India is among the fastest-growing economies in the world and electricity demand is nearly expected to double in the next decade. India’s electricity demand is expected to go from 1,275 TWh in FY2019 to 2,325 TWh in FY 2030 (for utility-scale) in moderate case of demand projection. The Indian government has outlined a plan to ramp-up the installed base from 356 GW to 831 GW to meet this demand increase.
The plan is majorly pegged onto two pillars – land-based renewable and coal-based power plants. However, both the resources are expected to be restricted by investment and infrastructure issues.
Coal-based power plants have been in the cornerstone of India’s capacity growth story. India installed nearly 116 GW of coal-based power plants in the previous decade and plans to install another 96 GW until FY 2030, while 32 GW retires. However, the current investment scenario for new coal is quite grim. At present, more than 50% of the projects in India’s coal-based power plant pipeline have an uncertain time of delivery.
Moreover, 20% of the already installed coal-based capacity struggles to produce and sell enough power to meet its debt obligations. In a realistic case, only 41 GW of new coal-based capacity is anticipated for addition until FY 2030, cutting, the government plans short by more than 50 GW.
Land-based wind faces challenges
The second pillar of land-based wind and solar is challenged for the requirement of infrastructure creation at a break-neck speed. For reaching the government plan of 440 GW of wind and solar by FY 2030, nearly 34 GW of grid needs to be added every year, something that has never been done before.
As per long-term plans of India’s transmission utility and previous growth trajectory, 25-27 GW of the grid is anticipated to be augmented per year. This would result in a cumulative 370 GW installed capacity of wind and solar in FY2030, which is 70 GW lower than the government’s plan.
In addition to large-scale renewable energy and coal, India has planned to ramp up large hydro and nuclear capacity. However, it would be difficult to scale nuclear and hydro beyond 10 GW and 24 GW, respectively. This is due to the long gestation period and permitting process of both sources.
As the national electricity plan gets challenged, the supply is expected to add up to 2,169 TWh against a power demand of 2,375 TWh creating a demand-supply gap in 2030. Scaling of onshore wind, solar, hydro and nuclear capacity would be a challenge due to the grid infrastructure cap on onshore wind and solar sector and the long gestation period of nuclear and hydropower plants. Hence, the supply needed to meet the demand can come from sources from new coal or alternatives like OW.
New coal in FY2030 is expected to be available at the price of EUR 65/MWh. This is due to the increasing cost of coal raw material and the increased equipment costs needed to meet environmental norms. This is suitable for OW in FY 2030, given that the most competitive OW bids globally are at EUR 45/MWh in 2019 and the technology is expected to go through a 20-30% LCoE decline within the next 10 years. However, meeting the cost levels on coal would require a set-up of the supply chain and building local capabilities to deploy OW.
India must start thinking about offshore wind today to keep up with its commitment to COP21 on emission reduction and must choose the greener alternative over excessive pollution from coal burning. Furthermore, offshore wind offers India an opportunity to kick-start a new industry in the country, the renewable industry with the highest potential to create jobs.
Offshore fits the cut for India environmentally and economically, and that is the reason why India must bother about offshore wind today.
India’s energy landscape is undergoing a change across the value chain, and the electricity mix is expected to revamp towards 2030. MEC Intelligence (MEC+) is uniquely placed in India, with its renewables sector expertise, experience of work with energy leaders, and an in-depth understanding of the Indian energy market.