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Challenges of Power Sector of India

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  • Last Updated : 26 Dec, 2021

Power, also known as electricity, is the most visible form of energy that is often associated with progress in modern civilization. It is an important part of a country’s infrastructure that determines its economic development. The rate of increase in power demand is generally higher than the rate of increase in GDP. According to studies, the power supply must grow at a rate of around 12% per year in order to achieve an annual GDP growth rate of 8%.

Thermal sources accounted for 82% of India’s power generation capacity in 2018. Nuclear power provided for only 2.5 percent of total electricity generation, whereas hydroelectric power accounted for 8.5 percent. India’s energy policy promotes three energy sources: solar, hydro, and wind, all of which do not rely on fossil fuels and thus do not emit carbon. However, this has not resulted in a faster increase in the amount of electricity generated by these sources.

Atomic energy is a significant source of electric power with significant economic benefits. Currently, only 2.5% of total energy consumption is generated from nuclear power energy, compared to a global average of 13%. As a result, some academics advocate for generating more electricity from atomic (nuclear) sources, while others object to environmental and sustainable development grounds.

Challenges Faced by Power Sector

A portion of the electricity generated by various power stations is consumed by power station auxiliaries, rather than by ultimate consumers. Furthermore, a portion of the transmitted power is lost during transmission. Net availability is what we get in our homes, offices, and factories.

1. Inadequate Electricity Generation

India’s installed capacity to generate electricity is insufficient to support the country’s 7-8 percent annual economic growth. India’s commercial energy supply must grow at a rate of about 7% to meet the rising demand for electricity. India can only add 20,000 MW per year at the moment.

Coal-fired power stations provide the bulk of India’s electricity. Despite efforts to diversify the alternatives, coal remains the country’s dominant source of power, particularly in the case of renewable energies. Since 2000, the share of coal-fired electricity generation has steadily increased, from 68 percent at the turn of the millennium to 73 percent in 2013. Except for renewables, the perceptual shares of all other energy sources have decreased over time.

2. Underutilization of Installed Capacity

The plant load factor (PLF) is a measurement of a power plant’s output in comparison to its maximum output. In India, PLF is extremely low, and very little effort is made to improve it.

The Plant Load Factor is a metric for determining how much of a plant’s capacity is being used. PLF in India was 60% in 2001-02, implying that 40% of electricity is wasted. In 2012-13, PLF reached 75%, and in 2014-15, it reached 65%.

3. Poor Performance of State Electricity Boards (SEBs)

The losses incurred by State Electricity Boards (SEBs), which distribute electricity, exceed 20,000 crores. Transmission and distribution losses, incorrect electricity pricing, and other operational inefficiencies are to blame. According to some analysts, the transmission of energy to farmers is the main cause of losses; nonetheless, power is stolen in many areas, increasing SEBs’ issues.

SEBs that distribute electricity have suffered losses because they are unable to pay a bill for the electricity they have purchased. These boards lost Rs. 21391 crore in 2007-08, which has since been reduced to Rs. 624.6 crore in 2014.

4. Limited role of Private and Foreign Entrepreneurs 

Foreign investors and private sector power generators have yet to play a significant role. In the power generation sector, the government almost has a monopoly. The public sector is unable to meet the challenges of power generation due to a lack of management facilities. The opportunity for private and foreign entrepreneurs to demonstrate their abilities has been denied.

5. Shortage of Inputs

Thermal power plants, which are India’s main source of electricity, are running out of raw materials and coal. Thermal capacity expansion is hampered by the industry’s growing concerns about fuel availability. Due to a lack of gas, a significant gas-based capacity of more than 20,000 MW is idle. CIL’s coal supplies are limited to around 65 percent of actual coal demand by coal-fired power plants, resulting in increased reliance on imported coal and, as a result, high power generation costs.

6. Pattern of Energy Consumption

The pattern of energy consumption refers to the percentage of time spent using various energy sources. It can only be assessed when various sources of energy are converted into a single unit, known in India as the MTOE (Million Tonnes of Oil Equivalent). 

Over time, the pattern of energy consumption has changed dramatically. The use of primary energy sources such as coal, petroleum, and natural gas has shifted dramatically. During the years 1953-54 to 2004-05, non-commercial use of this energy increased from 36% to 76%. Despite an increase in total coal consumption, the percentage of direct final coal consumption has decreased dramatically. It consumed 355 million tonnes in 2008-09, up from 95 million tonnes in 1980-81. In addition, our country’s oil consumption, which was previously reliant on Gulf countries, has increased. The agricultural sector’s electricity consumption has increased over time, while the industrial sector’s consumption has remained the highest in comparison to other sectors.

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