About two weeks ago, the Central Electricity Authority (CEA), a statutory agency constituted under the Ministry of Power, released final National Electricity Plan for the five-year period beginning April 2017. The Plan is an important document – it should provide a roadmap for power sector development and serve as a planning guide for all government agencies. Unfortunately, unrealistic assumptions about power demand growth and RE capacity addition as well as some fundamental exclusions render the exercise futile in our opinion.
Despite annual demand growth of only 4.5% in the recent years, the Plan uses much more optimistic growth projections (6-7%) as per findings of the 19th Electric Power Survey.
Table: Power demand projections
Source: Electric Power Survey, National Electricity Plan
Generation capacity requirement is subsequently estimated so as to meet 24×7 demand in line with recent government initiatives. The snag is that the Plan considers 175 GW of RE capacity addition target as a given even though only about 110 GW of it seems likely. That makes the entire exercise questionable. The Plan considers variability constraints of RE power as well as retirement of 23 GW of old thermal plants over 2017-22 (plus another 26 GW between 2022-27) to come up with incremental capacity requirement from other sources.
Table: Power capacity projections
Source: National Electricity Plan
Note: CAGR is calculated for previous five years. MU – million kWh
As per the Plan, thermal capacity should actually fall in the next five years net of retirals. But an extra 42 GW of thermal capacity is believed to be already under construction. The Plan projects thermal PLF at 56% in the next five years but the actual number could be materially different because of lower RE capacity addition (positive), lower demand growth (negative) and lower than expected thermal capacity addition because of concerns about overcapacity (positive).
The Plan duly notes that high variable RE generation would have an adverse impact on the grid. But it refrains from any meaningful discussion of remedial measures such as creation of an ancillary services market, making thermal plants more flexible, strengthening of the transmission grid and improvement in forecasting ability. There are no details on timelines, policy or procedures on these critical aspects. There is also surprisingly little depth on storage or any other new technologies.
Because of all these limitations, the Plan is a wasted exercise. Much like the recently released Ministry of Power report on optimal energy mix and Niti Aayog’s long-term National Energy Plan, it is another missed opportunity to take stock of challenges facing the sector and come up with pragmatic solutions. That the final Plan document is issued more than year after the start of the relevant period, only betrays the lack of rigor to this exercise.
