Enough but not enough– The present scenario of power demand and supply in India

This article appeared in the Indian Wind Power Association’s (IWPA) WindPro Magazine-December 2021 issue and was authored by JMK Research and Analytics

With the increasing need to reduce carbon emissions, renewable energy (RE) installations have seen a surge in recent years. Cumulative installed capacities for RE sources are reaching a point where it is soon likely to exceed our peak demand. This begs the question, does it make sense to increase our capacity beyond the demand, or will it become a wasted investment?

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To answer this question, it is first important to understand the peak demand and energy generation patterns in India, how much of it is met and the current energy generation mix. As of 30 November 2021, India has a total of 392.017 GW of installed capacity as illustrated in figure 1, 60% of which is accounted for by fossil fuels. While RE sources account for 26% share in overall installed capacity, it accounts for only 10.7% share in overall energy generation in 2020-21. On the other hand, coal, which accounts for 52% share of the overall installed capacity, produced nearly 71% of the energy generated in 2020-21.

Fig 1: Installed Capacity in India (as of 30 November 2021) and Energy Generation trend

Source: CEA, JMK Research

*2021-22 data consists of entries from April 2021 to November 2021

India reached its highest ever peak demand of 203,014 MW in July 2021. In absolute terms, the installed capacity in July 2021 (386.88 GW) suggests that this demand could be easily met, with enough energy as surplus. However, data published by the Central Electricity Authority (CEA) suggests otherwise. The peak demand could not be met, and this has consistently been a trend. In fact, this trend also extends to meeting our overall energy demand too, as depicted in figure 2.

Fig 2: Highest Peak Power and Overall Energy Demand and Supply (2013-Present)

Source: CEA, JMK Research

*2021-22 data consists of entries from April 2021 to November 2021

While the highest peak power demanded in a year has been on a sharp increasing trend, the overall energy demand started plateauing during the 2019-20 year, with a slight slump in 2020-21, which can be attributed to the COVID related lockdowns leading to a fall in demand. On an average, there has been a shortfall of approximately 6 billion units (BU) in the last six years.

Going forward, with the recently concluded COP-26 saw India, among other participant countries, agree to the ‘phasing-down’ of coal-fired plants in the overall energy generation mix. This would require India to decommission its thermal plants to reach its goal of net-zero emissions by 2070. Energy generation presently contributes 40% of the total emissions created by the country.

Additional capacity addition from RE sources will fill in this gap as well. However, RE needs to be coupled with storage to become a viable replacement for coal plants. While RE on its own is cheap, adding storage to it makes it expensive and it is still few years away for this to be an economically viable solution.

Going further, the energy demand is expected to increase as industries pick up from its slump and as the rate of electrification of our transportation systems increases. The government aims to achieve at least 30% EV penetration by 2030. Niti Aayog recommendations further suggests that only EVs will be sold in the country from 2030. As a consequence, energy demand too will increase to charge these EVs that will soon be hitting the road, becoming the next major source of demand. These factors combined point to the need of the following:

  1. An increase in the Renewable capacity is necessary to not just replace coal plants, but also to meet the peak power demands. With the major targets given for electrification of transport the demand is expected to grow significantly in near future.
  2. Need of energy storage systems to reduce RE intermittency and improved flexibility to meet this peak power demand in order to successfully decarbonize our energy generation systems.
  3. A need to upgrade the grid infrastructure to improve the generation to transmission ratio, balance the increasing renewable feed and to be able to carry electricity to meet future demands.

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