Indian electricity sector

Indian Electricity Sector: Trends and Future

Science and Technology in Independent India

Neha B Joseph Shivraj Singh Negi



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



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

uncertain, because of the expected continuation of India’s

dynamic economic growth and development. GDP development,

industry structure, population growth and income levels are

important drivers for energy and electricity demand.

According to IEA analysis, the Indian economy is projected to

grow at a much faster rate than those of Europe or the United

States during the coming four decades. A consequence of this

growth will be a significant increase in energy use and

associated CO2 emissions. In the ETP 2010 Baseline Scenario for

India (IEA, 2010a), between 2007 and 2050, GDP will increase

eightfold, primary energy use quadruple and CO2 emissions

increase almost fivefold. A fivefold increase in electricity

demand from 792 TWh in 2007 to 4069 TWh in 2050 is

projected in the IEA Baseline Scenario. Total electricity demand

is reduced in BLUE Map to the level of 3769 TWh.

In Energy Technology Perspectives 2010

(ETP 2010) (IEA, 2010a), the IEA develops

two different scenarios to analyse the power

sector:

The Baseline Scenario reflects

expected developments on the

basis of the energy policies that

have been implemented or

approved for implementation.

The BLUE Map Scenario is

target‐driven and aims to halve

global energy‐related CO2

emissions by 2050 compared to

2005 levels. A global carbon price

of USD 175/tCO2 in 2050 is

needed to achieve this reduction

target. Worldwide CO2 emissions

in the power sector are reduced by

74% in this scenario relative to

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

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

http://articles.economictimes.indiatimes.com/2011-11-23/news/30433349_1_nuclear-power-india-plans-kudankulam-nuclear-plant

http://articles.economictimes.indiatimes.com/2011-11-23/news/30433349_1_nuclear-power-india-plans-kudankulam-nuclear-plant

http://www.world-nuclear.org/info/inf53.html

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=

http://pfc.gov.in/brief_umpp.pdf

http://powermin.gov.in/whats_new/pdf/ultra%20mega%20project.pdf

http://www.pfc.gov.in/Content/UltraMegaPower.aspx

http://www.projectsinfo.in/News.aspx?nId=jgM68d88Dvhj6Q25HniRng

http://www.reliancepower.co.in/business_areas/power_projects/coal_based_projects.htm

http://articles.timesofindia.indiatimes.com/2009-11-18/india/28064964_1_solar-power-solar-mission-solar-lighting-systems

http://articles.timesofindia.indiatimes.com/2009-11-18/india/28064964_1_solar-power-solar-mission-solar-lighting-systems

http://www.projectsmonitor.com/ELECTRICITY/impetus-for-renewable-energy-in-12th-plan

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

Indian electricity sector

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