The financial year 2023-24 saw many reforms in the electricity sector with a major emphasis given on the extensive addition of renewable capacity and enhancing the energy storage systems.
Moreover, the year saw new plans for thermal capacity addition as India chose to rely on coal-based power to meet the rising electricity demand.
Much effort has been made to address the issues of delayed payments, helping reduce the outstanding dues of disoms to gencos substantially.
The renewable energy sector faced challenges in the first half of FY24, registering only a marginal increase in capacity addition at 6.6 giga watt (GW) against the annual target of 20 GW.
High solar module prices have weighed on investor sentiments. Of the total solar capacity that was added, the share of the residential sector was again low compared to the commercial and industrial installations.
However, the latter half of the fiscal year witnessed a rise in the solar installations as lower solar module prices helped developers complete their pending projects before the ALMM (approved list of models and manufacturers) deadline kicks in from March 31.
As a result, the country’s total installed RE capacity reached 183.5 GW as of February against 122.1 GW in the same period last year, as per data from the Central Electricity Authority.
Of this, solar capacity accounted for 41.2% at 75.6 GW while small and large hydro accounted for 66.4% at 121.8 GW.
The country’s rooftop solar capacity also increased to 3 GW this year from 1.8 GW in FY23.
During the current financial year, the country also saw a series of supply constraints in order to meet the peak demand. Low coal inventories hit thermal sector intermittently and inadequate reservoir levels resulted in poor hydel power generation.
Despite an increase in the RE installed capacity, RE generation this fiscal up to February has remained low, registering a 2.1% decline at 333.6 billion units (BU), the data showed. The country’s total power generation from April till date stood at 1,494.7 BU, down 1.5% from targeted 1,517.1 BU. The government has set an annual target of 1,535 billion units of electricity generation for FY24.
In 2023-24, hydel power generation has declined by 17%. “Going by the current reservoir level, hydel generation could remain subdued,” said Vikram V, vice-president & Co-Group Head, corporate ratings, Icra. “It also depends on how the monsoon plays. Due to El Nino, either the demand could be higher because of heatwaves or the hydel generation could be lower.
Further, to be able to achieve the government’s ambitious target of 500 GW of RE capacity by 2030, an annual addition of 25 GW of RE capacity is required. Additionally, for the installed RE capacity to be operational without intermittency issues will require a proper storage system.
The power ministry took a step forward in this direction with the launch of Battery Energy Storage Systems scheme that envisages development of 4,000 MWh of projects by 2030-31, with a viability gap funding of up to 40% of the capital cost. It targets at achieving a levelized cost of storage ranging from Rs 5.50-6.60 per kilowatt-hour, making stored RE a viable option for managing peak power demand.
Estimates by the CEA show that India requires 60.63 GW of energy storage capacity by 2030 including 18.9 GW of pump storage technology and about 41.65 GW of BESS.
While the RE installed capacity was able to register a healthy growth, the government had to cut down its target for thermal capacity addition for the current fiscal to 7.16 GW from 14.72 GW projected earlier due to issues pertaining to execution of various thermal power projects.
During FY24, India added only 5.4 GW of thermal capacity, taking the total installed thermal capacity to 243.2 GW.
“The key reasons for cutting down the thermal capacity addition target is the delay in some or the other work, some equipment getting delayed, or some work getting delayed. There also have been land acquisition issues,” said Vikram.
In 2023, India’s peak demand touched 243 GW against projected 229 GW in response to which the government announced an addition of 80 GW of thermal capacity by 2030. The electricity demand growth is expected to grow at an average of 6-7% in the upcoming fiscal 2024-25.
Now with the peak demand estimated to touch a level of 260 GW this summer, the power ministry is confident of being able to meet the higher demand with improved coal stocks and easing supply of imported coal.
Moreover, new gas capacity additions owing to the softening gas prices is further expected to meet any shortfall in the demand.
“During the upcoming summer season, we do not see any significant gap between demand and supply that will impact dynamic prices. There has been a surge in sell-side liquidity due to sizeable capacity additions in renewable and thermal power while gas based power plants are coming back due to sharp fall in gas prices,” said an official industry source who did not wish to be identified.