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Electricity Reforms in India: Firm Choices and Emerging Generation Markets

India's electricity reforms, beginning in early 1990's, have altered the ownership profile of generation firms. Changing behavior of a firm manifests in choices of fuel, technology and operational practices, which profoundly impact firms' performance. The Indian constitution accords concurrent jurisdiction on electricity matters to states and the center. Besides, energy resources and market dynamics vary geographically. The electricity comparisons are therefore best revealed at the state level. This book analyzes the performance of generating firms in two prominent states of India Andhra Pradesh and Gujarat. Among the questions addressed by the book are:

  1. How have reforms affected technology and fuel choices of generation firms?
  2. How have reforms changed the generation market? What are the key drivers of the change?
  3. What is the impact of reforms on technical and economic efficiency of generation?
  4. What are the implications of electricity reforms on the environment?
  5. What are the key legal and institutional changes associated with reforms?
  6. What are the investment risks for generation firms? How these firms hedge the risks?

The analysis is based on a survey of firm's choices of fuel, technology, ownership, investment and operational practices. The findings suggest that reforms have fragmented the generation market; creating heterogeneous ownership structures like IPPs, co-operatives, hybrids and captives alongside state and central government owned firms that command major market share. A key contribution of the book is the mapping of state level performance baselines that show the extent of contribution of the reforms to improvements in aggregate energy and emissions performance. The baselines reveal that the reforms have benign impact on energy efficiency; though the emission baselines do not show secular improvement, e.g. in Andhra Pradesh due to declining share of hydro. Analysis of the rising captive generation is another contribution of the book.

Central to the reforms are legal and institutional changes that provide signals to which firms respond. The book discusses key legal and institutional changes; their influence on risks and firm's hedging strategies in dynamic environment, using Dabhol Power Company as a case example.

The book is an important addition to Indian electricity sector reforms literature. Its analysis rests on empirical data and robust framework that segregates and quantifies the impact of reforms on energy efficiency and emissions. The book is eminently readable and would be useful for policy makers, utility managers, investors, academics and others interested in the dynamics of electricity sector reforms.

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