Redesigning power purchase: Peak-load pricing the way forward, India also needs to push renewables

The average plant load factor of thermal power stations have come down from over 75% to 60%. Quite a few new thermal power plants are not being able to sell enough electricity and are, therefore, having difficulty in repaying their loans. The common inference, therefore, has been that India has surplus power generating capacity. The reality, however, is a bit more complex. Electricity is unlike other industrial goods. It is supplied through the grid, and at every moment supply needs to match demand to maintain grid stability. If demand falls, generation has to be reduced. If demand rises, generation has to rise. If it cannot be raised to meet the full demand, load shedding has to take place; this was fairly common across the country earlier. Demand varies throughout the day as also across seasons. In Delhi, the peak demand is 70% higher than the minimum demand on an average day. At the height of the summer the peak is 10% higher. The decline in the plant load factor of the thermal plants in the country is a consequence of peak demand being met. 80% plant load factor was possible only due to substantial load shedding. The latest report of the Central Electricity Authority says that India still has a peaking power shortage of 2%.