$600 bn needed to meet power demand

MUMBAI: India will need to spend $600 billion on adding capacity to meet electricity demand, which may triple to 3,35,000 megawatts by 2017 if the current growth rate is maintained, according to consultant McKinsey & Co.

The second-fastest growing major economy needs to add as much as 40,000 megawatts each year to meet the predicted demand, which exceeds current estimates by 1,00,000 megawatts, McKinsey said in a report on Wednesday.

The projected requirement is more than double India’s generation capacity of 141,080 megawatts as of January 31.

India must prepare 140 sites by 2012 for the new capacity, the report said. About 300,000 workers will have to be trained to meet demand, according to McKinsey.

“If India continues to grow at an average rate of 8% for the next 10 years, the country’s demand for power is likely to soar from around 120 GW at present to 315 to 335 GW by 2017, 100 GW higher than most current estimates,” the report — ‘Powering India - The road to 2017’, authored by Vipin Tuli, Jaidit Brar, and Adil Zainulbhai, said.

The report says peaking deficit will soar from 15 to 20 GW now to 70 GW by 2017. This will be driven by higher growth in manufacturing sector, growth in residential consumption, connection of 125,000 more villages and realisation of demand suppressed due to load shedding. Of the $600 billion (approximately 24 lakh crore) investment required to meet power demand, around $300 billion will be needed for generation, $110 billion for transmission, and the balance $190 for distribution.
It has proposed a 10-point programme to overcome the problems in the power sector.

The first two points relate to viability and market risks and talk about reducing the aggregate technical and commercial (AT&C) losses to 15% by 2017 and creating market mechanisms to stimulate investments in peaking plants. The third point says that there has to be administrative focus to prepare and bid over 140 project sites by 2012, with end-to-end approvals in place.

The next point talks about creating 30 GW per year capacity for equipment and manufacturing related supply chain and the fifth emphasises on training and developing 300,000 skilled and semi-skilled workers to make them ready for the upcoming opportunity.

The report says that fuel supply is also a major concern and suggest accelerated captive mine development and creating requisite infrastructure capacity for 100 MMTPA of coal imports as the most important measure for ensuring fuel supply. The next important thing is to secure natural gas supplies for peaking plants by reviving LNG projects, and making regional pipelines a strategic priority.

The third measure for tackling fuel supply concern is to launch a renewable energy programme to generate 30 GW by 2020 with a focus on solar power and on biomass.  The last two points emphasise on creating an action plan for over 10% gain from demand-side management and finally extending the Partners in Excellence programme to realise an additional 7 GW by improving the productivity of existing generation plants.
“Administrative focus and a proper reviewing and monitoring and de-bottlenecking hold the key towards achieving the goal of 300 GW by 2017,” said Tuli. He said the problem here is there are so many agencies involved and implementation becomes a problem. “All these agencies should come under one platform and work collectively towards the target. Because under the current business conditions even the target of 78,577 MW is not possible,” he said.

(With Bloomberg inputs)
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