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Power Sector Analysis Report 

[Key Points | Financial Year '19 | Prospects | Sector Do's and dont's]

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  • With a generation of 1,561 terawatt-hour (TWh), India is the third largest producer and the third largest consumer of electricity in the world. Electricity production reached 360.5 GW as of July 2019.
  • India ranked sixth in list of countries to make most investment in clean energy at US$ 90 billion. Renewable energy is fast emerging as a major source of power in India.
  • Power is one of the most critical components of infrastructure crucial for the economic growth and welfare of nations. The existence and development of adequate infrastructure is essential for sustained growth of the Indian economy.
  • Indian power sector is undergoing a significant change that has redefined the industry outlook. Sustained economic growth continues to drive electricity demand in India. The Indian government’s focus on attaining ‘Power for all’ has accelerated capacity addition in the country.
  • India’s power sector is one of the most diversified in the world. Sources of power generation range from conventional sources such as coal, lignite, natural gas, oil, hydro and nuclear power to viable non-conventional sources such as wind, solar, and agricultural and domestic waste.
  • Coal drawal will be permitted against valid Long Term PPAs and to be concluded Medium Term PPAs. The sector also witnessed emphasis on transparency through various web/mobile applications and digitization of competitive bidding through MSTC platform for short and medium term power procurement.
  • On the policy and regulatory front, the Government and Regulatory bodies continued the reform process for improvement in efficiency in various aspects of power supply. Government of India launched “Pradhan Mantri Sahaj Bijli Har Ghar Yojana (SAUBHAGYA)” to achieve universal household electrification in the country. Under UDAY scheme for financial and operational improvement of Discoms, bonds have been issued by various States for a total amount of Rs 2,321.6 billion. Ministry of New and Renewable Energy (MNRE) launched competitive bidding for procurement of power from wind projects and so far, bidding for more than 6,000 MW has taken place in four phases.

How to Research the Power Sector (Key Points)

  • Supply
  • The total installed capacity in the country as on 31 October 2019 was 365 GW. Hence, sufficient capacity is being built to meet the demand requirements.
  • Demand
  • The long-term average demand growth rate is expected to remain in the higher single-digit growth levels given the much lower per capita power consumption in India as compared to the global average. Not only this, the poor financial state of SEBs could possibly lead to lower demand for power going ahead.
  • Barriers to entry
  • Barriers to entry are high, especially in the transmission and distribution segments, which are largely state monopolies. Also, entering the power generation business requires heavy investment initially. The other barriers are fuel linkages, payment guarantees from state governments that buy power and retail distribution license.
  • Bargaining power of suppliers
  • Not very high since the tariff structure is mainly regulated.
  • Competition
  • Getting intense, but despite there being enough room for many players, shortage of inputs such as and natural gas and regulatory hurdles has dissuaded new entrants.

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Financial Year '19

  • With power being one of the most critical infrastructure components for economic growth, India’s electricity demand has increased significantly over the past decade, with peak demand growing by 61% from 110 GW in FY 2008-09 to 177 GW in FY 2018-19. India’s rank jumped to 24 in 2018 from 137 in 2014 on the World Bank’s Ease of Doing Business – ‘Getting Electricity’.
  • In FY18-19, generation capacity increased by about 3.5%, while electricity supplied increased 5.2%, largely driven by an improvement in PLF due to improved coal availability.
  • As of September 2019, total thermal installed capacity in the country stood at 228.6 GW, while renewable, hydro and nuclear energy installed capacity totaled to 81.3 GW, 46.1 GW and 6.8 GW, respectively.
  • As per Economic Survey 2018-19, additional investments in renewable plants up to year 2022 would be about US$ 80 billion and an investment of around US$ 250 billion for the period 2023-2030.
  • Under the Union Budget 2019-20, the Government of India has allocated Rs 50 million to increase capacity of Green Energy Corridor Project along with Rs 9.2 billion for wind and Rs 30.1 billion for solar power projects.
  • Total FDI inflows in the power sector reached US$ 14.5 billion during April 2000 to June 2019, accounting for 3.5% of total FDI inflows in India.

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  • The Government of India has targeted to achieve 175 GW capacity by 2022, comprising of 100 GW Solar, 60 GW Wind, 5 GW Small Hydro and 10 GW Bio-power (including biomass). Several measures in the renewable energy sector such as (i) Guidelines for Tariff Based Competitive Bidding Process for procurement of power from grid connected solar PV and wind power projects, (ii) Solar-wind hybrid policy are intended to create investment opportunities in the sector.
  • With many bilateral nuclear agreements in place, India is expected to become a major hub for manufacturing nuclear reactors and associated components. Foreign participation in the development and financing of generation and transmission assets, engineering services, equipment supply and technology collaboration in nuclear and clean coal technologies is also expected to increase.
  • India’s power sector is one of the most diversified in the world. Sources of power generation range from conventional sources such as coal, lignite, natural gas, oil, hydro and nuclear power to viable non-conventional sources such as wind, solar, and agricultural and domestic waste. Electricity demand in the country has increased rapidly and is expected to rise further in the years to come.
  • In order to meet the increasing demand for electricity in the country, massive addition to the installed generating capacity is required.
  • Going forward, it is expected that the demand will grow to cater to the continued economic growth of the country, creating more volume in the power market with strengthening of financials of Discoms.
  • The demand is also likely to come from shift of usage from fuel to electricity in transport and agriculture sector in particular from distributed generation with solar installations.

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Related Links for Power Sector
Quarterly Results | Sector Quote | Over The Years

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