India currently suffers from a major shortage of generation capacity. In 2008, India had approximately 177 gigawatts (GW) of installed electric capacity and generated 761 billion kilowatt hours. Conventional thermal sources produce more than 80 percent of India's electricity. Hydroelectricity, nuclear power, and other renewable sources account for the remainder. India also imports marginal amounts of electricity from Bhutan and Nepal and has signed an agreement to begin importing power from Bangladesh.
India suffers from a severe shortage of electricity generation capacity. According to the World Bank, roughly 40 percent of residences in India are without electricity. In addition, blackouts are a common occurrence throughout the country's main cities.
Further compounding the situation is that total demand for electricity in the country continues to rise and is outpacing increases in capacity. Additional capacity has failed to materialize in India in light of market regulations, insufficient investment in the sector, and difficulty in obtaining environmental approval and funding for hydropower projects.
In addition, coal shortages are further straining power generation capabilities. In order to address this shortfall, the Indian government continues to work towards adding capacity.
In the IEO2011, EIA projects that electricity consumption in India will grow at an average rate of 3.3 percent per year through 2035. To meet this growth, India will have to expand their current generation capacity by 234 GW.
Conventional Thermal Power Generation
Conventional thermal-generated power accounted for more than 80 percent of electricity in India in 2008. Coal predominates, generating roughly 70 percent India's power. India is both the third-largest consumer and third-largest producer of coal in the world. India's domestic coal is low in quality – this renders coal-fired power generation relatively inefficient and necessitates imports of metallurgical coal for steel-making. The country imports considerable quantities of coal (83 million tons or 11 percent of total consumption in 2010).
Natural gas, which was primarily to offset the seasonality of hydroelectricity, is now becoming an increasingly important power generation fuel. Capacity additions and increasingly abundant domestic natural gas are causing this expansion. In the IEO2011, EIA projects that the share of natural gas in India's power generation mix will expand from 11 percent in 2008 to 16 percent in 2035.
Nuclear Power Generation
The Indian government continues to focus on the development of nuclear power to meet its power generation targets. Although India is not a party to the Nuclear Nonproliferation Treaty (NPT), its 2005 nuclear cooperation deal with the United States, known as the "123 Agreement", allows for civil nuclear trade between the U.S. and India.
This agreement will facilitate India's goal of increasing India's installed nuclear power generation capacity to 20 GW by 2020. India currently operates 20 nuclear reactors, which represent 4.4GW of generation capacity. The country is building another six reactors that will more than double this.
Hydropower and Other Renewables
As part of India's goal of diversifying its sources of electric power generation and increasing the country's capacity, the government also plans to increase the use of hydroelectric power.
International organizations such as the World Bank are providing funding for a variety of hydroelectric projects around the country. However, lack of reliability and environmental and land-use concerns surrounding construction may make it difficult to capitalize fully upon this domestic energy resource.
While India holds the potential for developing other renewable power sources, such as geothermal, solar, and wind power, cost concerns and an underdeveloped transmission and distribution network will likely hinder their expansion.