Number theory: Management of peak power demand will test India’s renewable push

A look at how government’s efforts to bring down power demand during peak hours is a recognition of a crucial structural challenge facing India’s power sector.

In June, the government announced that power tariffs would be linked to the time of consumption in the country. “Under the Time of Day (ToD) system, tariff during solar hours (duration of eight hours in a day as specified by the State Electricity Regulatory Commission) of the day would be 10%-20% less than the normal tariff, and the tariff during peak hours, 10-20% higher. “ToD tariff will be applicable for commercial and industrial consumers having maximum demand of 10 KW and above, from 1st April, 2024 and for all other consumers except agricultural consumers, latest from 1st April, 2025”, the power ministry said in a release. An HT analysis of relevant statistics shows that the government’s efforts to bring down power demand during peak hours is a recognition of a crucial structural challenge facing India’s power sector as income levels rise and the share of renewables in power production increases. Here are three charts which explain this in detail.

Rising income levels and the changing share of renewables in power production are transforming India's power patterns.

The charts that matter

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  India’s peak power demand has increased at a faster rate than overall power demand

  That India’s power consumption has increased with rising incomes is a no-brainer. However, what needs to be underlined is the fact that the peak power demand has increased at a faster rate than overall power demand in the recent past. Data from Centre for Monitoring Indian Economy (CMIE) shows this clearly. In 2009-10, India’s overall power demand and peak power demand was 1.73 times and 1.64 times that in 1999-2000, the earliest year for which data is available in the CMIE database. These numbers were 1.29 and 1.24 between 2009-10 and 2014-15 and became 1.41 and 1.46 between 2014-15 and 2022-23, the latest year for which this data is available.
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  This has happened at a time when domestic demand has overtaken commercial demand for power

  What explains the recent acceleration in peak demand? While there is no sector-wise breakup of peak demand, data on connected load by sector can give us an idea into what is happening. The Central Electricity Authority (CEA) gives data on connected load by sector, which is just the sum of the power rating of each electrical equipment. While a household or factory is unlikely to use all their electrical equipment at once even at the time of peak demand, connected load can tell us which sector has the potential to increase peak demand the most. This shows that domestic consumers are now the leaders in connected load, accounting for over 40% of it since 2016-17. This trend started in the last decade. Domestic consumers have consistently surpassed commercial and industrial users combined consistently since 2008-09. None of this should be surprising however. The growth in connected load of domestic consumers has been higher than the growth of commercial and industrial users (combined) regularly since the 1980s. With developments such as rising ownership of air-conditioners, household peak demand is expected to maintain its momentum.
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  And meeting peaks may become less feasible with more renewables in the mix

  As part of its green transition strategy, India has been increasing the share of renewables in its power production basket. This share has increased from 5.6% in 2015-16 to 12.5% in 2022-23. To be sure, the share of non-thermal power (this includes large hydropower and nuclear power apart from renewable power) has also increased from 19.1% in 2015-16 to 25.3% in 2022-23, which the government aims to increase to 50% by 2030. However, nuclear sources and large hydropower projects are not considered renewable sources generally because the former involves mining a finite mineral and the latter adversely affects the environment by restricting water flow, submerging forests, and thus becoming a source of greenhouse gas emissions. While renewable power generation does not have such disadvantages, it suffers from a crucial handicap as far as meeting peak demand is concerned. Power production from sources such as solar energy cannot be scheduled to meet peak demand outside daylight timings. Doing this will require either better storage of power generated during off-peak hours or efficient sharing of power between grids. Both of these strategies will require significant investment in India’s power grid infrastructure. By increasing tariff rates during peak demand hours, the government might be hoping to achieve two desired objectives: reduce peak demand and gather much needed finances for boosting India’s power grid infrastructure. Whether or not the policy delivers on its promise, especially given the track record of previous reforms in the power sector, remains to be seen.