India’s Power Capacity Vs. Electricity Demand in India
Does India have Excess Capacities?
India’s power installed capacity has grown substantially over the last decade, at a compounded annual growth rate (CAGR) of 8.1%. The installed capacity as on 31st March 2008 was 143 GW and by 31st March 2010, it stood at 159.4 GW. However, between April 2011 to 31st March 2015, the installed capacity grew substantially to 274.9 GW. As on 31st January 2021, the total general installed capacity in India is 377.3 GW. The compounded annual growth rate of generation installed capacity in India from 2008-09 to 31st January 2021 is 7.7 percent.
Electricity Generation Installed Capacity in GW
However, the growth in demand for electricity has not necessarily met the same pace of growth in installed capacity. The current demand for electricity is estimated to be around 190 GW, which is almost half the current installed capacity.
The sluggish demand growth and weaker economic activity has led to a fast decline in the Plant Load Factor (PLF) of particularly coal fired power plants. The PLF for coal fired power plants, has drastically reduced from 77% in 2009-10 to 56% in 2019-20. In the current financial year 2020-21 (Up to 31st January 2021), the PLF for coal fired power plant was at a low of 51.5 percent. The major reason for such a low PLF was the country-wide “lockdown” owing to the COVID-19 pandemic, particularly in the months of April-June 2020. The lockdown saw the shutdown of many industrial and commercial establishments for extended periods, which in turn negatively impacted the electricity demand. The demand for electricity in the month of April 2020 was 23.2 percent less than the demand for electricity in April 2019. Similarly, the demand for electricity in the month of May 2020 was 15 percent less than the demand in May 2019 and in June 2020, the demand for electricity was 11 percent less than the corresponding demand for electricity in June 2019. The revival of demand of electricity happened only in September 2020, where the demand was also slightly higher by about 4.6 percent as compared to the demand in September 2019.
Notwithstanding this, and even if one discounts the low PLFs of coal fired power plants due to the pandemic, in the year 2020-21, the fact remains that low PLF trends has been seen since 2014-15. Given the rise in electricity generation capacity addition, a number of questions have been raised on whether this rapid increase in capacity addition is justified or not and whether, a number of these assets could become non-performing assets and end up defaulting payments to banks, which are already in high stress in India.
In order to stimulate a discussion on whether such capacity addition of electricity generation in India is justified or not, Vasudha Foundation on the basis of the vast data it has collated and compiled from various publicly available sources and found on its data portal, www.vasudhapower.in , has developed a few scenarios on installed generation capacities, potential generation and possible demand scenarios.
We have considered various electricity generation and electricity demand scenarios for the power system size of 817 GW as projected by CEA for the year 2030. We further explored an interesting case to factor in only those electricity generation capacities that are in various stages of construction and commissioning, particularly for conventional power plants. For the latter one, we have also included the 450 GW RE target by 2030 announced by the Government of India at various Forums.
To arrive at electricity generation, we developed four scenarios. First scenario, was the projected generation by the Central Electricity Authority, given in its “Optimal Generation Mix Report, January 2020”.
The second scenario was to assume a Best Case PLF of 85 percent for coal and lignite power plants, 100 percent PLF for nuclear power plants; 50 percent PLF for gas power plants; 45 percent PLF for hydro power plants; 20 percent PLF for solar power plants; 26 percent PLF for wind power plants and a 40 percent PLF for small hydro and bio-mass power plants.
A third scenario, looked at a slightly reduced PLF rates of 75 percent for coal and lignite power plants, 90 percent PLF for nuclear power plants; 45 percent PLF for gas power plants; 45 percent PLF for hydro power plants; 18 percent PLF for solar power plants; 24 percent PLF for wind power plants and a 40 percent PLF for small hydro and bio-mass power plants.
A fourth scenario looked at more or less the current PLF trends. The assumed PLF rates in this scenario are 65 percent for coal and lignite power plants, 80 percent PLF for nuclear power plants; 40 percent PLF for gas power plants; 45 percent PLF for hydro power plants; 18 percent PLF for solar power plants; 24 percent PLF for wind power plants and a 40 percent PLF for small hydro and bio-mass power plants.
Further, in order to arrive at the net generation, we took two scenarios of Transmission and Distribution losses. One a 7 percent loss and second, 10 percent loss.
To assess the demand projections, we developed five scenarios. One scenario was to directly take the projected peak demand by the Central Electricity Authority, given in the “Optimal Generation Report-2020”. In terms of scenarios developed by Vasudha Foundation, one is business as usual scenario, which assumes that the current per-capita electricity consumption continues to grow at the rate of growth in the last 5 years, which is 3.6% per annum till 2030. The second scenario assumes the growth rate of per-capita electricity consumption at 5 percent per annum from 2021 till 2030 and the third scenario assumes a growth rate of per-capita electricity consumption at 7.2 percent per annum, which is double the current growth rate of 3.6 percent and the last scenario assumes a growth of per-capita electricity consumption of an aspirational level 10 percent per annum till 2030. This scenario also assumes that we reach the current global average of per-capita electricity consumption by 2030.
