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245	245	= Industry Overview =
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247		-Global Power Sector
	247	+== Global Power Sector ==
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249		-The global power sector is on the cusp of a major transformation with new energy sources and new players entering the arena of energy supply. Nations, corporates, individuals across the globe are rising to the cause of climate change, and are consciously opting for greener sources of energy, resulting in the rising share of renewables in the debate on power sector’s transition portfolio mix. The COVID-19 pandemic has further stimulated the debate on power sector’s transition from fossil fuels to cleaner energy sources. Additionally, electric vehicles, digitalisation, battery storage, cyber security, big data analytics, hydrogen fuel are some of the key emerging trends that could profoundly define the way the global power and renewable markets operate in the coming years.
	249	+The global power sector is on the cusp of a major transformation with new energy sources and new players entering the arena of energy supply. Nations, corporates, individuals across the globe are rising to the cause of climate change, and are consciously opting for greener sources of energy, resulting in the rising share of renewables in the debate on power sector’s transition portfolio mix. The COVID-19 pandemic has further stimulated the debate on power sector’s transition from fossil fuels to cleaner energy sources. Additionally, electric vehicles, digitalisation, battery storage, cyber security, big data analytics, hydrogen fuel are some of the key emerging trends that could profoundly define the way the global power and renewable markets operate in the coming years. {{footnote}}https://www.tatapower.com/investor-relations/tata-power-2021/pdf/TataPower-full-annual-report-2021.pdf{{/footnote}}
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251		-[[https:~~/~~/www.tatapower.com/investor-relations/tata-power-2021/pdf/TataPower-full-annual-report-2021.pdf>>url:https://www.tatapower.com/investor-relations/tata-power-2021/pdf/TataPower-full-annual-report-2021.pdf]]
252		-
253	253	The COVID-19 pandemic brought about unprecedented changes in 2020 to the power sector worldwide, with significant demand disruptions, supply chain bottlenecks, decline in fuel prices, changes in energy consumption profiles, asset sales and acquisitions. It imparted the worst ever impact delivered by any crisis on the global economy and the power sector. Global Gross Domestic Product (GDP) posted the biggest decline of -3.3% as per IMF April 2021 report in the past 20 years and the power demand contraction of 1% was the sharpest registered in more than 50 years. Power demand is likely to recover slowly from the COVID-19 disruptions, driven by developing economies such as China and India, which have shown growth resilience and a steady increase in power demand, following the easing of lockdown measures. While the extent of demand revival in 2021 remains to be seen, the roll out of vaccines and policy support-led revival in economic activities (6% world GDP growth projected for 2021 by IMF) create grounds for the recovery of power demand in most countries.
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255	255	With an increasing number of nations responding to the challenge of climate change, the energy landscape is undergoing change, with greater focus being lent to cleaner sources of energy. More than 100 countries have pledged carbon neutrality by 2050 and many more such commitments are on the horizon. Similar announcements on the corporate front have gathered pace worldwide. Be it energy companies or those in the IT/technology space, both utility and non-utility companies are undertaking 100% carbon free initiatives.
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259	259	Reduction in costs of newer technologies is helping greater penetration of such technologies and shifting the power profile towards more variable capacities. The same is leading to rising flexibility needs for power systems. Coal and gas fired power plants are currently the main source of flexibility in many systems, with additional contributions from hydro and nuclear. Energy storage systems are gaining strength, as evidenced from the rising number of new solar projects that come with battery storage, lower costs, improved performance indices and policy support are creating opportunities for battery storage market. The global energy storage market grew significantly even in the pandemic year, achieving record installations of 5.3 GW in 2020 from 3.4 GW in 2019, led by China, and followed by the US and Europe. It is expected to grow substantially in the next couple of years, with the Asia-Pacific region accounting for more than 50% of the global market share.
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261		-Indian Power Sector
262	262
	260	+== Indian Power Sector ==
	261	+
263	263	India’s power sector witnessed many successes in the recent years, including energy access being extended to millions of households, the adoption of energy-efficient LED lighting by most households and expansion of renewable power sources, led by solar. However, the COVID-19 crisis has complicated the efforts to resolve other pressing issues that loom large across the power value chain. Among these are reliable power supply, the ailing financial health of Distribution Companies (Discoms) and rising pollution levels.
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265	265	The year 2020 was marked by one of the biggest health challenges faced by the world. It impacted all segments of the economy, and the power sector was no exception. India’s demand for power fell significantly by 8.5% in the first half of FY21 but picked up pace in the second half of the fiscal, with the easing of lockdown measures. In fact, the country recorded the highest ever peak power utilisation of 190 GW in FY21.
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269	269	Government has over the last year moved several regulatory and legislative changes to bring in reforms in the sector. Some of these changes are covered in the following section and the key highlights include privatization of Discoms in States and Union Territories, a special one-time liquidity infusion of ₹ 90,000 crore (that was scaled up to ₹1.35 lakh crore), focus on consumer rights through the Draft Electricity (Rights of Consumers) Rules, 2020, impetus to domestic solar manufacturing through Basic Custom Duty (BCD) imposition and Performance Linked Incentives (PLI) scheme, opening up commercial mining for private players, and announcement of ₹3.05 trillion reform-based result linked scheme for distribution. The success of some of these interventions like privatisation of Odisha Discoms will be key for setting trend in the sector.
