During FY12-17, a cumulative generation capacity of 99,209 MW was added to the target of 88,537 MW, which exceeded the growth in demand and resulted in a declining trend in PLFs.
For the fifth year in a row, the demand for electricity in the country fell below the projection made by the government in the FY20. The gap between the forecast and the actual demand remained, even after the Central Electricity Authority (CEA) apparently narrowed the previous one a little over the years.
With lower-than-anticipated demand growth leading to a halt in many large-scale power generation projects – several of which have turned into non-performing assets – additional capacity has also slowed.
While the rate of thermal capacity addition has seen a sudden deceleration since FY16, the segment of renewable energy partially offsets this trend (see chart).
Actual power consumption, a close proxy for demand, was 13 per cent lower than the CEA 's estimate for FY20.
As pointed out earlier by the High-Level Powered Committee, the low-than-anticipated increase in electricity demand is one of the main reasons behind the stress in the power sector, with the use level (PLF) of thermal units falling from 79% in FY07 to 56% in FY20.
“Electric power survey carried out by the CEA uses the partial end-use method and has been missing out on accuracy, over-estimating the demand,” Debasish Mishra, leader, energy resources and industrials at Deloitte in India, said. “(Insufficient) quality of data received from states could be the reason for this,” Mishra added. The agencies of the Union Ministry of Power tend to struggle to reconcile the data received from state-run power distribution companies (discoms) with the information collected from elsewhere.
FE has been told by a senior government official that state governments do not follow uniform formulae and definitions of key parameters, and that manual data management leads to errors and delays. Inadequate governance, accountability and transparency in the field of discomfort and lack of high data management skills have also been attributed to poor data quality. A recent incident of projections off the mark was also witnessed during a nine-minute light-off event on 5 April, when the demand for a projection of 12,879 MW fell by 31,089 MW.
Projections of high demand have triggered an increase in the commissioning of power plants , resulting in an oversupply scenario. During FY12-17, a cumulative generation capacity of 99,209 MW was added to the target of 88,537 MW, which exceeded the growth in demand and resulted in a declining trend in PLFs. Of course, the overall pace of adding thermal capacity has slowed in recent years.
According to the data reviewed by FE, the net addition of thermal capacity — the difference between the plants commissioned and retired — was only 4.530 MW in the FY20.
“The new project starts from conventional sources (coal, gas, etc) have significantly declined over the last 3- 4 years as India has focused primarily on renewable energy for incremental additions,” Abhishek Tyagi, vice president of the Moody Investors Service, said. Out of the 23,730 MW of private thermal power plants currently under construction, only projects with 1,825 MW have announced the date of commissioning, while others are listed as "uncertain," according to the government's recent response to Parliament.
However, with per capita electricity consumption still lower than the world average, this even compares poorly with other Southeast Asian peers. Tyagi believes that "the demand for electricity should increase as more reliable electricity supplies are made available to households and India's per capita income rises." Echoing similar sentiments, Kameswara Rao, leader of PwC India, said: “The progress of electrification from farms to kitchens to cars is building up demand. The available spare generation capacity is able to accommodate this incremental for now, and there is a growing view that new generation capacity has to be planned soon to meet the likely higher growth in demand in the future.”
