Power Demand in India has Surged Tremendously over the Last Two Decades

Summary: India is the third-largest producer and consumer of electricity in the world. India lacks adequate distribution infrastructure even though it has surplus power generation capacity. India is aggressively promoting the use of alternative energy and for this purpose, it has been building renewable power plants all across the country. India’s per capita consumption of electricity is low as compared to other countries in the world and the government of India has launched ‘Power for All’ program that aims to provide the necessary infrastructure to ensure uninterrupted electricity supply to all households, industries and commercial establishments.

Electricity demand in India will almost triple in the next two decades

The electricity demand in India would grow by 30 percent between 2018 and 2040 as a result of rapid urbanization and industrial growth. In the last ten years, the total installed generation capacity in India increased 154.7 GW in 2007 to 345.5 GW in 2018, making it the world’s third-largest producer of electricity. Despite the noticeable progress, India still faces an enormous challenge of meeting the growing demand for electricity in the country.

Private sector investments in the power sector have increased substantially Power sector companies in India are investing heavily in renewable energy to meet the ever-increasing demand as fossil fuels are not going to last longer. After the introduction of the Electricity Act of 2003, there has been a phenomenal increase in private sector investment thanks to the government’s initiatives to rope in more and more private companies in the power sector. After this act, a competitive market has emerged in which power producers can sell electricity to the highest bidder and end-users can purchase electricity from the cheapest source. More private players are required to enter the power sector There is a lack of competition in the energy sector as electricity generation in India is dominated by projects owned by the central and state governments. There are several barriers to the entry of private companies in the power sector as several state governments impose a heavy open access charge on consumers who buy electricity from the third party instead of buying it from state distribution utilities. In some states, this additional open access charge doubles the cost of electricity for consumers who purchase from a power exchange. Distorted allocation of coal and low tariffs has also discouraged the private generators from entering the power sector.

Transmission congestion has to be prevented to meet the power supply-demand of the country In the northern and southern regions of India, transmission congestion has prevented power trading across several states which have resulted in the loss of a significant amount of electricity due to congestion in the electric network. India loses about a quarter of electricity in the network due to transmission congestion which is caused because of both commercial and technical reasons and it is well above the 10 percent international norm. The three types of distortion which are affecting the power sector of India immensely are Institutional distortions arising from weak governance, Regulatory distortions stemming from price regulation and subsidies and Social distortions that cause environmental and health damages.

Sumit Pawar is a freelance writer, with years of experience, creating content for varied online portals. His content is published on many national and international publications.