Top 5 Reasons Why India’s Power Demand Exceeded Projections

Top 5 Reasons Why India's Power Demand Has Surprised Projections

India’s power demand has been rising steadily. The country’s higher than anticipated peak demand has been in the news, with peak demand touching a lifetime high of 223 GW in June 2023 when peak deficit touched 0.17 percent.

As per the Load Generation Balance Report (LGBR) released by the Central Electricity Authority, the peak demand estimated for 2022 to 2023 was 214,871 MW. The actual demand, however, exceeded projections by over 1000 MW and stood at 215,888 MW. There is also a notable difference between the energy requirement as per LGBR and the actual figures of 2022 to 2023.

The first two months of 2023 had already set the tone for the rest of the year having jumped by 10% when compared to the same period in 2022. India’s power demand has consistently exceeded CEA’s estimates.

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The top five reasons behind the growing demand for power and the actual power demand exceeding the demand estimated are as follows and taking estimated by surprise-

Economic Growth Coupled with Automation

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As per a report by the IEA, for economies such as India that are growing rapidly, electricity demand in buildings grew on average by more than 8% per year over the last decade.

The rapid urbanisation in the country is complimented by a surge in household appliances, use of electric machinery, the acceleration of electric vehicles and of course, adoption of cooling systems. However, it has been challenging to predict demand in the EV sector, since there is no historical data available. At the same time, there are uncertainties about  the rate and industrial structure of growth, which can make it hard to make demand estimates.

As per reports, the growth of electricity demand in buildings has seen an uptick particularly in 25 years. This alone makes up close to 60% of the cumulative growth in total electricity consumption. Globally, buildings account for about 55% of demand for electricity worldwide.

Economic growth has been driven up substantially by the increase in industrial production.

Further, electricity use in buildings is set to nearly double from 11 petawatt hours (PWh) in 2014 to around 20 PWh in 2040, requiring large increases in power-generation and network capacity.

While residential is responsible for a fourth of the electricity demand, the commercial and industrial sector can be attributed to half of the power demand in India with agriculture accounting for a sixth of it.

Domestic data on electricity consumption by Indian utilities was reported at 334,000.000 GWh in 2022 from the former 330,808.936 GWh a year ago.

Home to Heatwaves

The demand for electricity was augmented by 8.4 per cent in July 2023 when compared to July 2022.

This has been indicated in a recent report by the IEA, which points that coupled with strong post-pandemic recovery, along with intense heat waves, electricity demand has surged dramatically.

India has been home to more than 700 heatwaves over the last five decades. Against such a backdrop, while incomes have risen steadily, so has the ownership of air conditioners in response to this phenomenon. Since 2010, the demand for air conditioners has tripled, to reach the current number of 24 air conditioners for a hundred households. Studies unanimously agree that the ownership of air conditioners will grow nine times by 2050. This is set to overtake every other electric household appliance such as TV, refrigerator or washing machine. The rise in use and ownership of ACs and other electric cooling machines has majorly contributed to peak electricity demand.

At the same time, the weather patterns in the country have been difficult to predict to say the least, thus it has been equally hard to estimate demand. For instance, in June 2023, bleak showers and heatwave drove up peak demand to a new high. As the monsoon season improved, the demand also slid. Despite this, the southern peninsula saw an increase in demand contradicted by the northern and western regions seeing a decline in demand. In such situations, when the weather pattern is unpredictable, forecasting demand becomes a challenge.

The forecast of All India Energy Requirement and Peak Demand as per the LGBR of 2022-23 were lower than the actual figures of 2022-23 by 0.7% and 0.5% respectively due to abnormal heat wave resulting unexpected All India Energy Requirement and Peak Demand rise.

Regional Increases

The demand in the month of August in Rajasthan for electricity was 39% more YoY when compared to August 2022.

The misjudgment on India’s power demand estimate has created a gap between supply and demand. This came to the fore especially for a few days in August this year when Jaipur Vidyut Vitran Nigam Limited indicated that on those days, this resulted in a partial power outage in rural areas. There was a surge in demand from other states but the electricity needed was not available on energy exchange either.

The demand in the month of August in Rajasthan for electricity was 39% more YoY when compared to August 2022. This was because of higher agricultural connections, less rainfall, higher temperatures in comparison to last year.

August remained a notable month in the year for the country on the whole as demand for power saw a rise by 21% in August this year vis a vis August 2022. The rise in humidity was complemented by increase in hours of cooling, leading to higher demand in turn.

The electricity consumption in the month overtook the estimated by the Ministry of Power that forecasted 229 GW between August 16 to 18 while actual demand stood between 231.6 GW to 234.1 GW.

In the Northern Region, the Actual Energy Requirement and Peak Demand for 2022-23 was higher than the anticipated by 0.8% and 0.4% respectively.

Greater Availability & Accessibility

With greater power access for all, there has been a thrust on making levels of availability of electricity, in the process, creating greater demand and demand patterns.

The government in its drive for 100% electricity connections, has focused on achieving electrification of all un-electrified households in the country. In August 2015, PM Modi had announced the ambition to electrify all houses.
To pave the way for this, barriers in the way of electrification, such as lack of awareness, cost of obtaining new connections, complexity and other logistics, have also been eliminated with initiatives under SAUBHAGYA- Pradhan Mantri Sahaj Bijli Har Ghar Yojana, Deen Dayal Upadhyaya Gram Jyoti Yojana’ (DDUGJY) among others. With easier accessibility through apps, levels of consciousness, subsidised costs, higher levels of awareness among consumers and easier process of achieving connections, the demand has been pushed upwards. With 24×7 power the next big goal, the household sector will continue to hold up demand for more power, with power prices the only remaining obstacle to even faster demand growth

Dependence on Coal

In H1 of 2023, India’s coal-fired generation saw a 3.8 per cent increase

This could be attributed to greater growth in demand growth. Colar plants PLF or plant load factor has already been rising since last year, and overall , is estimated to cross 60% from the average of 58% last year The situation was aggravated by the fact that the power from hydro declined by 8% and that the estimates on electricity demand had gone astray. The reliance on coal continues as the deployment of renewables has failed to match step with demand, stepping up in the time of crisis. Between March 16 to September 30 2023, the government asked coal plants to run at full capacity to ensure supply.

This means that India is still dependent on coal to keep homes cool and avoid power outages. No wonder then fossil fuels, account for 75% of the country’s power supply. Coal continues to be the most abundant fossil fuel in India. To manage this regression, the government has leaned on gas power plants to augment supplies, especially for the winter months when gydro power will reduce generation further.

Adding to the electricity woes of India and to India’s power demand is the fact that storage remains expensive in the country and until it is made cheap and scalable, the crisis shall continue. Additionally, the firm capacity addition only indicates aggravated power deficits and power cuts. In the pipeline, firm capacity addition is just 25 GW.

To manage India’s power demand, the ToD tariff mechanism, which can help bring down electricity bills by shifting interruptible loads to high-solar hours, has been introduced recently.