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Credible electricity demand projection for Year 2027 and beyond

Shankar Sharma

The Central Electricity Authority (CEA) under the Ministry of Power has prepared an electricity generation plan for the period 2017-2027, and also has invited feedback on its draft. Such a generation plan prepared by CEA can be seen as crucial in the context of overall development of the power sector in the country because the same is intended to be used by prospective generating companies, transmission utilities and transmission/ distribution licensees as a reference document. Since the omissions and commissions in the power sector have huge impact on the overall welfare of our thickly populated, resource constrained and poor communities, the generation plan by CEA must be seen as one relevant to all sections of our society.

The country is witnessing an unfortunate scenario where about 25% of the population has no access to electricity even after nearly 7 decades of independence, while many of the thermal power plants are idling due to want of power purchasers.  Such an unfortunate scenario should be seen as an indication of a clear mismatch between planning, implementation and the true needs of the society. CEA has the onerous role to project a credible electricity demand such that the country’s meagre resources are put to optimum use through careful planning of generation capacity. 

A high level analysis of the power scenario in the country throws up an interesting picture, and may point towards a viable solution to the power sector woes. A different approach as compared to the conventional thinking in demand projection may provide an interesting perspective.  For the sake of such an analysis the power sector data for the year 2014-15, for which latest authentic CEA data is available, can be considered.

* Installed Generation Capacity (as on 31-3-2015) was 271,722 MW with 235,945 MW of conventional power including hydro power and 35,777 MW of renewable power excluding hydro power capacity (refer CEA website). 

* The peak power and annual energy demand for year 2014-15 was 148,166 MW (refer CEA Annual report/website). When this peak power demand is compared to the conventional power capacity available in the system, it allows a spare capacity of about 87,780 MW of conventional power capacity alone.  Allowing for 10% outages and 10% spinning reserve (a total reserve capacity of about 30,000 MW) to meet the peak demand, the system seems to have surplus of about 57,780 MW installed generating capacity without taking into account the renewable power capacity.

* The actual/deemed peak demand on the grid of 148,166 MW during 2014-15 (CEA website), when viewed from the perspective of gross inefficiency prevailing in the sector means that in real term it was much less. CEA itself admits, in its previous generation plan, that there is a saving potential of about 15% in the end use. The transmission and distribution (T&D) loss reduction of 10% (from the present level of about 20 %) is techno-economically feasible during the period 2017 -2027 if adequate emphasis is provided. Through concerted demand side management (DSM) measures the actual peak demand on the grid can be brought down further.

* Even assuming the demand reduction potential of only 25% (15% from end uses PLUS 10% from T&D losses), the true demand on the grid as on 31.3.15 could have been only about 111,125 MW of peak power during 2014-15. 

* From the base figure of 148,166 MW for peak demand as on 31.3.15, and at an assumed compounded annual growth rate (CAGR) of 4% demand growth, the power demand in the country can be projected as about 237,220 MW of peak hour demand by 2027.

* Similarly the figures for the annual electrical energy can be arrived at.

The rationale for 4% CAGR
A brief note about GDP centred growth paradigm, which has a traditional correlation to electricity demand, would be useful here.  At 6% constant CAGR the electricity demand will double in 13 years, treble in 20 years, and quadruple in 25 years. At 8% constant CAGR the electricity demand will double in 10 years, treble in 15 years, and quadruple in 19 years.  While the implications of demand for electricity at such high rate should be well known, the high CAGR of GDP growth of our economy should also become clear. 

A high GDP growth rate, year after year, will mean the manufacture of products and provision of services at an unprecedented pace leading to: setting up of more factories/manufacturing facilities; consumption of large quantities of raw materials; unsustainably increasing demand for natural resources such as water, minerals, timber etc.; acute pressure on the govt. to divert agricultural/forest lands for other purposes; huge demand for energy; clamour for more of airports, airlines, hotels, shopping malls, private vehicles, express highways etc. Vast increase in each of these activities, while increasing the total demand for electricity will also lead to higher GHG emissions, and will also reduce the ability of natural carbon sinks such as forests to absorb GHG emissions.

In view of the fact that India has already achieved a good level of industrial and commercial development, as evidenced by the size of its economy, efforts in future should focus on inclusive economic growth at much lower CAGR.  This can be achieved by putting focus on less energy intensive growth sectors, which will also reduce the demand for electricity/energy.  Also in view of the fact that there has been a steep decline in CAGR of electricity consumption from 6.87% in the 30-year period (between 1974-75 and 2004-05) to 4.30 % in the recent 5 year period (between 1999-2000 and 2004-05), and taking into account the huge potential with efficiency improvement measures to reduce demand, it can be credibly argued that not more than 4% of CAGR of electricity generation for next 20-25 years may be required. 

