Power Sector in India 2020

Description

Over the years, the Indian power sector has undergone a significant transformation in terms of power supply, energy demand, fuel mix, and market operations. It is the third-largest power generating country in the world. India’s total installed capacity rapidly increased at 8.4% during the FY 2010-FY 2019 period. As of 31st December 2019, India held a total installed capacity of 367.28 GW, emerging as a power-surplus nation.

Segmentation insights:
The power sector in India is characterized by its diversified fuel sources which consists of environmentally sustainable sources like solar, wind and small hydro energy, along with conventional sources like coal, oil and gas. Thermal power was the predominant type of installed capacity in India, accounting for 63.5% of the total installed capacity in FY 2019. The commissioning of various Ultra Mega Power Projects (UMPPs) based on thermal power attributed to the largest share of thermal power in the country’s energy mix.
Renewable energy accounts for 21.8% of the total installed capacity in India in FY 2019, and is the second-leading source of energy in the country. The Indian government’s ambitious target of installing 175 GW of renewable energy capacity, coupled with the establishment of solar parks and the solar city program propelled the growth of clean energy in the country. Furthermore, financial incentives offered by the government are likely to encourage state-owned operators to invest in clean energy parks and ultra-mega renewable energy power parks (UMREPPs).
Nuclear and hydro are other prominent sources of power in India. In order to utilize the enormous hydro-energy potential (~600 billion units per annum), the country has set a target to add 1190 MW of hydro capacity (600 MW in the center 379 MW in private sector, and 211 MW in states) by FY 2020. As of FY 2019, India has 6.78 GW of nuclear energy installed, which is operated by the Central government owned Nuclear Power Corporation of India Limited (NPCIL).

Market influencers:
Soaring demand from the industrial and domestic sectors is a major factor driving the Indian power sector. The industrial sector in India expanded significantly over the past few years, marked by the steady increase in the index of industrial production (IIP) for the electricity domain, from 126.6 in FY 2015 to 156.9 in FY 2019. The industrial sector has been the largest power consumer in India, accounting for around 44.1% of the total power consumption in FY 2019. On the other hand, the consumption from the domestic sector increased swiftly at 7.5% during the FY 2010-FY 2019 period. Improved access to electricity, surge in sales of white goods, and spurring demand for LED bulbs have propelled the demand from the domestic sector. Furthermore, supportive government policies such as UDAY 2.0, 24×7 – Power for All, SAUBHAGYA, UJALA Scheme, Green Energy Corridor, and vehicle electrification aided the growth of the Indian power sector.
The constrained supply of raw materials poses a substantial challenge for the Indian power sector. Players are struggling to acquire raw materials for power generation due to inconsistency in domestic coal supply, fluctuation in international coal prices and shortage of natural gas. Furthermore, the weak infrastructure of the transmission and distribution (T&D) system leads to T&D losses, affecting the power sector. The T&D loss in India is around 20%, which is much higher than other Asian countries. Of late, the thermal power sector has been facing challenges on account of environmental issues, tariff structure, and difficulty in acquiring power purchase agreements (PPA).

Competitive landscape
The power sector in India is slowly moving towards consolidation, owing to the presence of established players with a keen focus to expand their businesses through inorganic growth strategies. Small companies, on the other hand, are striving to sustain in the highly competitive market. In September 2019, Adani Power Limited acquired 100% stake of Bikaner Khetri Transmission Ltd (BKTL). Furthermore, NTPC Limited and Adani Power Limited are competing to purchase the stressed power project of Avantha Group. Key players in the thermal power sector include CESC Limited, Jindal Steel and Power Limited, GMR Energy Ltd and Adani Power Limited.

Companies covered
• Adani Power Limited
• CESC Limited
• Damodar Valley Corporation (DVC)
• NHPC Limited
• NTPC Limited
• SJVN Limited
• Suzlon Energy
• Tata Power Limited
• Websol Energy System Limited
• Nuclear Power Corporation of India Limited (NPCIL)