Power sector at 'inflection point': WEF report

India's power sector is at an inflection point and most of its electricity demand in the next two decades will be met by burning fossil fuels despite huge investments in renewables, WEF said today.

Calling for developing an integrated outlook for the country's energy sector, the World Economic Forum (WEF) report said tariffs and rates for fuel pricing, costs that are passed through to customers, and peak power policies and pricing should all be transparent and consistent across states.

India has set an ambitious plan to add 175 GW of renewable energy generation capacity by 2022. The country aims to have 100 GW of solar power by 2022 alongside its 260 GW of thermal and nuclear generation, and 62 GW of hydro generation capacity.

"India's power sector is at an inflection point, given the government's conviction that electricity is a critical enabler for economic growth," the report said. Titled 'The Future of Electricity in Fast-Growing Economies Attracting Investment to Provide Affordable, Accessible and Sustainable Power', the report has been prepared by WEF in collaboration with consultancy Bain & Company.

Noting that the government recognises the need for private investment in the power sector and is planning to adopt progressive policies on renewables, the report said alignment between federal and state government objectives is critical, as India devolves significant power to the states.

"Even with the huge investments in renewables, most of the electricity consumed in India over the next two decades will be generated by burning fossil fuel, and India can do much to improve the efficiency of the existing power infrastructure," it added.

Besides, the country needs to fix the viability of its distribution system and address fuel supply challenges.

WEF noted that India's plan to add 175 GW of capacity from renewables by 2022 can succeed only if the relevant stakeholders act in ways that encourage investment in this part of the sector. "Regulators can enforce the mechanisms underlying renewable purchase obligations (RPOs) and renewable generation obligations (RGOs), while also promoting open access for wind power. Critically, they should ensure long-term tariff consistency with no retroactive changes or flip-flops," the report said. As per International Energy Agency (IEA) estimates, India would invest about $845 billion in T&D (Transmission & Distribution) networks between 2015 and 2040 to ensure universal access to power for customers.

According to the report, non-OECD countries would have to double their annual investments in electricity from about USD 240 billion to USD 495 billion between 2015 and 2040. This would amount to USD 13 trillion required to satisfy growing demand and meet energy policy objectives, it added.