November 22, 2008

Power demand in India to reach 335 GW by 2017 – Report

According to the McKinsey & Company’s Electric Power & Natural Gas Practice study, with soaring crude oil prices, the time has come for the Indian power sector to explore substitutes. If India continues to grow at an average rate of 8% for the next 10 years, power demands may rise from the present 120 GW to 315-335 GW by 2017, 100 GW higher than current estimates.

The study said that India is gradually progressing towards a service led economy from an agrarian economy. Supply and production have increased but demand has doubled. It added that the demand can only be met through a 5 to 10 fold rise in power production. This means investments in the power sector will increase over USD 600 billion in the next 10 years.

Consumer demand across rural and urban sectors is growing at 14% over the next 10 years, whereas India’s GDP growth is just 8% a year. The second reason is the government’s plan to provide electricity to everyone by 2012. This means 23 million below poverty line households should be added in the power grid. The third reason is the 24X7 supply of electricity to consumers and the industrial demand to switch to expensive diesel based power.

When the demand rises to 335 GW, India’s power sector will have to generate 415 to 440 GW for plant availability adjustments and 5% spinning reserves. Adding 300 GW by 2017 will mean increasing the annual capacity by 30 GW against the current growth capacity of 9 GW.

The McKinsey & Company’s report, however, said that India will be able to add only 160-180 GW by 2017 even in case of best development trajectory. If these estimates are to be broken, India needs to increase its capacity at a fast pace.