After the new regime took over under the leadership of Prime Minister Narendra Modi, the country is aiming high in terms of getting larger share of foreign investment and achieving higher GDP growth in years to come. The Government has identified areas of growth such as development of infrastructure and manufacturing. The bottlenecks in the path of development are identified. The government has initiated necessary course correction with the intention to iron out all kinds of hurdle and put India on the growth path. World Bank Group in one of its Global Economic Prospects (GEP) report has also predicted the GDP growth of India at 6.4 per cent in the current fiscal and expects the country to touch 7 per cent growth mark in the next two years. Sandeep Sharma examines the power sector as it is one of the most important and vital component of the Indias growth story....
Indias focus has shifted on the development of new infrastructure and overhauling of the existing ones. The country is gearing up to set up manufacturing zones on a wider scale. The Delhi-Mumbai Industrial Corridor project and similar such projects in the country are likely to give a fillip to the growth rate and generate employment on a larger scale. Transport sector in India is promising windfall of opportunities to companies involved. Number of metro and monorail projects have either taken off or is in the process to start. The interest in the Real Estate and Retail sector are likely to be revived and may soon emerge as the frontrunner in the countrys development process.
The pointers clearly indicate that to reach and sustain a growth rate of more than 7 per cent, the country would need consistent and increased power supply. The Power sector seems to be the ultimate winner in the development process of the country. ¨Make in India¨ and ¨Smart Cities¨ campaign success largely depends on power availability.
As of now the sector is deeply stressed out. The players are hurt not only by the shortage in the supply of fuel mainly coal and gas, but due to subdued demand are also hit by the higher interest rates. Many of the existing players mainly the private sector companies have sold or are in the process of exiting stranded power assets. The banking sector is also facing considerable amount of NPAs from the power sector. The higher interest regime coupled with low demand for power and non-availability of vital fuel is killing the private sector participation in the power generation. Only companies with deep pockets are able to withstand the current onslaught.
The Government has been fire fighting for reviving the power sector. The supply side constraints are being addressed by the government in terms of increasing domestic availability of coal supply through fuel supply agreements and coal imports at a cost-plus basis, streamlining coal block auctioning, financial restructuring of state electricity distribution companies and gas pricing guidelines. Though the government efforts have yielded some turnaround but lot needs to be done to bring in fresh investment to revive the stalled projects. The demand side pressure faced by the power sector is in terms of overall economic slowdown coupled with weak financial condition of the state and privately owned electricity distribution companies, which are reluctant to buy power. All this pressure points are leading to power producers operating below capacity. During 2013-14, the Plant load factor (PLF) of thermal power plants has declined from 70.3 per cent to 65.6 per cent on y-o-y basis, thus adding pressure on the profitability of the power generation companies. The sector is further stressed out due to environmental clearance and land acquisition issues which are obstructing the path of new projects to take off.
The banking sector is facing lot of stress due to its huge exposure in the power sector. As per media reports of November 2014, the power sector exposure of Indias leading bank - SBI is to the tune of Rs.92,919 Crore. SBI has approached RBI to allow a 25-year scheme with a refinancing window after five years. This would offer longer repayment tenures for new infrastructure projects and can be extended to existing power projects. The Andhra bank has an exposure of Rs.11,000 Crore in the power sector as of December 2014 amounting to 11 per cent of its loan portfolio. The power projects comprising 1,36,000 MW capacity involving capital outlays of more than Rs.6 Lakh Crore have been affected due to various factors as per the Association of Power Producers. The association is pleading for a 10 per cent additional debt exposure by financial institutions and easing of financing norms for stranded power assets.
As per the 12th Five Year Plan (2012-17) document of Planning Commission, the investment required in electricity sector for the years 2014-15 to 2016-17 is Rs.10.14 lakh crore. Out of this investment figures, around Rs.4.91 lakh crore is expected from the private sector. The investment required for 2015-16 is around Rs.3.33 lakh crore and for 2016-17, it is Rs.3.86 lakh crore.
$250 billion investment expected in the Indian power sector
PUBLIC SECTOR FINANCING
At the First Renewable Energy Global Investors Meet & ; Expo (RE-INVEST) summit organised by Ministry of New and Renewable Energy (MNRE), Arvind Subramanian, Indias Chief Economic Advisor, said that the role of public sector financing will assume paramount importance if India is to expand its renewable energy footprint in power generation over the next decade.