Some of the demand scenarios factor in the aspirations of Government of India, articulated in various policies such as Atmanirbhar Bharat, Make in India et al.
A detailed assessment of the above scenarios was done to look at the demand-supply gap.
This section provides an overview and unpacks the various scenarios that we looked at for installed capacities; electricity generation and demand by 2030.
A. A bird’s eye view of the scenarios is as below -
Scenario 1 | Scenario 2 | Scenario 3 | Scenario 5 | |
Power Installed Capacity Assumed | 817 GW | 817 GW | 817 GW | 817 GW |
Gross Generation in Billion Units | 2518 Billion Units | 3406 Billion Units | 3071 Billion Units | 2810 Billion Units |
Net Generation @ 10% loss factor | 3066 Billion Units | 2764 Billion Units | 2529 Billion Units | |
Net Generation @ 7% loss factor | 3168 Billion Units | 2856 Billion Units | 2613 Billion Units | |
2030 Demand at current growth of Per-capita Electricity Consumption (3.6% per-annum for the last 5 years) | 2325 Billion Units | 2598 Billion Units | 2598 Billion Units | 2598 Billion Units |
Supply-Demand Gap factoring in a 7 percent loss | +193 Billion Units | +570 Billion Units | +258 Billion Units | +15 Billion Units |
Supply-Demand Gap factoring in a 10 percent loss | +468 Billion Units | +166 Billion Units | -69 Billion Units | |
2030 Demand at a growth rate of 5 percent Per-capita Electricity Consumption per annum | 2959 Billion Units | 2959 Billion Units | 2959 Billion Units | |
Supply-Demand Gap at 7 percent loss factor | +209 Billion Units | -103 Billion Units | -346 Billion Units | |
Supply-Demand Gap at 10 percent loss factor | +107 Billion Units | -195 Billion Units | -430 Billion Units | |
2030 Demand at a growth rate of 7.2 percent Per-capita Electricity Consumption | 3640 Billion Units | 3640 Billion Units | 3640 Billion Units | |
Supply-Demand Gap at 7 percent loss factor | -472 Billion Units | -784 Billion Units | -1027 Billion Units | |
Supply-Demand Gap at 10 percent loss factor | -574 Billion Units | -876 Billion Units | -1111 Billion Units | |
2030 Demand at a growth rate of 10 percent Per-capita Electricity Consumption | 4711 Billion Units | 4711 Billion Units | 4711 Billion Units | |
Supply-Demand Gap at 7 percent loss factor | -1543 Billion Units | -1855 Billion Units | -2098 Billion Units | |
Supply-Demand Gap at 10 percent loss factor | -1645 Billion Units | -1947 Billion Units | -2182 Billion Units |
B. Detailed Explanation-
B1. CEA Estimates
The CEA assumed a total generation installed capacity of 817 GW by 2030; total generation of 2,518 Billion Units by 2030 and projects a demand of 2,325 Billion Units by 2030. As per the CEA, the estimated generation from coal and lignite power plants will be at a PLF of 58 percent by 2030.
B2. Alternate Scenario I (Best Case PLF Scenario)
We assume the total installed capacity of 817 GW and at a Best Case PLF rates, the gross generation would be 3,406 Billion Units. The net generation at 10 percent loss factor would be 3,066 Billion units. The demand at the current growth rate of per-capita electricity consumption (3.6 percent) would be 2598 Billion Units. However, if the per-capita electricity consumption grows at 5 percent, the demand would be 2,959 Billion units. In both these scenarios, the supply would be more than the demand. In the scenario of a per capita electricity consumption growth rate of 7.2 percent per annum until 2030, the total demand would be 3640 Billion Units by 2030, which means a deficit of 234 Billion Units. However, if we assume a loss of 7 percent and 10 percent, the deficit would be 472 Billion Units and 574 Billion Units respectively.In the scenario of a per-capital electricity consumption growth rate of 10 percent per annum until 2030, the total demand by 2030 would be 4,711 Billion units, which means a deficit of 1645 Billion Units. However, if we assume a loss percentage of only 7 percent, the deficit between demand and supply at a 10 percent growth rate of per-capita electricity consumption is 1,543 Billion Units.
B3. Alternate Scenario 2 (Reduced PLF Scenario)
Assuming the total generation capacity of 817 GW by 2030, the gross generation computed at a reduced PLF as detailed in the methodology note in this discussion paper, will 3071 Billion Units. The net generation at 10 percent loss factor would be 2764 Billion units. The demand at the current growth rate of per-capita electricity consumption (3.6 percent) would be 2598 Billion Units. However, the per-capital electricity consumption grows at 5 percent, the demand would be 2959 Billion units. In the scenario of a per capita electricity consumption growth rate of 7.2 percent per annum until 2030, the total demand would be 3640 Billion Units by 2030. In the scenario of a per-capital electricity consumption growth rate of 10 percent per annum until 2030, the total demand by 2030 would be 4711 Billion units. For all three scenarios, the demand would be more than the supply, by 195 Billion units, 876 Billion Units and 1947 Billion units respectively.
