The Indian power sector has seen significant developments over the past year, marked by notable progress and strategic milestones across the value chain. Peak power demand has been effectively managed, renewable energy capacity has increased and major policy initiatives have been introduced. Despite these achievements, several challenges remain, including infrastructure constraints, supply chain disruptions and inadequate storage solutions. As the energy landscape continues to evolve, addressing the remaining hurdles will be crucial for ensuring a sustainable and efficient power sector. Industry experts share their views…
What has been the progress in the power sector over the past year? What have been the major milestones?
Pankaj Batra
Peak demand reached 250 GW, a 3 per cent increase from 243 GW in 2023, which is lower than last year’s 12 per cent growth. The government ensured coal availability through increased mining and transportation, with thermal plants starting the year with 50.5 million tonnes (mt) of coal, a 37 per cent year-on-year increase. The India Meteorological Department predicted a good monsoon, likely reducing power needs for irrigation. Imported coal- and gas-based plants were directed to operate at full capacity until September and June 2024 respectively. Despite heat waves, there was no electricity shortage, and day-ahead market prices dropped to Rs 4.90 per unit compared to Rs 5.20 per unit last year.
Renewable generation increased by 5 per cent between April 2024 and June 2024, with solar up by 18 per cent and wind down by 3 per cent. Meanwhile, solar capacity grew by 15 GW and wind by 3 GW. The Ministry of New and Renewable Energy set a target of 9 GW for renewable plus storage bids in 2023, yielding competitive results. Solar Energy Corporation of India Limited’s March 2024 tender for solar photovoltaic cells and battery storage registered low bids, highlighting the cost-effectiveness of renewable energy compared to coal. The government continues to promote energy storage and offshore wind, with significant tenders and policy initiatives under way.
Offshore wind projects are being developed in Gujarat and Tamil Nadu, with a 4 GW tender launched in February 2024. The government also approved a viability gap funding (VGF) scheme for offshore wind, with a total outlay of Rs 74.53 billion. The PM Surya Ghar Muft Bijli Yojana, launched in February 2024, aims to increase rooftop solar PV adoption, benefiting 10 million households and resulting in savings of Rs 750 billion annually.
The National Electricity Plan 2023 projects significant energy storage capacity requirements by 2031-32, driven by renewable energy growth. The Ministry of Power’s (MoP) 2023 framework and pumped storage policy aim to boost energy storage installations. Nuclear power is also being promoted, with NTPC Limited and Nuclear Power Corporation of India Limited collaborating on new projects and the development of a prototype fast breeder reactor at Kalpakkam, Tamil Nadu.
The Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (EVs) scheme continues to encourage EV adoption, with increasing charging station usage. Transmission and distribution losses decreased from 34 per cent in 2001-02 to 17.68 per cent in 2022-23, supported by the Revamped Distribution Sector Scheme (RDSS). Cybersecurity in the power sector is also being strengthened, with new regulations and guidelines issued by the Central Electricity Authority (CEA) in 2024.
Sachin Gupta
The operational performance of the power sector has been robust during 2023-24, with a growth of around 7 per cent in generation and offtake. This growth has continued through the first four months of 2024-25. In 2023-24, the peak shortage was 1.4 per cent and the energy shortage was 0.3 per cent, compared to 4 per cent and 0.5 per cent, respectively, during the corresponding period last year.
During 2023-24, over 5 GW of thermal capacity was added. Coal allocation to the thermal power sector remained satisfactory, with despatches to the thermal sector (including imports) growing by 10 per cent. This resulted in relatively healthy coal stocks at thermal power plants, exceeding 50 mt. There have been continual coal allocations through various Shakti schemes (five auctions with a total volume commitment of over 24 mt and increased production by captive coal mines. The allocation of coal mines through the auction route also continued at a steady pace.
In terms of renewable energy capacity, India added nearly 18 GW, with the solar sector accounting for the majority. The government’s reaffirmation of the 500 GW target by 2030 bodes well for the growth of the country’s renewable energy sector. The Renewable Energy Investment Authority’s mandate to auction 50 GW lays out a road map for achieving this target.
