As we bid adieu to 2019 and welcome the next decade, I wanted to take stock of the last 10 years and reflect on the upcoming decade with respect to the power sector in India. In this article, I am highlighting the major developments that have impacted the power sector in the past decade and some key trends that will shape the coming decade:
- Greening of the Grid enabled by dropping RE costs: Renewables now form almost 22% of the total generation capacity (in GW terms) as compared to about 10% in FY10 (and 1% in FY02). Renewables also form about 10% of energy generation in FY19 and is expected to rise to 25%-30% in the next decade. The growth in renewable has no doubt happened because of the rapidly declining costs particularly of solar power which has reduced from a high of about ₹18/unit early in the decade to less than ₹3/unit now. This has now made it economical for Discoms to procure higher quantum of renewable power and reduce its procurement costs.
- Power Shortage to Sufficient Power: As per data from CEA, India had a declared peak power deficit of close to 10% in the beginning of the decade. With close to 200 GW capacity addition in the last 10 years (as compared to 54 GW in the previous 8 years), this situation has changed drastically. While issues such as coal supplies do emerge time-to-time and several states cut back on supply due to various reasons, the supply-demand situation related to power is now fundamentally different as compared to a decade back (Deficit in FY19 was reported to be less than 1%) with large amount of thermal capacities also stuck as stranded assets. This scenario has also led distribution companies to shun long term power purchase agreements and pursue medium term/ short term tie-ups.
- One Grid One Frequency and Tightening of Grid Discipline: To derive the full benefit of generation capacities and connect generation to the load centres, growth in intra & inter-state transmission has seen a major thrust over the last 10 years. On 31st December 2013, Southern Region was connected to Central Grid in Synchronous mode thereby achieving the milestone of “One Grid-One Frequency”. Earlier, in August 2006 North and East grids were interconnected thereby 4 out of the five regional grids Northern, Eastern, Western and North Eastern grids were synchronously connected. The major grid disturbance in North/ East/ North-East Grids in July 2012 affected more than 0.6 billion people, spread across 22 states. This tightening of the frequency band has been a critical step that has been pushed to reduce the risk of a grid collapse as at that time, reasons like crossing of line loading limits of Inter-Regional transmission lines, voltage variation etc. played a key role. Consequently, thanks to the sustained efforts from all stakeholders – CERC, POSOCO, LDCs (National, Regional, State) etc. – the operational frequency band has been tightened over time and now quite close to the band adopted by Continental Europe (Band in India is 49.9 – 50.05 Hz vs. Band in Europe is 49.95-50.05 Hz).
- Electricity Access: The Saubhagya Scheme and other “Power for all” preceding programs have enabled electricity to be provided to almost all the unelectrified households in the country. Currently, about 20,000 households out of the 0.21 billion households in India don’t have access to electricity – translating into a coverage of 99.99% of households. Going forward billing, collection (to keep AT&C losses under control), availability and quality of power need to be ensured to these households.
- Discom Health: During the decade, two major attempts have been made to make Discoms viable – the Financial Restructuring Plan launched in 2012 and UDAY scheme launched in 2015. Despite taking close to ₹ 2.5 lakh crores (₹250 trillion) out of the balance sheet of Discoms and passing it on to the respective States, the health of the Discoms is again showing signs of deterioration. Discoms are estimated to have faced losses of ₹ 27,000 crores (₹270 billion) in FY19 alone – due to familiar reasons such as tariffs not being reflective of costs, AT &C losses, etc. Also, while progress has been made by channelizing investment in areas such as IT Systems for Billing, SCADA, Metering & others, large scale change to bring down AT&C losses to less than 15% has not been achieved yet. Rather than pursuing repeated bailouts, there is an urgent need to bring in the private sector in a larger way and opt for Public Private Partnership (PPP) such as the one in Delhi where that the losses can be reduced from over 50% to less than 8% (As on date).
While these were some of the highlights of the sector in the last decade, Now, let us look into what may be in store for all of us in the next decade. Few thoughts (10 Trends for the coming decade in India, not necessarily in order of importance) …
- Storage will play a critical role in scaling up renewables further in the grid as well as through distributed generation (rooftop, etc.). Multiple options for storage are being experimented (the foremost being Li-Ion batteries and others such as Hydrogen for storage, etc.).
- Struggle in setting up new coal based capacities as investments become extremely risky and difficult to fund. Alternative Technologies such as small modular nuclear reactors could take off in a big way as an option towards the end of the next decade if storage does not materialize.
- Challenge in grid management with higher renewables and moving from 15 mins scheduling to 5 mins scheduling for grid participants to tighten the frequency band further.
- Risks of Cyber-attacks are increasing and will see much higher focus from utilities address the issue.
- Supply and Wires (Carriage and Content) Segregation bringing in competition in retail supply.
- Smart Meters becoming ubiquitous as mobile phones today –are revolutionizing the way Discoms and Consumers interact. Electricity will no longer be a commodity. Customer experience & Value Added Services will become prime focus areas.
- Electric Vehicles scaling up especially in cities like Mumbai, Delhi, Bangalore, and Hyderabad and adding to the demand growth for Discoms as well as bringing in higher uncertainty of demand during forecasting.
- Environment remaining centre stage with issues such as disposal of solar panels, acute water stress, will impact the sector
- With digital technologies/ IoT generating abundant data, changing business models such as Prosumers, Peer-to-peer trading through technologies such as blockchain, the Workforce in Discoms will need to be as conversant. They will have to apply techniques such as Advanced Analytics to manage day-to-day operations & commercial activities. This upskilling and training of the workforce will be crucial in the upcoming decade.
- And last but not the least, – Discoms becoming financially viable and the discourse in the country moving away from access/ availability to power quality.
Wishing everyone a very happy new year and great decade ahead!
Written By: Mr. Ganesh Srinivasan, CEO, TATA Power-DDL