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2012-08 At a Crossroads of Power by

Mr. Vishvjeet Kanwarpal CEO GIS-ACG


Global InfraSys - Asia Consulting Group

THE ENERGY INDUSTRY TIMES - AUGUST 2012


Published: August 2012 by The Energy Industry Times

Industry Perspective 13

At a crossroads of power
India’s hunger
for power and T he installed power capacity of
India as of May 31, 2012 was
almost 203 000 MW. An im-
pressive 20 500 MW of capacity was
The major challenge in 12th five-year
plan is to supply sufficient coal to
achieve a targeted capacity addition of
63 781 MW of new coal plant.
energy is likely to added in 2011-12 and the government
aims to add another 18 000 MW of ca-
India is the third largest producer and
consumer of coal in the world, with
continue unabated pacity in 2012-13. In the 12th five-year 533 Mt of production and total reserves
plan (2012-2017), India is targeting an of 285 862 Mt. About 57 per cent of
even though many addition of 94 065 MW to its genera- power generated in India is based on
tion capacity with a total estimated fund coal.
mature economies requirement of Rs. 13, 72, 580 Crores The aggregate demand for coal at the
($247.3 billion). end of the 12th Plan in 2017 is esti-
will be impacted by But while the government has set mated to be between 900 and 1000 Mt
ambitious capacity addition targets to depending on the pace of commission-
the current global meet the growing economy, the sector ing of power capacity. The domestic
is encountering severe challenges in- production of coal is estimated to ex-
economic uncertainty. cluding fuel shortages, slippages in ceed 750 Mt indicating a more than
But the road forward capacity addition, policy and regula-
tory issues, foreign investment slow-
200-250 Mt shortfall to be met from
imports.
Kanwarpal: tough measures are needed

