevening‘peakers’byFY2022.34IEEFAsupportsthisproposal,eventhoughitrequiresasustainedgovernmentsubsidy,givenitbestleveragestheexistingUS$20bn,25GWofcurrentlystrandedgas-firedpowercapacityalreadyinstalledacrossIndia.

India’sambitiousplantobuild175GWofrenewableenergybyFY2022and450GW(plus73GWofhydro)byFY2030demandsmassivestepstowardsincorporatinggrid

32CEA,ExecutiveSummaryFY2018/29(page36),March2019.33FinancialExpress,SCreliefforGujaratpowerplants:CERCmayconsiderPPArevisiononlyafterallfivestatesseekit,4December2018.34ETEnergyWorld,Indiatotestgas-firedplantsas‘peakers’tosmoothpowergrid,16August2018.

India’s ambitious plan to build 175GW of renewable energy by FY2022 and 450GW (plus 73GW of hydro) by FY2030

demands massive steps.

Gas PlantsCapacity

(MW)

Generation in

FY2018/19

(GWh)

Utilisation

Factor (%)Tariff (Rs/kWh)

Dhuvaran Gas Based CCPP 595 699 13.4% 6.22Essar Hazira Power Plant 515 376 8.3% 3.03Jhanor-Gandhar Thermal Power Station 657 1,573 27.3% -Kawas Thermal Power Station 656 2,499 43.5% -Utran Gas Based Power Station 374 418 12.8% -Pipavav CCPP 702 493 8.0% 7.11Baroda CCPP 160 0 0.0% -Sub-total 3,659 6,058 18.9% -Other 2,903 6,744 26.5% -Total 6,562 12,802 22.3% -


24

flexibilityandfirmingofflexiblecapacity.

Forgas-firedpowerplants,itiseasiertoramponandoffitssupplylevelsgivenitcouldoperateatalowminimumrequiredload(MRL).Inotherwords,gas-firedpowerplantsprovidemuchbetterflexibilitycomparedtocoal-firedpowerplantsastheycaneasilybeturnedonandoff.

Asmentionedearlier,India’sgasproductionisnotenoughtosupportafurtherexpansionofitsgas-firedfleet.ExpensiveimportedLNGterminalsandtherequiredsupportinginfrastructuretakesawaythecompetitiveedgeofgas-firedpower.

Flexiblepeakingusageofthegas-firedcapacityrequiresa‘time-of-day’pricingmechanismthatincentivisesbetterusageofexistinggas-firedcapacitytoprovideon-demandfirmingcapacitywhenmostvaluable.Thispricingmechanismisnecessarytoincentiviseotherimportantfacetsofcheapintermittentrenewableenergyintegrationsuchasdemandresponsemanagement,storagetechnologies,solarthermalwithstorage,aswellasgridmodernisationcoupledwithanexpansionofinterstateandeveninternationalgridconnectivity.

Gujarat,withitsalreadyexistingexpansivegas-firedpowerrelatedinfrastructure,isinagreatpositiontotakearapidleadonintegratinglargeamountsofvariablerenewableenergyintoitsgridatrelativelylowincrementalfirmingcost.

Risk to Thermal Sector from Water Stress Inadditiontothedearthinavailabilityofcheaperdomesticfuel,anotherriskthatisextremelyimportanttoconsiderisIndia’sgrowingproblemofwaterstress.

Coal-firedpowerplantsrequiresignificantamountsofwaterforsteamtoproduceenergy,coolequipment,performsystemmaintenance,andcleansitesandequipment.35ScarcewaterisbecomingincreasinglyhardtocomebyinIndia.

InIndia,theamountofraindeliveredduringtheMonsoonseasonhasbeendeclining,droppingbysome20%inrecentyears.36Inaddition,ithasbecomelesspredictablewhilethenumberofheavy,andoftenharmful,rainfalleventshasincreased.3738India’scontinuedpopulationgrowthcoupledwithitsstrongeconomicgrowtharealsobuildingpressureonthefinite,decliningscarceresource.

35UnionofConcernedScientists,HowitWorks:WaterforCoal,2014.36NatureCommunication,DryingofIndiansubcontinentbyrapidIndianOceanwarmingandaweakeningofland-seathermalgradient.Nature,6,7423,16June2015.37MyIndia,ClimateChangeandItsImpactonMonsoonInIndia,9July2017.38TheWorldBank,India:ClimateChangeImpacts,2018.

Scarce water is becoming increasingly hard

to come by in India.


25

Figure 4.6: Water Stress in India

Source: World Resource Institute.

TheWorldResourcesInstitutefoundthatfourteenofIndia’stop20largestthermalpowerutilitycompaniesexperiencedwatershortage-relateddisruptionsatleastoncebetween2013and2016,losingmorethanUS$1.4bninpotentialrevenue.39

AsshowninFigure4.6,GujaratisoneofthemostwaterstressedregionsinIndiaexacerbatedbyitsactiveindustrysectors.

Acoal-basedthermalpowerplanttakesaround3.8cubicmetre/MWhofwaterascomparedto0.1cubicmetre/MWhforsolar,andalmostnilforwind.40

IEEFArecommendsthatGujarataimtoreduceitsincreasingwaterstressthroughanelectricitysectortransitiontoamorerenewableenergyreliantsystem.Waterstressisnotonlyasocialandeconomicdeterrenttodevelopment,butalsoafinancialone.

39WorldResourceInstitute,ParchedPower:WaterDemands,Risks,andOpportunitiesforIndia’sPowerSector,January2018.40LiveMint,Anevolvingriskparadigminthepowersector,16May2017.

A coal-based thermal power plant takes around

3.8 cubic metre/MWh of water as compared to 0.1 cubic metre/MWh for solar.


26

5. Renewable Energy Sector TheMNREestimatesGujarat’srenewableenergypotentialtobeat72.7GW,dominatedby35GWofsolarand35GWofwindenergypotential.41AsofMarch2019,Gujarathadcommissioned8.6GWoftotalrenewableenergy,including2GWofsolar,6GWofwindand0.6GWofsmallhydrogenerationcapacity.

InJuly2019,Gujaratannouncedinitsstatebudgetthatitsrenewableenergytargetwashikedto30GWfrom17GW,asperthestate-wisebreakuprequiredtoachievethe175GWnationaltargetbyFY2021/22.42Therevisedtargetof30GWenvisagesadramaticexpansionofinter-stateexportcapacityasakeypartofthesolutiontomanagingthevariabilityofrenewableenergy.

