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Indian Power Sector Analysis Report - May 19, 2014

May, 2014


Power or electricity is one of the most critical components of infrastructure, affecting economic growth and wellbeing of nations. The existence and development of adequate power infrastructure is essential for sustained growth of the Indian economy. With a production of 1,006 terawatt hours (TWh), India is the fifth largest producer and consumer of electricity in the world after US, China, Japan and Russia.

The Indian power sector is one of the most diversified in the world. Sources for power generation range from commercial sources such as coal, lignite, natural gas, oil, hydro and nuclear power to other viable non-conventional sources such as wind, solar, and agriculture and domestic waste. The demand for electricity in the country has been growing at a rapid rate and is expected to grow 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.

Market Size

Electricity production in India (excluding captive generation) stood at 911.6 TWh in FY 13, a 4 per cent growth over the previous fiscal. Over FY 07–13, electricity production expanded at a compound annual growth rate (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 October 2013, total thermal installed capacity stood at 156.5 gigawatt (GW), while hydro and renewable energy installed capacity totalled 39.8 GW and 28.2 GW, respectively. Nuclear energy capacity remained broadly constant from that in the previous year, at 4.8 GW.

Indian solar installations are forecast to be approximately 1,000 megawatt (MW) in 2014, according to Mercom Capital Group, a global clean energy communications and consulting firm.

The growth in energy demand in India would be the highest among all countries by 2030–35, beating even China, according to the 2014 energy outlook report by British oil giant BP.


The investment climate is very positive in the power sector. Due to policy liberalisation, the sector has witnessed higher investment flows than envisaged. The power ministry has set a target for adding 76,000 MW of electricity generation capacity in the 12th Plan (2012–17) and 93,000 MW in the 13th Plan (2017–2022).

The Working group on power for formulation of the 12th Five Year Plan has estimated total fund requirement of Rs 1,372,580 crore (US$ 227.98 billion) for the power sector. The industry attracted foreign direct investment (FDI) worth Rs 40,417.6 crore (US$ 6.72 billion) during April 2000 to January 2014.

The following are some of the major investments made into the Indian power sector:

  • Suzlon Group through its wholly-owned US subsidiary Suzlon Wind Energy Corp (SWECO) has acquired Big Sky wind park from US-based Edison Mission Energy (EME). With this acquisition, Big Sky will become Suzlon’s biggest wind park in the US and one of the best performing installations in the country.
  • BS Ltd has won several orders worth Rs 722 crore (US$ 119.95 million) from various power utilities. The orders are for turnkey engineering, procurement and construction (EPC) contracts for 220 kilovolt (KV) and 132 KV transmission lines and associated sub-stations in Madhya Pradesh.
  • Jaiprakash Power Ventures Ltd (JPVL) has signed a deal with Abu Dhabi National Energy Company PJSC (TAQA) for selling two hydropower projects in Himachal Pradesh for Rs 10,500 crore (US$ 1.74 billion).
  • Elecon Engineering Company Ltd has announced that its subsidiary Elecon EPC Projects Ltd has been awarded an order worth Rs 246.78 crores (US$ 40.93 million) by National Thermal Power Corporation Ltd (NTPC). The order is for supply of coal handling plant package of Gadarwara Super Thermal Power Projects, Stage-I (2x800MW), said Mr Prayasvin Patel, Chairman and Managing Director, Elecon Engineering.
  • Hindustan Cleanenergy Ltd plans to set up a 20 megawatt (MW) solar farm in Uttar Pradesh (UP) and two 15 MW farms in Punjab at an investment of Rs 400 crore (US$ 66.33 million).
  • ABB has won orders worth around US$ 56 million from Power Grid Corporation of India Ltd to supply power transformers and shunt reactors for sub-stations being built to support the country's ultrahigh voltage transmission grid development.

Government Initiatives

India has emerged as one of the fastest growing economies in the world. Its current economic performance reflects a healthy trend based on increased consumption, investment and exports. Over the next five years, this growth is expected to continue. The Government of India has identified the power sector as a key sector of focus to promote sustained industrial growth.

The following are some of the initiatives taken by the Government of India to boost the power sector:

  • India and Sudan have good potential for enhancing cooperation in promoting renewable energy, according to Dr Farooq Abdullah, Union Minister of New and Renewable Energy, Government of India. He also offered Indian assistance for developing renewable energy resources in Sudan.
  • The Ministry of Environment and Forests (MoEF) has given clearance for a reworked plan of the power generator NTPC's Rs 15,000 crore (US$ 2.48 billion) North Karanpura Super Thermal Power Project to come up in Jharkhand.
  • The Government of India plans to reintroduce 'generation-based incentives' for wind power projects to boost capacity addition in the sector.
  • During FY 13, the government liberalised FDI policy for Power Trading Exchanges. Foreign investments in power exchanges registered under the Central Electricity Regulatory Commission Regulations, 2010, are allowed up to 49 per cent (FDI 26 per cent and FII 23 per cent).
  • India and the Netherlands have signed a memorandum of understanding (MoU) to set up an Indo–Dutch Joint Working Group to facilitate the exchange of technical and institutional knowledge on clean energy.
  • India and Argentina have agreed to enhance cooperation in the field of renewable energy. The two countries decided to explore avenues for cooperation in the fields of solar energy, wind energy and bio-fuel generation.

Road Ahead

Wind energy is the largest renewable energy source in India; projects like the Jawaharlal Nehru National Solar Mission (aims to generate 20,000 MW of solar power by 2022) is creating a positive environment among investors keen to tap into India’s potential.

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 CAGR of around 49.5 per cent during 2010–2014 to reach 1,500 MW by end of 2014, according to a RNCOS research report titled, 'Indian Solar Energy Market Analysis'.

Exchange Rate Used: INR 1 = US$ 0.01658 (as on April 8, 2014)

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