What should India do about the Impending Power Shortage
- Jan 16, 2023 6:42 am GMT
Last year, I wrote how India’ missed RE targets was a direct cause of last year’s power/energy shortage. Unfortunately, this year’s lacklustre capacity addition means India will be even more short in 2023.
How Short Electricity will we be in 2023?
India is a growing economy and electricty consumption per capita iis still at a third the global average. While we should also be investing in energy efficiency, it is crucial for development that India continue to expand its electricity production. In 2022 there was an energy shortfall, particularly in April. Though most people reading this article live in a major metropolitan areas and have power back-up, energy shortfalls have a significant impact on development, particularly for SMEs and in rural areas.
Since April 2022 there was just 120 MW of new hydro power and actually net retirments of coal generation of 356 MW.There was an addition of just 14,000 MW of solar and 1900 MW of wind in 2022. However, to meet India’s electricity requirements, a minimum of 56,000 MW of solar and wind would have had to been installed. A comparison of the expected electricity consumption growth vs. newly installed capacity is shown in Figure 1.
In these scenarios, I am ignoring all the generation gap from October-February (there is some shortfall), as the shortfall tends to be minor and is likely linked to specific DISCOM generation issues. If electricity energy demand grows at historical rates (5.2%), the additional requirement across these 6 months will be ~48,000 GWh. In November, demand grew 14% y-o-y and in December, demand grew 11%. This is likely confounded by covid and industrial users with captive generation opting for grid supply (due to lower prices), but a 10% y-o-y demand growth certainly seems plausible. In this scenario, the new demand across these 6 months will be ~92,000 GWh. In contrast, the ~16,000 GW of new RE installations will likely only produce 14,000 GWh across these 6 months (though we can hope for a good wind year, as I am basing this estimate on the 2022 wind production). I am further estimating that the government’s herculean efforts to boost fossil fuel production could increase production by 2% (another 14,000 GWh), on top of compensating for the net retirements and the 6000 GWh shortfall across these 6 months in 2022 (the section below outlines why this is optimistic).
Even in this best case scenario, India will be short about 3000 GWh/month, a little bit worse than April of last year.
Fossil Fuels Are Expensive and Unreliable
Though some were misled into the opposite conclusion, 2022 really emphasized how unrealiable coal is. Despite an official installed capacity of ~205 GW of coal, they have never been able to deliver more than ~150 GW (~73%, including losses due to auxiliary loads). Last June, due to monsoon, coal was able to only deliver a maximum of 145 GW at peak power demand.
Coal is unreliable for a number of reasons. In addition to fuel supply shortages due to logistical constraints, it can also be de-rated, suffer unplanned equipment breakdown, suffer from variable quality of coal supply, shut down due to statutory reasons, etc. Though top-performing plants might have a higher availability, All-India coal availability is about 70-75%, vs 90-95% for a well-designed RE+storage system. In April 2022, when power demand was at its highest, the unavailability of fuel was responsible for only 2.5 GW more outages than normal (CEEW data). Yes fixing coal transport issues (including rail-ship-rail) would have improved production by about 1%, but not enough to avoid shortages.
For example, ~12.5 GW (~6% of the fleet) was out due to issues with the boiler or boiler auxiliaries (CEEW). Some of these can be avoided by better planning/preventative maintenance, but boilers are just inherently complex machines with a lot of heat stresses and uncertainties. So if an RE + storage system is designed for 94% annual availability, this “unreliability” is comparable to boiler outages in coal plants alone.
Furthermore, the governments tremendous efforts to boost coal consumption is extremely expensive and damaging to the local economy. Imported coal will cost about Rs. 9.7/kWh (let’s say 8-10/kWh) while importing gas will cost about Rs. 20.4/kWh (let’s say 18-22/kWh). These two measures alone will cost Indians tens of thousands of Crores in 2023.
The government is also planning to transporting coal via rail-ship-rail, which will cost Rs 4.5-6.0/kWh (about a 10% premium to existing coal coasts for non-pithead plants). Furthermore, this takes precious rail, rake, port and ship capacity away from other potential users such as transporting agricultural goods or people, further damaging India’s development. This is on top of coal already taking away scarce water and agricultural land required for development.
A lot of people have touted new coal as the answer to India’s energy needs. However, new coal plants have tended to cost Rs. 5/kWh or higher, much costlier than new RE + storage. Unit additions to brownfield mine mouth plants could cost as low as Rs 3.2-4/kWh, but will likely not come online until 2027 at the earliest. By this time, RE + storage economics will have improved their edge over coal even more, leaving scarce capital stranded in uneconomic coal plants, and even more stranded if they are over budget as recent coal plants have tended to be.
RE+storage is the answer, but needs to be massively ramped up and expedited
Thankfully, after a hiatus of about 6 years, the government is finally considering to start building wind again (8000 MW/year), which last year averaged Rs. 2.8/kWh. Utility-scale solar was ~11 GW last year, and recent streamlining of the process should finally support a rooftop solar market in India. Similarly, the introduction of resource adequacy planning is a fantastic step and should be stringently enforced to the extent possible.
To meet India’s development needs, avoid power outages in 2023 and 2024, and make power more affordable for consumers and DISCOMs, it is imperative RE and storage be ramped up immediately, to at least 45-50 GW/year of wind + solar and 5-10 GW/year of energy storage.
I have previously written about the number of ways RE + storage are disadvantaged, though will re-iterate a few options now:
- Equalize GST rates so wind, solar and energy storage drop from 12%/18% to 8%, and boost coal’s GST to 8%
- Direct CPSU’s (eg. NTPC) to immediately build 10 GW of solar, 5 GW of wind and 5 GW of energy storage, and increase this amount annually. Bar CPSU’s from crowding out private investment by bidding on SECI/state tenders/C&I and instead sell directly to states/the market
- In coordination with NIWE, procure/convert land for use in wind parks, and auction off to developers. Apply the same principles of land acquisition/conversion as has been historically applied to coal
- Immediately release the GIB “potential” areas for solar and wind development (unlocking ~3000 GW of land for RE), while protecting the “priority” areas and investing in GIB conservation
- Regularize and boost SECI’s RE + storage tendering to better match the required demand growth and set a price cap at APPC, rather than the arbitrary limit of 3% above the L1 bid. This has already been proposed for wind and can be extended to solar + storage as well. Ideally at least 20 GW of solar, 10 GW of wind and 5 GW of storage annually can be auctioned in this way and pooled by SECI as required.
There have been some fantastic reforms over the past few years to create the right framework for RE investment and deployment, and there is now no shortage of either finance or capable private sector developers. It is too late to avoid severe power outages in Spring 2023, but if action is taken quickly, outages in 2024 and beyond can be mitigated. The average power consumer in the country cannot wait until 2027 or 2030. Development needs to be prioritized which means massively scaling up RE deployment starting in 2023.
Get Published - Build a Following
The Energy Central Power Industry Network is based on one core idea - power industry professionals helping each other and advancing the industry by sharing and learning from each other.
If you have an experience or insight to share or have learned something from a conference or seminar, your peers and colleagues on Energy Central want to hear about it. It's also easy to share a link to an article you've liked or an industry resource that you think would be helpful.