Power is one of the most critical components of infrastructure crucial for the economic growth and welfare of nations. The existence and development of adequate infrastructure is essential for sustained growth of the Indian economy.
India’s power sector is one of the most diversified in the world. Sources of power generation range from conventional sources such as coal, lignite, natural gas, oil, hydro and nuclear power to viable non-conventional sources such as wind, solar, and agricultural and domestic waste. Electricity demand in the country has increased rapidly and is expected to rise further in the years to come. In order to meet the increasing demand for electricity in the country, massive addition to the installed generating capacity is required.
India ranks third among 40 countries in EY’s Renewable Energy Country Attractiveness Index, on back of strong focus by the government on promoting renewable energy and implementation of projects in a time bound manner.
India has moved up 73 spots to rank 26th in the World Bank’s list of electricity accessibility in 2017, according to Mr Piyush Goyal, Minister of State (Independent Charge) for Power, Coal, Renewable Energy and Mines, Government of India.
In September 2017, the Government of India launched the Saubhagya scheme to provide electricity connections to over 40 million families in rural and urban areas by December 2018 at a cost of US$ 2.5 billion.
Indian power sector is undergoing a significant change that has redefined the industry outlook. Sustained economic growth continues to drive electricity demand in India. The Government of India’s focus on attaining ‘Power for all’ has accelerated capacity addition in the country. At the same time, the competitive intensity is increasing at both the market and supply sides (fuel, logistics, finances, and manpower).
Total installed capacity of power stations in India stood at 330,260.53 Megawatt (MW) as on May, 2017.
The Ministry of Power has set a target of 1,229.4 billion units (BU) of electricity to be generated in the financial year 2017-18, which is 50 BU’s higher than the target for 2016-17. The annual growth rate in renewable energy generation has been estimated to be 27 per cent and 18 per cent for conventional energy.
The Government has added 10.2 Giga Watts (GW) of conventional energy generation capacity
The total solar power capacity addition from new installations in India in the first half of 2017 reached 4,765 MW and has exceeded the total capacity addition done in 2016*.
Two under-construction hydro projects of NHPC in Himachal Pradesh and Jammu & Kashmir (J&K), expected to be commissioned in 2018, will produce 4,458.69 million units of additional power, according to the Ministry of Power, Government of India.
A total of 13,872 villages out of 18,452 un-electrified villages in India have been electrified up to June 30, 2017 as part of the target to electrify all villages by May 1, 2018.
A total of 26.3 million households which are below poverty line (BPL) have been electrified under the Rural Electrification component of Deen Dayal Upadhyay Gram Jyoti Yojana (DDUGJY), according to the Ministry of Power, Government of India.
Around 293 global and domestic companies have committed to generate 266 GW of solar, wind, mini-hydel and biomass-based power in India over the next 5–10 years. The initiative would entail an investment of about US$ 310–350 billion.
Between April 2000 and March 2017, the industry attracted US$ 11.59 billion in Foreign Direct Investment (FDI).
Some major investments and developments in the Indian power sector are as follows:
- International Finance Corporation (IFC), the investment arm of the World Bank Group, is planning to invest about US$ 6 billion through 2022 in several sustainable and renewable energy programmes in India.
- GE Energy Financial Services (GEEFS) plans to invest US$ 90 million to develop a solar power project of 500 megawatt (MW) in partnership with Rattan India Group.
- Greenko Energy Holdings has raised US$ 155 million from its existing investors, Abu Dhabi Investment Authority (ADIA) and Singapore’s sovereign wealth fund GIC, which will be utilised for expanding its clean energy portfolio to 3 gigawatts (GW) from 2 GW at present.
- Private equity (PE) investment firm, Actis LLP, is planning to invest about US$ 500 million in Solenergi Power Pvt Ltd, its second renewable energy platform in India.
- Mahindra and Mahindra Ltd is planning to invest in high-end electric powertrain technology in a move towards the future of mobility as well as for the electrification of its existing and future line-up of products.
- Hero Future Energies Pvt Ltd is planning to foray into the battery storage business and set up solar charging stations for electric vehicles (EV) in India to capitalise on India’s emerging EV market.
- The Asian Development Bank (ADB) and the Punjab National Bank (PNB) have signed a financing loan worth US$ 100 million, which will be used to support solar rooftop projects on commercial and industrial buildings across India.
- Tata Capital Ltd and International Finance Corporation (IFC) have invested Rs 200 crore (US$ 31.05 million) in their joint venture (JV), Tata Cleantech Capital Ltd (TCCL), to increase its loan book for investing in renewable energy projects.
- CDC Group Plc, a development finance institution, plans to set up its own renewable energy platform in the eastern states of India like Bihar, Odisha and Assam, and other neighbouring countries to focus on developing hundreds of megawatts (MWs) of high-quality greenfield generational capacity.
- Japan’s JERA Co. Inc, has acquired a 10 per cent stake in ReNew Power Ventures Pvt. Ltd for US$ 200 million, valuing the company at US$ 2 billion before its proposed Initial Public Offer (IPO).