IEEFAwaspleasedtoseethatthebudgetalsoallocatedacorpusofRs1,000crore(US$140m)fordistributedrooftopsolar.

Earlierin2019,theState’sflagshipVibrantGujaratGlobalSummitsawacommitmentofRs50,000croreinGujarat’srenewableenergysectorwithmultiplesmallandlarge-scalewindandsolarprojectsbeingannounced.43

Demand and Supply Profile GujarathashighdemandforelectricityduringApriltoJuneandthenOctobertoDecember,accordingto2018/19figures.DuringJulytomid-September,Gujaratdemandremainslowduetothemonsoonseason.

ThehighestdemandexperiencedduringaparticulardayinFY2018/19was18,221MWon21September2018.44

41MNRE,NationalElectricityPlanPage6.24,January2018.42ETEnergyWorld,Gujarattoincreasegreenenergycapacityto30,000MWby2022,3July2019.43ETEnergyWorld,VibrantGujaratsummit:MoUsforRs50,000-crrenewablepowerprojectslikely,6January2019.44WesternLoadDispatchCentreAnnualCompendiumFY2018/19

The revised target of 30GW envisages a dramatic

expansion of inter-state export capacity.


27

Figure 5.1: Seasonal Variation in Gujarat’s Demand FY2018/19

Source: Western Load Dispatch Centre.

Significantly,Gujarat’speakdemandoccurredbetweenthedayhoursof10.00am-2.00pm,forthreequartersoftheyearfromJulythroughtoMarch.DuringtheApriltoJunequarter,peakdemandoccurredbetween2.00pm-7.00pm,highlightingthevalueofdemandresponsemanagementandgas-peakers.

Figure 5.2: Solar Generation Pattern in Gujarat



28

Maximumsolargenerationof1,481MWwasobservedon10March2019.AsshowninFigure5.2,peaksolargenerationinGujaratoccursroughlybetween10.00amto5.00pm.ThisindicatesGujarat’sdemandpeakcouldbeentirelysupported(onaverage)bysolarpowerforninemonthsoftheyearfromJulytoMarch.

Figure 5.3: Wind Generation vs. Demand Pattern (April to June 2017/18)


AsillustratedinFigure5.3,fromApriltoJune2017/18windgenerationfavouredGujarat’sdemandmostofthetimeandbarringafeweveninghours,windpatternisalmostfollowingthedemandpatternofGujarat.AsobservedinGujarat’sseasonalvariationindemandpatterns(Figure5.1),ApriltoJuneweretheonlymonthswherepeakdemandwasexperiencedbetween2.00pm–7.00pm.

IEEFAnotesbuildingsufficientwindpowercapacityinGujaratcouldsupportpeakhoursupplyfromlowcost,lowemissionpower.

Solar Power Assumingthathalfofthetargetedcapacityof30GWofrenewableenergybyFY2021/22willbesolar,Gujaratwillrequireabout5GWofcapacityadditionsfromFY2019/20.

Gujarat’s demand peak could be entirely supported (on average) by solar power for nine months of the year

from July to March.


29

India’ssolarsectoriscurrentlyembroiledinpolicyuncertaintiesintheneartermduetoimportdutiesonsolarmodules.IEEFAexpectscapacitycommissioningtoremainsluggishforFY2019/20.

Gujarat’snear-termtargetof5GWofannualcapacityadditionscurrentlylooksextremelyambitious.

GujaratenteredintolongtermPPAsof1.8GWofsolarpowercapacitybetweenSeptember2018-May2019withinatariffrangeofRs2.44-2.80/kWh,withzeroindexationfor25years.Thereisalso1.5GWofsolarcapacitycurrentlyunderthetenderingprocesswhichisexpectedtobeauctionedsoon.

Ultra-Mega Solar Parks

Duringthe2019VibrantGujaratGlobalSummit,Gujarat’sChiefMinisterMrVijayRupaniannouncedtheworld’slargestsolarparkwith5GWcapacityintheDholeraSpecialInvestmentRegion(DSIR)inAhmedabaddistrict.45Thesolarparkwouldbespreadacross11,000hectaresoflandalongtheGulfofKhambhat,andwouldattractinvestmentofRs250bn(US$4bn).TheDSIRalsoaimstobeaglobalmanufacturingandtradinghub.

DholeraSolarPark’sfirstauctionawarded300MWofcapacitytoTataPowerandGujaratIndustriesPowerCompanyLtdatatariffofRs2.75/kWh.However,thetenderoriginallyinvited1GWofcapacityandwasundersubscribedby700MWamidstmultiplecancellationsofauctionedcapacities,tariffrenegotiationsandaggressivetariffcapsfromGUVNL.The700MWwasretenderedwiththesametariffcapofRs2.75/kWhinJune2019.46

Additionally,NTPCannouncedaplanforanother5GWofsolarparkinKutch,GujaratduringitsannualanalystandinvestormeetforFY2018/19.47GurdeepSingh,ChiefManagingDirectorofNTPC,talkedaboutusingKutch’sexcellentwindandsolarenergyresourcestoimplementhybridwind-solargenerationtoimproveefficiencyofgenerationinfrastructureaswellasmaximisetheutilisationoftransmissioninfrastructure.ThisannouncementputsGujarataheadintheraceforbuildingrenewableenergycapacitybetweenstatessuchasTamilNadu,Karnataka,Maharashtra,AndhraPradeshandRajasthanwithsimilarrenewableenergypotential.

ThePowerMinistryhasapproved6.2GWofsolarparkcapacityforGujarat,thehighestshareofthetotal26.5GWapprovedallacrossIndia.48

45PVTech,India’sGujaratapproves5GWsolarpark,11April2018.46MercomIndia,GujaratInvitesBidsfor950MWofProjectstobeDevelopedAcrossTwoofitsSolarParks,25June2019.47ETEnergyWorld,NTPCplans5,000MWultra-megasolarplantinKucthworthRs20,000croreinvestment,20August201948ETEnergyWorld,GujaratleadsIndiainapprovedcapacityofsolarparks,7August2018.


30

Rooftop Solar Gujaratrecentlyemergedasthenumberonestateintermsofon-the-meterrooftopsolarcapacitywith262MWinstalledasofJune2019.49IEEFAoptimisticallyassumestwentyfoldgrowthinrooftopsolarto4.2GWby2029/30,likelysupportedbythedevelopmentofincreasinglycosteffective,behind-the-meterstorage.

