Economy

Power: Not a charged up performance

Twesh Mishra New Delhi | Updated on January 27, 2018

The Centre’s flagship scheme for household electrification, ‘Saubhagya’, was the most eventful move in the power sector DGOPALAKRISHNAN

While thermal energy faced policy headwinds, clean energy did not have a smooth run either

The launch of the Centre’s flagship scheme for household electrification, ‘Saubhagya’, appears as the most eventful move in an otherwise dull year for the power sector. The scheme is expected to be instrumental in improving the country’s power demand.

Under the scheme, the Centre aims to complete electrification of all villages in the country by December-end and targets electrifying each willing household by March 2019.

“I see demand picking up already... We are going to add 40 million homes,” Minister of State (Independent Charge) for Power and Renewable Energy, RK Singh, told BusinessLine recently.

The Central Electricity Authority, however, painted a grim picture for the power sector and lowered its forecast in the draft National Electricity Plan. The CEA stated that there will be no need for additions to coal-based power generation capacity from 2017 to 2022. The projected peak demand by 2021-22 is 235 GW, which is 17 per cent lower than the projection made in the 18th Electric Power Survey (EPS) report.

But Singh believes otherwise. He said, “We have asked the CEA to revise its projections while keeping in mind the demand that is expected to come online with the increase of Saubhagya connections.”

“Currently, our per capita consumption is 1,100 units and, I think, it is going to, at least, double in the next five years. And not only double, in seven years, I think, it should almost treble,” Singh added.

Structural changes

While Saubhagya is the more visible reform, the Centre is also moving in to iron out structural discrepancies in the power sector. Tariff standardisation and cross-subsidy elimination were on the agenda at the State Power Ministers’ conference held earlier this month.

It was decided that the multiple power tariff slabs for consumers will be clubbed to a maximum of 10-15 slabs. After the conference, the States also committed to cap losses in State power distribution utilities to below 15 per cent by March 2019. This will check cross-subsidies and is considered as an enabler for Direct Benefit Transfer of the power subsidy to agrarian consumers.

A bulk of the Centre’s focus was on distribution reforms and the neglect of the generation-end saw a crippling of the sector by mid-year. A 25 per cent slump in nuclear power generation and 17.16 per cent lower hydro-power generation during September saw the demand for thermal power skyrocket.

The increased demand for thermal power put pressure on the coal supply chain which, in turn, was heavily depended on rail rake availability for fuel transport.

For independent power producers it was a double whammy — they were hit by lower coal supplies and stunted offtake from power distribution companies.

According to a Crisil report, “As of August 2017, about 21 GW of commissioned private sector coal-based capacities were under stress for lack of long-term power purchase agreements (PPAs) or because of poor/no offtake.”

In addition, plants with around 35 GW of power-generation capacity is languishing because of lack of fuel-supply agreement or coal linkage, unviable tariffs due to increase in cost of imported coal, project cost overruns on account of commissioning delays, and high receivables due to weak financial condition of procurers, the Crisil report added.

Clean energy

While dirty energy is facing headwinds, clean energy is not having a smooth run either. The introduction of tariff-based competitive bidding saw wind energy equipment manufacturers looking at ways to cut staff costs, which included benching and retrenching.

Inox Wind, Suzlon, Gamesa India and ReGen Powertech are known to have trimmed employee strength as the wind power generation industry moved towards a low-tariff regime.

For solar, the double-edged sword of anti-dumping duty is hanging on project developers. Capacity addition too has slowed because of a 20 per cent increase in imported, predominantly Chinese, solar panel and cell prices, according to industry watchers.

But the sun is still shining for the solar energy sector as the Centre has proposed an ambitious ₹11,000-crore scheme for promoting domestic solar manufacturing. The policy targets creation of manufacturing capacity of 10 GW over five years, far from the projected demand, but better than nothing at all.

Published on December 20, 2017

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