May 2021

Over the years, the country’s power generation has grown at a rapid pace to reach an installed capacity of 382.7 GW as of April 2021. While coal continues to account for a major share of the installed capacity, at 55 per cent, its contribution has declined from 61 per cent in 2014-15.

Meanwhile, renewables have emerged in a big way and today account for nearly 25 per cent of the installed capacity mix, as against 13 per cent in 2014-15. Government support through conducive policies and programmes has pushed the renewable energy sector forward, and it is now clocking capacity additions greater than the thermal sector. Meanwhile, the growth in hydro and nuclear has been subdued due to the long gestation period of these projects, besides intrinsic issues in each of these segments. Gas-based power, on the other hand, has completely stagnated, with existing projects operating at sub-optimal plant load factors due to a shortage of domestic natural gas and no visible project pipeline.

Overall, generation capacity additions have slowed down in the last year, owing mainly to the devastating impact of the Covid-19 pandemic. In 2020-21, conventional capacity addition stood at 5,436 MW (thermal 4,926 MW and hydro 550 MW), a decline of 23 per cent over the 7,065 MW recorded in the previous year. Meanwhile, renewable capacity addition stood at over 7 GW during the year, less than the 8.8 GW recorded in 2019-20.

Besides Covid-related disruptions, the generation segment is facing challenging times due to long-standing issues such as the lack of power purchase agreements, mounting outstandings from discoms and a financing crunch. For coal-based plants, funding the investments needed for the implementation of emission control technologies is a key concern, especially as a transparent and well-defined compensation mechanism to ensure that equipment costs are duly recovered in tariffs is yet to be notified. Meanwhile, renewable energy developers are reeling under the burden of unrealistic expectations of continually falling solar tariffs, leading to renegotiation of PPAs. That said, renewables, especially solar, are still the brightest spot in the generation segment and the one that will see the highest growth in the coming years, given the ambitious target of 450 GW by 2030.

Going forward, the role of coal in power generation will transition to a supportive one from the dominant position it has enjoyed over the years and flexibilisation will be key to its survival even as renewables take centre stage.

Power Line’s Infocus section this month on “Power Generation” takes an in-depth look at each of these segments, as well as the major issues and the way forward…