Electricity Sector in India - Demand

Demand

Demand drivers

"Expanding access to energy means including 2.4 billion people: 1.4 billion that still has no access to electricity (87% of whom live in the rural areas) and 1 billion that only has access to unreliable electricity networks. We need smart and practical approaches because energy, as a driver of development, plays a central role in both fighting poverty and addressing climate change. The implications are enormous: families forego entrepreneurial endeavors, children cannot study after dark, health clinics do not function properly, and women are burdened with time consuming chores such as pounding grain or hauling water, leaving them with less time to engage in income generating activities. Further, it is estimated that kitchen smoke leads to around 1.5 million premature deaths every year, more than the number of deaths from malaria each year. After gaining access to energy, households generate more income, are more productive and are less hungry, further multiplying the Millenium Development Goal's progress."

— Rebeca Grynspan, UNDP Associate Administrator and Under Secretary General, Bloomberg New Energy Summit, April 7, 2011

Of the 1.4 billion people of the world who have no access to electricity in the world, India accounts for over 300 million.

Some 800 million Indians use traditional fuels – fuelwood, agricultural waste and biomass cakes – for cooking and general heating needs. These traditional fuels are burnt in cook stoves, known as chulah or chulha in some parts of India. Traditional fuel is inefficient source of energy, its burning releases high levels of smoke, PM10 particulate matter, NOX, SOX, PAHs, polyaromatics, formaldehyde, carbon monoxide and other air pollutants. Some reports, including one by the World Health Organization, claim 300,000 to 400,000 people in India die of indoor air pollution and carbon monoxide poisoning every year because of biomass burning and use of chullahs. Traditional fuel burning in conventional cook stoves releases unnecessarily large amounts of pollutants, between 5 to 15 times higher than industrial combustion of coal, thereby affecting outdoor air quality, haze and smog, chronic health problems, damage to forests, ecosystems and global climate. Burning of biomass and firewood will not stop, these reports claim, unless electricity or clean burning fuel and combustion technologies become reliably available and widely adopted in rural and urban India. The growth of electricity sector in India may help find a sustainable alternative to traditional fuel burning.

In addition to air pollution problems, a 2007 study finds that discharge of untreated sewage is single most important cause for pollution of surface and ground water in India. There is a large gap between generation and treatment of domestic wastewater in India. The problem is not only that India lacks sufficient treatment capacity but also that the sewage treatment plants that exist do not operate and are not maintained. Majority of the government-owned sewage treatment plants remain closed most of the time in part because of the lack of reliable electricity supply to operate the plants. The wastewater generated in these areas normally percolates in the soil or evaporates. The uncollected wastes accumulate in the urban areas cause unhygienic conditions, release heavy metals and pollutants that leaches to surface and groundwater. Almost all rivers, lakes and water bodies are severely polluted in India. Water pollution also adversely impacts river, wetland and ocean life. Reliable generation and supply of electricity is essential for addressing India's water pollution and associated environmental issues.

Other drivers for India's electricity sector are its rapidly growing economy, rising exports, improving infrastructure and increasing household incomes.

Demand trends

As in previous years, during the year 2010–11, demand for electricity in India far outstripped availability, both in terms of base load energy and peak availability. Base load requirement was 861,591 (MU) against availability of 788,355 MU, a 8.5% deficit. During peak loads, the demand was for 122 GW against availability of 110 GW, a 9.8% shortfall.

In a May 2011 report, India's Central Electricity Authority anticipated, for 2011–12 year, a base load energy deficit and peaking shortage to be 10.3% and 12.9% respectively. The peaking shortage would prevail in all regions of the country, varying from 5.9% in the North-Eastern region to 14.5% in the Southern Region. India also expects all regions to face energy shortage varying from 0.3% in the North-Eastern region to 11.0% in the Western region. India's Central Electricity Authority expects a surplus output in some of the states of Northern India, those with predominantly hydropower capacity, but only during the monsoon months. In these states, shortage conditions would prevail during winter season. According to this report, the five states with largest power demand and availability, as of May 2011, were Maharashtra, Andhra Pradesh, Tamil Nadu, Uttar Pradesh and Gujarat.

In late 2011 newspaper articles, Gujarat was declared a power surplus state, with about 2–3 GW more power available than its internal demand. The state was expecting more capacity to become available. It was expecting to find customers, sell excess capacity to meet power demand in other states of India, thereby generate revenues for the state.

Despite an ambitious rural electrification program, some 400 million Indians lose electricity access during blackouts. While 80% of Indian villages have at least an electricity line, just 52.5% of rural households have access to electricity. In urban areas, the access to electricity is 93.1% in 2008. The overall electrification rate in India is 64.5% while 35.5% of the population still live without access to electricity.

According to a sample of 97,882 households in 2002, electricity was the main source of lighting for 53% of rural households compared to 36% in 1993.

The 17th electric power survey of India report claims:

• Over 2010–11, India's industrial demand accounted for 35% of electrical power requirement, domestic household use accounted for 28%, agriculture 21%, commercial 9%, public lighting and other miscellaneous applications accounted for the rest.
• The electrical energy demand for 2016–17 is expected to be at least 1392 Tera Watt Hours, with a peak electric demand of 218 GW.
• The electrical energy demand for 2021–22 is expected to be at least 1915 Tera Watt Hours, with a peak electric demand of 298 GW.

If current average transmission and distribution average losses remain same (32%), India needs to add about 135 GW of power generation capacity, before 2017, to satisfy the projected demand after losses.

McKinsey claims that India's demand for electricity may cross 300 GW, earlier than most estimates. To explain their estimates, they point to four reasons:

• India's manufacturing sector is likely to grow faster than in the past
• Domestic demand will increase more rapidly as the quality of life for more Indians improve
• About 125,000 villages are likely to get connected to India's electricity grid
• Currently blackouts and load shedding artificially suppresses demand; this demand will be sought as revenue potential by power distribution companies

A demand of 300GW will require about 400 GW of installed capacity, McKinsey notes. The extra capacity is necessary to account for plant availability, infrastructure maintenance, spinning reserve and losses.

In 2010, electricity losses in India during transmission and distribution were about 24%, while losses because of consumer theft or billing deficiencies added another 10–15%.

According to two studies published in 2004, theft of electricity in India, amounted to a nationwide loss of $4.5 billion. This led several states of India to enact and implement regulatory, and institutional framework; develop a new industry and market structure; and privatize distribution. The state of Andhra Pradesh, for example, enacted an electricity reform law; unbundled the utility into one generation, one transmission, and four distribution and supply companies; and established an independent regulatory commission responsible for licensing, setting tariffs, and promoting efficiency and competition. Some state governments amended the Indian Electricity Act of 1910 to make electricity theft a cognizable offense and impose stringent penalties. A separate law, unprecedented in India, provided for mandatory imprisonment and penalties for offenders, allowed constitution of special courts and tribunals for speedy trial, and recognized collusion by utility staff as a criminal offense. The state government made advance preparations and constituted special courts and appellate tribunals as soon as the new law came into force. High quality metering and enhanced audit information flow was implemented. Such campaigns have made a big difference in the Indian utilities’ bottom line. Monthly billing has increased substantially, and the collection rate reached more than 98%. Transmission and distribution losses were reduced by 8%.

Power cuts are common throughout India and the consequent failure to satisfy the demand for electricity has adversely effected India's economic growth.