The transmission sector also saw progress, with the addition of 14,203 ckt km of transmission capacity and a transformation capacity of 70,708 MVA.
Key reform measures initiated in the past year include:
- Waiver of interstate transmission system (ISTS) charges for offshore wind projects to promote offshore wind generation.
- Waiver of ISTS charges for green hydrogen production to promote green hydrogen initiatives.
- The issuance of the Modified Revised Biomass Policy on June 16, 2023, which included the price benchmarking of biomass pellets and the procurement process for these pellets.
- Notification of the Green Energy Open Access Rules by the majority of the states.
- VGF of Rs 37.6 billion as a capital subsidy to create battery energy storage systems (BESSs) of 4,000 MWh by 2027-28.
- Notification of the Energy Conservation Act, 2001, mandating the minimum share of non-fossil energy consumption for designated consumers, effective from April 1, 2024, to promote the use of renewable energy.
- Implementing additional measures to improve the financial health of discoms by streamlining the process of accounting, reporting, billing and payment of subsidies by states to the discoms.
K. Shanmugha Sundaram and Pankaj Kumar Gupta
India’s power sector has made significant strides, becoming the third largest producer and consumer of electricity globally, with an installed capacity of approximately 448 GW as of July 31, 2024. In 2023-24, coal’s share in the energy mix fell below 50 per cent, while renewables reached around 197 GW, comprising 43.9 per cent of the total installed capacity. Power generation grew by 7.04 per cent year on year, with non-fossil fuels contributing 23.7 per cent of the overall power generation in India. On May 30, 2024, India met a record power demand of 250 GW. NTPC Limited, with 17 per cent of the installed capacity, contributed 24 per cent of the total generation and produced 422 BUs in 2023-24, a 6 per cent increase year-on-year, and added 3,924 MW, bringing its total installed capacity to 76 GW.
NTPC is advancing efforts to clean and green its thermal fleet, including biomass co-firing, installing flue gas desulphurisation (FGD) systems and combustion modifications for NOx reduction, etc. R&D works are also being carried out on carbon capture from flue gases for synthesis of green chemicals and low-carbon fuel/methanol firing in coal and gas plants. Biomass co-firing plays a key role in decarbonising thermal power plants and reducing pollution from stubble burning, with each percentage of co-firing proportionately cutting carbon emissions. To achieve a higher percentage of biomass co-firing without any major modifications in the existing system, the possibility of using torrefied biomass was explored by the Energy Transition and Policy Research Division of NTPC Engineering. NTPC’s milestone achievements include 20 per cent torrefied biomass co-firing at the Tanda thermal plant. NTPC is also leading initiatives in green hydrogen, energy storage, waste-to-energy projects, etc. Further, the MoP is supporting the energy transition through new policies, including the revised biomass policy, green project incentives, the National Green Hydrogen Mission, policy support and financial assistance for renewable energy/storage projects.
What are the key challenges that remain unaddressed?
Pankaj Batra
Despite the government’s commendable policies and schemes for advancing energy transition and ensuring power sector efficiency, some initiatives have yet to fully take off, likely due to insufficient promotion, awareness and stakeholder engagement. For instance, the Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan (PM-KUSUM) scheme, aimed at solarising agricultural pumps, offers significant benefits to farmers and reduces the state government’s subsidy burden.
However, its impact could be greater with better implementation.
Similarly, the RDSS focuses on improving distribution infrastructure, which could drastically reduce technical losses and theft, thereby boosting efficiency. Accelerating its implementation could yield significant savings for the country.
Sachin Gupta
While the payment track record of discoms to central and private sector generating and transmission capacities has improved since the implementation of the late payment surcharge scheme, several key discoms remain financially stressed, with relatively high aggregate technical and commercial loss levels. This raises concerns about their long-term sustainability.
Although energy demand has grown significantly, there is concern regarding the current limited pipeline of thermal capacity under implementation. While the renewable energy pipeline is strong, the lack of sufficient storage capacity means it is unlikely to meet demand during non-solar hours. The government has initiated a plan to add 80 GW of new thermal capacities, but given the long lead times for capacity addition, it will take some time before this issue is resolved.
