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India as a country is witnessing a significant transformation in energy generation, a shift from fossil fuel to renewable energy. However, the sluggishness seen in the overall economy would adversely effect the power sector writes Renjini Liza Varghese.

Electricity has redefined the standard of living of modern man. And the dependency on power is going up day by day. According to the data released by the government, the country’s electricity reach is above 99 per cent. It also produces surplus electricity.          

India’s energy basket has an exciting mix of fossil fuel-generated, renewable energy, hydropower and nuclear power. Of the current installed capacity of 360 GW, fossil fuel still dominates the chart with 79.8 per cent. Interestingly, a sector which was dominated by the government-owned generation companies has slowly given way to private players. Currently, 44 per cent of the total generated power comes from the private sector.

India’s Total installed capacity as on 31 July 2019 is 360456 MW. 

Energy is the base of the growth of any country in the world. It is a proven fact that the energy capacity addition should be double the growth domestic product (GDP) of the country. That means if the GDP is growing at the rate of 7 per cent, the country should have energy capacity addition growing at 14 per cent. This, many of the experts’ opinions that, is necessary for sustaining the growth of the country. The decline in power demand is indicative of the sluggish growth in an economy.                

For a country like India, which was consistently positioned in the growth trajectory for the last decade or so has improved its energy consumption, capacity addition and in terms of electrification. The per capita consumption, which was below 800 units per person now stood at 1181 units. This is far behind the global leaders like the US, UK and China.              

41.16 per cent of the total produced is consumed for industrial purposes — residential consumption of 24.76 per cent, followed by agricultural use of 17.69 per cent  and commercial consumption is at 8.24 per cent. 

For India, thermal power will continue to be the mainstay for the next decade at least.  However, it has taken significant steps towards increasing its renewable energy capacity addition. India’s concentration is on Solar power and Wind power in a substantial way. It also is tapping hydroelectric projects as well.

India, in its endeavour in the fight against climate change and global warming, has moved towards renewable energy in the past few years in a big way. Harnessing green power in a sizeable way is one of the critical steps in attaining this goal.    

India had announced the National Action Plan on Climate Change (NAPCC) a decade ago (2008). As a part of the NAPCC, the government has set specific targets for renewable energy. The government must look at moving away from fossil fuels and tap into the potential of renewables in India beyond 2022.          

Thermal Power

The classification of thermal energy consists of energy produced from coal, gas, lignites, and diesel. The total installed capacity from this segment totals to 227644.34 MW.       

As witnessed in the last few years, thermal energy capacity addition would decline in the coming years. It is now predicted that the sectors capacity addition will remain subdued over FY20-FY21. 

The global research analysis firm India Ratings and Research from the Fitch Group, in one of its recently released reports, said, “We expects coal-based capacity addition in the Indian power sector, which fell to a low of 3.6GW in FY19, to remain subdued at 5GW-6GW per year in FY20 and FY21. This likely decline in thermal capacity addition is attributed to the following factors:
i) the decommissioning of nearly 2GW annually as the plants complete their useful life; and ii) the stress in nearly 85 per cent of the private under-construction capacity, given the issues with regards to availability of funds, coal, power purchase agreements and evacuation; and iii) decline in fresh project starts (FPS) across the central, state and private sectors.”   

Recalling here, during FY13-FY17, excess capacity in the thermal power sector had increased to an average of 42 per cent on account of a significant increase in capacity and lower-than-expected growth in power demand. The excess capacity touched a peak of 45 per cent in FY16 and then declined subsequently to around 42 per cent at FYE19. Power demand is likely to see healthy growth during FY20-FY24, and only a part of the incremental demand can be met by existing and upcoming renewable capacities. Considering the absence of any major alternatives to achieve the growth in demand, the proportion of excess capacity in the thermal power sector would decline further during FY20-FY24, in Ind-Ra’s opinion. The slowdown in new thermal capacity addition by the state and central thermal sectors would also support the absorption of the excess thermal capacity over this period.     

The India Ratings report continues, “Decline in Fresh Thermal Project Starts: Fresh Project Starts (FPS) for thermal projects declined steeply to a mere 1.6GW in FY19 from an average of 10GW per year over FY15-FY18. The private sector’s contribution to new projects was nil during FY19, signalling the private players’ lack of interest in the thermal sector. FPS by the state and central sector too have declined meaningfully owing to the gradual shift towards renewable capacity addition, given the single part tariff and the cost competitiveness of such tariffs.”           

