Captive Power Plants: Centre Invokes Section 11 Amid High Electricity Demand

Context

The Centre has invoked Section 11 of the Electricity Act, 2003, directing around 112 coal-based Captive Power Plants (CPPs) to maximise generation from 1 October to 31 December 2026, following an unusual 269 GW peak electricity demand in September 2026, close to the year’s record of 270 GW.

About Captive Power Plants

1. Captive Power Plants (CPPs) are electricity-generating units established by industrial enterprises or groups of industries primarily to meet their own electricity requirements.
2. Their primary purpose is captive consumption, but surplus power can be supplied to the grid through power exchanges.
3. Current Coverage: The directions apply to coal-based CPPs with an installed capacity of 50 MW or more.

Reasons for High Power Demand

1. Persistent Heat: Higher temperatures have increased cooling demand.
2. Deficient Rainfall: Below-normal rainfall has increased dependence on electric irrigation pumps.
3. Lower Hydropower Output: Rainfall deficiency has reduced hydropower generation, increasing reliance on thermal power.
4. El Niño Conditions: Associated weather patterns may have prolonged heat and rainfall irregularities.

Section 11: Key Directions and Other Measures

1. Maximum Generation: Covered CPPs must operate at their maximum available capacity.
2. Surplus Power: After meeting captive consumption, surplus electricity must be sold through power exchanges.
3. Coal Stocks: Plants must maintain adequate coal reserves for uninterrupted generation.
4. Monitoring: CPPs must submit weekly data on generation, captive consumption, surplus sales, available capacity and coal stocks to the Central Electricity Authority (CEA).
5. Extraordinary Circumstances: Section 11 empowers the government to direct generating companies to operate in such circumstances to maintain adequate power supply.

6. CGPL Extension: The emergency provisions for Coastal Gujarat Power Ltd (CGPL), Tata Power’s 4-GW imported coal-based plant, have been extended until 31 December 2026.

1. Tariff Determination: For high-cost plants operating under Section 11, a CEA Chairman-led committee determines the procurement tariff after considering costs such as fuel expenses.

Significance

1. Energy Security: Mobilises additional generation capacity to meet high electricity demand.
2. Grid Reliability: Surplus CPP power can strengthen grid supply and reduce shortage risks.
3. Capacity Utilisation: Ensures better use of existing generating assets.
4. Economic Activity: Supports industrial operations and irrigation during periods of high demand.

Challenges

1. High Generation Cost: Imported-coal and gas-based plants may produce electricity at a higher cost than domestic-coal plants.
2. Fuel Supply Risks: Maintaining continuous generation requires adequate coal stocks and reliable fuel supply.
3. Demand Uncertainty: Changing weather conditions make electricity demand difficult to forecast accurately.
4. Tariff Burden: Higher procurement costs may create pressure on consumer electricity tariffs.

Way Forward

1. Demand Forecasting: Use weather and consumption data for more accurate demand estimates.
2. Fuel Security: Maintain adequate fuel reserves and flexible generation capacity.
3. Clean Energy & Storage: Expand renewable energy and energy storage to manage demand fluctuations.
4. Grid Flexibility: Strengthen grid infrastructure and power markets for efficient use of surplus electricity.

FAQs

Q1. What is a Captive Power Plant (CPP)?
Ans: A CPP is a generating unit established by an industry primarily for its own electricity needs.

Q2. Which CPPs are covered by the latest directions?
Ans: The directions cover coal-based CPPs with an installed capacity of 50 MW or more.

Q3. Why are CPPs important during periods of high electricity demand?
Ans: They can generate additional power and supply surplus electricity to the grid when required.