Scale Up Demand, Unlock Logjam

On the installed capacity front, coal-based capacities should not increase from the current level. While there is surplus power generation, rise in power demand and signing of PPAs remain the key factors to watch.

- Devam Modi

India’s power sector is undergoing structural changes with an unprecedented scale-up in renewables, Ujwal Discom Assurance Yojana (UDAY) implementation at distribution companies (discoms/SEBs), uncertainties over off take arrangements and pressure on promoters/ lenders to divest assets to avoid bankruptcy. The government is focusing on Aggregate Technical and Commercial (AT&C) loss reduction, fuel and Power Purchase Agreement (PPA) rationalisation, energy efficiency and demand revival. While there is definite progress, implementation is likely to be uneven as power is a concurrent subject with different starting points for each SEB. Though power procurement remains uncertain with competition among various modes of generation, we are seeing steady demand for Transmission and Distribution (T&D) infrastructure.

India’s total installed power capacity as of October 2017 stood at 331 GW with ~58 per cent share of coal-based capacities. All India installed renewable capacities as of September 2017 stood at 60 GW, with Wind and Solar capacities comprising ~54 per cent and ~25 per cent respectively. In the past 3 years, Solar and Wind are growing faster than the remaining market, but have seen headwinds emerge over the last 6 months in terms of revision of PPAs by states, rise in solar panel prices and GST related uncertainties.

Receding renewables’ pace