Recently,oneofthediscomsinGujarat,PaschimGujaratVijCompany(PGVCL)invitedabidforamassive600MWofresidentialrooftopsolar.50ThisisthelargestrooftopsolarcapacityevertenderedinIndia.

India’snear-termtargetof100GWofsolarbyFY2021/22envisaged40GWtocomefromdistributedrooftopsolarcapacity.AttheendofFY2018/19India’srooftopsolarcapacitystoodat4.3GW.Theambitioustargetof40GWisnotlikelytobeachievedinthenextthreeyears.However,therateofgrowthofsolarinstallationhasbeenpromising.India’srooftopsolarcapacityadditionsgrewat89%CAGRannuallybetween2013-2018.Thegrowthinrooftopsolarcapacitywillcontinuetocomefromthecommercial&industrial(C&I)sectorasitseekstoavoidpayingforexpensivecross-subsidisedC&ItariffsintherangeofRs8.0-10.0/kWh.

IEEFAnotesIndia’sdebt-riddenstate-owneddiscoms’inabilityorunwillingnesstoincorporatecheaperrooftopsolarcapacityhasbeenoneofthecoreissuesresponsibleforslowprogressofrooftopsolarcapacityinIndia.PGVCL’slatest600MWtenderisagreatstrategicandtransitionalmoveinIEEFA’sopinion—anexcellentskills-basedcapacitybuildinginitiative.

ItiscriticalthatIndia’sdiscomschangetheirbusinessmodelsoonerratherthanlaterasC&Iaswellasresidentialconsumersincorporatecheaperrooftopsolaroptions.

49ETEnergyWorld,GujarattopsIndiainrooftopsolarpowergenerationcapacity,24July2019.50MercomIndia,GujaratSeeksEmpanelledAgenciesfor600MWofResidentialRooftopSolarProjects,24July2019.

IEEFA optimistically assumes twentyfold growth in rooftop solar to 4.2GW by 2029/30.


31

Group Captive Model TheopenaccessmarketallowsC&Icustomerstoprocuresolarenergyatcompetitivepricesfromoffsitesolarprojectsusingexistingtransmissionanddistributioninfrastructure.TheopenaccessmodelhasnotyetbeenabletogaingroundinIndia,largelyduetorestrictivestatepoliciesandamyriadofadditionalcharges.AccordingtoMercomIndia,theopenaccesssolarmarketstillaccountsforlessthan10%ofthetotalinstalledsolarcapacity.51

Reportedly,developershavenowstartedtolookatgroupcaptivepowerprojectsasabusinessmodeltoexpandoperationsintheopenaccessmarket.Unlikeanindividualcaptiveorthird-partypowerproject,agroupcaptivemodelisaprojectdevelopedforthecollectiveusageofoneormanycorporatebuyers.Forinstance,itcanbeanarrangementthroughwhichadevelopersetsupapowerprojectforthecollectiveuseofmultipleC&Icustomerswhohaveaminimumtotalof26%equityintheproject,whomustoff-take51%ofthepowerproduced.

Theprimaryadvantageofagroupcaptivemodelisthatcross-subsidiesandadditionalsurchargesarenotleviedonthepowerprocured.Gujarat,withitslargebaseofC&Ishouldbenefitfromsuchamodel.

Equityownershipfromthecustomersidereducesoff-takerriskwhichhasbeengenerallyhighviatherouteofstate-owneddiscoms.Itpotentiallyprovidesbetterreturnonequityfordevelopersastheprojectlocksintariffsthatarecheaperthantheon-gridC&I(RS8.0-10.0/kwh)tariffs,buthigherthanthewholesaleprices(Rs2.44-3.00/kWh)atwhichdiscomsbuythepowerfromtheproject.

TataChemicalsrecentlyannouncedabatterymanufacturingfacilityinGujarat’sDSIRwithaninvestmentofRs4,000crore(US$600m).ThemanufacturingfacilityreportedlysignedaPPAwithTorrentPowertosupplypowerviaanopenaccessrouteatatariffofRs4.65/kWh(refertoSection5).

51MercomIndia,IsGroupCaptivetheNextAttractiveSolarMarketin2019?,8July2019.

The open access solar market still accounts for less

than 10% of the total installed solar capacity.

With its large base of C&I, Gujarat should benefit

from such a model.


32

Wind Power AsofJune2019,Gujarat,with6.5GWofwindcapacity,isIndia’ssecond-beststateforwind,onlybehindTamilNadu(9.2GW).Gujaratadded430MWofwindpowercapacityduringFY2018/19andanother519MWduringthefirstthreemonthsofFY2019/20.52

InMay2019,GUVNLinvitedbidsfor1GWofwindpowercapacityinGujarat.GUVNLreceivedbidsfor931MW.Only80%ofthetotalsubscribedcapacityisallowedtobeawarded,accordingtocentralgovernment’slaw,incasethetenderedcapacityisnotfullysubscribedbydevelopers.

GUVNLawardedatotal745GWofcapacityfortariffsbidbetweenRs2.80-2.95/kWh.DevelopersawardedthecapacityincludedthelikesofInoxWind,ReNewPowerandAdaniGreenEnergy—India’stoprenewableenergydevelopers.53

Later,GUVNLaskedalldeveloperstomatchtheirbidstothelowesttariffofRs2.80/kWhdiscoveredinthereverseauction.Developershavenotagreedtothediscoms’demandandhaveexpressedtheirconcernsregardingthiscontinuedmishandlingofauctionsandafter-the-eventrulechanges.

India’s First Offshore Wind Project InJune2018,Indiaannouncedanoffshorewindtargetof5GWby2022and30GWbyFY2030.54

In2018,MNREinvitedanexpressionofinterestfor1GWofoffshorewindcapacityintheGulfofKhambhat,locatedoffthecoastofGujarat.Theinvitegarneredimmenseinterestfromdomesticaswellasforeigndevelopers.ProminentparticipantsfromIndiaincludedSterlitePowerGrid,Greenko,MytrahEnergy,InoxWind,SuzlonEnergy,andReNewPowerVentures.Someofthewell-knownforeignparticipantsincludedØrsted,alfanar,DeepWaterStructures,E.ONClimateandRenewables,TerraformGlobal,MacquarieGroup,ShellandSenvion.55

InJuly2018theNationalInstituteofWindEnergy(NIWE),anautonomousinstitutionundertheMNRE,installedaremotesensinginstrument—LiDAR(LightDetectionandRanging)—forassessmentofoffshorewindresourcesofftheGulfofKhambhat.

