The Indian power sector has witnessed significant growth and diversification, with a focus on increasing capacity from renewable sources while maintaining a balance with conventional energy sources such as coal and lignite. The country’s peak power demand has been growing rapidly, keeping pace with economic activity and industrial growth. As of June 2024, India’s total installed capacity stood at approximately 446 GW, with coal-based power accounting for the largest share, followed by renewables and hydropower. The Union Budget 2024-25 has further emphasised the importance of energy security, with new policies promoting advanced technologies such as small modular reactors and pumped storage projects. Additionally, the government’s push towards reducing carbon emissions is evident in its focus on setting emission targets for hard-to-abate industries.
The transmission and distribution segment has also seen substantial developments, with ongoing efforts to expand and modernise the grid to accommodate the growing renewable capacity. The Central Electricity Authority (CEA) has laid out ambitious plans for future expansion, projecting a total power capacity of 900 GW by 2031-32, underpinned by significant investments in generation, transmission and distribution infrastructure.
Indian Infrastructure provides an overview of the power sector and its future outlook…
Segment-wise trends
Generation
India’s total installed capacity across all generation sources stood at about 446 GW as of June 2024. Coal- and lignite-based power accounted for the highest share (48.77 per cent) at nearly 217.59 GW, followed by renewables at 148.08 GW (33.19 per cent) and hydropower at 46.93 GW (10.52 per cent). Gas-based installed capacity stood at 24.82 GW (5.56 per cent), nuclear at 8.18 GW (1.83 per cent) and diesel accounted for the remaining 0.1 per cent. The year 2023-24 saw a capacity addition of 25,367 MW, higher than the 16,854 MW in 2022-23. In 2023-24, renewable capacity addition stood at 18,485 MW, thermal at 5,404 MW, nuclear at 1,400 MW and hydro at 78 MW. Power generation recorded a CAGR of 6.1 per cent, reaching 1,734 BUs in 2023-24 from 962 BUs in 2013-14. Thermal generation accounted for 79 per cent of the total in 2023-24, while renewables accounted for 21 per cent.
In the Union Budget 2024-25, the finance minister announced measures to enhance energy security, including collaboration with the private sector for developing Bharat Small Modular Reactors and Bharat Small Reactors. The Energy Transition Pathways policy will be released to address employment, growth and environmental sustainability challenges, while a new policy will promote pumped storage projects for electricity. A joint venture between NTPC Limited and Bharat Heavy Electricals Limited will set up an 800 MW plant using advanced ultra-supercritical technology.
In order to meet the power demand during the crucial monsoon months and ensure uninterrupted power supply across the country, the Ministry of Power (MoP), in July 2024, extended its coal import advisory for domestic coal-based power plants to ensure sufficient fuel reserves during the monsoon season. Initially issued on October 25, 2023, the advisory mandated a 6 per cent blending of imported coal. This directive was subsequently extended on March 4, 2024. The latest notification now extends this requirement until October 15, 2024, with a revised blending rate of 4 per cent. Additionally, in April 2024, the MoP initiated the operationalisation of gas-based power plants to address the escalating electricity demand during the summer months. Under Section 11 of the Electricity Act, 2003, directives were issued to gas-based generating stations to maximise power generation capacity. A substantial portion of these stations remains underutilised due to commercial considerations. The order, effective from May 1, 2024, to June 30, 2024, is aimed at optimising power availability during the peak demand period, similar to measures taken for imported-coal-based plants. Grid Controller of India Limited will coordinate with gas-based plants regarding power requirements, prioritising power purchase agreement (PPA) holders. Any surplus power will be offered in the open market. A high-level committee chaired by the CEA will oversee implementation. During the same month, the MoP directed power generation companies to offer surplus power for sale in the power markets. It was observed that some power generators were not offering their surplus power–after fulfilling medium and long-term procurement agreements–in the power market, leading to unused power capacity nationwide. This directive was issued in response to the surge in peak power demand.
In order to promote the nuclear power segment, the government plans to invite private firms to invest approximately $26 billion in its nuclear energy sector to boost electricity production from non-carbon-emitting sources. This marks the first time the country seeks private investment in nuclear power, a sector that currently contributes less than 2 per cent to India’s total electricity generation.