is fraught with tough down, environment clearances, trans-


mission/open access constraints, and
Effective January 1, 2012, Coal India
Ltd. (CIL) adopted a new coal pricing
of the Civil Liability for Nuclear Dam-
age Act, 2010. The Act and the Rules
the largest potential sources of Certified
Emission Reduction (CER) and Re-
policy decisions unmitigated high AT&C (Aggregate
Technical and Commercial) losses.
methodology from Useful Heat Value
(UHV) based on the internationally
were notified on the same day i.e.,
November 11, 2011.
newable Energy Certificates (REC).
Though potential upside of CER ben-
and the challenges The Planning Commission held a accepted Gross Calorific Value (GCV). On March 27, 2012, India made a efits exist for small hydro plants, uncer-
meeting with state power ministers to In this new pricing model coal is catego- strong appeal for membership in four tainty continues over Kyoto Protocol
of integrated review the strategies for the 12th five- rized into 17 grades. This has increased exclusive nuclear clubs – the Nuclear Mechanism post December 2012.
year plan. Taking cognizance of the prices of specific grades significantly. Suppliers Group (NSG), the Missile In the solar sector the main objective
infrastructure unbearable distribution losses amount- India imports about 12 per cent of its Technology Control Regime (MTCR), of the National Solar Mission is to re-
ing to almost Rs. 70 000 Crores ($12.6 coal requirements and sources 70 per the Wassenaar Arrangement and the duce the cost of solar power generation
planning. billion) annually, it was concluded that cent of that from Indonesia. Indonesia Australia Group – to strengthen its in the country through long-term pol-
loss reduction and increase in con- plans to impose a 25 per cent export tax export control systems and maintain icy, large-scale development, aggres-
Vishvjeet Kanwarpal sumer tariffs were critical to avoiding on coal, which in turn will impact the the high international standards of its sive R&D and the promotion of the
a catastrophic crisis in the power sector. net cost of power generation in India. nuclear programme. solar sector. The installed capacity of
Several options to restructure the ac- The challenge facing the Indian power The protests against Jaitapur nuclear solar power increased from 17.8 MW
cumulated debt and losses of the distri- sector is therefore not just the supply of power project in Maharashtra and to 500 MW in phase I of the National
bution companies (discoms) and State coal but maintaining a competitive cost Kudankulam nuclear power project at Solar Mission. The target of the mis-
Electricity Boards (SEBs) are being of generation. Tamil Nadu have delayed their com- sion is to achieve 20 000 MW installed
developed and considered. The Ministry of Environment and missioning due to safety concerns of solar capacity by 2022.
Having reached a dead-end due to the Forests has adopted a policy of ‘Go- the public. However, India continues India is facing problems in project fi-
crippling non-availability of fuel, espe- No-Go’ in which coal mining was its nuclear power plant development nancing and fund availability because
cially coal and gas, and the mounting completely banned in ‘No Go’ areas. programme. there is a lack of robust policy to support
losses of discoms and SEBs, many As large coal bearing areas were sud- Large hydropower projects will also capacity development and utilisation as
states have initiated hikes in power denly declared ‘No Go’ areas, this continue to be important. The Central well as clarity on subsidy support.
tariffs. The government has also allow- would have severely limited the abil- Electricity Regulatory Commission Meanwhile for wind power, as of
ed industrial consumers to buy electric- ity to expand domestic production of (CERC) plans to amend the hydro December 2011 the installed capacity
ity directly from generators and traders. coal. A final policy framework accept- tariff structure and has proposed a 16.5 of wind power plants was 16 179 MW.
This may potentially impact almost a able to all stakeholders is yet to be per cent RoE (Return on Equity) for India is estimated to have a potential of
third of the revenue of the distribution formalised. reservoir based hydro power stations. about 48 560 MW of wind capacity.
companies and further limit the option With the continued challenges in fuel Also some major changes in other Wind power accounts for 6 per cent
of subsidised supplies to farmers and supply to the power sector, India has types of hydro stations are being pro- of India’s total installed power capac-
special interest consumers. little choice but to continue its explora- posed. These steps have been taken to ity. However, it generates only about
Tamil Nadu Electricity Board has tion of the nuclear power option. increase the participation of private 1.6 per cent of the country’s power.
hiked power tariffs by an unprecedented As of July 2012, India had a total sector in the hydro sector, to increase The Ministry of New and Renewable
37 per cent. Other states such as Andhra installed capacity of 4780 MW of nu- the peak load capacity and also to im- Energy (MNRE) has announced a re-
Pradesh and Odisha have raised tariffs clear power. Its largely indigenous prove the thermal hydro mix. vised estimation of the potential wind
by up to 25 per cent. Haryana Energy nuclear power programme aims to Hydropower tariffs typically range resource in India from 49 130 MW
Regulatory Commission (HERC) has achieve 14 600 MW installed capacity from Rs1.50-3/kWh. Key hydropower assessed at 50 m hub heights to
hiked power tariffs by around 10 to 15 by 2020 and 27 500 MW by 2050. challenges include geological and hy- 102 788 MW assessed at 80 m hub
per cent and Bihar by over 12 per cent. The much debated Civil Liability for drological problems, evacuation of heights.
Power capacity addition by Even smaller states such as Tripura have Nuclear Damage Rules, 2010, are now power due to difficult terrain of hydro Biomass also offers significant poten-
Five Year Plan hiked tariffs by 17 per cent. in place to implement the provisions projects, environmental clearances, tial. As of March 2012, India had a
poor infrastructure, recent financial total installed capacity of 2675 MW
norms for project delays, land acquisi- (direct biomass 901 MW, cogeneration
tion as well as resettlement and reha- 1649 MW and gasification 125 MW)
bilitation issues, resulting in hydro connected to the grid. The total poten-
projects getting delayed with an associ- tial in biomass is estimated at more than
ated cost and tariff increase. 19 000 MW.
Hydro tariffs as high as Rs3.64/kWh Realising all of this potential, how-
in the public sector and Rs6.23/ kWh ever, requires the right policies. The
in the private sector have been peti- government has initiated significant
tioned. The delayed and erratic mon- initiatives and regulations to strengthen
soon has further increased the power the Indian power sector such as com-
generation challenge. Weak monsoons petitive bidding, new transmission
have caused a rise in power rates and pricing norms using point-of-connec-
tariffs have crossed Rs7/kWh on most tion (POC), development of a National
power exchanges. Electricity Fund, greater coordination
Small hydro (up to 25 MW) also with coal supply and a second amend-
offers potential. According to the ment in Sharing of Inter State Transmis-
MNRE assessment there are 5415 po- sion charges and losses Regulations
tential sites for small hydro with an 2012. However a lot more needs to be
aggregate potential capacity of 14 305 done.
MW. The Ministry aims to achieve Decades of populist policies by all
7000 MW SHP based installed capac- political parties have taken a heavy toll
ity by the end of 12th Plan. on the power sector and state govern-
Looking at other renewables, with ments are left with little or no option
the exception of wind power, the but to institute tough measures. India’s
utilisation of renewable energy sources tomorrow depends on the policy actions
is still relatively low in India, which of today.
presents a significant business poten-
tial. The total renewable installed ca- Vishvjeet Kanwarpal is CEO of Global
pacity in India as of March 2012 was InfraSys (P) Ltd. & Asia Consulting
24 914 MW. Group (P) Ltd.
Notably, India has emerged as one of Email: ceo.gis.acg@gmail.com