52MNRE,StatewiseinstalledcapacityofgridInteractiveRenewablepowerason(Postedon10.07.2019),10July2019.53MercomIndia,LowestTariffof₹2.80/kWhWinsGujarat’s1,000MWWindAuction,13May2019.54ETEnergyWorld,Indiaannounces30GWoffshorewindenergytargetby2030,19June2018.55CleanTechnica,IndiaPlansFirstEver1GigawattOffshoreWindTenderForGujarat,16February2019.

It is yet another opportunity to reduce reliance on expensive

imported fuels for its energy needs.


33

Withits1,600kmcoastalline,Gujaratpossessesabundantpotentialforoffshorewindpower.Itisyetanotheropportunitytoreducerelianceonexpensiveimportedfuelsforitsenergyneeds.

Therecenttechnologicaldevelopmentsinoffshorewindturbineshasbeendramatic.Therotordiameterhasjumpedfrom80metresto164metresandaveragecapacityhasmorethandoubled,climbingfrom1-2MWin2012to4-6MWtoday.LeadingplayerslikeØrstedarebettingonSiemens,GEandVestasMHIachievinganotherdoublinginsizeto10-14MWby2024.

Thesetechnologicalimprovementsandcross-sectorlearningsfromotherindustrialsectorssuchasmaritime,automotiveandshipbuildinghavepushedcostsdownsignificantlyinthepast10years.

Overthecomingdecade,IEEFAexpectsoffshorewindtechnologytogetclosetomatchingthecostofenergyfromitsonshorecounterpartduetoitsnear-limitlesssizepotential,50-60%capacityutilisationrates,proximitytocoastalcityloadcentres,andexceptionalutilisationratesplussubseagridtechnologyimprovementsbyworldleaderslikePrysmianCables.

However,inIEEFA’sopinion,Indiashouldnotaccelerateitsoffshorewindcapacitycommissioning.Rather,thecountryshouldwaitfortheadvancedeconomiesofEuropeandAsiatotaketheleadinthelearningcurveandwaitforcoststocomedownandforoffshorewindtariffstobecompetitiveintheIndianmarket.

IEEFArecognisesthatby2030,Gujaratwilldefinitelyneedtheadditionalcapacityandgriddiversificationbenefitsof50-60%utilisationratedoffshorewindprojects.

Battery Manufacturing ThegovernmentofIndiahasannouncedambitiousplanstoissuetendersinvitingglobalandlocalcompaniestosetup50GWofbatterymanufacturingbaseinIndia.56NITIAayog,theIndiangovernment’splanningthink-tank,willseekproposalsfromstatestoidentifylocationsforplantsandwillprovidedutywaivers,exemptionsandotherfiscalbenefitstobatterymanufacturers.ThisisestimatedtobeaUS$8bninvestmentopportunityforglobalinvestorslikeTesla,ContemporaryAmperexTechnologyCo(CATL)andBYD.57

ArecentreportfromtheCEAprojectsanoptimalenergymixforIndia’selectricitysystembyFY2029/30.58ThereportestimatesIndia’srenewableenergycapacitytobe523GWbyFY2029/20,including300GWofsolar,140GWofwind,10GWofbiomassand73GWof

56EconomicTimes,Companiesmaysoonbeinvitedtosetupbatteryplants,11June2019.57Livemint,TeslashowsinterestinIndia’splanstobuildbatteryplants,18August2019.58CEA,DraftReportonOptimalenergyMixby2030,February2019.

This generation capacity will require 34GW/136GWh of battery storage capacity.


34

largehydropower.Thisgenerationcapacitywillrequire34GW/136GWhofbatterystoragecapacity.

Onthebackofthegovernment’sdeclaration,TataChemicalsannounceda10GWLithium-ionbatterymanufacturingplantinGujarat’sDSIRwithaninvestmentcommitmentofRs4,000crore(~US$600m).59

ThefacilitywillbepoweredatarelativelycheaperC&ItariffofRs4.65/kWhcomparedtoaverageC&ItariffsofRs8-10/kWh.Thiscostreductioncouldpotentiallyresultincheaperbatteries.

Policy Issues—Auction Cancellations, Tariff Renegotiations, and Land Acquisition GujaratfellbehindKarnataka,Telangana,Rajasthan,AndhraPradeshandTamilNadufortotalsolarpowercapacityinFY2018/19.Cancellationsofauctionedcapacity,withdiscomsforcingatariffrenegotiation,havebeendetrimentalfortheprogressofrenewableenergy.

GUVNLtwicecancelled500MWofawardedsolarcapacityinordertoachieveevenlowertariffsfromdevelopers.Asmentionedearlier,duringthelatest745MWwindpowerauction,GUVNLdemandeddevelopersthatwereawardedthecapacityatRs2.95/kWhtomatchitwiththelowesttariffachievedtodate—Rs2.80/kWh.InIEEFA’sview,thisis“pennywise,poundfoolish”.

GUVNL’sprojectcancellationsandretenderingprocesstookmorethan6months,blockadingtheprogressofthestate’srenewableenergygrowth.Thereversebiddingauctionshavebeenextremelysuccessfulinbringingrenewableenergytariffsdown,whilealsobringingtransparencyandcompetitionintotherenewableenergytenderingprocess.Retrospectivechangeswillaffectinvestorconfidenceandcausedeteriorationtothestate’sriskprofile.

Land Issues for Renewable Energy Projects

Lackofcoordinationbetweencentreandstategovernmentsinplanningforwindenergytendershascreatedaprobleminlandavailabilityforwindpowerprojects.

SECIandNTPC,beingstate-ownedenterprises,haveplayedathird-partyroletofacilitaterenewableenergytendersofferedbythecentralgovernment.Thesetendersaregenerallyflexibleandallowdeveloperstocommissiontheprojectatlocationsoftheirpreference.Ontheotherhand,state-owneddiscomshaveinvited

59ETEnergyWorld,TataGrouptosetupRs4,000crlithium-ionbatteryplant,12July2019.

