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Power sector Latest News and Updates - Indira Securities October 22 2021Power sector, Electricity, India’s Power sector, R

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India's power sector is one of the world’s most diverse. Power generating options include coal, lignite, natural gas, oil, hydro, and nuclear power, as well as feasible non-conventional options including wind, solar, and agricultural and household waste. The country's electricity demand has risen fast and is anticipated to continue to climb in the coming years. To fulfill the country's growing need for energy, a huge increase in installed generating capacity is needed. 


Advantage to India of rapidly growing power sector:


• India has been on track to meet the Saubhagya scheme's goal of 100% home electrification. The Saubhagya project had electrified around 26.2 million homes as of March 2019.

• In the six years prior to the Union Budget 2021-22, 139 GW of built capacity, 1.41 lakh circuit km of transmission lines, and 2.8 crore homes were connected, according to the Union Budget 2021-22.



• India has 95.65 GW of installed renewable energy capacity as of May 2021. By 2022, solar energy is expected to provide 114 GW, followed by wind power at 67 GW and biomass and hydropower at 15 GW. The renewable energy target has been increased to 227 GW by 2022.

• India is the only country in the G20 that is on pace to meet the Paris Agreement's goals.


• Under the automatic method, 100 percent FDI is permitted in the electricity and renewable energy sectors.

The government suggested launching a National Hydrogen Mission to generate hydrogen from renewable energy sources in the Union Budget 2021-22.

2. Increasing demand

• Increased industrial activity will increase electricity demand.

• Increasing electrification and per-capita use, as well as a growing population, will offer further momentum.

• In 2022, power consumption is expected to reach 1,894.7 TWh.

•With a total investment of US$ 90 billion between 2010 and the second half of 2019, India ranked sixth on the list of nations that have made substantial investments in renewable energy.


1. Expected increase in investment

• Between FY19 and FY23, India's power sector is expected to attract investment worth Rs 9-9.5 trillion (US$ 128.24-135.37 billion).

• Between April 2000 and December 2020, total FDI inflows into the electricity industry were US$ 15.36 billion.

• Energy sector projects accounted for the largest part (24 percent) of the overall projected capital expenditure of Rs. 111 lakh crore (US$ 1.4 trillion) according to the National Infrastructure Pipeline 2019-25.

1. Upcoming opportunities

• Over the next five years, the government has set aside Rs. 305,984 crore (US$ 42 billion) in the Union Budget 2021-22 for a revised, reform-based, and result-linked new electricity distribution sector program.

• In June 2019, the government issued a series of US$ 5 billion transmission-line bids in order to meet a target of 175 GW by 2022.


1. Policy support

• Electrification in the nation is expanding with the help of initiatives like Deen Dayal Upadhyay Gram Jyoti Yojana (DDUGJY), Ujwal DISCOM Assurance Yojana (UDAY), and Integrated Power Development Scheme (IPDS).

                                                               Market Size

The Indian electricity sector is now undergoing substantial changes that are redefining the business. India's electricity sector is constantly attempting to transition from nonrenewable to renewable energy sources.


The country's power demand has been driven by sustained economic development throughout the years. The Indian government's goal of achieving "Power for All" has spurred capacity expansion in the country. Power for All (24x7 PFA) is a joint initiative of the Government of India (GoI) and state governments with the goal of making 24x7 power available to all homes, industries, commercial companies, public requirements, and any other energy consuming organization by FY 19.


Both the market and the supply sides are growing more competitive at the same time (fuel, logistics, finances, and manpower).

Solar energy is expected to generate 114 GW by 2022, followed by wind power at 67 GW and biomass and hydropower at 15 GW. The renewable energy target has been increased to 227 GW by 2022.

The country's total thermal installed capacity was 234.05 GW in FY22 (till June 2021). Renewable, hydro, and nuclear energy installed capacity were 96.95 GW, 46.32 GW, and 6.78 GW, respectively.

 Among top four power generating nations:

·         • India is the world's third-largest producer and user of electricity, with a total generation of 1,558.7 TWh. Despite the fact that electricity generation has increased more than 100-fold since independence, consumption has expanded even faster due to increased economic activity.

·         In the global energy industry, India's energy companies have achieved considerable success. Reliance Industries Ltd. and Indian Oil Corp. Ltd. are rated 19th and 25th, respectively, in the S&P Global Platts Top 250 Global Energy Rankings 2019.

·         The Export-Import Bank of India (Exim Bank) announced in June 2021 that it had extended a line of credit (LOC) worth US$ 100 million to the Sri Lankan government for the purpose of funding solar energy projects and ensuring that renewable energy sources meet 70% of the country's power needs by 2030.


Investment Scenario

The industry attracted US$ 15.33 billion in Foreign Direct Investment (FDI) between April 2000 and March 2021, representing for 3% of total FDI intake into India.


The following are the major stakeholders in the electricity sector


Power generation: overall fundamentals will remain strong

Renewable energy is fast emerging as a major source of power

According to the Central Electricity Authority (CEA), renewable energy generation will grow from 18 percent to 44 percent by 2029-30, while thermal energy generation would decrease from 78 percent to 52 percent.

Wind energy is India's most abundant renewable energy source. It contributes for 41.23 percent of total installed renewable capacity (39.44 GW) (95.65 GW). By 2022, there are plans to increase wind power generating capacity to 60 GW.

Solar energy is the second-largest renewable energy source. It represents for 42.94 percent of total installed renewable capacity (41.08 GW) (95.65 GW). The government has set a goal of 100 gigawatts by 2022.

Mr. Mukesh Ambani, Chairman of Reliance Industries Ltd., said in June 2021 that the firm planned to invest Rs. 750 billion (US$ 10.10 billion) over the next three years in a new energy sector.

In July 2021, GAIL, a subsidiary of the Ministry of Petroleum and Natural Gas, agreed to invest Rs 5,000 crore (US$ 671.14 million) in two plants to produce ethanol and compressed biogas (CBG) from municipal waste.


In the present context, we can observe that major economies are experiencing a big electricity deficit due to a major coal scarcity caused by severe rains in coal mining towns, posing a huge short-term problem for major economies such as China, Europe, and India. This demonstrates how reliant we are on an energy source that is finite and poses significant environmental risks to economies.

This is why many big corporations in India and throughout the world are turning toward renewable energy sources, and governments in many countries have begun to promote the wider use of renewable energy.

As economies develop, demand for industrial and home power sources will grow rapidly, and the power sector's capacity will grow in line. The growing demand for electricity cannot be met only by nonrenewable energy sources. Companies will have to rely on renewable energy sources in the future and expand their renewable energy capacity.

As electric vehicles (EVs) are going more prevalent in India and throughout the world, the demand for energy is expected to skyrocket in the coming decade. As a result, now is a wonderful time to invest in firms that are constantly growing their capacity utilization towards renewable energy, as they will eventually become a big contributor to the power sector and general economic development.

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