Transmission
As of June 2024, the total transmission line length (at the 220 kV and above levels) stood at 486,517 ckt km, AC substation capacity stood at 1,227,840 MVA and high voltage direct current substation capacity at 33,500 MW. At the 220 kV level, the transmission line length stood at 208,194 ckt km. At the 400 kV level, the transmission line length was 204,151 ckt km, while at the 765 kV level, the transmission line length was 54,797 ckt km.
During 2023-24, approximately 14,203 ckt km of transmission lines were added at the 220 kV and above levels and AC substation capacity of about 70,728 MVA was added. The country’s total interregional capacity stands at 118,740 MW. Power Grid Corporation of India Limited continues to dominate the country’s transmission sector with 177,790 ckt km of lines and 528,761 MVA of substation capacity (as of June 2024).
During the same month, the MoP issued new guidelines for addressing right-of-way (RoW) issues related to transmission lines, aiming to expedite construction and ensure timely completion, particularly in urban areas. The updated guidelines, which replace previous ones, specify compensation for damages related to RoW under the Electricity Act, 2003.
In May 2024, the Central Electricity Regulatory Commission (CERC) notified the CERC (Procedure, Terms and Conditions for Grant of Transmission License and Other Related Matters) Regulations, 2024. As per these regulations, no individual or entity will be eligible for a license for interstate transmission of electricity unless they are selected through the competitive bidding process or they are selected by the central government or its authorised agency to implement projects under the regulated tariff mechanism.
Further, the MoP notified the Electricity (Amendment) Rules, 2024, in January 2024, amending the existing Electricity Rules, 2005. These amendments aim to address two key challenges: promoting the development of dedicated transmission lines and facilitating open access to the electricity grid. The rules now allow consumers with specified energy loads and energy storage systems to establish, operate and maintain their own dedicated transmission lines without the requirement of a license. The rule covers companies/entities with loads over 25 MW and 10 MW on the interstate and intra-state transmission networks respectively.
Distribution
The distribution network has been growing steadily in terms of line length and transformer capacity. As per the CEA, the total number of power substations (66/11 kV, 33/11 kV and 22/11 kV) in the country was 39,965, as of March 31, 2022, with a total installed capacity of 482,810 MVA. The total number of feeders (66 kV/33 kV/22 kV) stood at 36,804 in March 2022 and the length of the feeder infrastructure was 589,304 ckt km. The country had 230,979 feeders at the 11 kV level with a combined length of 4,935,279 ckt km. It had 1.47 million distribution transformers, with a combined capacity of 6.89 million MVA during the same period. The low tension power grid comprised 2,231,495 km of single-phase lines and 5,714,263 km of three-phase lines.
In 2022-23, aggregate technical and commercial (AT&C) losses fell to 15.37 per cent, almost 6 per cent lower than the 2018-19 levels. This was driven by an improvement in collection efficiency, from 92.77 per cent in 2020-21 to 97.27 per cent in 2022-23. Meanwhile, billing efficiency improved from 86.13 per cent in 2021-22 to 87 per cent in 2022-23. As per the 12th Annual Integrated Rating and Ranking of Power Distribution Utilities report, the financial deficit in the power distribution sector widened to Rs 790 billion in FY 2023, primarily driven by an 8 per cent increase in the gross input energy and a substantial rise in power purchase costs during the year. The absolute cash gap also increased from Rs 440 billion in FY 2022 to over Rs 790 billion in FY 2023, driven by the increasing average cost of supply-average realisable revenue (ACS-ARR) gap.
The government’s Revamped Distribution Sector Scheme aims to improve discoms’ efficiency and financial stability with a budget of Rs 3,037.58 billion over five years (2021-22 to 2025-26), including Rs 976.31 billion in government support. The scheme targets reducing AT&C losses to 12-15 per cent by 2024-25, closing the ACS-ARR gap by 2024-25 and enhancing power supply quality and affordability. The scheme has sanctioned Rs 1,217 billion for loss reduction and Rs 1,304 billion for smart metering, with funds released based on progress. REC Limited and Power Finance Corporation Limited (PFC) are the nodal agencies, with REC covering 19 states and PFC 14 states. As of December 2023, PFC has disbursed Rs 535.87 billion and REC Rs 588.69 billion. Progress includes a 9.64 per cent completion rate for loss reduction, a decrease in AT&C losses from 16.23 per cent to 15.37 per cent and a reduction in the ACS-ARR gap from Re 0.69 per kWh to Re 0.45 per kWh. For smart metering, 222 million meters have been sanctioned, with 116 million awarded and 11 million installed.