Reverse bidding auctions have been extremely successful in bringing

down renewable energy tariffs.


35

developerstobuildprojectsinstatespecifiedlandsidentifiedforrenewableenergyproejcts.

Gujarat,beingatopdestinationforsolarandwindpowerpotential,hasrunintolandavailabilityissues.Reportedly,projectdevelopershadtoacquireexpensiveprivatelandsastheGujaratgovernmentdidnotprovidethelandwhichtheyhadreservedfortheirownstate(province)-backedtenders.60Theprivatelandisreportedtocostfivetimesthelandwhichisgenerallyusedforrenewableprojects.Expensivelandcostsshrinkadevelopers’marginsandreturnonequity.

Gujarat’s Land Policy for Renewable Enegry Projects

InJanuary2019,theGujaratgovernmentannounceditslandpolicyforrenewableenergyprojects.Thegovernmentallottedlandfor30GWofsolar,wind,andsolar-windhybridcapacity.Outofthe30GW,10GWworthofprojectlandhasbeenallottedtostate-backeddiscoms.Theremaining20GWworthoflandisavailableforstateaswellascentre-backedprojects.61

ThisisawelcomedevlopmentforwinddevelopersinGujaratwhostruggledtoacquirelandareawithwindpowerpotentialatareasonableprice.Thiswillprotectprojectsfromrunningintocostescalationsandpenaltiespaybleoncommissioningdelays.

60ETEnergyWorld,SECIprojectwinnersbuyingexpensivelandasstatestaysreluctantonleasingforcentralprojects,11February2019.61ETEnergyWorld,Gujaratframeslandpolicyforgreenenergyprojects,28January2019.


36

6. Gujarat Electricity Sector Model 2029/30 Gujaratcurrentlydoesnothaveawell-diversifiedelectricitysystem,withgenerationcapacitydominatedbythermalpowerat69%oftotalcapacityand81.1%oftotalgeneration.Nuclear,hydroandrenewablesonlyform0.9%,0.9%and11.8%ofitsgenerationcapacity,respectively.Theoverrelianceonexpensiveimportedfuel-basedgenerationcapacityhasbeenunreliable.

InIEEFA’sview,itistimeforGujarattotransitiontoalow-emission,low-cost,renewableenergy-basedelectricitysystemgivenitsrenewableenergypotential.

IEEFA’sGujaratelectricitymodelforFY2029/30projectsGujarat’selectricityproductionrequirementstogrowby74%from116TWhinFY2018/19to203TWhFY2029/30.

Weprojectadramaticshiftinitselectricitysectorcompositionwithrenewablesforming70.3%ofcapacityand48.1%oftotalgeneration.Moreover,thetwo-unitextensionofKakraparAtomicPowerStationcurrentlyunderconstructionisexpectedtobecommissionedbyFY2024/25.Thiswilladd1.4GWofnuclearcapacitytothestate’selectricitysector,takingthenuclearpowergenerationshareto6.8%ofthetotalgenerationbyFY2029/30.

Gujarat’snuclearcapacityoperatedatanunsustainablylowcapacityfactorof20.4%inFY2018/19(refertoFigure3.1),whilsttheutilisationfactorforthenationalfleetwas63.7%forthesameperiod.IEEFAexpectsGujarat’snuclearcapacityfactortoimproveto80%,contributing6.8%ofGujarat’soverallgenerationinFY2029/30.

IEEFAprojectsthemajorityofGujarat’snewgenerationcapacitywillcomeintheformoflow-cost,low-emissionrenewableenergysourcesincludingsolarandwind.AsillustratedinSection5,Gujarat’safternoonpeakdemandcouldbeprogressivelysupportedbybuilding20GWofnewsolarcapacity.Gujarat’sgridexperiencesaneveningpeakbetween2.00pmand7.00pmduringthemonthsofApriltoJune—whichisalsotheperiodforpeakwindgenerationhoursduringthemonthsofApriltoJune(refertoFigure5.3).Withitsabundantonshoreandpotentiallyoffshorewind,nowsupportedbyfavourablelandpoliciesforrenewableenergyprojects,Gujaratiswellpositionedtobuild10GWofnewonshorewindpowercapacityand2GWofoffshorecapacitybyFY2029/30.

Gujarat is well positioned to build 10GW of

new onshore wind power capacity and 2GW of

offshore capacity by FY2029/30.


37

Withimprovedwindturbinetechnologiesincludingtheincreasedsizeofrotordiametersandpoleheights,utilisationfactorsof30-35%foronshoreand50-60%foroffshorewindcapacitiescouldbeachieved.

Onthethermalside,IEEFAexpectsnetnegativeadditionsof1.8GW.Gujarat’s3.9GWofexistingthermalcapacityoperatesonoutdatedsubcriticaltechnologyandwillreachitsend-of-lifebyFY2029/30.IEEFArecommendsgradualretirementofthiscapacityinlinewithIndia’sNationalElectricityPlan2018.

Withitslackofin-statecoalcapacity,Gujarathasandwillcontinuetoexperiencetheburdenofexpensivethermalassetsdesignedtooperateonimportedcoal.Goingforward,brownfieldexpansionsbackedbythestate-ownedpowerdeveloper,GSECL,withexistingfuellinkagesandPPAs,appearstobearelativelylessriskystrategy.GSECLcurrentlyhas1.3GWofcapacityunderconstructionintheformoftheBhavnagarLignitePowerStation(500MW)andWanakboriThermalPowerStation’sunit8(800MW).Additionally,theUkaiThermalPowerPlantsunit7(800MW)extension,stillinregulatoryapprovalstage,isabrownfieldexpansiontoreplacetheplant’sunit1and2whichwereretiredin2017.

2.1GW(GrossAdditions)—3.9GW(Retirements)=-1.8GW(NetAdditions)



IEEFA’sbearishoutlookoncoal-firedcapacityadditionsinGujaratisbasedontwokeyreasons:alackofactivecoal-firedproposalsinthepipeline;and,thestructuralissueofalackofinstatecoalminingandrailcapacity.

