GS Paper: GS3-13.Infrastructure: Energy, Ports, Roads, Airports, Railways etc:

Context

With an ever-growing list of countries announcing net-zero emissions targets, the global energy system is set to undergo a transformation in the coming decades. But India needs to ensure that this transition is smooth and people-centric.

Transition in India

• According to an IEA analysis, 90 per cent of new electricity generation capacity around the world now comes from renewables.
• In India, that energy transformation is well underway.
• India is among the world’s top five countries in terms of renewable power capacity.
• Ambitious target of 450 gigawatts: Its ambitious target to increase India’s renewable energy capacity to 450 gigawatts (GW) by 2030 would help move it closer to achieving the country’s broader climate goals and commitments made under the Paris Agreement.
• Clean energy leadership by India: India is also showing global clean energy leadership through initiatives such as the International Solar Alliance, which has more than 70 member countries.
• Transition in rural area: The energy transition in rural India can be driven by dedicated policies to promote renewables, incentivise investment in decentralised low-carbon power sources like rooftop solar, and train and build the capacity of clean energy entrepreneurs.
• Incorporating energy efficiency in the Affordable Housing Mission: In the short term, stimulus spending in the labour-intensive construction sector could accelerate progress on the Affordable Housing Mission.
• Incorporating energy efficiency and green construction methods into these projects could ensure millions of homes enjoy thermal comfort, and help make energy efficiency a core part of building designs.

Factors to consider in transition to clean energy

• Ensure equity: It must be ensured that the opportunities of India’s transition are shared fairly throughout society — and workers and communities are not left to face the challenges alone.
• Make it people-centric: To achieve the trifecta of jobs, growth and sustainability, India must strive to put people at the centre of its energy transformation.
• Provisions for coal-dependent regions: New jobs would need to be found over time for the coal miners affected by the changes, as well as for people who work in the fossil fuel power plants that will close down.
• Policymakers must earmark special “transition funds” to help coal-dependent regions, some of which are among India’s poorest.
• Increase investment by rationalising energy subsidies: Energy subsidies must be rationalised and directed towards those who need them most.
• Fiscal resources freed up through subsidy reform should then be invested in clean energy solutions, especially in underdeveloped regions and marginalised communities.
• Support rural livelihood: A just transition should focus on how clean energy can support rural livelihoods and increase communities’ resilience in the aftermath of the pandemic shock.
• Ensure women’s participation in the green workforce: While India’s energy transition will create many new jobs, the limited participation of women in the growing green workforce must be addressed.
• A 2019 study by CEEW and the IEA suggests that women account for nearly 32 per cent of the renewables workforce globally but only around 11 per cent of the rooftop solar workforce in India.
• Engage youth: Engaging the youth is critical to ensure that the energy transition is sustainable, inclusive and enduring.
• Young entrepreneurs in India have already shown their impact by expanding the footprint of renewables and disrupting traditional energy models.
• Some of these key themes are being explored by the 30 members of the Global Commission on People-Centred Clean Energy Transitions, which the IEA launched in January.

Conclusion

A people-centric approach, backed by good policy design, will not only help India build a clean and inclusive energy future, but could also provide a model for other countries and communities worldwide.

Power regulatory body in Rajasthan recently ordered discoms to solarise unelectrified public schools. The move has several benefits and therefore can be emulated by the other states as well. 

Expanded electricity access in rural areas and shortcomings in it

• Estimates suggest that India has doubled the electrified rural households, from 55% in 2010 to 96% in 2020.
• However, the measure of access to power supply has been the number of households that have been connected to the electricity grid.
• This measure discounts large areas of essential and productive human activities such as public schools and primary health centres.
• And despite greater electrification, power supply is often unreliable in rural areas.

Solar energy: Solution to electrification in remote parts

• To address the above problems, the Rajasthan Electricity Regulatory Commission (RERC) has ordered the State’s discoms to solarise unelectrified public schools.
• The RERC has also suggested installation of batteries to ensure storage of power.
• Apart from enabling education, this ruling would benefit several other crucial aspects of rural life.
• The RERC order also directed discoms to seek corporate social responsibility (CSR) funds for the solarising drive and allows schools ownership of the power systems in a phased manner.
• This removes the burden of infrastructure development expenses on discoms, while also ensuring clean energy for the schools.
• The power that is generated could also be counted towards the discoms’ Renewable Purchase Obligations (RPO).
• Large-scale projects are generally financed by companies that wish to profit from economies of scale.
• They are less interested in investing in rural electricity as it is not as lucrative.
• Large-grid based projects add to the supply of power in urban areas, and therefore, only marginally further greater energy access goals.

