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    Indian Power Sector Analysis Report – October 09, 2013

  • Indian Power Sector Analysis Report - October 09, 2013

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October 09, 2013


India has the world’s fifth-largest electricity generation capacity and demand is expected to surge in the coming years owing to growth in the economy. The power sector is high on India's priority as it offers tremendous potential for investing companies based on the sheer size of the market and the returns available on investment capital.

The Indian power sector is one of the most diversified sectors in the world. Power in India is generated from commercial sources like coal, lignite, natural gas, oil, hydro and nuclear power as well as other viable non-conventional sources like wind, solar, agriculture and domestic waste. The demand for electricity in the country has been growing at a rapid rate and is expected to increase further in the years to come. In order to meet the increasing requirement of electricity, massive addition to the installed generating capacity in the country is required.

The country offers unlimited growth potential for solar photovoltaic (PV) industry as well. India is endowed with vast potential of solar energy and is quickly developing itself as a major manufacturing hub for solar power plants. Besides, it is expected that, the annual PV-installed capacity will grow at a compound annual growth rate (CAGR) of around 49.5 per cent during 2010-2014 to reach 1,500 megawatt (MW) by the end of 2014, according to RNCOS research report titled, 'Indian Solar Energy Market Analysis'.

Market Size

Electricity production in India stood at 911.6 terra watt hour (TWh) in FY13, a four per cent growth over the previous fiscal. Over FY07–13, electricity production has expanded at a CAGR of 5.5 per cent. The Planning Commission’s 12th Plan projects that total domestic energy production would reach 669.6 million tonnes of oil equivalent (MTOE) by 2016–17 and 844 MTOE by 2021–22.

As of April 2013, total thermal installed capacity stood at 151.7 gigawatt (GW), while hydro and renewable energy installed capacity totalled 39.6 GW and 27.5 GW, respectively. Nuclear energy capacity remained broadly constant from that in the previous year, at 4.8 GW. For the 12th Five-Year Plan, a total of 88.5 GW of power capacity addition is targeted, of which 72.3 GW constitutes thermal power, 10.8 GW of hydro power and 5.3GW of nuclear power. The capacity addition target for 2013–14 is 1,198 MW of hydro power, 15,234 MW of thermal power and 2,000 MW of nuclear power. Total capacity target is 18,432 MW.


The investment climate is very positive in the power sector. Due to surge in the sector, the power sector has witnessed higher investment flows than envisaged. The Ministry of Power has set a target for adding 76,000 MW of electricity capacity in the 12th Five Year Plan (2012-17) and 93,000 MW in the 13th Five Year Plan (2017-2022).

The industry attracted foreign direct investment (FDI) worth Rs 37,335.68 crore (US$ 6.01 billion) during April 2000 to July 2013.

Some of the major investments made into the Indian power sector are as follows:

  • Welspun Energy Ltd has launched a 55 MW solar plant in Rajasthan. The Rs 500 crore (US$ 80.60 million) project, stated to be Asia's largest single-location solar plant
  • Sterlite Grid has commissioned a 23 km 400 kilo volt (KV) double-circuit quad transmission line connecting Purnia and Bihar Sharif district substations in Bihar, with an investment of Rs 500 crore (US$ 80.60 million)
  • NHPC Ltd plans to take over private hydropower projects and is ready to invest equity worth Rs 20,000 crore (US$ 3.22 billion) over the next five years
  • Suzlon Energy has won orders to supply wind turbines totalling 48 MW from French energy company Valorem
  • Sanofi India has signed an agreement with Suzlon Energy Ltd (SEL) for a 2.1 MW offsite windmill installation, to generate renewable power for captive consumption at its Ankleshwar manufacturing site
  • GE Energy Financial Services India has invested Rs 257 crore (US$ 41.43 million) in the hydropower project developed by Gati Ltd in Sikkim

Government Initiatives

The Government of India has set a target to generate 10,000 MW of power through solar energy by 2017. The Phase I of the Jawaharlal Nehru National Solar Mission has been very successful, wherein 1,685 MW of solar power was generated, said Dr Farooq Abdullah, Union Minister for New and Renewable Energy, Government of India.

In order to attract foreign investments in the power sector, FDI up to 100 per cent is permitted under the automatic route for projects of electricity generation (except atomic energy), transmission, distribution and power trading.

India has offered to help Cuba develop its renewable energy resources. Dr Farooq Abdullah, Union Minister of New and Renewable Energy, Government of India, is visiting Cuba along with a high level delegation of experts to explore greater opportunities for cooperation and collaboration.

Under the Union Budget 2013-14, the government plans to construct a transmission system from Srinagar to Leh at an investment of Rs 1,840 crore (US$ 296.63 million).

Some of the initiatives taken by the Government of India to boost the power sector are:

  • To facilitate flow of renewable energy into the national grid, the Government of India plans to roll out Rs 43,000 crore (US$ 6.93 billion) 'green energy corridor' project
  • Ministry of Power and Ministry of Water Resources have drawn up a framework for speedy technical clearances to power projects by Central Electricity Authority (CEA) and Central Water Commission (CWC)
  • The Government of India plans to set up 4,000 MW of solar thermal power capacity in Rajasthan. "We have discussed the plant with the Rajasthan government and we aim to set up a solar thermal capacity near the Sambhar salt lake in Jaipur," said Mr Farooq Abdullah, Union Minister for New and Renewable Energy, Government of India
  • India plans to strengthen its ties with Iraq in the energy sector. A formal memorandum of understanding (MoU) on cooperation in the sector would be signed during the four-day visit of Mr Nouri al-Maliki, Prime Minister of Iraq, to India
  • The Government of United Kingdom (UK) has agreed in principle to share the best practices with the Government of Andhra Pradesh (AP) in energy efficiency and energy conservation initiatives
  • Hydro Projects worth 2,500 MW across various states have been given clearance by the Forest Advisory Committee (FAC) and Ministry of Environment and Forest (MoEF)

Road Ahead

Renewable energy is fast emerging as a major source of power. Wind energy is the largest source of renewable energy in India; it accounts for an estimated 87 per cent of total installed capacity in renewable energy. The country aims to increase the importance of wind power even further; there are plans to double wind power generation capacity to 20 GW by 2022.

Biomass is the second largest source of renewable energy, accounting for 12 per cent of total installed capacity in renewable energy. There is strong upside potential in biomass in the coming years.

Solar energy accounts for one per cent of total renewable energy installed capacity. However, the share is not indicative of the country’s true potential, which stands at an estimated 5,000 TWh per annum.

Exchange rate used: INR 1 = US$ 0. 0161 (as on October 9, 2013)

References: Ministry of Power, Press Information Bureau, Media Reports, RNCOS Report


x IBEF : India Brand Equity Foundation