IEEFArecommendsbetterusageofGujarat’sexistinggas-firedcapacitybyreconfiguringthemtobeusedason-demand‘peakers’,toprovideflexiblecapacity

Utilisation Capacity Adds

Source (GW) % (TWh) % % (GW)Coal 14.0 17.8% 68.7 33.8% 56.1% -1.8Gas 6.6 8.4% 14.4 7.1% 25.0% 0.0Diesel 0.0 0.0% 0.0 0.0% 0.0% 0.0Nuclear 2.0 2.5% 13.7 6.8% 80.0% 1.4Hydro 0.8 1.0% 1.4 0.7% 20.0% 0.0Renewables 55.1 70.3% 97.7 48.1% 24.0% 46.5Net imports 7.2 3.6%Total 78.4 100.0% 203.1 100.0% 46.1


Capacity Generation


38

tomeetgridfluctuationsandunexpectedpeakingdemandsondaysoflowerrenewablepowergeneration.Thiswillrequireapolicymechanismof‘time-of-day’pricingtoincentivisetheincreasinglyimportantadditionalvalueassociatedwithfirmingandfast-rampingpeakingcapacity,withtheassociatedgridstabilisationservicesinvolved.

Decoupling Electricity vs. Economic Growth Gujarat’sGDPhasgrownatanunprecedentedCAGRof9.9%annuallybetweenFY2011/12andFY2018/19.62Meanwhile,electricitydemandgrewataCAGRof6.6%annually.63Thisimpliestheneedforeitheradecouplingofelectricityvs.economicgrowthorasignificantamountofitselectricitydemandtobeplacedbehind-the-meter,suppliedthroughcaptivegaspowerplants.AsshowninFigure1.1,77-78%ofGujarat’sGDPcomesfromtheindustrialsectorwhichisgenerallymoreenergyintensivecomparedtotheserviceoragriculturesectors.

InNovember2017,theU.S.EnergyInformationAdministration(EIA)publishedananalysisnotingtheincreasingevidenceofasystemic,sustainedglobaldecouplingofelectricitydemandfromeconomicgrowth.64IEEFA’sanalysisshowsthissamedecouplingtrendisevidentinEurope,America,JapanandAustralia.

Mostimportantlyfortheglobalpicture—therewasamajordecouplingofelectricitydemandfromeconomicgrowthinChinapost2013.Fortheperiod2000-2013,electricitydemandgrewinlockstepwitheconomicgrowthof10%annuallyinChina;ataratioof0.9-1.0.Since2014theratiohasbeenvolatile,halvingto0.5.

IEEFAprojectsafarmoremodest5.6%CAGRinelectricitydemandoverthecomingdecadeto2029/30.WereferenceGujarat’selectricitydemandgrowthof6.6%annuallyrelativetorealGDPgrowthof9.9%,givingaratioof0.67duringthepastdecade.IEEFAprojectsGujarat’sGDPtoreachalong-termsustainablegrowthrateof7.0%asopposedtothecurrentgrowthrateof9.9%(effectivelystartingfromalowerbase).

IEEFAassumesagrossratioof0.95overthecomingdecade.Thisreducestoanetratioof0.80(electricitydemandtoeconomicgrowth)ifa1%annualenergyefficiencysavingcanbesustainedoverthecomingdecade.MovestointroduceLEDs,high-ratedairconditioners,solarirrigationpumpsandbetterbuildingconstructionstandardswillallmateriallyassistinthisleastcost,leastpollutingsourceofprocurement—theelectricityproductionnotneeded.

62ReserveBankofIndia,HandbookofStatistics,03March2019.63CEA,GenerationReports,FY2011/12toFY2018/19.64U.S.EnergyInformationAdministration,Linkbetweengrowthineconomicactivityandelectricityuseischangingaroundtheworld,20November2017.

IEEFA projects a far more modest 5.6% CAGR in electricity demand over the coming decade to 2029/30.


39

AnotherkeyoptionforreducingtheneedfornewgenerationisreducingAT&ClossesacrossGujaratfrom12.6%currentlyto8.4%by2029/30,or0.4%annually.ThishasbeenanabsolutelycoreprincipleoftheUDAYprogram.Itisalsokeytoensuringelectricityproductiongrowsataratebelowelectricitydemandthroughreducedwasteofelectricityduringtransmissionanddistribution.Reducedpowertheftmostlikelyrequirestheroll-outofanautomatedsmartmetersystemtoreducemeterreadingbribery,nottomentiontheefficiencygainsrelatingtoanyassociatedinvestmentindistributed,behind-the-meterrooftopsolarand/orstoragesystems.

IEEFA’sGujaratmodelassumesan86TWhor74%increaseinelectricityproductionto203TWhannuallyby2029/30.Deducting8.9%AT&Clossesin2029/30givesnetdemandinGujaratof185TWh,ariseof84TWhor82%overthedecade.Thisispredicatedon7.0%realGDPgrowthannually,inlinewithIEEFA’sforecastforIndiaoverall.Theratioofelectricitydemandgrowthtoeconomicgrowthisforecastat0.80netofaforecast1.0%annualenergyefficiencydividend(Figure6.2).

Figure 6.2: Gujarat’s Production and Consumption FY2018/19 to FY2029/30


IEEFA’s Gujarat model assumes an 86TWh or 74%

increase in electricity production to 203TWh annually by 2029/30.

GDP Growth 7.0%Electricity to GDP multiplier 0.95Electricity Demand Growth 6.6%Energy Efficiency -1.0%GDP to Electricty Multiplier 0.80Reduction in AT&C Losses -0.4%

2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27 2027/28 2028/29 2029/30Electricity Production (TWh) 116.6 122.6 128.9 135.6 142.6 150.0 157.7 165.9 174.5 183.5 193.0 203.0Electricity Production Growth (%) 5.2% 5.2% 5.2% 5.2% 5.2% 5.2% 5.2% 5.2% 5.2% 5.2% 5.2%AT&C Losses (%) 12.6% 12.2% 11.8% 11.4% 11.0% 10.7% 10.3% 9.9% 9.5% 9.1% 8.8% 8.4%AT&C Losses (TWh) 14.6 14.9 15.2 15.5 15.7 16.0 16.2 16.4 16.6 16.8 16.9 17.0Real GDP Growth (%) 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0%Electricity Multiplier (x) 0.80 0.80 0.80 0.80 0.80 0.80 0.80 0.80 0.80 0.80 0.80 0.80Electricity Growth (%) 6.6% 6.6% 6.6% 6.6% 6.6% 6.6% 6.6% 6.6% 6.6% 6.6% 6.6% 6.6%Energy Efficiency -0.01 -0.01 -0.01 -0.01 -0.01 -0.01 -0.01 -0.01 -0.01 -0.01 -0.01 -0.01Net Demand (TWh) 101.9 107.7 113.7 120.1 126.8 134.0 141.5 149.5 157.9 166.7 176.1 186.0Net Demand Growth (%) 5.6% 5.6% 5.6% 5.6% 5.6% 5.6% 5.6% 5.6% 5.6% 5.6% 5.6%


40

New Demand to be Met Through Renewable Energy Sources IEEFAforecastsatotalof46.4GWofrenewableenergytobeaddedonGujarat’sgrid.Thiswillconsistof20GWofnewsolarcapacity,ofwhich4GWwillbedistributedrooftopsolarcapacity.Solarwillsupply48%oftheincrementaldemandbyFY2029/30.Wealsoassumeasmallfirst-of-a-kindlocaldeploymentof100MWcapacityofconcentratedthermalsolarcapacitywithstoragewhichwouldsupportpeakdemandtariffsofaroundRs5/kWh.

