NEW DELHI: India is likely to face power shortages in the short and medium terms on rising demand in the peak season and supply-demand mismatch, according to a study by Bank of America Securities.
The report also pointed out that the slower thermal capacity addition in the past few years is one of the reasons for the power shortage. It said the power demand grew steadily at 4% annually between FY10 and FY19 as against thermal capacity addition, which rose only 9% during this period. The capacity addition declined to just about 2% between FY19 and FY22 when demand jumped 5 %.
“This demand-supply mismatch has been due to multiple stressed projects, focused on renewable energy. Besides, harsh seasons and higher economic activity have increased the peak power deficit to 1.3% as against 0.4% in FY20-21,” said the report.
The report further mentioned that the new capacity expansion will take at least two-three years and renewables generation will be limited to 10-11% on lower plant load factors, which means the power shortages are likely to continue, going forward.
To tackle the ongoing power crisis due to the coal shortage, the government is trying to import coal. According to another study by Nomura, India imported nearly $32 billion (1% of GDP) worth of coal in FY22, nearly double the import bill from FY21.
With both prices and volumes of coal imports set to rise this year, the report expects an additional burden of 0.3% of GDP from higher coal imports. “Imported coal costs are likely to exert pressure on state government-run discoms and they may pass on the costs to consumers, the report stated.