A tale of two power zones

While the grid-connected consumer opts for diesel power, the off-grid consumer burns kerosene

India’s supply of power exceeded demand in June 2017, according to the latest data from the Central Electricity Authority (CEA). Not only that, peak demand was also lower than peak supply yet again. This yielded somewhat deceptive negative numbers on the peak deficit, numbers that do not mean that India is a power-surplus country or that there were no power cuts. Consumers willing and able to pay for power would have found themselves without power, and have been forced to crank up their diesel generators to keep their homes, industries or commercial establishments running.

The utilisation rates of coal-fired plants, meanwhile, have dipped. In June, the plant load factor was down to 57 per cent, against 61 per cent in the same month last year. That has been blamed on low demand, the impact of renewables and the limited paying capacity of distribution companies. The discoms do not have much of an incentive to buy and then sell power, since they make a loss on every unit of power sold — the average cost of supply is higher than the average revenue realisation in most cases.

Meanwhile, more than 200 million Indians, who do not even have access to electricity (there are 42 million households that are not electrified), would be curious about the country having more electricity than it can consume. Some of them might have tried a solar home system, which provides basic lighting and mobile phone charging. Many might be connected to a micro-grid or mini-grid running on renewable energy, funded via the Deen Dayal Upadhyaya Gram Jyoti Yojana, which aims at off-grid generation using renewables for areas where grid connectivity is technically or financially challenging.

There are thus two power zones in India and both are thirsty for power. Both rely on expensive and often polluting options to meet their needs — the grid-connected consumer with the ability to pay opts for diesel power, while the off-grid consumer burns kerosene. 

The data on demand and supply of power needs improvement so that it captures better the actual demand for power in both the zones as well as the supply, including that from captive plants and diesel generators. The decision by the CEA of India to track generation data better by issuing a unique registration number to each generating unit is a welcome move. Units without registration would not be allowed to inject power into the grid. 

It is fair to assume, meanwhile, that demand for electricity will grow as the number of appliances per household increases in both the power consumption zones. The urban consumer might have an electricity-guzzling vehicle parked outside his door, while the rural consumer is likely to be looking for refrigerators and air-conditioners in the not too distant future. Most Indians already own a phone — the mobile phone population is more than one billion already — though the smartphone population is a smaller number. Housing for all will add to overall power demand, as will commercial activity. The industrial sector will consume more power, though tempered by efficiency initiatives. The last word on India’s electricity demand growth is a long, long way from being spoken.

The author is editor, Global Policy, for Bloomberg New Energy Finance; vgombar@bloomberg.net