How to shock-proof India’s power sector
- In October last year, India witnessed significant power shortages stemming from the low inventory of coal at the power plants.
- After seven months, we are back to square one as reports of coal-shortage induced power outages across states continue to pour in.
- On the one hand, there is a rush towards buying expensive coal and power on the exchanges.
Impact of Russo-Ukrainian Conflict
- Russia-Ukraine conflict has sent coal prices touching historical highs.
- The cost of imported coal in India is expected to be 35%higher in the fiscal year 2022-23 compared to the past year.
- Subsequently, power producers paid a premium of up to 300% in March to secure coal supplies in the domestic spot market.
Increased Energy Demands
- Even as coal stocks available with state thermal power plants fell, India also witnessed a sudden rise in energy demand in March — the hottest in its recorded history.
- This pushed peak power demand to 199 GW in the middle of March.
Measures by Government against this:
- Giving directions to ensure maximum production of coal at captive mines,
- Rationing of coal to non-power sectors
- A price cap of Rs 12 per unit on electricity traded on exchanges.
- But it is more required to enhance the sector’s resilience to such disruptions from exogenous factors.
Steps to be taken
- Creating an enabling ecosystem
- To ensure power plants work efficiently.
- India has about 200 GW of coal-based generation capacity which accounts for nearly 70% of the total electricity generated in the country.
- CEEW assessment - a disproportionate share of generation comes from older inefficient plants
- Newer and efficient ones remain idle for want of favourable coal supply contracts or power purchase agreements.
- Enabling discoms to undertake smart assessment and management of demand
- India has advanced tools for medium- and short-term demand forecasting.
- However, few discoms have embraced these to inform their procurement decisions.
- More than 90% of power is procured through long-term contracts, so, discoms have little incentive to dynamically assess and manage demand.
- Introducing time-of-day pricing and promoting efficient consumption behaviour would help shave peak demand and avoid panic buying in the market.
- Empowering electricity regulators to help bring down discom losses.
Despite two decades of sectoral reforms, the aggregate losses of discoms stand at 21 % (2019-20).
- Given the country’s development aspirations, India’s power demand is set to rise substantially and become more variable.
- Increasing climatic and geopolitical uncertainties underscore the need to become more efficient in the way we generate, distribute and consume energy.
- We need to act now for the long-term resilience of India’s power sector.
- Russian energy exports from India
Q. Discuss the problems faced by the power sector in India. Suggest some measures to tackle these problems.