As summer hits India, power demand is rising again leading to fears of shortages and blackouts. On 18 April 2023, demand hit this year’s high of 216 GW and crossed last year’s peak demand. Over the next two months, peak demand is expected to touch an all-time high of 229 GW, up 8% over last year. The government is going all out to avert a power crunch. It has directed all thermal plants using imported coal to ensure 100% capacity utilisation from March 16 onwards. Domestic coal fired plants have been mandated to use 6% imported coal to ensure adequate fuel availability. Gas-fired stations are being revived – NTPC is operating 5,000 MW gas-fired capacity, while its trading subsidiary NVVN has floated a tender to procure 4,000 MW gas-fired power. GAIL has been asked to ensure sufficient supply of fuel during this period.
The government has also introduced a special trading window on the exchanges with a higher ceiling price of INR 20/ kWh for gas and imported coal-based plants. Alongside these short-term measures, support is also building up for adding new coal-fired capacity. 21 projects totalling 28,210 MW capacity are under construction by various central and state-government owned PSUs. NTPC also has more than 10,000 MW capacity under different stages of development.
This cycle of high temperatures, followed by surge in power demand and focus back on thermal power repeats every year. And it brings barely any mention of renewable power, which reflects an outdated mindset that this power always comes with an intermittent output profile. This approach is not only slowing energy transition and growth of renewables, but also proving extremely costly and risky in today’s geo-political environment. The flawed approach is being helped by a skewed set of incentives. Coal attracts customs duty and GST of only 2.5% and 5% as compared to respective rates of 20-40% and 12% for solar power equipment. It is extraordinary that the DISCOMs are seemingly happy to pay up to INR 10-11/ kWh and up to INR 7-8/ kWh for short-term and long -term thermal power respectively but refuse to buy storage-based renewable power at prices of around INR 4-6/ kWh.
Figure: Cost of RE-storage hybrid and marginal thermal power, INR/ kWh
Source: Merit India, BRIDGE TO INDIA research
It is worth noting the various perils of greater reliance on coal, which besides being the dirtiest power source, needs huge investments in mining and transportation infrastructure. Production cost is constantly edging upwards due to inflation besides being exposed to high volatility in coal prices. Coal imports increased by almost 70% in March 2023 as compared to last year. Somewhere between 50-90% of coal-fired plants are almost always operating with critically low coal stock presenting a great supply side risk. Moreover, setting up new coal-fired plants requires minimum lead time of 5 years as against 2.5 years for new renewable projects.
The government needs to shed its ambivalence towards renewable power and show more commitment to the sector. Instead of offering subsidies and other support to thermal power, resources should be diverted towards developing indigenous technology and manufacturing capability in green technologies across the spectrum.
The post Why no renewable power for meeting peak demand? appeared first on BRIDGE TO INDIA.