Even if we assume only a 7 percent loss factor, the total generation at the assumed levels of PLF would be 2856 Billion Units. In this scenario, the demand would be more than the supply by 103 billion units, 784 Billion Units and 1855 Billion units respectively.
B4. Alternate Scenario 3 (PLF at Current Trends)
Assuming the total generation capacity of 817 GW by 2030, the gross generation computed at the current PLF trends, as detailed in the methodology note in this discussion paper, will be 2810 Billion Units. The net generation at 10 percent loss factor would be 2529 Billion units. The demand at the current growth rate of per-capita electricity consumption (3.6 percent) would be 2598 Billion Units. However, the per-capital electricity consumption grows at 5 percent, the demand would be 2959 Billion units. At a per capita electricity consumption growth rate of 7.2 percent per annum until 2030, the total demand would be 3640 Billion Units by 2030. In the scenario of a per-capital electricity consumption growth rate of 10 percent per annum until 2030, the total demand by 2030 would be 4711 Billion units.
In this scenario, the demand would always be more than the supply, by 69 Billion units, 430 billion units, 1111 Billion Units and 2182 Billion units respectively.
However, if we assume only a 7 percent loss factor, the total generation at the assumed levels of PLF would be 2613 Billion Units. In this scenario, the demand would be more than the supply by 346 billion units, 1027 Billion Units and 2098 Billion units respectively.
The graphs below provide a bird’s eye view of the scenarios assumed for per-capita electricity consumption trends; generation for the various scenarios; demand for electricity for the various scenarios and also the demand-supply surplus/deficit.
Supply Vs Demand in 2030
Note: In the scenario of a CAGR of 10% growth in per-capital electricity consumption, India’s per-capita electricity consumption by 2030 is close to the current Global Average per-capita electricity consumption.
Electricity Generation in various scenarios
Electricity Demand in various scenarios in 2030
Per Capita Electricity Consumption Trend
Notwithstanding the CEA projections of 817 GW of Electricity Generation Installed Capacity, the Vasudha team estimated the possible installed capacity for electricity generation in India by 2030. As detailed in the methodology section, this estimate is based on the premise that all the power plants that are in various stages of construction, would be commissioned by 2030.
The table below provides a snap shot of our estimated electricity generation installed capacity.
Generation Installed Capacity 2021 (In GW) | Generation Installed Capacity 2022 (In GW) | Generation Installed Capacity 2030 (In GW) | |
Coal | 206.40 | 206.40 | 264.99 |
Oil and Gas | 25.47 | 25.47 | 38.98 |
Nuclear | 6.78 | 6.78 | 13.98 |
Hydro | 46.06 | 46.06 | 51.94 |
Wind | 38.68 | 59.00 | 159.00 |
Solar | 38.79 | 110.00 | 410.00 |
Other RES | 15.07 | 15.07 | 15.07 |
Total Capacity | 377.25 | 468.78 | 953.96 |
In this scenario of the installed capacity stands at 953.96 GW, at a best case scenario of PLF, the gross generation would be 3604 Billion Units. In this scenario, even at a 5 percent growth of per-capita electricity consumption, India will still have excess capacities to meet the demand. However, at a 10 percent growth in per-capita electricity consumption, there would be a gap of roughly 1107 billion units.
The key findings of this exercise are as below:
a) In the CEA scenario of generation capacity, actual generation in TWh and demand seems to indicate that India is not likely to have surplus capacity. However, the CEA has projected the PLF for coal fired power plants to be in the sub-optimum range of 58 percent.
b) However, assuming a best-case scenario of PLF, which will ensure that all power plants are able to sell their generation and reducing the incidence of “stranded assets”, there would be surplus capacity, even with a growth in demand by 5 percent per-capita electricity consumption year on year from 2021 to 2030. A growth of 5 percent per-capita electricity, would take our per-capita electricity consumption from the current levels of 1208 kWh to 1968 kWh by 2030.
c) In a scenario where per-capita electricity consumption grows at 10 percent per annum for the next 10 years, the demand for electricity will be far higher than the supply of electricity even with a maximum capacity utilization factor.
To conclude, it is very clear that while there could be a number of scenarios and projections for demand for electricity, including having aspirational targets, a realistic assessment of demand is absolutely essential. Hitherto, our power sector planning seems to be more “supply side” focus, which perhaps was the need in the early 1990s and perhaps even in the decade of early 2000. However, given that our electricity generation capacity has grown at a fairly fast pace of 7.7 percent CAGR over the last 13 years, it is perhaps time to focus on the demand side.
Unless the demand grows in tandem with the supply, a number of power generation projects could end up becoming “stranded and non-performing assets”, which will perhaps deter future investments in to this sector. For a country like India that has a scarcity of capital, this is a situation that is best avoided. Further, a boom-bust-boom in India’s power sector cannot be good for the overall economic health of the country.
Going forward, we will further develop this initial discussion paper by adding further layers and also try to assess possibly demand growth segments.
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