While it is recognised that economic policy is not the domain of the Power Ministry, CEA being the supervisor/custodian of the interest of the power sector should take a diligent view of the above discussion, and should recommend accordingly to the Union govt.  Since it is in the overall interest of the society to restrict the electricity demand, all possible efforts should deployed to restrict the demand growth to less than 4% CAGR. Hence CEA’s consideration of 6.34%, 7.34% and 8.34% CAGR of demand growth (refer section 5.11.3) needs a diligent review. As a welfare society we cannot be silent spectators of annihilation of our natural resources, and consequent harm to our communities.

* If we apply the total of 25% reduction potential associated with T&D Loss and end use efficiency, the true demand figure may be 177,900 MW by 2027.

* As compared to the demand projection figures by 2027 in CEA’s draft plan of 317,674 MW, this figure is less by about 46%.

* Allowing for 20% reserve margin (10% spinning reserve and 10% outage) the required generation capacity figures of 213,900 MW by 2027 can be stated as below the installed conventional capacity of 235,945 MW as on 31.3.2015. If we also take into account the RE capacity (some percentage of which can provide peak hour support also), it appears that the installed capacity as at the end of 2014-15 may be able to meet the peak demand of 2027, if due diligence is followed in power management.

* As on 30.11.2016 the total installed capacity had increased to 308,834 MW with 45,900 MW of non-hydro RE capacity.   This should mean that there may not be a need for any kind of additional generation capacity till 2027, if the existing capacities are optimally utilised.

* Basically what this analysis means is that the power sector may not need a lot of additional capacity if the existing infrastructure is put to use optimally. But it requires concerted efforts not to allow the true demand on the grid to escalate without diligent checks and to increase the efficiency at all levels/segments of the power sector.

* As compared to the huge logistical and societal problems associated with the planned capacity additions, this approach can bring huge benefits to the society while avoiding humongous costs.

* In view of the huge potential existing in the distributed type renewable energy sources  such as roof top solar photo voltaic systems (SPVs) and community bio-energy plants, the additional annual energy requirements by 2027 and beyond should be met by them as far as possible, by shifting all smaller loads from the grid to these distributed power sources.

* The huge solar power potential should be made use of to meet the additional peak demand also in future by installing CSPs (concentrated Solar power Plants) of 10 to 15 MW capacity at suitable locations (such as each taluka places) to feed to the grid.

* Such diligent discussions should lead the nation to a realisation that in view of the serious social, environmental and economic issues associated with the conventional power plants, these plants should be phased out at an early date and should be replaced by RE sources for which there is huge potential.

It need not be an exaggeration to state that the country has enough base load generation capacity (or what is termed as despatchable capacity) and all the additional demand for electricity can be met by a combination of effective demand side management (DSM) measures and diligent deployment of renewable energy (RE) sources in the future. This should basically mean that the power sector should seriously consider preparing a time line to gradually phase out fossil fuel and nuclear power plants.  Shutting down the old and inefficient coal power plants and the nuclear power plants (which are contributing almost negligibly to the overall capacity) should be the priority in this context.  This approach has many good examples to emulate from around the world.

[Reference: The book “Integrated Power Policy”, http://mitramaadhyama.co.in/archives/2791 ]

CEA plan should consider this approach seriously starting from the present plan period itself. A set of action plans is recommended in this regard.

* Because of the huge inefficiency prevailing in the country’s power sector, the highest priority is needed to take the overall efficiency to the international best practice levels; this approach is known to cost least amongst various options to meet the legitimate demand for electricity of all sections of our society; it will also have the shortest gestation periods and many associated benefits.

* In view of the huge impact on our society, including the all-important environment, the use of conventional energy sources, such as dam based hydro, coal, natural gas and nuclear, should be minimised in the short term, and discontinued at the earliest; their usage should peak early, and gradually eliminated latest by 2050.

* In view of the inevitability of harnessing the renewable energy sources on a sustainable basis, all out efforts should be made to develop them early to meet our entire electricity needs before the middle of this century; this should include adequate focus on R&D, fiscal incentives if necessary, suitable policy interventions, necessary regulatory measures etc..

Shankar Sharma, Power Policy Analyst

Aug 13, 2018


Shankar Sharma [email protected]

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