Business Environment
Robust Power Demand Growth
Over the last two years, India’s power demand growth has been robust underpinned by a strong GDP growth and various Government initiatives. The peak power demand touched an all-time high of 177 GW in FY2019, an increase of 8% y-o-y.
The strong GDP growth expectations and universal household electrification, along with continuous improvements in last-mile connectivity, should help unlock latent power demand. Incrementally, we are seeing the capacity additions shedding momentum, thereby balancing the demand-supply dynamics. All these factors provide headroom for growth for strong incumbent power sector players.
Government Initiatives
Over the years, the Government has taken the right steps to address the various challenges plaguing the sector through various structural reforms and initiatives such as Ujjwal DISCOM Assurance Yojana (UDAY), Scheme for Harnessing and Allocating Koyala (Coal) Transparently in India (SHAKTI) and Pradhan Mantri Sahaj Bijli Har Ghar Yojana (SAUBHAGYA). While UDAY addresses the stress in the Distribution Company (DISCOMS), SHAKTI addresses the fuel availability risk for the thermal players. SAUBHAGYA aims at universal household electrification, which unlocks the demand from rural India. Further, other reforms such as 'One Nation, One Grid' will ensure power availability to states at affordable rates.
Additionally, the recent pilot schemes launched by the Government to procure power based on competitive bidding has been a boost to the Independent Power Producers (IPPs) that were under stress due to the lack of PPAs.
The effective implementation of all these initiatives and reforms will tremendously aid in the well-being of the sector and pave way for exciting growth opportunities.
Renewable Energy (RE)
The Indian Government has undertaken many initiatives to incentivise and encourage the generation of RE in the country. As of March 2019, total RE installed capacity in the country stood at ~78 GW, which has steadily increased from ~30 GW as on March 2014. Continuous improvements in technology has resulted in cost parity of RE and thermal power, which has further boosted the RE project economics.
The Government of India is committed to increase the use of clean energy sources and has set a target of 175 GW of RE capacity by FY2022, of which about 100 GW is planned from solar, 60 GW from wind power and the remaining from biomass and small hydro. With this kind of a strong impetus and improving project economics, RE offers significant growth opportunities, which we intend to capitalise in a calibrated and prudent manner.
Digitalisation
With the advent of technology, digitalisation is playing a major role in India’s energy sector landscape. Through innovative initiatives such as grid digitalisation and effective use of big data and analytics, the energy value chain is being transformed to be future-ready. Through effective technological interventions, thermal power plants are adopting automatic load setting technology, while DISCOMs are focusing on enhancing their consumer service experience. Such measures can help achieve considerable efficiency gains, aid in better decision-making and result in emergence of cost-efficient business models, which will drive future growth in the sector.