Acquiring land for renewable energy projects remains challenging, with state-specific issues hindering land availability. The availability of open access is also a concern due to state-specific procedural issues. High cross-subsidy surcharges and additional surcharges further hinder the development of an open power market.
Transmission capacity is constrained, primarily due to right-of-way (RoW) issues and ecological concerns, such as the Great Indian Bustard issue, particularly in states with high solar and wind potential. The lack of adequate manufacturing capacity in the wind sector is another area of concern. This, coupled with other issues, has resulted in an imbalanced solar-to-wind ratio, which affects the country’s ability to ensure firm and despatchable power from the renewable energy sector.
K. Shanmugha Sundaram and Pankaj Kumar Gupta
Supply chain disruptions caused by geopolitical tensions and trade disputes can delay renewable energy projects and increase costs. Infrastructure challenges, such as availability of land for such huge renewable energy capacity addition, and need for significant investment in land, transmission lines and grid integration, can further complicate project timelines.
India’s reliance on imports due to a lack of domestic manufacturing capabilities for solar, wind and green hydrogen technologies can slow the progress in renewable energy capacity growth. Additionally, grid stability is a concern, as the variability of renewable energy sources requires flexible generation solutions to maintain security and reliability.
Developing cost-effective storage solutions is essential for ensuring round-the-clock renewable power supply. Solutions such as pumped storage hydro, BESSs and green hydrogen must be pursued based on resource potential and technology maturity to effectively integrate variable renewable energy.
Coal-based thermal plants need to operate flexibly to accommodate renewable energy integration. This reduces their efficiency, shortens the lifespan of equipment and raises costs, highlighting the need for policies that compensate and incentivise flexible operations. The power sector also faces challenges in securing domestic gas, leading to reliance on more expensive regasified liquefied natural gas.
In response to environmental regulations, NTPC is exploring innovative uses for ash, such as developing products like nano concrete aggregate. Additionally, its efforts to reduce water consumption, including the use of air-cooled condensers (ACCs), sewage treatment plant water and zero liquid discharge solutions have reduced the specific water consumption to 2.68 litre per kWh, below the 3 litres per kWh norm.
How do you rate India’s energy transition so far? What more needs to be done?
Pankaj Batra
India is successfully balancing energy adequacy with carbon reduction efforts. The country is rapidly transitioning to renewable energy, EVs and solar agricultural pumps. As of June 30, 2024, India’s installed renewable energy capacity stands at 195.01 GW, making up 43.71 per cent of the total installed capacity of 446.1 GW.
India has awarded over 8 GW of grid-scale energy storage as of November 2023, with significant growth projected. By 2047, energy storage needs are expected to reach 2,380 GWh due to increased renewable energy adoption.
The push for nuclear energy, including fast breeder reactors and small modular reactors (SMRs), is a step forward. SMRs are a promising solution due to their smaller footprint and cost efficiency, with ongoing projects in Argentina, China and Russia.
Despite existing frameworks for demand response, implementation at the state level remains lacking. Engaging state regulators and implementing pilot projects could unlock significant potential for balancing renewable energy intermittencies.
Cross-border power interconnections and trade, including ongoing projects with Nepal, Bhutan and Bangladesh, are key to balancing intermittencies. Future connections with Sri Lanka and Myanmar, along with the global “One Sun, One World, One Grid” vision, could reduce the need for energy storage globally.
Sachin Gupta
India’s energy transition has been positive so far. Renewable energy capacity addition has been robust, with nearly 18 GW added in 2024, building on the 15 GW added in 2023. As a result, renewable energy, including large hydro, now accounts for well over 40 per cent of the country’s generation capacity.
To continue the energy transition, the following steps are necessary:
- Continued auctioning of 50 GW of renewable energy capacity as stipulated.
- Facilitating access to land and RoW for renewable energy developers.
- Speeding up the implementation of transmission projects in key generation clusters.
- Developing a domestic manufacturing ecosystem for wind, solar and battery storage.