270	270
271		-Generation
272	272
	271	+=== Generation ===
	272	+
273	273	India’s installed generation capacity stands at 382.15 GW as on 31st March 2021, which excludes 55 GW of captive generation capacity. Grid connected capacity addition during FY21 was 12 GW vis-à-vis 14 GW in FY20.
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275		-Thermal Generation
276	276
	276	+==== Thermal Generation ====
	277	+
277	277	Coal-based capacities still account for more than half of India’s total installed capacity, though the share has been consistently declining over the past ten years from 75% in FY11 to about 55% in FY21, indicating subdued investor interest in the sector. This is also evident in the Plant Load Factor (PLF) of thermal plants that have witnessed a declining trend in the last decade, falling from 75% in FY11 to 54.49% in FY21.
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279		-Renewable Generation
280	280
	281	+==== Renewable Generation ====
	282	+
281	281	Installation of renewables capacity has been on the rise from 11% share in FY11 to 25% in FY21. Several policy initiatives by the government have provided the muchneeded boost to the sector. Favourable cost economics has also provided impetus for the rapid increase in renewable based capacities. The government’s push towards clean energy has garnered interest among global investors, and this is reflected in project tenders getting oversubscribed amid strong participation by global investors and the cost of solar projects dropping further, as seen in the new record low tariff of ₹ 1.99/unit discovered in 500 MW solar projects of the Gujarat Urja Vikas Nigam Ltd. (GUVNL). Sustained enabling regulations for the renewables sector are visible through various policy interventions by the government, catering to both the demand and supply side, such as the ‘Must Run’ status for renewables, lifting of the tariff cap, thrust on domestic solar manufacturing, enhancing the Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan (PM-KUSUM) scheme, priority sector lending, Domestic Content Requirement (DCR) projects and so on. However, delay in Power Purchase Agreement (PPA) tie-ups, renegotiation/cancellation of bids, land issues, supply chain disruptions, etc. are some of the challenges that need to be resolved for the sector to meet its targeted growth
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283		-Fuel
284	284
	286	+==== Fuel ====
	287	+
285	285	Coal produced by CIL and its subsidiaries declined by 1% during FY21 to 596 MT (from 602 MT in the previous fiscal), missing its FY21 target of 660 MT. The decline is mainly due to lower demand from power plants during the fiscal amid reduced electricity requirement. Thermal coal imports declined sharply by 18% due to firm prices and high freight rates in the international market.
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287	287
288		-Transmission
	291	+=== Transmission ===
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290	290	The backbone transmission system in India is mainly through 765 kV, 400 kV and 220 kV AC networks, with the highest transmission voltage level being 800 kV (HVDC). Total transmission lines and substation capacity reached nearly 4.42 lakh Ckms and 10.25 lakh MVA respectively, reflecting an increase of about 16,750 Ckms and 57,575 MVA over the previous year. The National Electricity Plan (Volume II-Transmission) i.e. NEP-Trans, has been notified to review the development of transmission system during the 12th Plan Period, the current planning period 2017-22 and the subsequent period 2022-27.
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292	292	With changing power generation mix on account of increase in renewables, the government is emphasizing on augmenting the transmission infrastructure to support demand growth. In order to expedite the development of transmission lines for solar parks under Green Corridor II (Under Green Corridor-I, Power Grid Corporation of India Limited is responsible for strengthening transmission networks and constructing inter-state transmission network for connecting renewable energy-rich states) and open-up private participation, which is still limited to 7%, the government has decided to award these projects to private players through TBCB.
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294		-Distribution
295	295
	298	+=== Distribution ===
	299	+
296	296	The distribution sector in India is going through a transformation. The issues of AT&C losses, payables to Gencos and overall effective management of the utility have been affecting the performance of the sector over the years. Discoms’ overdue to Gencos had crossed the ₹ 1 lakh crore mark in FY21 and stood at ₹ 67,417 crore as of February 2021, indicating the stress in the sector. The government has announced schemes and decisions towards addressing the issues in the sector with a liquidity injection of ₹ 90,000 crore (scaled up to ₹ 1.35 lakh crore) being announced under the COVID-19 relief package in May 2020. It also announced the push for the privatisation of Discoms of Union Territories (UT) and states. The Electricity Amendment Bill under discussion also highlights several measures planned, including delicensing the distribution business to increase competition in the sector and improve services for the customers. The Union Budget 2021-22 also saw a ₹3.05 trillion reform scheme for system improvement and smart metering in the distribution sector. Effective implementation of the proposed reforms would be key to ensuring the long term recovery and sustenance of the sector in the country.
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298		-Power Trading
299	299
	303	+=== Power Trading ===
	304	+
300	300	Around 133 Billion Units (BUs) of electricity were traded in the short-term power market during FY21, as compared to a total of 137 BUs traded during FY20. Out of this, about 47% of the trading took place on power exchange platforms. The trading margins were under immense pressure due to the stiff competition amongst traders. The market is concentrated among ~~10 larger players, with the remaining traders operating in regional pockets largely for trading their own power.
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302	302	At ₹ 2.819 per unit, the average clearing price for spot markets in FY21 decreased by 6% as compared to the previous fiscal. This decrease is largely attributable to lower demand, primarily because of the impact of COVID-19 in FY21 on the economy and the manufacturing sector, and higher merchant capacity available for power sale on exchange platforms.
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304	304
305		-Business Segments
	310	+= Business Segments =
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308	308	The company’s generation business operates under various business models across divisions in the domestic as well as international markets, with the PPA/Fixed Tariff model contributing to the largest share of the generation segment.