Policy & GovtPOWER

Budget 2020-21 wishlist: Key developments and challenges in power sector

The electricity industry is in a strong position. The generation capacity expanded (4.2% growth over past year) ahead of demand (1.1%) which places it well to meet the emerging needs of recently connected households and electrification of transport.

Non-fossil fuel generation has grown in share from 21.5% to 23.9% during the year making a credible and continued progress towards our climate change commitments. The prices of short-term electricity traded on the power-exchanges remained steady over a moderate range (12%) during the year

Key issues

The larger share of non-fossil fuel generation (exceeding 25% of supply for 5 months of the year) poses new challenges to state utilities, particularly, the cost of maintaining base-load generation across the capacity utilisation of thermal power plants (PLF) averaged 57.5% dipping to low 50s in the last few months with softening demand. year and managing intermittency and transmission constraints.

The state governments have to expedite implementation of actions to improve operational performance of utilities with roll-out of smart meters, digitization, and private participation.

Regulatory reforms continue to lag with only a few states implementing real tariff increases and as a result for most state utilities the unit revenue lags cost by about 5% to 16% leading to delayed payments to suppliers.

Business Standard
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