PRIVATE SECTOR PARTICIPATION
The private sector has started playing an important role in the power sector. In the past five years more than half of the power generation capacity added has come from the private sector. No doubt The necessary framework and policies needs to be implemented to increase participation of private sector companies in the strengthening and building power transmission and distribution network. Non-discriminatory open access to the transmission and distribution network can drive increased private sector participation.100% FDI is permitted to facilitate private investment on automatic route for the projects of power generation, transmission and distribution.
PLANT LOAD FACTOR
The national average Plant Load Factor (PLF) of Coal / Lignite based power generating stations during last three years i.e. 2011-12, 2012-13 and 2013-14 is 73.32%, 69.93% and 65.55% respectively. The low PLF is attributed to various reasons such as planned maintenance, forced outages, transmission constraints, availability of fuel and quality of fuel, less schedule given by beneficiary states due to low demand/higher cost of generation. During the current financial year, upto November 2014, 79 stations were having PLF below national average.
Power sector growth is severely strained due to shortage of coal. The requirement of domestic coal stands at 554 MT, while the availability is only 473 MT.
There is a shortage of close to 81 million tonne of indigenous coal for power generation in India. During the current fiscal, the overall demand of coal is estimated to be around 787.03 MT, while the domestic coal supply would be around 643.75 MT. The imported coal to the tune of 143.28 MT would be required to fill in the gap between demand and supply. To ensure adequate availability of coal in the country, the Government of India has asked Coal India Ltd to increase the coal production. The Government is also encouraging power utilities to import coal.
IMPACT OF FUEL SCARCITY
The acute shortage of fuel in terms of coal and gas has affected new capacity of around 30,000 MW. It has also resulted in creating financial stress for new project proponents. With the turnaround expected soon in the manufacturing, construction and infrastructure segment, the demand for power is likely to surge in the near future. If the supply side of fuel is sorted out by the Government, this could be a 30,000 MW bonanza for the industry at large as the installed capacity is already in place. It is expected that the government would come out with a road map on achieving the 1 billion tonne coal production target. The gas supply issue also needs immediate attention and solution.
INTEGRATED ENERGY POLICY (IEP)
The Government has formulated an Integrated Energy Policy (IEP) covering all sources of energy including renewable energy sources. The IEP document gives a roadmap to develop energy supply options and increased exploitation of renewable energy sources.
NEW RENEWABLE ENERGY POLICY IN THE OFFING
The Government is likely to enact New Renewable Energy Policy to have provisions for Renewable Generation Obligation. The new policy is likely to impose penalties on non-compliance of RPO (Renewable Purchase Obligation).
The Centre is taking pro-active steps to boost power generation across the length and breadth of the country. The 24x7 Power for All mission can be achieved with the help of individual states. To become self-sufficient in terms of power availability, the role of state is pivotal. The States need to make and implement specific policies to boost the power generation. Each district potential should be studied and steps needs to be taken to tap the energy sources in the most cost effective way.
Due to lot of stress in the power sector, the weaker players are offloading their stake in stranded or stressed power assets and making way for industry consolidation lead by strong players. In a disclosure to BSE on December 10, 2014, Tata Power has informed that they have signed Share Purchase Agreement for acquisition of 540 MW coal based thermal power project in Maharashtra. This power plant belongs to IRB group firm Ideal Energy Projects. As per media reports, the deal is pegged at Rs.3,500 crore. Earlier in the month of November, JSW Energy had acquired two hydroelectric power plants with a combined capacity of 1391 MW from Jaiprakash Power Ventures for Rs.9,700 crore. Adani Power acquired 600-MW Korba West thermal power plant in November from Avantha group at a cost of Rs.4,200 crore. In August 2014, Adani group acquired 1200 MW thermal power project at Udupi from Lanco Infrastructure for a consideration of Rs.6,000 crore.
Central Public Sector Enterprise NTPC Ltd had earlier formed a committee to evaluate potential opportunities for acquisition of stranded power assets. The company had hinted to acquire 8,000 - 9,000 MW of capacity.
The company could receive 34 proposals totaling 55,000 MW capacities available for acquisition in its first round of inviting expression of interest from power producers. In December 2014, the company has received 12 more proposals in response to its second round of floating expression of interest invite. The company has so far identified 7-8 proposals which are likely to be finalized before the end of the current financial year. Power major is reportedly in talks with Avantha Group, L&T, Shapoorji Pallonji Group and Adhunik Group for acquiring their stranded plants.
