1. Capacity Addition Planning in the Power Sector Shantanu Dixit www.prayaspune.org shantanu@prayaspune.org

2. Prayas 2 Interaction plan Capacity addition plans – e.g Konkan region Climate friendly, economic options for meeting energy services needs Indias current capacity addition plans Key shortcomings and implications for climate

3. ~7,600 MW of new generation planned in Shahapur Taluka, Dist. Raigadh ~6,600 MW of new generation planned in Ratnagiri district ~19,000 MW of new generation planned in the Konkan strip of Maharashtra ~4000 MW of existing generation in Konkan Raigadh : 9,558 km² Ratnagiri : 8,208 km² Sindhudurg : 5207 km²

4. Prayas 4 Interaction plan Capacity addition plans – e.g Konkan region Climate friendly, economic options for meeting energy services needs Indias current capacity addition plans Key shortcomings and implications for climate

5. Prayas 5 Integrated Resource Planning: Case studies from India DEFENDUS (Karnataka 1990) – Development Focused End Use oriented Scenario Amulya Kumar N. Reddy et.al. Least Cost Plan (Maharashtra 1994) – Prayas Energy Group

6. Prayas 6 Typical Energy Saving Potential (based on Karnataka IRP by Reddy et. Al.) End use efficiency savings – Industry modernisation–efficient drives etc: 15-25% – CFL for lighting : 14-58% – Solar Water heaters: 28% – LPG instead of electric stoves: 18% – Frictionless foot-valves and HDPE piping for agirculture pumps: 30%

7. Prayas 7 Conclusions of Integrated Plan for Maharashtra (Prayas 1993)

8. Prayas 8 Typical Benefits of IRP Typically: efficiency can meet 25-40% and renewable generation can meet 20-25% of incremental needs at lower economic costs. Maharashtra IRP – while meeting same level of energy services – Financial saving - ~ 33% – Reduction in incremental fossil fuel consumption - ~ 55%

9. Prayas 9 Interaction plan Capacity addition plans – e.g Konkan region Climate friendly, economic options for meeting energy services needs Indias current capacity addition plans Key shortcomings and implications for climate

10. Prayas 10 Capacity Addition: 11 th Plan targets Projection to add ~ 600 GW in next 25 years 11 th Plan (2007-12) - 68869 MW 48010 Coal & Lignite, 15585 Hydro, 3160 Nuclear, 2114 Gas 53% Central, 33% State, 14 Private + 13,500 MW Renewable, Captive … Transmission & Distribution to carry this power

11. Prayas 11 Drivers Growing economy – GDP growth from ~ 5 - 6% to 8 - 9% Continuing shortages – Peak shortage - ~ 12% and energy shortage ~ 8% – Only 40-50% of targets met in 8,9,10 th plans Need for greater reliability – Target of 5% spinning reserves Need to electrify all houses – 44% houses do not have electricity About 12000 MW of capacity addition

12. Prayas 12 Approach towards meeting energy needs We do not enjoy the luxury of an either-or choice: India needs energy from all known and likely sources. – Prime Minister of India (Speech at Tarapur Automic Station 31 st August 2007, - http://www.rediff.com/news/2007/aug/31guest.htm) Ambitious projections for 10 years – 100,000 MW Thermal – 50,000 MW Hydro – 11,000 MW Nuclear Expanding fuel supply and sources

13. Prayas 13 Policy changes to meet capacity addition needs De-licensing of generation projects Merchant plants Captive power plants Ultra mega power plants Encourage capacity addition through all means

14. Prayas 14 Ultra Mega Power Projects 4000 MW super critical coal thermal plants (5 – 7 plants expected) Federal government lead – Fiscal incentives, conducting competitive bidding, helped evolve power purchase agreement and payment security mechanism Encouraging results for first two projects – Half a dozen bids for each project – Highly competitive tariff US cents 2.7 / kWh for pithead project and US cents 5 / kWh for imported coal based project (levalised tariff) – Both projects won by private sector

15. Prayas 15 Ultra Mega Power Projects Key Features of UMPP Competitive Bidding Process – Transparent process Well laid out procedures and timetable Anonymous comparison of all bids to be made public All contracts signed with winning bidder (including PPA) will be public – No uncertainty and little scope for post bid negotiations All required inputs and clearances to be provided by special purpose vehicle (govt. owned shell company) Project contract formats finalized before bidding Simple criteria for selection of winner

16. Prayas 16 Interaction plan Capacity addition plans – e.g Konkan region Climate friendly, economic options for meeting energy services needs Indias current capacity addition plans Key shortcomings and implications for climate

17. Prayas 17 Capacity addition planning – Oblivious of key challenges Significant over projection Even though capacity addition is 40 – 50% less, shortages have reduced or increased very moderately

18. Prayas 18 Capacity addition planning – Oblivious of key challenges Economic implications 11 th five yr. plan – Projected investment need – US $ 255 Billion Fixed cost of US cents 15 / unit of incremental sales! (v/s current total tariff of around – US cents 8 / unit)

19. Prayas 19 Social and Environmental issues -1 Electricity Policy – Environment Appropriate advance action through EIA and Environment Action Program Streamline procedures including setting up of Land Bank and Forest Bank Coal washeries, full compliance with environmental norms – Demand Side Management, Energy Conservation Hydro Policy – Proper implementation of National Policy on Rehabilitation and Resettlement to ensure that the concerns of project-affected families are addressed adequately. – Adequate safeguards for environmental protection with suitable mechanism for monitoring of implementation of Environmental Action Plan and R&R Schemes

20. Prayas 20 Environment issues -2 Plans have little details on environment & social impacts – Emphasis on speeding up clearance of environmental obstacles – No analysis on: How much land required? How many people displaced? Livelihood impact? – No focus on enhancing the effectiveness through democratisation (participatory R&R mention in Transmission Chapter of11th Plan)

21. Prayas 21 Salient observations Over projection of demand and poor implementation performance Shortage psychosis and exaggerated capacity addition plans Integrated resource planning is avoided Climate friendly options, even though economical, are ignored

22. Prayas 22 Lesson To address climate change issues, improvement in national level planning process is critical.

23. The vicious circle

24. Prayas 24 Indias Capacity Addition Plans YearPeak Demand GW Inst. Cap GW Remarks 2007104132 14% peak shortage; Coal (54%),Hydro (26),Gas (11), Nuclear(3), Renewable (6) 2012158220 2022323425 2032592778 ~Coal (50%),Hydro (29),Gas (6), Nuclear(12), Renewable (5) Source: Integrated Energy Policy, 8% GDP Growth Scenario