- The Indian Railways is looking to award six tenders worth Rs 8000 crores (US$ 1.2 billion), for setting up of a country-wide electricity transmission network, as part of a strategy to reduce electricity bills.
- Renewable energy company ReNew Power has announced securing US$ 390 million debt funding from its existing investor Asian Development Bank (ADB) for developing and expanding capacities of 709 megawatt (MW) across various states of India.
- International Finance Corporation (IFC), along with IFC Global Infrastructure Fund, the private equity fund of IFC Asset Management Company, has announced investment of US$ 125 million equity in Hero Future Energies, which will help the firm set up 1 gigawatt (GW) of greenfield solar and wind power plants over the next one year.
The Government of India has identified power sector as a key sector of focus so as to promote sustained industrial growth. Some initiatives by the Government of India to boost the Indian power sector:
- The ‘Pradhan Mantri Sahaj Bijli Har Ghar Yojana’, with an outlay of Rs 16,320 crore (US$ 2.51 billion), has been launched by the Government of India with the aim of providing electricity access to over 40 million families in the country by December 2018.
- The Ministry of Environment, Forest and Climate Change, Government of India has clarified that solar PV (photovoltaic) power, solar thermal power projects, and solar parks will not require the environment clearance which was mandatory under the provisions of Environment Impact Assessment (EIA) notification, 2006.
- By installing 3 million LED street lights to illuminate 50,000 kilometres of roads in India under the Street Lighting National programme (SLNP), the state-run Energy Efficiency Services Limited has achieved 390 million kWh in annual energy savings, according to the Ministry of Power, Government of India.
- The Ministry of Power, Government of India, has taken various measures to achieve its aim of providing 24X7 affordable and environment friendly ‘Power for All’ by 2019, which includes preparation of state specific action plans, and implementation of Green Energy Corridor for transmission of renewable energy, among other measures.
- India has become an associate member of the International Energy Agency (IEA), which makes the Paris-based body more significant, indicating India’s growing prominence in playing an important role in the global energy dialogue, according to the IEA.
- The Government of India plans to auction coal blocks for commercial mining by the end of December 2017, which would end the monopoly of state-run firms in coal mining and help in achieving the country’s target of producing 1 billion tonnes of coal by 2020.
- The Cabinet Committee on Economic Affairs (CCEA) has approved a new coal linkage policy, aimed at providing necessary supply of fuel to power plants through reverse auction
- The Government of India has announced plans to implement a US$ 238 million National Mission on advanced ultra-supercritical technologies for cleaner coal utilisation.
- The Cabinet Committee on Economic Affairs (CCEA) has approved the enhancement of capacity of the Scheme for Development of Solar Parks and Ultra Mega Solar Power Projects from 20,000 megawatt (MW) to 40,000 MW, which will ensure setting up of at least 50 solar parks each with a capacity of 500 MW and above in various parts of the country.
- The Union Cabinet, Government of India has given its ex-post facto approval for signing of a Memorandum of Understanding (MoU) on Renewable Energy between India and Portugal, which will help strengthen the bilateral cooperation between the two countries.
- The Ministry of New and Renewable Energy plans to introduce a fixed-cost component to the tariff for electricity generated from renewable energy sources like solar or wind, in a bid to promote a green economy.
- The Union Cabinet has approved the ratification of International Solar Alliance’s (ISA) framework agreement by India, which will provide India a platform to showcase its solar programmes, and put it in a leadership role in climate and renewable energy issues globally.
THE ROAD AHEAD
The 2026 forecast for India’s non-hydro renewable energy capacity has been increased to 155 GW from 130 GW on the back of more than expected solar installation rates and successful wind energy auctions.
India could become the world’s first country to use LEDs for all lighting needs by 2019, thereby saving Rs 40,000 crore (US$ 6.23 billion) on an annual basis.
The Indian power sector has an investment potential of Rs 15 trillion (US$ 225 billion) in the next 4–5 years, thereby providing immense opportunities in power generation, distribution, transmission, and equipment, according to Union Minister Mr Piyush Goyal.
The government’s immediate goal is to generate two trillion units (kilowatt hours) of energy by 2019. This means doubling the current production capacity to provide 24x7electricity for residential, industrial, commercial and agriculture use.
The government has electrified 13,000 villages so far out of the total 18,452 villages and is targeting electrification of all villages by 2019, within the targeted 1,000 days.
The Government of India is taking a number of steps and initiatives like 10-year tax exemption for solar energy projects, etc., in order to achieve India’s ambitious renewable energy targets of adding 175 GW of renewable energy, including addition of 100 GW of solar power, by the year 2022. The government has also sought to restart the stalled hydro power projects and increase the wind energy production target to 60 GW by 2022 from the current 20 GW.
Exchange Rate Used: INR 1 = US$ 0.015 as on October 10, 2017
References: Media Reports, Press Releases, Press Information Bureau (PIB)
Note: *- Mercom India Research,#-BMI Research,&- Bridge to India
Disclaimer: This information has been collected through secondary research and Kohli & Kohli Law Associates is not responsible for any errors in the same.