INDIA CHOOSES RENEWAL PATH
Out of 254 GW of installed power capacity, the renewable energy portfolio stands at 33.79 GW. The use of coal is not preferable for power generation as it leads to environmental degradation and pollution issues across the region. The Government of India has chosen the wise path of focusing mainly on development and use of renewable energy. In its bid to increase the supply of power through renewable sources, the Government of India plans to install 100 GW of solar PV capacity by 2022. To achieve this target, lots of activities in various states have already started. Recently a memorandum of understanding (MoU) has been signed for the development of Indias single largest solar PV power plant spread across 1500 hectare site in Rewa District of Madhya Pradesh. The MOU is signed between the Solar Energy Corporation of India and Urja Vikas Nigam of Madhya Pradesh for the development of a 750 MW solar PV plant.
With the aim to attract large scale investments in the renewable energy sector, the Ministry of New and Renewable Energy had recently organized RE-Invest 2015. The conference concluded with 2.66 lakh MW commitment of green energy. During the conference, 15 private sector companies, 14 banks and financial institutions and 8 gave their Green Energy Commitments to the Government of India.
The RE sector holds tremendous potential for foreign investment. ¨The key challenge for India is to grow at 9-10% per annum for three decades or more, to be able to create jobs for a young population. The second challenge is - India is urbanising rapidly. These challenges of growth can only be met if the manufacturing sector grows at 13-14% per annum. India has largely grown through services. You cant grow without energy and it is important to understand that, in Indias case, you cannot grow without renewable energy.¨ said Amitabh Kant, Secretary, Department of Industrial Policy & Promotion (DIPP) at a session of RE-INVEST 2015 titled Make In India - Renewable Energy Focus.
According to Ministry of Power, the country boast of 188 Nos. of hydro stations with total installed capacity of 40798.76 MW including 9 Pumped Storage Schemes (PSS) with installed capacity of 4785.6 MW as on 30/11/2014. At the end of 11th Plan, hydro power capacity in the country was 38990 MW. During the 12th Plan period, 10,897 MW hydro capacity addition is planned. The total hydro capacity in the country at the end of 12th Plan is likely to be 49887 MW. The Government has taken a number of initiatives to boost hydro power development and hydro-power projects in order to meet the countrys power requirements which include policy initiatives like National Electricity Policy, Hydro Power Policy, National Rehabilitation & Resettlement Policies, National Tariff Policy etc. except setting up of a hydro-development fund.
Details of the Central Financial Assistance (CFA) provided during last three years to set up grid-connected biomass power/bagasse cogeneration projects in Gujarat, Haryana, Karnataka, Maharashtra, Rajasthan, Tamil Nadu and Uttar Pradesh are as follows:
The promoters/project developer has to ensure supply of biomass for biomass based power generation projects.
STEPS TAKEN TO BOOST SOLAR POWER GENERATION IN THE COUNTRY
The Government has approved Advanced Ultra Super Critical Technology R&D Project at a cost of Rs.1,500 Crore involving BHEL, NTPC and Indira Gandhi Centre for Atomic Research (IGCAR). The aim is to improve higher efficiency, reduce carbon-dioxide emissions and coal consumption for coal based power plants. To develop advanced testing facilities, the Government has accorded investment approval of Rs 996 crore for capital projects of Central Power Research Institute (CPRI). This will support augmentation of High Power Short Circuit Facilities as well as establishment of new test facilities in existing laboratories of CPRI, located at Bengaluru, Hyderabad, Kolkota, Guwahati, Noida and Nagpur. In addition, a new laboratory will also be established in Western Region at Nashik.
POWER SECTOR REFORMS
POSOCO currently operates the National Load Despatch Centre (NLDC) and Regional Load Despatch Centres (RLDCs). The government has decided to set up Power System Operation Corporation (POSOCO) as an Independent Government Company under Ministry of Power. POSOCO is designated as the nodal agency for initiating major reforms in the power sector such as the Renewable Energy Certificate (REC) Mechanism, transmission pricing, short term open access in transmission, Deviation Settlement Mechanism, Power System Development Fund (PSDF), etc.
