India has turned in a robust economic performance in recent quarters even as major economies like the US and Europe are struggling to recover from the recession. That shows the resilience of the Indian economy. However, the high economic growth cannot be taken for granted given the risk of energy crisis emanating from the power sector’s sluggish development pace.
With electricity demand growing by over 7% a year, India needs to add at least 20,000 mw every year to overcome power shortages. However, despite all the efforts made by the government, the target remains elusive. For example, the actual capacity addition during the previous Five-year Plan was nearly 50% below the target.
The union power ministry had envisaged 78,700 mw capacity addition in the current 11th Plan. However, given the slow pace of progress, the Planning Commission has already reduced the achievable target to 62,000 mw in its mid-term appraisal.
But going by the current pace of capacity addition, even the revised target seems difficult to achieve. For example, only 29,361 mw capacity was added till November 15 under the current plan programme.
Even as the power ministry continues to under-perform on capacity addition target set by the Planning Commission, global consultancy firm Mckinsey has said India’s actual electricity requirement by 2017 could be 100 giga watt higher than the projection given by the plan panel.
While flows of private investment into power generation have improved following policy initiatives by the central government in recent years, the power distribution sector continues to reel under high commercial losses. This poses a risk to the investment flows into power generation as revenues can be recovered at distribution level only.
Expediting capacity addition in power generation has been a challenge over the years given the bottlenecks in the domestic supply of key inputs like equipment. The new urgency to fight climate change has further compounded the challenge for Indian policy makers.
The government has responded to the emerging challenge by unveiling ambitious capacity addition plans in non-conventional energy like solar and nuclear. However, that might not be enough to meet India’s fast-growing electricity requirement.
India needs to tap conventional sources of energy like coal and natural gas if it wants to ensure energy security for its booming economy.
While availability of natural gas has improved in the country in recent years following new discoveries in the Krishna-Godavari offshore basin, the long-term supply prospects still remain far from assuring. In other words, India cannot bank on domestic gas supplies to meet its energy security challenge.
India meets the bulk of its electricity requirement from coal-fired generating stations. Coal has been a reliable and cheaper fuel for meeting the country’s electricity requirement given its domestic abundance. However, given the growing international pressure on India in recent years to cut its emissions and fast-depleting domestic reserves of coal, the government has been forced to look at alternate sources of energy. However, a credible solution continues to elude Indian policy makers.
Union law minister M Veerappa Moily grapples with the same challenge in his latest book, Unleashing India: Powering the Nation.
?To fulfill its power requirement of 315 to 335 giga watt by 2017, India will require generation capacity of 415 to 440 giga watt, after adjusting for plant availability and a modest 5% spinning reserve. This implies a tripling of installed capacity from the current level of 140 giga watt, which, in turn, translates into an annual addition of 20 to 40 giga watt. This is five to tenfold the 4 giga watt capacity addition per year that was achieved in the last ten years,? the author says to underline the enormity of the challenge facing the policy makers.
Moily calls for a drastic change in the policy approach but does not offer any suggestion.
?The magnitude of the task at hand shows that piecemeal measures will not be enough. To achieve this quantum of increase in the pace of capacity addition, and to suitably modify the profile of fresh capacities, India needs to adopt a radically new approach,? the author says in conclusion.
The government has taken new initiatives like launch of ultra mega power project and merchant power project scheme to accelerate capacity addition in power generation and allocation of captive blocks to improve domestic coal availability for the power sector. Besides, it is also encouraging utilities to import coal to meet the domestic fuel shortfall for their power plants.
It has also unveiled ambitious capacity addition programme in nuclear and solar power generation to reduce the country’s dependence on fossil fuel-based generation. Meanwhile, the government has also taken initiative to forge international collaboration with countries like the US to develop cleaner coal-fired power generation technologies while promoting usage of washed coal from domestic sources.
But despite all these efforts, the country?s electricity scenario remains alarming and power shortages could hurt the economic growth if not tackled in time.
This book from Moily can inspire Indian policy makers to come out with more out-of-the-box policy initiatives to overcome this formidable challenge.