Onthewindpowerside,weassume10GWofnewonshorewindpowercapacityand2GWofoffshorewindcapacitywillbeadded—serving50%oftheincrementaldemand.Another700MWofbiomasspowercapacityadditionscouldfulfilanother1%ofnewdemand,againaddingfirmingcapacity.

TherenewableenergycapacityadditionsattariffsbelowRs3.00/kWhcontractedfor25yearswithzeroindexationandzeromarginalfuelcostsmeansdeflationinrealterms.ThiswillensureareductioninGujarat’saveragecostofpowerpurchase.

IEEFA forecasts a total of 46.4GW of renewable

energy to be added on Gujarat’s grid.


41

Figure 6.3: Gujarat Electricity Consumption for FY2018/19 to FY2029/30


Further Collapse of Coal-fired Power Utilisation Rates IEEFAforecastsnetnegativeadditionsof1.8GWcoal-firedpowerplantsinGujaratbyFY2029/30,asmentionedpreviouslyinthissection.Asdiscomslooktocatertoincrementaldemandthroughcheaperrenewableenergysources,coal-firedplantswillloseoutonmarketsharetoabout-16%or13TWh,from~82TWhgeneratedin2018/19to~69TWhinFY2029/30.Effectively,thecoal-firedpowersector’sutilisationrateswilldropto56.1%inFY2029/30fromanalreadyunsustainablylow59.5%inFY2018/19.

Betterutilisationoftheexistinggas-firedcapacityas‘peakers’willservefor2%oftheadditionaldemandbyFY2029/30.Further,anexpansioninnuclearpowercapacitywillsupply13%ofadditionaldemand.

102

7.0% pa

0.80 times

6.6% pa 87

-1.0% pa -6

11

-0.4% pa grid efficiency gain -8

186

84

86

TWh Uplift36 42%

5 6%

0 0%

34 40%

9 10%

1 1%

0 0%

2 2%

13 15%

-13 -16%

86 100%

Electricity to GDP multiplier

Gujarat's Waterfall ChartNet electricity consumed in Gujarat in 2018/19 (TWh)

Real GDP Growth

Solar expansion

Electricity Demand Growth

Energy Efficiency

Growth: gross production losses

Reduced grid AT&C losses

Net electricity consumed in Gujarat in 2029/30 (TWh)

Net expansion in electricity demand 2029/30 (TWh)

Net expansion in electricity production required by 2029/30 (TWh)

The Increase in net electricity demand is met by (TWh)

Solar rooftop expansion

Solar thermal expansion

Onshore wind expansion

Increase in biomass & cogeneration generation

Increase in hydro electricity

Increase in gas-fired electricity

Increase in nuclear generation

Change in coal-fired power use

Net expansion in electricity production by 2029/30 (TWh)

Offshore wind expansion


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Competitionfromrenewableenergy,backedbythegovernmentofGujarat’sambitiouscapacitytargets,willputtremendouspressureonthecoal-firedsector.Theoptionofflexibleoperationsforcoal-firedpowerplantsisnotviablegiventhecapexrequiredforplanmodifications.ArecentstudybyCEAtoevaluateflexibleoperationforcoal-firedpowerplantsconcludedaneffectivetariffincreaseofRs2.15/kWhfora220MWunit,Rs2.20/kWhfor500MWandRs2.18/kWhfora660MWunittooperateat50%minimumloadfactor.65Giventheexistinghightariffsofcoal-firedplantsinGujarat,thisoptionwillbeproblematicabsenttheintroductionofafair,technologyneutraltime-of-daypricingmodel.

Integration of Renewable Energy Theincorporationofnearly55GWofvariablerenewableenergyonGujarat’selectricitynetworkbyFY2029/30willrequireactivemeasuresingridintegration.Itwillrequiremulti-technologystorageoptionsrangingfrompumpedhydrostorage(PHS)toutility-scaleaswellassmall-scalebatteries.

Therenewableenergy-basedmodernsystemwillneedtobesupportedbygridexpansiontoconnectrenewableenergyspecificzonestointrastateaswellasinterstatenetworks,withtheaddedadvantageofbroadercoveragesomewhatsmoothingvariablerenewableenergysupply.Gridmodernisationandgriddigitalisationcansupportdemand-responsemanagement.66

65CEA,FlexibleOperationofThermalPowerPlantsforIntegrationofRenewableEnergy,January2019.66IEEFA,India’sGridTransmissionInfrastructureNeedsFurtherModernisation,Urgently,22January2019.


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7. DISCOMs In2015/16,thegovernmentofIndiaintroducedanationalschemetoreformthefinancialandoperationalperformanceofdebt-riddendiscoms.Theschemeentailedstategovernmentstakingoverdiscoms’debtbyissuingnon-statutoryliquidityratio(non-SLR)bondsandtransferringtheproceedstodiscomsinamixofgrant,loan,andequity.Thefinancialsupportfromthegovernmentdemandeddiscomsimprovetheiroperationalefficiencies,suchasreducedAT&Clossesandimprovedaveragecostofsupplyvs.averagerevenuerealised(ACS-ARR)gap,toreducediscomlosses.

InthecaseofGujarat,theUDAYschemepromisedinducementsofabettersupplyofcoaltothestate-ownedpowerdeveloper,GSECL,andliberalcoalswapsbetweeninefficientplantstoefficientplants.

