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"I Don't Think People Should Plan New Thermal Units"

The power sector is one of the key growth drivers of the economy. While there has been fast capacity addition in renewables, the excess capacity in thermal power has weighed it down

RK Singh, Union Minister for Power, New and Renewable Energy - Photograph by Bandeep Singh

Union Minister for Power, New and Renewable Energy, RK Singh, spoke to Business Today's nirbhay kumar on challenges and opportunities in the sector. Edited excerpts:

Demand for power dropped in recent months and is likely to remain subdued. How will it impact the sector??

The major dip was during the April lockdown. Now we are back. Energy is a function of demand from consumers, both households and industries.

In the national Infrastructure Pipeline, power accounts for 20 per cent of investment during Fy20-25. How has the progress been?

If you look at capacity addition from 2014/15, in renewables alone, capacity addition and projects under implementation have been about 100GW. That entails investment in power generation alone of about Rs 5 lakh crore. Then, we have thermal and hydro. Our capacity addition has been satisfactory. When we started off, we, in fact, had a power deficit. We did not generate enough power to meet demand. Today, our installed capacity is double the demand. Our maximum demand is 185GW and installed capacity is 377GW. We increased transmission by almost 1,25,000 circuit kilometres to cover the entire country. Now, we are one country, one grid. We also added 2.7 crore new consumers under the Saubhagya scheme connecting every house. So, availability of power is not an issue.

Imports from China have been impacted from the last week of January. To what extent has the solar power sector suffered?

We continued with the bids despite the lockdown. The bids have been well subscribed. During the lockdown, we finalised bids for almost 5,500 MW. Apart from this, another bid has been finalised by NTPC recently. We have continued with capacity addition. The tariffs have again come down, with the last bid by NTPC at Rs 2.43 per unit. In fact, a Bloomberg study noted that we had the fastest growth in renewable energy capacity addition globally. We are the most attractive market in the world for renewable energy.

It is said that a mega solar power tender is in the pipeline...?

The government had set a target to establish 175GW of renewable capacity by 2022 with 100GW being solar. We have already established 88GW and another 45GW is under installation. That makes it 133GW. Capacity addition of about 30GW is under various stages of bidding. So, by and large, we are on track. As I said, we are the fastest growing market for renewable capacity in the world.

While there has been capacity addition in renewables, there is excess capacity in thermal power and dozens of plants are stressed. Do you think more thermal capacity will be needed?

Only the capacity under implementation will come up. Some states want to add capacity. It is an unlicensed sector, so they can add capacity. But they will find it more cost effective to buy renewable power. In any new thermal power plant you set up, including fixed charge and energy charges, it will not be less than Rs 4 per unit. However, renewable energy is available for Rs 2.40 a unit. I don't think people should be planning new units. I don't think anybody in the private sector will plan.

Once the storage cost for solar comes down further, coal-based plants which are grounded will remain grounded. That's why I have been telling Coal India to reduce coal prices. What they cannot sell now, they will not be able to sell later.

While many thermal plants remain grounded, operational ones have a low PLF of 50-55%, making them also unviable...

We are already surplus and our thermal generation PLF is dropping because of renewable energy capacity that we have added. We have said that you (thermal plants) must be flexible to bring it down to 55 per cent. Many plants have done it, while others are going to do it. This is essential because we have to add renewable capacity as we pledged to the world that we will reduce our carbon footprint. Incidentally, as far as that pledge is concerned, we are on our way. We pledged to the world that by 2030, 40 per cent of our capacity will be non-fossil fuel. We are already at about 38 per cent.

India is being projected as a major investment destination. But investors complain about the high cost of factors of production with electricity being more expensive.

There is a provision for cross-subsidy. The Electricity Act said cross-subsidy must be reduced and eventually eliminated. In 2007, the word elimination was removed. But, the Act continues to say that cross-subsidy should be reduced. The tariff policy of 2016 says cross-subsidy shall be reduced to 20 per cent. It has not happened so far. Because of cross-subsidy, the cost of power for industry is high. The new tariff policy which we have sent for Cabinet approval and approved by the Group of Ministers lays down the trajectory for reducing the cross-subsidy.

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