It is also noted that 85 per cent of private sector under-construction capacity is stressed. As of FYE18, of the total under-construction capacity of 24.7GW in the private sector, 14.4GW of capacity was uncertain/stressed/work on hold. This proportion increased to 20GW (85 per cent of the private under-construction capacity) at FYE19, as the debt-servicing issues being faced by companies caused the supply of incremental credit from banks and equity markets to come to a standstill.            

The decline in FPS on a yearly basis during FY17-FY19 clearly points to the likely decrease in thermal capacity addition over the medium term. FPS declined sharply to a mere 1.6GW during FY19 from an average of 10GW over FY15 to FY18. Another interesting trend is the shift from private sector to the state and the central sectors, with the bulk FPS coming in from the state sector. However, the intensity of capacity addition by the public sector too is declining. Ind-Ra’s analysis suggests that even in the public sector, the central sector is shying away from FPS due to its increasing focus on renewable energy.

Renewable Energy

India ranks as the fourth largest carbon emitter in the world ranking. To reduce the carbon emission and fight against climate change, the country has set a target of renewable energy capacity of 175 GW by 2022. Of which 100 GW would be from Solar energy (60 GW grid connected and 40 GW rooftop). The balance 75 GW would come from wind energy, hydro and biomass.    

While the wind industry is talking about achieving 80GW and beyond, the target seems to be unachievable owing to issues like slow capacity addition, lack of interest of developers, lack of evacuation facilities etc.            

India in the recent past has crossed the 80GW in installed capacity with 29.55 GW of solar energy and 36.37 GW wind power. Wind energy continues to  lead the renewable energy pack. Though wind and solar are trying to add more capacity every year, it appears that both sectors stay far behind in their capacity addition targets.             

While capacity addition gets eyeballs, EPC, project management the two segments that run any major project is less talked about.

Project Management

Any plan that is translated to reality is a project. And for a power project, the management of the project starts from the time the construction begins. Any project, whether it is a power project, a bridge or a railway track, all comes with a shelf life and a lifecycle.          

Project management is an organisational structuring concept designed to obtain more effective and efficient utilisation of company’s resources of workforce, money, information, equipment, facilities and materials.     

In the case of a power project, let us divide the project cycle into three. The first segment constitutes the pre-planning or conceptual
stage. That also include pre-project approvals and acquisitions. Land acquisition,
environmental clearance, ordering the types of machinery all happen in this stage. The second stage includes the construction stage of the proposed plant to the commissioning of the project. Material transport management, Managing the logistics of the supply, and
the timely completion of the projects and commissioning are managed in tandem to avoid escalation of costs. Here the project, as practice gets evaluated for security, quality and another commissioning parameter before handing over to the client.     

The third stage is a more crucial point for a power plant, which consists of transporting power from the generation point to the end-user. The process of evacuation from the generation point, transmission to distribution points and then to the consumers has multiple processes involving complex processes. India’s Aggregate Transmission losses (At&C) and transmission and distribution (T&D) losses are much higher than its global peers.             

In the year 2018, India’s T&D losses were recorded as 21.1 per cent. The country has set a target of bringing the losses to below 15 per cent. The stakeholders have adopted many new technologies to achieve this set target.  

Implementation of CADA system and smart equipment in the distribution network is expected to increase efficiency to a significant level. The smart grid implementation has helped the country to have ‘one nation one grid.’  

The smart grid has also facilitated the integration of renewable energy at different points in the grid across the country. As of today, there is an injection of more than 80 GW of infirm power (renewable energy) into the network.           

Demand supply management is also a complex task. That is why we call the electricity grid as a complex marvel of engineering. Smart grid aid the distribution companies in managing the supply-demand gap in real-time.                

With the help of smart electric equipment, the distribution companies (Discoms) are able to recover the out-standings from the consumers. The best example is the prepaid meters — this work as how your mobile recharges work. Smart cities and Smart grids once on-stream would be exciting to watch on what changes it is bringing on the electrical landscape of the country.

Conclusion

Power project management was not distinguished as a single business opportunity in India. However, with the changing times, the analyst feels that this branch of business would soon emerge.

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