Gujarathasfourstate-owneddiscomsundertheumbrellaenterpriseofGujaratUrjaVikasNigam(GUVNL).AspertheUDAYdashboard,GujaratisthenumberoneperformingstateonUDAY’sperformanceindicator.67

ItmustbenotedhoweverthatinFY2015/16,Gujaratwasalreadyinaprofitable

positionwithsignificantlybetteroperationalefficiency.68InthatyearGujarathadrelativelylowAT&ClossescomparedtootherIndianstatesat14.1%with85%billingefficiencyand100%paymentcollectionefficiency.

GujarathaswellsurpasseditsAT&Closstargetof13.0%with12.59%AT&ClossesinFY2018/19.TheACS-ARRgapimprovedfromanalreadyprofitablepositionof-Rs0.03/kWhinFY2015/16to-Rs0.06/kWhinFY2018/19(withthenegativenumberrepresentinghigherrevenuevs.cost).

Figure 7.1: Gujarat Discom Performance Indicators

Source: UDAY Dashboard, UDAY MOU. Note: These are cumulative performance indicators for all the four discoms.

67MinistryofPower,UDAYDashboard68UDAY,GujaratMOU,February2016.

UDAY Performance Indicators TargetsFY2015/16 FY2018/19

AT&C Losses (%) 14.05% 13.00%

FY2015/16 FY2018/19Net Income including subsidies (Rs Crores) 194.0 456.0

FY2015/16 FY2018/19ACS-ARR Gap (Rs/kWh) -0.03 -0.06

AT&C losses at 12.59% for FY2018/19

Profit of Rs464 crore for FY2018/19

ACS-ARR Gap of -Rs0.05 for FY2018/19


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AnimprovedACS-ARRgapreflectsindiscoms’bottom-line.TheprofitofRs194crore(US$27m)inFY2015/16hasincreasedataCAGRof34%annuallyforthreeyearstobeRs464crore(US$65m),surpassingitstargetofRs456crore(US$64m).However,netincomeincludesastatesubsidyofRs1,100crore(US$155m)whichgenerallyaccountsforsubsidisedorfreepowertoagriculturalconsumers.

InIEEFA’sview,Gujaratshouldmobiliseitsdiscomstofurtherreducetheirrelianceonstatesubsidies.TheMinistryofPowerhassoughttointroducenewprogressivetariffpoliciesthatabolisholdcross-subsidytariffstructures.Also,directbenefittransfers(DBTs)tolowincomefarmerscouldprovidethemwiththefinancialmeanstobuypowerandatthesametime,encouragesignificantlymoreefficientuseofelectricity.

TheIndiangovernment’srolloutofagriculturalsolarpumpsunderKisanUrjaSurakshaevamUtthaanMahabhiyan(KUSUM)willprovidefarmersenergysecurityalongwithfinancialandwatersecurity.ThereisamassiveopportunityforGujarattofullyimplementthesereformstofurtherfinanciallystrengthenitsdiscoms.69

69ETEnergyWorld,KUSUMschemeforsolaruptakebyfarmers:Afineprint,22March2019.

Gujarat should mobilise its discoms to further reduce their reliance

on state subsidies.


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Conclusion Gujarat,oneofthelargestelectricitymarketsinIndiaatthestatelevel,isontracktotransitiontoarenewableenergydriven,low-cost,low-emissionelectricitysystem.ThestatecouldbeoneofthelargestcontributorstoIndia’stargetof450GWofrenewableenergyby2029/30.

NonewnetthermalpoweradditionsbetweenFY2012/13toFY2018/19isreflectiveofmarketconditionsinthestate.Newgreenfieldthermalpowerprojectdevelopmentisunlikely.Further,IEEFApredictsGujaratwillgraduallyretireandreplaceitsoutdatedandend-of-lifethermalpowerfleetwithless-riskierbrownfielddevelopmentswithsupercriticaltechnology.Thestate’sthermalpowersector’sfinancialandoperationaldistressarealessonforIndianstatesaswellasotheremerginganddevelopingeconomies.

Gujaratisatransitionleaderintherenewableenergysectorandislookingatmassiveongoingnewinvestmentinrenewablesandgridinfrastructure,aswellasassociatedmanufacturingopportunities.India’sfirstoffshorewindpowerprojectandfirstlarge-scaleLithium-ionbatterymanufacturingplantareexamplesofthestate’sproactivenessintransformingitsenergysector.

TheGujaratgovernment’sambitiontotransformitselectricitysectortoincorporatemorerenewableenergywillrequirethestatetostayontrackandprotectinvestorconfidencethroughastrongandconsistentpolicyframework.Thestatehasexperiencedsomehiccupsduringthistransition,however,itsintenttotroubleshootandkeepmovingforwardisevident.

IEEFAisconfidentthatGujaratwillachieveitslong-termelectricitysectortargetswhilebeingamodelforotherIndianstatestofollow.

IEEFA is confident that Gujarat will achieve its long-term electricity sector targets.


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About IEEFA TheInstituteforEnergyEconomicsandFinancialAnalysisconductsresearchandanalysesonfinancialandeconomicissuesrelatedtoenergyandtheenvironment.TheInstitute’smissionistoacceleratethetransitiontoadiverse,sustainableandprofitableenergyeconomy.www.ieefa.org

About the Authors Tim Buckley TimBuckley,IEEFA’sdirectorofenergyfinanceresearch,Australasia,hasover30yearsoffinancialmarketexperiencecoveringtheAustralian,Asianandglobalequitymarketsfrombothabuyandsellsideperspective.Timwasatop-ratedEquityResearchAnalystandhascoveredmostsectorsoftheAustralianeconomy.TimwasaManagingDirector,HeadofEquityResearchatCitigroupformanyyears,aswellasco-ManagingDirectorofArkxInvestmentManagementP/L,agloballistedcleanenergyinvestmentcompanythatwasjointlyownedbymanagementandWestpacBankingGroup.

Kashish Shah KashishShah,aResearchAnalystatIEEFA,hasamaster’sdegreeineconomicsfromtheUniversityofSydneyandanengineeringdegreefromNMIMSUniversityinMumbai.KashishhasworkedintheGlobalAnalyticsDivisionoftheRoyalBankofScotlandwithafocusonregulatorypolicies.KashishhasresearchexperiencesinIndia’spublicsectorinhisworkforamemberofIndianParliamentandaUniversityofSydney-basedresearchgroup.

Gujarat’s Electricity Sector Transformation

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