BOOMING POWER SECTOR

Why we need to Invest in Power Sector?

Power is among the most critical component of infrastructure, crucial for the economic growth and welfare of nations. The existence and development of adequate infrastructure is essential for sustained growth of the Indian economy.

In May 2018, India ranked fourth in the Asia Pacific region out of 25 nations on an index that measured their overall power. India was ranked fourth in wind power, fifth in solar power and fifth in renewable power installed capacity as of 2018. India ranked sixth in the list of countries to make significant investments in clean energy at US$ 92 billion. India is the only country among the G20 nations that is on track to achieve the targets under the Paris Agreement.

Indian power sector is undergoing a significant change that has redefined the industry outlook. Sustained economic growth continues to drive electricity demand in India. The Government of India’s focus on attaining ‘Power for all’ has accelerated capacity addition in the country. At the same time, the competitive intensity is increasing at both the market and supply sides

In FY21, the total thermal installed capacity in the country stood at 234.72 GW. Installed capacity of renewable, hydro and nuclear energy totaled 94.43 GW, 46.21 GW and 6.78 GW, respectively. By 2022, solar energy is estimated to contribute 114 GW, followed by 67 GW from wind power and 15 GW from biomass and hydropower. The target for renewable energy has been increased to 227 GW by 2022.

Between April 2000 and September 2020, the industry attracted US$ 15.23 billion in Foreign Direct Investment (FDI), accounting for 3% of total FDI inflow in India.

The Government of India has identified power sector as a key sector of focus to promote sustained industrial growth.

In April 2021, the Ministry of Power released the draft National Electricity Policy 2021. The Ministry of Power has created an expert committee including members from state governments, the Ministry of New and Renewable Energy, NITI Aayog and the Central Electricity Authority. As per the Central Electricity Authority estimates, by 2029-30 the share of renewable energy generation would increase from 18% to 44%, while that of thermal is expected to reduce from 78% to 52%. On November 17, 2020, Energy Efficiency Services Limited, a joint venture of PSUs under the Ministry of Power and Department of New & Renewable Energy, Goa, signed a memorandum of understanding to discuss roll-out of India’s first Convergence Project in the state. Pradhan Mantri Sahaj Bijli Har Ghar Yojana-Saubhagya was launched by Government of India with an aim to achieve universal household electrification by March 2019. In September 2018, a draft amendment to Electricity Act, 2003 was introduced. It discussed separation of content & carriage, direct benefit transfer of subsidy, 24*7 power supply as an obligation, penalisation on violation of PPA, setting up smart meter and prepaid peters along with regulations related to the same.

The Government of India has released its roadmap to achieve 227 GW capacity in renewable energy (including 114 GW of solar power and 67 GW of wind power) by 2022. The Union Government of India is preparing a 'rent a roof' policy for supporting its target of generating 40 gigawatts (GW) of power through solar rooftop projects by 2022.

Coal-based power-generation capacity in India, which currently stands at 199.5 GW, is expected to witness total installed capacity addition of 47.86 GW by 2022.

According to the Union Budget 2021-22, 139 GW of installed capacity and 1.41 lakh circuit km of transmission lines were added and 2.8 crore households were connected in the past 6 years. Solar tariffs in India have reduced from Rs. 7.36/kWh in FY15 to Rs. 2.63/kWh in FY20. As December 2020, over 36.69 crore LED bulbs, 1.14 crore LED tube lights and 23 lakh energy-efficient fans have been distributed across the country, saving 47.65 billion kWh per year. In the first half of November 2020, India's power consumption increased 7.8% to 50.15 billion units , indicating an improvement in economic activity, according to government data. According to data from the power ministry, power consumption in the country was registered at 46.52 BU between November 1 and November 15 last year. Energy generation from thermal sources stood at 472.90 billion units in April-September 2020. NTPC Ltd.’s oldest unit in Singrauli, Uttar Pradesh, has achieved the highest Plant Load Factor of 100.24% among all thermal units in the country between April 2020 and December 2020. India’s rank jumped to 22 in 2019 from 137 in 2014 on World Bank’s Ease of doing business - "Getting Electricity" ranking. Energy deficit reduced to 0.7% in FY20 from 4.2% in FY14. As of April 28, 2018, 100% village electrification was achieved under Deen Dayal Upadhyaya Gram Jyoti Yojana.

World is entering a new energy era and "Mukesh Ambani" wants to be a part of it.

Indian tycoon Mukesh Ambani unveiled an ambitious push into clean energy involving 750 billion rupees ($10.1 billion) of investment over three years, marking a new pivot for one of the world’s biggest fossil-fuel billionaires.

Reliance Industries Ltd., which gets 60 per cent of its revenue from oil refining and petrochemicals, plans to spend 600 billion rupees on four “giga factories” to make solar modules, hydrogen, fuel cells and to build a battery grid to store electricity. An additional 150 billion rupees will be invested in value chain and other partnerships, Asia’s richest man told shareholders on Thursday.

Speaking at the company’s virtual annual meeting, Ambani gave scant details of how he would execute the plan. He was ranked No. 4 among global fossil-fuel billionaires by Bloomberg Green last year. The $10 billion in green investment over three years compares with a Fitch Ratings’ estimate -- published Wednesday -- of $7.4 billion in annual average capital expenditure by the Reliance group through March 2025.

Shares of the company fell 1.9 per cent as of 9:37 a.m. in Mumbai on Friday, extending declines following their biggest loss in more than two months the previous day.

The Adani-led group is also raising its game in clean energy goals. Adani Green Energy Ltd. agreed last month to buy SoftBank Group Corp.’s $3.5 billion renewable power business in India, in a bid to achieve its goal of having 25 gigawatts of renewable power capacity by 2025. The green focus has led to a share rally with Adani Green jumping more than 580 per cent and Adani Total Gas Ltd. -- a joint venture with Total Energies by 670 per cent since the beginning of last year.

India’s government plans to expand its renewable energy capacity nearly fivefold to 450 gigawatts by 2030, as the nation aims to reduce its dependence on coal.

“Reliance’s strategy on energy, data and consumer will ensure the company continues to grow sustainably bucking all cyclical trends,” said Sunil Chandiramani, chief executive officer at Nyka Advisory Services. However, “it will need to navigate challenges of technology innovation, talent acquisition, investor expectations and global turmoil.