Growing demand seen leading to power shortage in 4 years: Analysts

By: | Published: December 1, 2018 5:16 AM

The gamut of steps to improve electricity access might lead to a supply shortage scenario after FY23, warranting ‘an immediate need to restart the capex cycle in generation’, according to analysts. 

The gamut of steps to improve electricity access might lead to a supply shortage scenario after FY23, warranting ‘an immediate need to restart the capex cycle in generation’, according to analysts.  “Our existing capacity and pipeline can at best meet projected peak demand till FY23, post which we will start running peak deficit,” ICICI Securities said in a recent note.

Peak power demand of the country breached the 180 giga-watt (GW) mark in October, 9.8% higher than the highest requirement recorded in FY18. Peak power demand have been increasing at a compound annual growth rate of 2.6% between FY15 and FY18. The rise in power demand coincides with the rampant addition of household connection under the government’s Saubhagya scheme and the reduction in the average duration of power cuts.

“Assuming we intend to maintain 5% reserve margin, India’s peak demand will catch up with the available peak supply by FY21,” an analyst said. Reserve margin is the excess of installed power generation capacity, over and above the expected peak demand. Currently, the installed power generation capacity stands at 346 GW.

Out of 47,855 MW of the coal-based power plants currently under construction, only 6,445 MW of additional capacity would be required between FY17-22, the ‘National Electricity Plan’ published by the Central Electricity Authority had said earlier this year, taking into account the possible retirement of 22,716 MW power plants.

With the average availability factor of coal and nuclear power plants being around 70%, ‘only about 55% of India’s current installed capacity is ‘available’ to meet its peak demand reliably’, the ICICI note added. Since the peak demand comes during the evening hours, the existing and upcoming solar plants would be useless in catering to the need because, keeping cost viability in mind, they are not equipped with storage facilities.

Research agency Crisil recently said that it is likely that the pace of capacity addition would slow down in the coming years as major distribution companies (discoms) have already tied up with excessive long-term power purchase agreements (PPAs) to meet their respective demand, diminishing the scope for new such agreements.

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