Porter's Analysis of Power Industry

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The article explains the Porter's five forces of Indian power sector. The Indian Power sector registered 9.2 per cent growth in power generation in April-December 2011 as against 4.6 per cent growth in the same period in 2010.

The threat of the entry of new competitors

Highly capital-intensive industry and hence demands huge investment Power producers – Behemoth like NTPC, SEBs contributing around 85 % of total power produced Ditto for Power Grid Corp. of India in Transmission and Distribution Segment Major plans by big companies like Reliance power, Adani power, Lanco etc. to make a entry into power sector after market opened up for private sector through Electricity Act 2003 and subsequent reforms However obtaining regulatory approvals,fuel linkages, land etc. still remain the major bottlenecks. Hence the threat of new entrant appears to be low

The threat of substitute products or services

Power does not have substitute but it can be generated from different sources of energy. Currently thermal power is dominant in India, coal being the major raw material. Coal availability is limited and therefore power from nuclear, hydro and other renewable sources could be used as substitute for thermal power in future. Agreements with various countries for nuclear collaboration will give major impetus to Nuclear power plants Although demand for power outstrips its supply, going forward, thermal power plant companies have threat from non-thermal power generators. Hence the threat of substitute products is medium

The bargaining power of customers (buyers)

Industrial consumers have huge demand for power
Their bargaining power is low in India as the number of power companies to buy from is limited in number. Hence power companies are in better position. Retail customers -Government regulates the power sector to ensure supply of power at reasonable prices but this regulation is limited. Peak shortage is much more in every region and it is about 12 %...
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