Friday, November 21, 2014

India's power generation problems: By the numbers

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While frequent power cuts would have many believe otherwise, India now has the third largest installed capacity for power generation in the world [1] at 253 GW. Yet, endemic problems in the supply and distribution system mean that Indians have not been able to enjoy the fruits of this formidable capacity.

India’s power-generation capacity is rapidly increasing, largely driven by coal-based thermal plants. [2]


Coal-based thermal plants are the primary driver of growth in India’s power generation. Hydro and nuclear power have largely been stagnant in the recent past. And while renewables have been rising rapidly, they only account for about 12% of India’s overall capacity. In view of this, coal-based thermal plants will be the focus of this analysis.

We have a problem


The plant-load factor, an indication of how much of a plant’s capacity is actually being used, has decreased every single year from 2010 at an annual rate of 4.1% [3]. This means that while India has been adding more capacity to the grid, it is using less of what is available to it.

Consequently, while India’s capacity to produce electricity has increased rapidly, its actual output increased at a less than impressive pace [4].


Plants cannot run without fuel… [5]


There are many reasons for India’s underperforming power sector, the biggest is a lack of fuel. The power sector consumed 75% of India’s coal in FY2011/12 [6], and is its key demand driver. Unfortunately, the output of Coal India, India’s largest coal producer with 81% of the country’s production, has crawled along at a snail’s pace.

… and plants are not running without fuel [78]


Plants that comprise 70% of India’s thermal power generation capacity currently have less than a week’s worth of coal reserves [as of Oct 6, 2014]. Many of these plants have begun stopping production to prepare for emergency situations. Moreover, plants that comprise a shocking 13% of India’s thermal capacity have no fuel at all in their stocks.

The implication (apart from less electricity): more imports [9]


India’s spending on coal imports has increased at 19% CAGR (Compounded Annual Growth Rate) over the past 5 years, and the country spent more on coal imports than on its entire education budget in FY13-14 [10]. This is despite the fact that India’s total coal reserves are 380 times its current demand. India’s legislative policies have been roundly criticized for creating a scenario where it must import coal despite its natural abundance.

Why is India not producing more coal?

A large part of the problem lies with Coal India, India’s notoriously inefficient state-owned giant. TK Arun of the Economics Times wrote a fantastic article articulating the problems with Coal India, and suggested breaking up its monopoly to unleash more competition in the sector, making it more efficient. While his recommendation would be welcome by India Inc, there is a big elephant in the room that makes it hard to act upon.

Take a look at the two graphs below, and you will see it straight away [1112].


The Naxalites are a communist guerilla group in central and eastern that has been carrying acts of terrorism in the recent past. Many local tribes in the area are sympathetic to the movement, making it difficult to suppress. They have caused a loss of production of coalattacked infrastructure such as roads and railways to disrupt supplies, and demanded 'protection money' from coal mines.
The government is concerned that privatization of coal would invariably lead to an escalation of conflicts in these regions, and hence is stalling.

Something that Pakistan and Bangladesh are doing better than India: reining in T&D losses [1314]


While there are serious issues with getting India’s power generation capacity to work, the country must also improve its delivery of power from power plants to citizens’ homes. These are an indication of the difference in production and (paid) consumption. This is largely attributed to power theft, free electricity to farmers, and leakages in the transmission and distribution system. It must be noted that many of India’s neighbours are performing much better than the country is in this metric. If India could reach China’s level of transmission losses, it would greatly increase the resources available to the currently cash-strapped power sector.

Recommendations

Keeping these problems in mind, there are 3 short-term recommendations to improve India’s power situation:
  1. Modernize Coal India: As TK Arun writes, Indian coal is up to 45% shale and rock (noncombustible material that turns into fly ash in power plants). The sensible thing to do is to remove this non-combustible material before coal is loaded on to trains and sent across the country. But Coal India does virtually no beneficiation of coal before it is despatched.

    This means that railway wagons careen around the country carrying useless shale and rock, wasting precious diesel and power in the process. At the same time, it uses outdated equipment and mining techniques that make efficient mining impossible. Modernizing the ailing giant, perhaps beginning with a change in its leadership, should be the government’s first task.
  2. Change coal supply laws: Tata Power complained that it had to import coal from Indonesia instead of getting it from Orissa when there was a shortfall in its Jharkhand-based supplies. This was because the government did not give it permission to use coal from the Orissa mine. This was detrimental to all parties, as Tata had to wait longer and pay more money for its supplies, while also contributing to a worsening trade deficit.
  3. Engage with Naxal leaders: The government’s approach to the “Naxal problem” has largely been one of open conflict so far. Unfortunately, this hasn’t yielded much results. It needs to have an open engagement with Naxalite leaders and understand the problems that they are fighting for instead of having a hostile approach. This would be far from easy, especially given in the aftermath of a brutal killing of a politician by Naxalites, but must be done if the uneasy stalemate in the area is to be broken.
The Prime Minister’s vision to bring 24/7 electricity to every Indian is certainly a laudable one, but will be met with a plethora of challenges. In addition to the issues described above, the Supreme Court’s ruling to take back coal blocks given to private companies will cause it’s own supply chain disruptions in the near future. The government must act decisively and quickly in order for Mr. Modi’s laudable vision to become a reality.

(this article was originally published at thenumerateindian.com/post/99759762251/indias-power-generation-problems-by-the-numbers)

1 comment :

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