PROJECT EVALUATION AND MONITORING
No evaluation/concurrence of Central Electricity Authority (CEA) is required for setting up Thermal and Gas Power Projects in India as per the Electricity Act, 2003. In respect of Hydro Power Projects, DPRs are evaluated by CEA. During the last three years and current year, CEA evaluated DP Rs of 54 Hydro Power Projects aggregating to installed capacity of 28,007 Mega Watt (MW). Out of these, CEA has accorded concurrence to 23 DPRs aggregating to installed capacity of 13,513 MW. To ensure timely completion of ongoing projects, regular monitoring is done by the CEA as per the Electricity Act, 2003 through frequent site visits, and interaction with developers and equipment suppliers.
ENERGY EFFICIENCY MEASURES
Piyush Goyal, Minister of state for Power, Coal & New and Renewable Energy (Independent Charge) has recently inform the lower house about the energy efficiency initiatives taken by the Government. Around 144 thermal power plants/stations are identified for improving energy efficiency thereby reducing fuel consumption under Perform, Achieve and Trade (PAT) Scheme of the Ministry of Power (MoP). The energy savings of 3.211 million ton of oil equivalent/year is targeted to be achieved by these thermal power plants by the end of first PAT cycle which is from 1.4.2012 to 31.3.2015. Some of these measures include:
The potential of power industry is immense. The big players like NTPC, Tata Power, Reliance Power, Adani, BHEL are going ahead with their plans to increase their overall installed capacity and grab larger share of the demand pie. The Government needs to address all the impediments in the growth path of the power sector. Despite the Government of India efforts to go in for Solar Power in a big way, the domestic coal is likely to remain the most favoured fuel for power generation.
Emphasis should be laid on Super Critical plants and clean coal technologies. In case of gap in supply of coal, the import of coal on moderate scale for coastal locations should be encouraged. The future strategy should be to focus on increasing gas production and rationalisation of gas prices. This can help in increasing the gas based power generation. Simultaneously, the gas import should be planned on a long term basis via LNG terminals and Trans-National gas pipeline.India needs to explore the development of its biomass, hydro, wind and solar resources.
Anil Sardana, CEO & MD, Tata Power Company Ltd
Fuel shortage has resulted in increasing non-utilisation of assets that are already built and this would distract new capacity additions thereby targets not being reached. Sudden spike in price & change in law has caused imported coal-based power projects to become economically unviable. On the other hand, the shortage of natural gas in India has stranded gas-based power projects with a combined capacity of around 18,903.5 MW. There is a need to evolve a robust energy security policy for the country so that guidance be given to all State Regulatory commissions to plan bulk supply procurement in line with basket of fuels that meet Indians energy security needs.
Y Srinivas Reddy, Managing Director, Bevcon Wayors Pvt Ltd
Indian power sector is really going through turbulent times. On one side there is wide gap in production Vs consumption leading to shortage of power for utilization. The reasons for this situation can be many but major are:
Ramnath Shenoy, Director, GM - Sales & Engineering, NTN Bearing India Pvt Ltd
The immediate challenge before the industry is to expedite the various projects which were on hold for so long. Now that we have a stable and strong government in place, I expect things to start moving. Coal sector and land acquisition reforms are being done as we speak. At the same time environmental and other issues must be kept in mind.
Sivasubramanian Natarajan Managing Director ThyssenKrupp Industries India Pvt Ltd
The Indian power sector is one of the most diversified in the world. The demand for electricity in the country has been growing at a rapid rate and is expected to grow further in the years to come. The growth in energy demand in India would be the highest among all countries for the next 2 decades according to the 2014 energy outlook report by British oil giant BP. Hence in order to overcome power shortage and meet this increasing demand, there is need for government intervention to arrange infrastructure to handle the increased power requirement. This would include increased focus and investments on infrastructure development and its maintenance and at the same time speed up the process of project clearances. The regulators need to promote technologies that are environment friendly and sustainable with the quality of coal reserve that we have in India.
Brijnandan Mundhra Director Shree N M Electricals Ltd
If India has to become a global super power and target a GDP growth rate of 8-9% in the coming years, the economy needs the support of its power sector to cater to the increasing power demand.
This is perhaps in the nutshell the biggest opportunity available to all the people linked with the power sector in India. Some of the challenges which are impeding investments are:
Ashok Jain Director & Strategist Terracon Ecotech Pvt Ltd
Key challenge for the power sector in India from environmental point of view is to balance the environmental concerns with that of increased generation and distribution of power. This requires major shift in the attitude, commitment and approach towards environmental compliances and community welfare. In fact, power companies need to think beyond mere compliances to be responsible power producer and distributor. There is also major change required in the government attitude and policies that encourages and rewards responsible power players and creating a level playing field for them.