The decentralised model of power generation

• While Rajasthan has land mass with vast, sparsely populated tracts available to install solar parks, bulk infrastructure of this scale is susceptible to extreme weather events.
• With climate change increasing the possibility of such events, a decentralised model of power generation would prove to be more climate resilient.
• With battery storage, the susceptibility of grid infrastructure to extreme weather events could be mitigated.
• This is called climate proofing.
• As solar installations become inexpensive and with rapidly advancing battery storage technologies, decentralised solar power generation has become a reality.

Conclusion

The ruling by Rajasthan’s power regulator not only helps in increasing access to electricity, achieving targets of renewable energy but also suggests solutions that other States could emulate.

The article highlights the need for frequent financial aids to the discoms by the Centre and discusses the factors responsible for this.

Frequent rescue packages for discoms

• Recently, there was a sharp decline in the dues owed by power distribution companies, discoms, to power generating companies.
• Discoms have paid off their dues in part by drawing down a liquidity facility arranged by the Centre last year.
• This rescue package was arranged to prevent the entire power sector chain from suffering because of the discoms’ inability to meet their obligations. 
• In the initial years after the introduction of UDAY some states did, in fact, witness an improvement in their financial and operational indicators.
• But it wasn’t sustained, There has been a sharp deterioration in several parameters.

Low performance of Discoms

1) On the basis of AT&C losses

• A key metric to measure the performance of discoms is AT&C losses.
• The UDAY scheme had envisaged bringing down these losses to 15 per cent by 2019.
• However, as per data on the UDAY dashboard, the AT&C losses currently stand at 21.7 per cent at the all-India level.
• In the case of the low-income north and central-eastern states — Uttar Pradesh, Bihar, Jharkhand and Chhattisgarh — the losses are considerably higher.

2) On the basis of cost and revenue per unit

• On another metric — the gap between discoms’ costs and revenues — the difference, supposed to have been eliminated by now, stands at Rs 0.49 per unit in the absence of regular and commensurate tariff hikes.
• For the high-income southern states of Tamil Nadu, Andhra Pradesh, and Telangana, this gap between costs and revenues is significantly higher.

What are the factors responsible for inefficiencies?

1) Electrification push without cost restructuring

• The government’s push for ensuring electrification of all have contributed to greater inefficiency.
•  To support higher levels of electrification, cost structures need to be reworked, and the distribution network would need to be augmented — in the absence of all this, losses are bound to rise.

2) Economic fallout of the pandemic

• With demand from industrial and commercial users falling, revenue from this stream, which is used to cross-subsidise other consumers, has declined, exacerbating the stress on discom finances.
• A turnaround in the economy will provide some relief, but will not form the basis of a sustained improvement in finances.

3) Lack of consumer data and metering

•  Even six years after UDAY was launched, various levels in the distribution chain — the feeder, the distribution transformer (DT) and the consumer — have not been fully metered.
• As a result, it is difficult to ascertain the level in the chain where losses are occurring.
• Other than discoms in metros like Delhi and Mumbai, there is also limited data on which consumer is attached to which DT.
• This lack of data makes it difficult to isolate and identify loss-making areas and take corrective action.

4) No tariff hike

• The continuing absence of political consensus at the state level to raise tariffs or to bring down AT&C losses signal a lack of resolve to tackle the issues plaguing the sector.

Way forward

• One of the solution centres around a national power distribution company.
• Another option is to deduct discom dues, owed to both public and private power generating companies, from state balances with the RBI forcing states to take the necessary steps to fix discom finances.
• The Centre has linked additional state borrowings to the completion of distribution reforms to incentivise states to act.

Consider the question “Despite several efforts by the Centre to improve the efficiency, discoms continue to perform dismally requiring frequent financial aids. What are the factors responsible for this? Suggest the way forward.” 

Conclusion

Short of radical measures — privatisation remains a chimera — it is difficult to see how a sustainable turnaround in the financial and operational position of discoms can be engineered. As the amounts involved rise, minor tinkering isn’t likely to produce the desired results.

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Back2Basics: AT&C losses

• Distribution loss consists of two parts:
• a. Technical loss
• b. Commercial loss.
• It is also called AT&C loss.
• AT&C loss is nothing but the sum total of technical and commercial losses and shortage due to non-realization of billed amount.
• AT&C Loss = (Energy input – Energy billed) * 100 / Energy input.