Powering India’s Growth: Exploring the Future of the Power Sector

Power plays a crucial role in the infrastructure of any nation, as it directly impacts economic growth and the well-being of its people. In India, the development of a robust power infrastructure is vital for sustained progress. The main objective of India’s power industry is to ensure that affordable and reliable electricity is accessible to all. The Ministry of Power has been working tirelessly to transform the country from facing power shortages to having surplus power. They have achieved this by establishing a national grid, strengthening the distribution network, and ensuring universal household electrification.

India’s power sector is incredibly diverse, with various sources of power generation. These sources include conventional options like coal, natural gas, and nuclear power, as well as non-conventional sources like wind, solar, and even agricultural and domestic waste. The demand for electricity in the country has been increasing rapidly and is expected to continue rising in the future. To meet this growing demand, there is a need for significant expansion in the installed generating capacity.

As of 2021, India holds an impressive position in terms of wind power capacity, solar power capacity, and renewable power installed capacity, ranking fourth globally. Moreover, India stands out among the G20 nations as the only country on track to achieve the targets set under the Paris Agreement. This highlights India’s commitment to sustainable and clean energy solutions for a better future.

Market Size

India’s electricity sector continues to make significant strides in both production and consumption. As of January 31, 2024, the country boasts an impressive installed power capacity of 429.96 GW, making it the third-largest producer and consumer of electricity globally.

However, what’s even more remarkable is India’s commitment to renewable energy. As of the same date, the country’s installed renewable energy capacity, including hydro, reached 182.05 GW, accounting for a substantial 42.3% of the overall installed power capacity. This demonstrates India’s dedication to sustainable and clean energy sources.

Breaking down the renewable energy sources, solar energy takes the lead with a contribution of 72.31 GW, followed closely by wind power at 44.95 GW. Biomass, small hydropower, waste to energy, and hydropower also play significant roles, contributing 10.26 GW, 4.99 GW, 0.58 GW, and 46.93 GW, respectively.

In terms of growth, the non-hydro renewable energy capacity witnessed an increase from 14.07 GW in FY22 to 15.27 GW in FY23, showcasing a positive trend in the adoption of renewable energy sources.

Furthermore, India’s power generation sector experienced its highest growth rate in over three decades during FY23. Power generation surged by 6.80% to reach an impressive 1,452.43 billion kilowatt-hours (kWh) as of January 2024. This surge in power generation aligns with the country’s increasing power consumption, which stood at 1,503.65 BU in April 2023, according to data from the Ministry of Power.

Highlighting the demand for electricity, the peak power demand in India reached a staggering 243.27 GW in January 2024, emphasizing the need for a robust and reliable power infrastructure.

While coal plants continue to play a significant role in India’s power generation, there has been a notable improvement in their performance. The plants registered a Plant Load Factor (PLF) of 73.7% for the first nine months of FY23, compared to 68.5% in the same period of FY22.

Looking ahead, the thermal power plant load is projected to improve by 63% in FY24, driven by strong demand growth and limited capacity addition in the sector. This forecast indicates a positive outlook for India’s power sector and its ability to meet the growing energy needs of the nation while embracing cleaner and more sustainable energy sources.

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Developments and Investments

Total foreign direct investment (FDI) inflows in the power sector amounted to US$ 18.17 billion from April 2000 to December 2023, representing 2.73% of the total FDI inflow in India.

• The cumulative FDI inflow in the power sector reached US$ 18.17 billion between April 2000 and December 2023.
• From April 2020 to September 2023, the renewable energy sector in India attracted US$ 6.1 billion in FDI equity investment.
• Over the past three fiscal years and the ongoing fiscal year until September 2023, India received a cumulative amount of US$ 3.8 billion in FDI in the solar energy sector.
• India ranked fourth globally in significant investments in renewable energy, allocating US$ 77.7 billion between 2015 and 2022.
• In FY24 (until November 2023), power generation in India reached 1,176.13 BU.
• India’s electricity generation from renewable and non-renewable sources for FY21, FY22, and FY23 was 1,373.08 BU, 1,484.36 BU, and 1,617.72 BU, respectively.
• The power generation industry in India will need a total investment of Rs. 33 lakh crore (US$ 400 billion) and 3.78 million power professionals by 2032 to meet the increasing energy demands, according to the National Electricity Plan 2022-32.
• By 2031, the current installed nuclear power capacity is projected to increase from 7,480 MW to 22,480 MW due to the completion of ongoing projects and sanctioned ones.
• In August 2023, NTPC announced plans to set up a hydrogen fuelling station, and solar plant, and provide five fuel cell buses for operation in Leh to achieve carbon neutrality in Ladakh.
• In August 2023, NEEPCO, a 100% subsidiary of NTPC, took a significant step towards sustainable energy development by signing an MoA with the Government of Arunachal Pradesh.
• In July 2023, NTPC’s Group installed capacity reached 73,024 MW.
• In July 2023, PFC signed several MoUs.

Government Policies and Incentives

The Indian government has recognized the importance of the power sector in driving industrial growth. They have implemented several initiatives to boost the Indian power sector, including:

1. The PM-Surya Ghar: Muft Bijli Yojana, which has been approved by the Union Cabinet. This initiative has a budget of Rs. 75,021 crore (US$ 9 billion) and aims to install rooftop solar systems. It also provides complimentary electricity of up to 300 units per month to one crore households.
2. In the 2024 Budget, the government has allocated funds that are 50% higher for power sector initiatives. These funds will be used for green hydrogen, solar power, and green-energy corridors, in line with the renewable energy target for 2030.
3. The government has allocated Rs. 7,327 crore (US$ 885 million) in the Union Budget 2022-23 for the solar power sector, including grid, off-grid, and PM-KUSUM projects.
4. In the Union Budget 2022-23, there are plans to issue sovereign green bonds and grant infrastructure status to energy storage systems, such as grid-scale battery systems.
5. The Green Energy Corridor projects have been initiated to facilitate the evacuation of renewable power and reshape the grid for future needs. As of October 2022, 8651 ckm of intra-state transmission lines have been constructed, and 19,558 MVA intra-state substations have been charged.
6. To encourage rooftop solar (RTS) adoption across the country, the Ministry of New and Renewable Energy has developed a National Portal. This portal allows residential consumers from any part of the country to apply for rooftop solar without waiting for Discom to finalize tenders and empanel vendors. Since its launch on July 30, 2022, the portal has received applications for a total of 117 MW solar capacity, and feasibility has been granted for more than 18 MW projects.
7. The Production Linked Incentive Scheme (Tranche II) on the ‘National Programme on High-Efficiency Solar PV Modules’ has been approved and launched with an outlay of Rs. 19,500 crore (US$ 2.47 billion). This scheme aims to promote the production of high-efficiency solar PV modules.

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