K. Shanmugha Sundaram and Pankaj Kumar Gupta
India’s energy transition has made notable strides. The country met its 2015 Nationally Determined Contribution (NDC) targets – reducing GDP emissions intensity by 33-35 per cent and achieving 40 per cent non-fossil fuel power capacity – well ahead of schedule. India’s updated NDC now commits to a 45 per cent reduction in GDP emissions intensity (from 2005 levels) and 50 per cent non-fossil fuel power capacity by 2030.
India is pioneering the low-carbon economic development model, positioning itself as a blueprint for other developing nations. With renewable energy growing faster than in any major economy, India is on track to achieve its 500 GW non-fossil fuel capacity target by 2030. However, several challenges remain in achieving net zero emissions, including the need for upgraded grid infrastructure, increased financing for renewables and storage, decarbonisation of thermal plants, exploration of alternative fuels for gas turbines, expansion of nuclear capacity and improvements in energy efficiency across all sectors.
What is the sector outlook for the next one to two years?
Pankaj Batra
The sector outlook is promising, with energy recognised as the driving force of the nation’s progress. Annual preparations by the MoP, the CEA, state governments and the private sector ensure power demand is met during peak months. There is a strong focus on expanding renewable energy and storage to meet NDC commitments. Pumped storage power plant capacity, especially closed-loop systems, is set to grow, with increasing renewable-plus-storage bids and declining tariffs. Offshore wind, nuclear power and EV adoption are expected to rise, while solarisation of pumps under the PM-KUSUM scheme has gained momentum. Energy storage and demand response will soon feature in ancillary service bids. The Resource Adequacy in Grid Code Regulations will require states to plan generation and transmission enhancements, guided by the CEA’s resource adequacy guidelines.
Sachin Gupta
CareEdge Ratings projects a favourable outlook for the renewable energy sector. Adequate resource availability, buoyant investor interest and a healthy pipeline of projects under execution are expected to lead to incremental capacity installations. A highly supportive policy and regulatory framework, including the government’s target to achieve 500 GW of renewable energy capacity by 2030, along with the renewable purchase obligation and energy storage obligation frameworks, further bolsters this outlook. The presence of central counterparties as offtakers also supports sector growth by addressing concerns related to receivables. However, challenges related to execution bottlenecks, the imposition of basic customs duty, supply chain issues due to the implementation of the Approved List of Models and Manufacturers, and hardening yields remain. Favourable demand-supply dynamics, improved domestic coal availability and softening international coal prices present a positive outlook for the thermal sector.
K. Shanmugha Sundaram and Pankaj Kumar Gupta
India’s power generation is set to expand significantly due to the anticipated GDP growth, with peak load demand projected to reach 366 GW by 2032. To meet this demand, the CEA estimates an additional 80 GW of coal-based capacity requirement by 2031-32, including the 28 GW already under construction. Out of the 80 GW, NTPC is expected to add around 25 GW, including 9.5 GW of under-construction capacity. All new capacity additions are planned as brownfield projects and will use high efficiency low emission (HELE) technologies (super critical/ultra-supercritical). Additionally, a joint venture between NTPC and Bharat Heavy Electricals Limited will implement a full-scale 800 MW commercial plant using advanced ultra-supercritical technology. NTPC’s fossil-to-non-fossil mix is expected to be approximately 60:40 by 2032. The company is also expanding into nuclear power with a 2.8 GW capacity project in Rajasthan through ASHVINI, a joint venture between NTPC and Nuclear Power Corporation of India Limited. NTPC is actively diversifying its portfolio with over 11 GW of renewables and hydro projects under construction, and a strong pipeline of over 20 GW at various stages of tendering. NTPC is taking significant steps towards becoming a fully integrated clean energy provider.
India’s power sector will need a multipronged approach, including adding renewables and implementing commercially viable storage solutions, optimising gas power plant operations, enhancing hydro generation, decarbonising existing thermal plants, using HELE technologies for new thermal plants and adding nuclear capacity to achieve net zero emissions and ensure reliable, sustainable and affordable power.
