India’s power demand surged over 9% in megawatts and nearly 11% in billion units in the first quarter of the current financial year compared to Q1FY24, according to the power secretary. The nation’s effort to prevent an electricity shortage by accelerating capacity addition across the value chain is encountering obstacles, with 32 transmission projects worth Rs 44,254 crore already or likely to be delayed.
Data from the Ministry of Statistics and Programme Implementation reveals that as of April 2024, out of 50 major projects worth Rs 60,439 crore being executed by the Power Grid Corporation of India (PGCIL), 18 projects valued at Rs 29,300 crore are experiencing an average delay of 32 months. Additionally, 8 projects awarded through the Tariff Based Competitive Bidding (TBCB) route, totaling Rs 8,755 crore, are delayed by an average of 12 months.
Analysts warn that delays in transmission projects and supply inefficiencies could exacerbate the country’s power deficit by 2032. Indu Shekhar Chaturvedi, Director General of the Electric Power Transmission Association, stated that delays in transmission projects would undermine new generation capacity, hindering the country’s ability to meet peak power demand, especially given the longer heatwaves due to climate change.
The Central Electricity Authority’s draft plan outlines the need for Rs 4.75 trillion in investments by 2027 to develop transmission infrastructure, including lines, substations, and reactive compensation. The plan covers 170 transmission schemes with an estimated cost of over Rs 3.13 trillion for inter-state transmission and around Rs 1.61 trillion for intra-state systems.
PGCIL manages over 80% of the country’s transmission projects, with private companies gradually increasing their share through the TBCB route. Economic growth, higher per capita consumption, and rising temperatures have driven India’s electricity demand to record highs this year. Peak power demand reached 250 gigawatts (GW) in May, a 13% increase from the previous year, and is expected to rise to 260 GW in September or October.
Anish Mandal, a Partner at Deloitte, estimates the peak power deficit could reach 35 GW by 2032 due to insufficient installed capacity, with the deficit’s magnitude depending on demand growth. He notes that the primary issue is not coal availability but inadequate installed capacity. He anticipates that the current 8-9 GW deficit will continue and increase until 2032, potentially exceeding 35 GW.
Inefficient power evacuation infrastructure and delays in transmission projects contribute to increasing power shortages. Mandal emphasizes the need for states, particularly those rich in renewable energy, to develop evacuation infrastructure plans to connect generating centers to load centers or at least to the Inter State Transmission System (ISTS).
State transcos are developing their own plans and issuing EPC contracts. Mandal advocates for reforms where states open up to PPP transmission projects and adopt competitive procurement. He stresses that without resource adequacy enforced by regulators and states, power deficits will continue to rise.
India’s power demand has risen over 9% in megawatts and nearly 11% in billion units in the first quarter of the current financial year compared to Q1FY24. Peak power demand has grown by 5-6% annually over the last decade, increasing to 8-9% over the past three years. Analysts now predict an 11% compound annual growth rate in peak power demand.
Anujesh Dwivedi, a partner at Deloitte India, highlights the rise in adverse weather events and the lack of preparedness in transmission and distribution systems. He suggests that the government may focus on funding and creating climate-resilient power infrastructure in the upcoming Budget.
As of June 30, India’s cumulative installed power capacity stands at 446.2 GW, comprising 242.9 GW of thermal and 195 GW of renewable energy. Mandal notes that despite adding thermal capacities, significant deficits remain due to insufficient additions of renewable energy. He estimates that 40-45 GW of renewable capacity needs to be added annually to meet requirements.
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