Optimal Electricity Generation Mix Report of CEA: Meeting INDCs but Perpetuating Energy Poverty

The Central Electricity Authority (CEA) has meticulously crafted an optimal electricity generation mix plan for 2029-30 that aligns with India's Intended Nationally Determined Contributions (INDC) under the Paris Agreement. This ambitious plan aims to balance the nation's energy demands with its commitment to reducing carbon emissions. However, a closer examination reveals a potential downside: while the plan supports the de-carbonization of selected industries through Green Hydrogen and EVs, it may inadvertently perpetuate energy poverty for the broader economy.

Meeting INDC Targets

India's INDC targets are ambitious, aiming to reduce the emissions intensity of its GDP by 33-35% by 2030 from 2005 levels and achieve about 40% cumulative electric power installed capacity from non-fossil fuel-based energy resources by 2030.  As per CEA, the total installed capacity as on 31^st March 2024 was 4,42,853 MW and generation in 23-24 was 1738.85 BU. With population of 1.428 billion, per capita annual electricity availability is 1217 KWh and assuming T&D losses of around 10%, it was around  1100 KWh or 92 KWh per month. Similarly, the share of electricity from non-fossil sources was 412 BU or 23.7%.

Source	Capacity (MW) March 2024	% Share in Installed Capacity	Generation (TWH) 2023-24	% Share in Generation
Coal, Lignite &Gas	242996	54.9%	1326.29	76.27%
Nuclear	8180	1.8%	47.94	2.76%
Large Hydro	46928	10.5%	134.05	7.71%
Small Hydro	5005	1.1%	9.49	0.55%
Wind	46161	10.42%	83.39	4.80%
Solar	82637	18.66%	115.98	6.67%
Biomass	10946	2.48%	16.99	0.98%
Import (Hydro)			4.72	0.27%
Total	442853		1738.83

(https://cea.nic.in/wp-content/uploads/resd/2024/03/Monthly_RE_Generation_report_March_2024-1.pdf)

The CEA's optimal generation mix plan for 2029-30 outlines a roadmap to meet these targets. It projects a total installed capacity of 817 GW, with non-fossil fuels (solar, wind, hydro, and nuclear) accounting for approximately 64% of this capacity and share of electricity generated from non-fossil sources is projected to be 1160 BU or 46%.

 

Fuel Type	Likely Capacity (MW) in 2029-30	Percentage Share (%) in Capacity	Likely Generation (TWH) in 2029-30	Percentage Share in Generation
Hydro	60,977	7.46%	206.6	8%
PSP	10,151	1.24%	4.4
Small Hydro	5,000	0.61%	2.2
Coal &Lignite	2,66,911	32.66%	1357.7	54%
Gas	25,080	3.07%	35.4	2%
Nuclear	18,980	2.32%	113	5%
Solar	2,80,155	34.28%	484.2	19%
Wind	1,40,000	17.13%	309.1	12%
Biomass	10,000	1.22%	5
Total	8,17,254		2518

(https://cea.nic.in/old/reports/others/planning/irp/Optimal_mix_report_2029-30_FINAL.pdf)

The aggressive frontloading of renewable energy capacity to 64%, well beyond the INDC target of 40%, seems driven more by the politically ambitious target of 500 GW of renewable capacity by 2030 and not by engineering or economics. This approach has significant implications and consequences that need to be carefully considered. While this shift towards renewable energy sources is crucial for reducing carbon emissions but has implications for economic development. The installed capacity of fossil fuel sources (coal, lignite, and gas) is projected to increase from approximately 243 GW to 291 GW by March 2030. However, their share in the total energy mix is expected to decrease from 58.6% in March 2024 to 36% by March 2030. Not only will their share decrease, but the Plant Load Factor (PLF) is also projected to drop to 58%. This low projected PLF indicates that thermal power plants will need to make space for renewables, leading to stranded assets for distribution companies (DISCOMs) equivalent to 27% of the fixed charges (85% - 58%). In essence, this will be a double whammy for DISCOMs and consumers, who will not only bear the additional costs of stranded thermal capacity but also towards extra transmission, storage, and balancing charges for accommodating the oversized renewable share.

