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A cost-effective way to power generation
With economic growth, the demand for power in India is only going to increase.
Present scenario
India is potentially expanding its power generation capacity.
At present the installed capacity of power is 358 GW which is four times of what it was in 1997-98.
The is evident of doubling the capacity two decades or about 75 MW per day.
India aims to have a renewables capacity of 175 GW by 2022 and 500 GW by 2030.
Solar and wind power plants would account for much of the targeted capacity from renewables.
China added generation capacity that was equal to a third of India’s total installed capacity in 2018.
Private sector engagement
In recent years, the major growth drivers have been renewable energy.
The important one includes solar and wind power and investment from the private sector.
The private sector accounts for almost half the installed generation capacity.
For the last three years, growth in generation from renewables has been close to 25%.
Project size
Thermal generation capacity accounts for about two-thirds of the installed generation capacity in the country. This shows that there is an increasing awareness about the environmental impact of fossil fuels.
Project ownership
Over the last two decades, 63% of the total planned generation capacity has come from the private sector. Private investment has been even more pronounced in renewables, accounting for almost 90% of investment in wind and solar projects.
How to achieve targets
Thermal plant capacities are large and therefore targeted capacity can be achieved by constructing fewer such plants.
On average, it would take 18 solar or wind projects to generate the same quantity of power as one thermal plant.
As the capacity of power plants increases, the average cost of power per MW reduces.
The average cost per MW for a thermal plant is about 25% lower than that of a solar plant.
Advantages of private players
Private sector plants have an average cost per MW that is 12-34% lower for all categories except solar. Lower capacity cost has a direct impact on electricity tariffs.
Electricity tariffs broadly consist of two components: fixed capacity costs and operation and maintenance costs, which include fuel expenses.
In general, capacity costs account for more than 90% of the levelised cost of electricity.
Private investment in the power sector has helped in augmenting capacity and also helped in lowering cost.
Marginal capacity costs
Total capacity in generation has been growing and the cost of installing additional capacity has fallen
The reasons for the decline could be:
Advances in technology have resulted in the construction of larger power plants.
Increasing share of private sector investment.
The share of private sector in capacity creation has been 70% in the last decade as compared to 46% in the decade before that.
The private sector capacity has lower costs.
Way forward
Focus on developing larger solar and wind power plants.
It is imperative to create generation assets with the lowest unit cost.
Optimising plant capacities and encouraging private sector investment.
Measures to regulate marginal cost for capacity.
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