INDIA'S POWER DEMANDS
1. Context
As the fastest-growing major economy in a rapidly heating world, India’s electricity demand is growing fast. Since FY21, India’s electricity consumption has risen at approximately 9% per annum, compared to an average of 5% annually in the preceding decade. The Central Electricity Authority (CEA) had projected electricity demand to grow at a 6% CAGR between 2022 and 2030. However, recent trends suggest a strong likelihood of overshooting these estimates
2. India's electricity demand
- Apart from economic expansion and urbanization, climate change-induced heat stress—characterized by increasingly intense summers—is a major factor driving electricity consumption.
- Presently, industries, households, and agriculture account for 33%, 28%, and 19% of India's total electricity usage, respectively. However, household electricity demand has witnessed the most rapid increase over the past decade.
- The summer of 2024 saw a significant surge of 40-50% in room air conditioner sales, fueled by rising incomes and record-high temperatures. On May 30, 2024, India's peak electricity demand surpassed 250 GW, exceeding projections by 6.3%.
- Looking ahead to 2025, following the warmest February in 125 years, the country must prepare for prolonged heatwaves and an estimated 9-10% rise in peak electricity demand.
- In essence, India's electricity consumption is rising swiftly and becoming increasingly unpredictable
3. How has India been meeting its rising demand?
- Since the early 2000s, India's power generation capacity has expanded fourfold to reach 460 GW, positioning the country as the third-largest electricity producer in the world.
- As part of its clean energy transition, India's power sector is undergoing a significant transformation, with renewable energy (RE) sources such as solar and wind playing an increasingly prominent role.
- Initially, in 2010, the government set a renewable energy target of 20 GW by 2020, which was later revised in 2014 to 175 GW by 2022. In 2021, this ambition was further elevated, aiming for 500 GW of non-fossil fuel power capacity by 2030.
- To address surging electricity demand, the government has consistently implemented both short-term and long-term strategies. For instance, during the 2022 peak, coal supplies to the power sector were increased, and railway transportation for coal was prioritized.
- Additionally, imported coal-based power plants were instructed to operate at full capacity. States that had expanded their solar power infrastructure leveraged excess solar energy to meet daytime peaks, though managing nighttime demand remains a challenge.
- The year 2024 marked a significant milestone, with India adding a record 28 GW of new renewable energy capacity, raising the share of renewables in the electricity mix to 13.5%.
- Meanwhile, coal’s share in installed capacity dropped below 50%, yet it continues to account for 75% of total power generation.
- At present, India’s renewable energy capacity stands at 165 GW, with an additional 32 GW projected to come online in 2025.
- To meet its 2030 target, India will need to accelerate its efforts, adding approximately 50 GW of renewable energy capacity annually over the next five years
4. Clean energy ambitions
- A recent study by the Council on Energy, Environment, and Water (CEEW) explores this issue by modeling six possible scenarios for India’s power sector in 2030. The findings indicate that failing to reach the target of 500 GW of clean energy capacity by 2030 could lead to power deficits and higher electricity costs, even if demand grows at a moderate pace.
- For instance, if India achieves only 400 GW instead of the 500 GW target, approximately 0.26% of the total demand would remain unmet. This shortfall, though seemingly minor, could disrupt power supply for around one million households for 2.5 hours each day. Northern states would face the greatest impact due to network limitations.
- If electricity demand grows at a faster rate—6.4% CAGR between 2023 and 2030 instead of 5.8%—even achieving 500 GW of clean energy will not be sufficient, necessitating additional capacity.
- In this scenario, India has two options: either add 6 GW of new coal-based power (beyond the projects already under construction) or expand renewable energy (RE) capacity by an additional 100 GW beyond the planned 500 GW. While the coal-based approach could meet demand, it would put excessive strain on existing coal plants, increasing the risk of outages and higher costs.
