If recent plans of India’s energy minister, Piyush Goyal, were to materialise, India is set to witness a paradigm shift in its energy policy. Speaking at the sidelines of the World Economic Forum last week, Goyal announced plans for $250 billion investment in India’s power sector to meet the prime minister’s goal of 24/7 electricity for all by 2019.
Encouraging global and domestic investors to participate in the India’s new growth story, the minister for power and coal laid out his broad plans for the growth of the sector, with $60-70 billion investment in power generation and $20-25 billion in replacement of outdated equipments. Renewable energy was set to take a much larger role with $100 billion investments.
Although the overall target of $250 billion may seem ambitious, India’s 12th Five-Year Plan, in fact, had already envisioned an investment of Rs13 lakh crore (approx. $ 222 billion) towards the development of the power sector. Therefore, the key development in the minister’s announcement was not the magnitude of investments but rather the planned distribution of funds across the various options.
The new announcements may drastically reduce the capacity additions of thermal power while significantly scaling up renewable energy and energy efficiency projects. While the 12th Plan projected around 68 GW of thermal power capacity addition with a fund requirement of around Rs 4 lakh crore, the minister’s new goals could lead to significant reduction in thermal power capacity addition targets (see tables below).
| Investment projections as per the 12th Plan |
| Generation and other power infrastructure |
Allocation of cost
(Rs. crore) |
Capacity in GW (1) |
| Thermal |
413,322 |
69 |
| Hydro |
90,119 |
11 |
| Nuclear |
123,400 |
12 |
| Sub-total |
626,841 |
92 |
| Transmission & Distribution |
486,235 |
- |
| R&M |
31,887 |
- |
| Energy Efficiency |
7,482 |
|
| Renewable energy |
135,100 |
19 |
| Total |
1,372,580 |
|
| Source: Planning Commission Report of the Group on Power for Twelfth Five Year Plan |
- Calculated based on cost per MW data from the planning commission
- Total allocation cost includes additional elements (not given in the table) towards the power sector infrastructure
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| Investment Projections as per new announcements |
| Generation and other power infrastructure |
Proposed funds
US $ (billion) |
Proposed funds
Rs.
(crore) |
Capacity in GW |
| Generation capacity |
60-70 |
369,960 -431,620 |
62-72 |
| Transmission & Distribution |
50 |
308,300 |
|
| R&M |
25 |
154,150 |
|
| Renewable energy |
100 |
616,600 |
75 |
| DSM & EE |
6 |
36,996 |
- |
| Total |
250 |
1,547,666 |
|
| Note: Conversion rate considered 1 US $ = Rs. 61.66 |
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Uphill task