Power agenda for new Indian government

Vinod Gupta | May 25, 2019 11:42 AM

CHANDIGARH: Indian power sector has grown tremendously in the in last decade than the preceding several decades but this is not enough. A model power sector in the country remains a pipe dream and benefits of surplus power generation capacity are negated by power distribution companies facing cash crunch.

The way out of this paradox of scarcity amid surplus power lies in fixing power distribution companies (Discoms). The formula that politicians must find the will to tell people to pay for the power they consume. Now new NDA government is taking  office  and every political party has promised   more subsidies to all sections of power consumers. Exercise of political will offers the maximum yield but politicians are wary of its electoral fallout which are held twice a year.

NITI Aayog  has recommended a slew of measures to reform the country’s energy sector including privatisation of power distribution companies, but we may not be ready to face the consequences of such challenge which may sideline the millions of poor consumers. Even the present power supply in rural and semi-urban areas is erratic and inadequate and expensive.

Electricity Act 2003 replaced the Electricity (Supply) Act 1948 which trifurcated the state electricity boards have not improved the service, but instead it has added to the overhead costs and lack of clear policy for the states as a whole.

Removal of techno- economic approval of Central Electricity Authority (CEA)

opened the floodgates of private thermal generation capacity across the states and accentuated the already acute hydro-thermal mix of generation. The private  developers setting up thermal power plants took undue advantage of the  situation and  forced the state power utilities  sign long term  power purchase agreements  with  deemed generation clause. This clause forces the power distribution company (Discom) to pay for the power that they may not consume during the lean periods. This has also crippled the state sector thermal units which have been put on forced outage.

The lapsed Electricity (Amendment) Bill 2014 envisaged segregation of carriage and content. This has far reaching implications not only for the industry but also the consumer. Government should recognize and accept that the conditions prevailing in the power sector are not at all favorable for introducing far reaching changes in distribution.

 Smart metering is a game-changer for India’s power sector. The smart meter technology is pivotal both for the buyer and the seller in optimizing energy use, enabling both to save energy and cut costs and  they will enable Discoms to address billing inefficiencies that contribute to their well-documented trouble.

Merit order scheduling procedure for operation of thermal units should be followed strictly without giving any undue preference to private sector units for keeping their plants in operation while backing down state thermal units. This proposal is within the prevailing ABT regime and principle of merit order scheduling.  The present PPA’s signed between the state Discom and private developer need to be amended accordingly.

UDAY and the NPAs of Banks and Financial institutions indicate the gravity and urgency of the financial crisis. There is nothing to indicate that change in legislation resulted in reduction of line losses. Line losses have reduced only due to improvement in both technology and investment. Even after the implementation of UDAY the financial position of state utilities has worsened again.

Power surplus India may be a major step towards reliable electricity supply and universal access but the power sector is facing several serious challenges as well. In the urban areas the average power cuts are to the tune of 25 hours in a month whereas in rural areas the supply rarely exceeds 12 hours in a day. The main reasons are financial constraints of power utilities which prohibits them from purchasing power as per demand and transmission constraints.

As part of the Paris Climate agreement, India had committed to produce 40% of its installed electricity capacity from non-fossil fuel sources by 2030.  India has set itself a target of adding 175 GW renewable energy capacity by 2022. Government’s overzealous approach towards solar power generation appears to be unsustainable.

 In the case of renewable, solar power  and wind power the quoted tariff has come down  but old power purchase agreements entered into several times the present cost have to be honored for the next one or two decades. Also, very large mega solar parks that would have installed capacity in thousands of megawatts are to be set up. There is serious concern relating to the evacuation of power since the investment in transmission would be used for about 6 to 8 hours in 24 hours.

The mix of thermal and renewable power  needed to be balanced  and a recent power ministry study on optimal energy mix has virtually concluded that the present solar and wind power target is more than adequate to achieve the optimal mix of renewable and non-renewable sources of energy. It has suggested renewable energy should not be more than 40% of energy requirement. Now hydro power has also been added to the renewable power.

States should go for combining generation, distribution and transmission under one integrated in one company for optimum utilization of resources. The States are empowered and at liberty to re structure their respective power utilities so as to achieve the objective of integrated operation since electricity is a concurrent subject. NTPC and Power Grid has been asked by central government to form a joint power distribution company.

For the success of Saubhagya scheme in given time then both Central and State governments will have to review the present energy policy and strengthen state owned Discoms instead of overdependence on private sector.

In a significant development, the government announced that the electrification work of all inhabited villages in India has been completed. While this is a significant achievement, it is still largely symbolic in nature.

 A vague definition of electrification creates a false sense of achievement and the claim of 100 per cent rural electrification, therefore, is not substantive in nature because what has been achieved is mere connectivity to the electricity grid of villages. It is also no certification for power availability.

 Bailouts have been made a recurrent feature for the power sector which is marred by shortages, operational inefficiencies, high interest costs and cross-subsidies for political gains. Periodic bailouts of state electricity boards haven’t helped.

Former US President Barack Obama stated in his book: “A nation that can’t control its energy sources can’t control its future.” Thus the area of focus for the government should be to ensure power for all in a durable manner at affordable price rather than privatizing the entire power sector.

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