- In contrast, the study suggests that expanding renewable energy capacity by 100 GW, distributed across different states, would be a more sustainable and cost-effective solution
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India needs to achieve 600 GW of clean energy capacity by 2030 to keep up with growing demand. Meeting this target will enable the country to provide reliable electricity at lower costs, potentially saving up to ₹42,400 crore ($5 billion) in procurement expenses in 2030 alone.
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Additionally, it would bring significant social and health benefits, including the creation of 1,00,000 new jobs between 2025 and 2030 and a reduction of air pollutant emissions by up to 23% in 2030.
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However, reaching 600 GW would require an ambitious annual addition of 70 GW of renewable energy (RE) capacity until 2030, which presents considerable challenges. Several operational and grid-related issues are already slowing down RE deployment and discouraging distribution companies from increased adoption.
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Key obstacles include delays in acquiring conflict-free land, shortages of transmission equipment, uncertainties surrounding incentives for inter-state RE projects, and the complexities of grid balancing. Given these difficulties, coal power plants might seem like a more feasible option.
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However, this approach would neither be cost-effective nor dependable. Historical data indicates that coal projects take more than seven years to become operational, whereas modular RE plants can be deployed much faster and offer more affordable electricity
5. Renewable energy programs
Achieving 600 GW of clean energy is both urgent and feasible with the right market incentives. To accelerate the deployment of renewable energy (RE) in India, three key strategies must be implemented.
- Expanding RE Projects Across More States
Currently, five states account for nearly 75% of India’s total RE capacity due to state-agnostic reverse bidding and the full waiver of inter-state transmission system (ISTS) charges, which have concentrated investments in specific regions, increasing land pressure. The government should collaborate with more states—such as Odisha, Madhya Pradesh, Bihar, Punjab, and Kerala—to create a more favorable environment for RE expansion. To encourage a more distributed approach, the ISTS waiver should not be extended beyond June 2025, except for storage-based projects. This would also promote smaller-scale RE plants under initiatives like PM-KUSUM and the PM Surya Ghar Scheme. - Promoting Co-location of Wind, Solar, and Energy Storage
Both central and state governments should encourage integrating wind and energy storage systems with existing and upcoming solar projects. This would optimize land use, enhance transmission network efficiency, and improve grid stability for renewable integration. According to a study by the Council on Energy, Environment, and Water (CEEW), integrating 600 GW of RE by 2030 will require 280 GWh of battery energy storage systems (BESS) and 100 GWh of pumped hydro storage. Priority should be given to BESS, as it can be deployed within six months and is rapidly becoming cost-effective. - Reforming Bidding and Contracting for Faster RE Procurement
Innovations in bidding processes and contract structures are essential to boost RE procurement and ensure its availability in power markets. Several large-scale solar and hybrid RE tenders issued in FY24, particularly by intermediaries like the Solar Energy Corporation of India, failed to attract interest from states. The central government should collaborate with states to stimulate RE demand, refine tender mechanisms, and address bottlenecks proactively. Beyond bilateral procurement, efforts should focus on increasing RE participation in power exchanges. One potential solution is establishing a Contract-for-Difference pool to mitigate risks associated with merchant RE capacities
6. Way Forward
Over the past decade, India has made remarkable progress in its renewable energy journey. With determined efforts, it could achieve what once seemed impossible—doubling the share of clean energy in its generation mix from 25% to 50% by 2030
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For Prelims: Electricity, Ministry of Power, solar energy,
For Mains:
1. Discuss the Reasons for the Power demand surge in India and its impact on climate change. (250 Words)
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Previous Year Questions
1. Consider the following statements: ( UPSC 2016)
Which of the statements given above is/are correct? (a) 1 only 1. Answer: (a) 2. With reference to solar power production in India, consider the following statements: [UPSC 2018]
Which of the statements given above is/are correct? (a) 1 only (b) 2 only (c) Bothe 1 and 2 (d) Neither 1 nor 2 2. Answer: (d)
For Mains 1. India has immense potential of solar energy though there are regional variations in its developments. Elaborate. (UPSC 2020) |
