Power generation: Indian industry analysis 2016

There’s little that’s more important to any country than its access to electricity. Quick and easy access to clean power has a ripple effect on every other industry and on the country’s GDP. Without a consistent supply of power, factories are forced to cut shifts and lower their manufacturing competency, which in turn affects the number of foreign companies that want to set up manufacturing units in the country and FDI inflows. Power also affects inflation levels in the country.

That’s why on the Indian government’s index of core sectors, electricity generation has a weightage of 10.32 percent, compared to say coal, which is at 4.38 percent, and cement at 2.41 percent.

As of August 31, 2015, India’s total power generation capacity was 280,328 MW. India is home to the world’s fifth largest power system. At 195,604 MW, power that was generated using coal, gas, and oil formed the bulk of the total, just under 70 percent. Electricity generated from renewable sources, including hydro, wind, among others made up 28 percent of the total. And the remaining 2 percent, about 5,780 MW, came from nuclear power.

Every year, the government sets a target of the amount of power that needs to be generated. In 2014-15, power generation companies exceeded their target. The target was set at 1,023 Billion Units (BU) of power, and 1048 BUs were created, representing a 2.5 percent increase in target. Between 2010 and 2015, electricity production expanded at a CAGR of 6.3 per cent. 

According to analysts, 2015 was a good year for the power generation sector. Its prime fuel, coal, saw government intervention with the reallocation of coal blocks through e-auctions.

#India‘s power deficit dips to lowest ever level of 2.4%.. #TrustModi #PowerForAll pic.twitter.com/RkuHZCx7eE

In 2016, “There’s plenty to be done in the power sector. We need a lot of innovation,” says Rama Rao Atluri, who until recently was executive director, Andhra Pradesh Power Generation Corporation. He is now executive director Andhra Pradesh State FiberNet.

In the year ahead, Atluri sees greater competition. Earlier, he says, power companies would generate electricity and immaterial of the price of a unit, it would be bought.

“Today, there’s a lot more competition. People will buy from whoever gives a better rate. If A is selling a unit of power Rs 5, and someone else is selling at Rs 4.5, because they are technologically more advanced or are more efficient, A will lose.”

Key to solving that problem is getting access to the cost of each unit of power in real time. In the past, that was hard to do. The cost of power is based on hundreds of factors, a primary of which is the quality of the coal being used in a thermal plant. In the past it took up to 15 days before a certain batch of coal could be sampled and a price of a unit of power was arrived at.

“It was post mortem,” he says.

By 2020, there will be an estimated demand for 1,900 BU. Getting there is imperative and 2016 should see strides in the right direction. 

Today, using a SAP module called MII, Roa has ensured that reference data for over 200 parameters is captured right from the field. This allows the PSU to figure out what it costs to generate a unit of power, precisely, and in real time. It’s information that puts the company in a better position to decide at which price to sell at, and to course correct.

Despite 2015’s heartening figures, there is a gap between the amount of power that is produced and the amount that’s needed.

Our government’s priority is to make India an energy efficient and energy sufficient country.

There is a big and continuing push to change the generation mix and lower the country’s dependence of carbon-creating forms of power generation. This is being achieved by changes in policy. One example are the amendments to the Electricity Act of 2003, which make power generation from renewable sources more enticing.

India’s has also moved up plans to create solar energy. The government’s target was to create 20,000 MW of solar power by 2022. It’s now said it will create 100,000 MW of solar power. It also plans to create infrastructure that will allow the generation of 60,000 MW of wind power, 10,000 MW of biomass-based power.

“In 2016 and beyond, we will see a lot of focus on renewable energy,” says Jagdish Lomte, VP-IT and CIO-BTG, Thermax.

But according to a report by the World Coal Association, coal is likely to dominate India’s energy mix even after 2030.

By 2020, there will be an estimated demand for 1,900 BU. Getting there is imperative and 2016 should see strides in the right direction.