The successful private sector bidding to construct two coal-based power plants at Sasan in Madhya Pradesh and Mundra in Gujarat has created some excitement in an otherwise beleaguered electricity sector in the country. These two plants are a part of the government’s plan to construct nine 4,000 MW each ultra mega power projects (UMPPs) with public-private partnership.
Growth of power is critically linked to the growth of a nation. While India’s economy is growing at 9 per cent per year, around 56 per cent rural households and 12 per cent urban households still do not have access to electricity. And the peak power shortage is around 12.5 per cent; all these are enough to short-circuit India’s quest to become a global player.
The government has set an ambitious target: Doubling the generation capacity and power to all by 2102. The investment required for new generation, transmission, distribution and rural electrification is pegged at $100 billion (Rs 4,50,000 crore). But given its past performance, achieving such a target still remains a million watt question.
“The UMPPs will definitely help the government to reduce the demand and supply gap and cut power tariffs in the long run. Competitive bidding has removed doubts over Indian industry’s ability to compete effectively,” says Shahid Hasan, associate director, The Energy Research Institute.
To facilitate private sector participation, the government passed the Electricity Act in the year 2003. It aimed to give private sector access to the state electricity board transmission grids and allow them to sell directly to large industrial consumers.
But the Act failed to adequately empower the state electricity regulatory commissions. Result: many provisions of the Act have yet to see the light of the day and only a few states are using the opportunity to reform their power utilities.
“The Act provides the enabling framework, but implementation of key provisions lies with the respective state governments. The progress here is uneven and incomplete,” says Kameswara Rao, leader power practice, PricewaterhouseCoopers. He adds that in a capital-intensive sector like power, more time, a stable policy and regulatory framework are necessary to attract new players and investments.
Transmission and distribution
For every 100 units of power generated, 60 units are paid for by consumers. The rest is lost in weak transmission and distribution (T&D). Power theft in the year 2005, according to the Planning Commission, was 20 per cent of the total power generated in the country.
Technical loss is also around 20 per cent because of carrying power across huge distances at low voltage. Ideally, power should be carried at high voltage and transformers should be deployed along the way for all distribution centers. The problem is severe in the eastern region, where surplus capacity is idling due to lack of absorption network and evacuation facilities.
This requires adequate investment. Countrywide, 80 per cent of the power investment is in generation and the rest for distribution. Taking a note of this imbalance, the Planning Commission says low investment in distribution is akin to “building a superstructure without the foundation”.
To make the Indian power sector viable, the Central Electricity Authority estimates that T&D losses should be below 10 per cent. And for every one per cent reduction in T&D loss, International Energy Agency estimates that India can save an additional capacity of 800 MW, enough to power a state like Himachal Pradesh.
Renovation and modernisation
One of the cheaper ways to increase power availability is to improve the efficiencies of the existing plants. It is estimated that about 30,000 MW of thermal capacity needs renovation, which can generate 5,000 MW of additional capacity. Though the government has introduced policy guidelines to encourage private participation for undertaking modernisation operations, an ICRA report says not much has been observed.
Secondly, a healthy level of plant load factor (PLF) — measure of performance of power station – can result in higher level of generation. In 1997 this was around 60 per cent, whereas ideally it should have been around 80 per cent. Since then though some central and private plants have achieved around 72 per cent, state generators have dipped below 50 per cent. This loss is significant, considering that every one per cent increase in PLF can result in additional capacity addition of around 1300 MW.
Energy efficiency also means reducing the usage of coal for power. The UMPPs has drawn a lot of attention to the inefficiencies in the thermal plants and increasing dependency on coal. The government should now focus on harnessing renewable resources to fuel India’s burgeoning energy needs.