Recently, several new rules have been amended in the power distribution segment, including:
Electricity (Late Payment Surcharge and Related Matters) (Amendment) Rules, 2024: In February 2024, the MoP notified the Electricity (Late Payment Surcharge and Related Matters) (Amendment) Rules, 2024. The amendments allow long-term power generators to sell power in the short-term market, allowing power generators to explore additional avenues for selling their generated power beyond their long-term contracts. Power generators who do not offer their surplus power will now not be eligible to claim capacity or fixed charges corresponding to that surplus quantum.
Amendment to Electricity (Rights of Consumers) Rules, 2020: In February 2024, the MoP notified the Electricity (Rights of Consumers) Amendment Rules, 2024, reducing the timeline for getting new electricity connections and simplifying the process of setting up rooftop solar installations. Exemption has been given for the requirement of technical feasibility studies for systems up to a capacity of 10 kW. For systems of capacity higher than 10 kW, the timeline for completing the feasibility study has been reduced from 20 days to 15 days.
Electricity (Second Amendment) Rules, 2024: In January 2024, the MoP incorporated provisions for subsidy accounting and payment as well as the framework for financial sustainability. As per these amendments, discoms are now required to provide quarterly reports with detailed information about subsidy payments. The amendment also introduces procedures for allowing the transfer of expenses incurred by distribution licensees for the creation and upkeep of distribution assets.
Outlook
The CEA’s 2023 National Electricity Plan (NEP) projects a total power capacity of 900 GW by 2031-32, with solar power accounting for 40 per cent, coal and lignite 29 per cent, wind 13 per cent, and small hydro, hydropower and pumped storage 11 per cent. To meet this goal, Rs 14,541.88 billion will be needed for generation capacity from 2022 to 2027, and Rs 19,064.06 billion from 2027 to 2032. By 2026-27, storage capacity must reach 16.13 GW/82.37 GWh, rising to 73.93 GW/411.4 GWh by 2031-32. The NEP also forecasts all-India peak electricity demand at 277.2 GW in 2026-27 and 366.4 GW by 2031-32.
As per the draft NEP (Volume II) for transmission, the tentative transmission line and capacity additions are expected to be 105,000 ckt km and 595,000 MVA respectively during 2027-32. The plan outlines a substantial investment of Rs 4.75 trillion by 2027 for developing transmission infrastructure, including lines, substations and reactive compensation at 220 kV and above voltage levels. This includes 170 transmission schemes with an estimated cost exceeding Rs 3.13 trillion for interstate transmission systems and around Rs 1.61 trillion for intra-state systems.
The CEA, with distribution utilities, has developed the Distribution Perspective Plan 2030, projecting peak demand to rise to 334,811 MW by 2030. The plan includes increasing substation capacity to 624,332 MVA, adding 92,920 new 11 kV feeders, and installing 46.5 million new distribution transformers, with an investment of Rs 742 billion required for distribution infrastructure upgrades from 2022 to 2030.
Overall, the power sector is poised for significant expansion and transformation, with ambitious goals set for the coming decade. The focus on renewable energy, coupled with sustained investment in transmission and distribution infrastructure, underscores India’s commitment to a balanced and sustainable energy future. The integration of advanced technologies, such as small modular reactors and pumped storage projects, reflects a forward-looking approach to energy security and environmental sustainability. Additionally, the government’s proactive measures to address challenges in transmission, distribution and power generation highlight a robust framework designed to meet rising electricity demand. With the ongoing modernisation of the grid and the push for increased efficiency in the distribution sector, India is on track to not only meet its energy needs but also play a pivotal role in the global transition to cleaner energy sources. This dynamic evolution of the power sector underscores India’s strategic vision of achieving a sustainable and secure energy future.
Akanksha Chandrakar
