Budget 2020-21 wishlist: Key developments and challenges in power sector

Topics Power Sector

Key developments 

The electricity industry is in a strong position. The generation capacity expanded (4.2% growth over past year) ahead of demand (1.1%) which places it well to meet the emerging needs of recently connected households and electrification of transport.

Non-fossil fuel generation has grown in share from 21.5% to 23.9% during the year making a credible and continued progress towards our climate change commitments. 

The capacity utilisation of thermal power plants (PLF) averaged 57.5% dipping to low 50s in the last few months with softening demand. 

The prices of short-term electricity traded on the power-exchanges remained steady over a moderate range (12%) during 
the year.


Key issues 

The larger share of non-fossil fuel generation (exceeding 25% of supply for 5 months of the year) poses new challenges to state utilities, particularly, the cost of maintaining base-load generation across the year and managing intermittency and transmission constraints.  

The state governments have to expedite implementation of actions to improve operational performance of utilities with roll-out of smart meters, digitization, and private participation. 

Regulatory reforms continue to lag with only a few states implementing real tariff increases and as a result for most state utilities the unit revenue lags cost by about 5% to 16% leading to delayed payments to suppliers.

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