The Green Hydrogen and EV Push

The plan includes significant provisions for the integration of Green Hydrogen and electric vehicles (EVs) into the energy mix. For Green Hydrogen production, an additional 250 BU (Billion Units or TWh) of electricity is allocated to produce 5 million metric tons of Green Hydrogen by 2030, as envisaged in the National Green Hydrogen Mission. Similarly, for electric vehicles, the impact on all-India demand by 2029-30 is projected to be 3 GW in peak demand and 15 BU in energy requirements. It may be noted that Green H2 is primarily a feedstock which is used in selected industries like fertilizers, steel, Petro-chemicals etc. but is receiving substantial concessions from power sector in form of free ISTS implying that electricity consumers will pay for transmission charges to selected industries thereby cross-subsidizing their input cost.

The Impact on Per Capita Electricity Consumption

A key component of the strategic plan is the projected per capita electricity consumption. Excluding the allocations for Green Hydrogen and Electric Vehicles (EVs), the net electricity availability is calculated as follows:

Total Generation - Green Hydrogen Requirement - EV Requirement = 2518 TWh - 250 TWh - 15 TWh = 2253 TWh.

Based on the World Bank's data, with an annual population growth rate of 0.85%, the population is expected to increase from 1.428 billion in 2023 to 1.514 billion by 2030.

Thus, the per capita electricity availability in 2030 is projected to be:

Total Electricity / Population = 2518 TWh / 1.514 billion = 1663.15 kWh.

After accounting for Green Hydrogen and EV allocations, this availability decreases to 2253 TWh / 1.514 billion = 1488.11 kWh.

Considering a Transmission and Distribution (T&D) loss of 8%, the projected per capita electricity consumptions in 2030 are:

1663.15 kWh * (1 - 0.08) = 1530 kWh including all uses.

1488.11 kWh * (1 - 0.08) = 1369 kWh excluding Green Hydrogen and EVs.

This adjustment translates to a Compound Annual Growth Rate (CAGR) of approximately 4.6% from the 2023 per capita consumption of 1100 kWh. Excluding electricity for Green Hydrogen and EVs, the CAGR is 2.95%.

Perpetuating Energy Poverty & delaying national ambition of Viksit Bharat

We aspire to become a "Viksit Bharat" by 2047, aiming to meet the economic indicators of developed nations. Developed economies have a per capita electricity consumption exceeding 6000 kWh, and to achieve this by 2047, we need a CAGR of around 7.5% in per capita electricity consumption. However, despite the projected increase in per capita electricity consumption in 2029-30, the growth remains relatively modest, especially in the broader economic context.

Prioritizing the production of Green Hydrogen for selected industries might lead to an uneven distribution of resources, potentially limiting electricity availability for other sectors and the wider population. This approach could favor the emerging class of industrial Green Hydrogen consumers at the expense of existing ones. While the shift towards renewable energy and Green Hydrogen is essential for sustainable development and fulfilling international climate commitments, it is crucial that this transition is inclusive and fair. The current focus on industrial decarbonization is important, but it should not detract from the broader goals of economic growth and enhanced living standards for all.

Additionally, aiming for a significantly higher share of renewable capacity (64%) than our Intended Nationally Determined Contribution (INDC) target of 40% by 2030 might hinder economic goals by making electricity more costly, thus diminishing the competitiveness of industries and the economy. Frontloading renewable capacity addition could also mean missing out on future technological advancements and efficiencies that emerge over time, potentially saddling us with outdated technologies for an extended period.

Balancing decarbonization with economic growth is essential. To maintain this balance, the Central Electricity Authority (CEA) and policymakers need to reassess the allocation of electricity generation resources to ensure fair distribution across all sectors and avoid excessive focus on renewable capacity at the expense of economic growth. By taking a comprehensive approach, India can meet its INDC targets while promoting economic development and addressing energy poverty, moving towards a more developed nation status.

(edited: 26 May 2024 at 7:25am)