Policy Wise: India’s Power Sector

Power Sector’s Policy making needs to give a good look to long-pending structural reforms. Greater power generation will not help unless distribution issues are sorted.

Policy Wise: India’s Power Sector

Issues faced by Discoms in India

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 3- Issues of Discoms

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.


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.

Policy Wise: India’s Power Sector

True empowerment of the electricity consumer

Note4Students

From UPSC perspective, the following things are important :

Prelims level : SERC

Mains level : Paper 3- The Electricity (Rights of Consumers) Rules, 2020

The article examines the various provisions of the Electricity (Rights of Consumers) Rules, 2020 and analyses whether or not these Rules will empower the consumers. 

Empowering electricity consumers

  • The Electricity (Rights of Consumers) Rules, 2020 was promulgated in December to deal with the problems faced by the consumers.
  • The enactment of consumer-centric rules does spark public debate that brings the rights of consumers to the fore.
  • the Rules lay an emphasis on national minimum standards for the performance parameters of DISCOMs. without urban-rural distinction.
  • They also reiterate the need for automatically compensating consumers.

Let’s analyse the changes introduced by the new Rule and issues with them

Supply quality issue

  • Many States have not been able to provide quality supply, especially to rural and small electricity consumers.
  • Provisions similar to made in the new Rule already exist in the Standards of Performance (SoP) regulations of various State Electricity Regulatory Commissions (SERCs).
  • It is not because of a lack of rules or regulations that quality supply is not provided; rather, it is on account of a lack of accountability systems to enforce them.
  • Unfortunately, neither these rules nor past efforts address these accountability concerns.
  • Guarantee of round the clock supply is a provision that the Rules emphasise, which might be missing in State regulations.
  • It is difficult to enforce since the availability of power supply is inadequately monitored even at 11 kV feeders, let alone at the consumer location.
  • This highlights not only the need for implementation of existing provisions in letter and spirit but also amending them with strong accountability provisions.

Weakening of existing provision

  • The Rules, in few cases, dilute progressive mechanisms that exist in State regulations.
  • For example, the Rules say that faulty meters should be tested within 30 days of receipt of a complaint.
  • Compared to this, regulations t in Andhra Pradesh, Bihar, and Madhya Pradesh, respectively, say that such testing needs to be conducted within seven days.
  • A similar observation can be drawn from the suggested composition of the Consumer Grievance Redressal Forum. 
  •  The Rules say that the forum — constituted to remedy complaints against DISCOMs should be headed by a senior officer of the company.
  • This is a regressive provision that would reduce the number of cases that are decided in favour of consumers.

Lack of clarity on net-metering

  • The Rules guarantee net metering for a solar rooftop unit less than 10 kW.
  • However, there is no clarity if those above 10 kW can also avail net metering.
  • This could lead to a change in regulations in many States based on their own interpretations.
  •  The possible litigation that follows would be detrimental to investments in rooftop solar units, and would discourage medium and large consumers to opt for an environment-friendly, cost-effective option.

Way forward

  • SERCs should assess the SoP reports of DISCOMs and revise their regulations more frequently.
  • SERCs should organise public processes to help consumers raise their concerns.
  • DISCOMs could be directed to ensure automatic metering at least at the 11 kV feeder level, making this data available online.
  • The Forum of Regulators — a central collective of SERCs — could come up with updated model SoP regulations.
  • Central agencies have taken proactive efforts to ensure regular tariff revision.
  • They could also support independent surveys and nudge State agencies to enforce existing SoP regulations.
  • The central government could disburse funds for financial assistance programmes based on audited SoP reports.

Consider the question”What are the problems faced by the electricity consumers in India? Will the Electricity (Rights of Consumers) Rules, 2020 help consumers to deal with the existing issues?”

Conclusion

The governments, DISCOMs and regulators need to work jointly and demonstrate the commitment and the will power to implement existing regulations. It is not yet late to recognise this and initiate concerted efforts to truly empower consumers.

Policy Wise: India’s Power Sector

[pib] Six successful years of UJALA Scheme

Note4Students

From UPSC perspective, the following things are important :

Prelims level : PM UJALA scheme

Mains level : Not Much

The Unnat Jyoti by Affordable LEDs for All (UJALA) Scheme and Street Lighting National Programme (SLNP) marks their sixth anniversary today.

Do not get confused with PM-UJJWALA Scheme.

UJALA Scheme

  • Unnat Jyoti by Affordable LEDs for All (UJALA) was launched by our PM on 1 May 2015, replacing the “Bachat Lamp Yojana”.
  • The project is spearheaded by the Energy Efficiency Services Limited.
  • In non-subsidized LED lamp distribution projects, this program is considered the world’s largest.
  • In May 2017, the Government of India announced that they were expanding the LED distribution project to the United Kingdom.
  • Both the programmes are being implemented by Energy Efficiency Services Limited (EESL), a joint venture of PSUs under the Ministry of Power, Government of India since their inception.

A roaring success

  • Under UJALA, EESL has distributed over 36.69 crores LED bulbs across India.
  • This has resulted in estimated energy savings of 47.65 billion kWh per year with an avoided peak demand of 9,540 MW and an estimated GHG emission reduction of 38.59 million tonnes CO2 per year.
  • Additionally, over 72 lakh LED tube lights and over 23 lakh energy efficient fans have also been distributed at an affordable price under this programme.

Policy Wise: India’s Power Sector

How should India navigate future energy transition?

Note4Students

From UPSC perspective, the following things are important :

Prelims level : International Energy Agency

Mains level : Paper 3- India's transition to renewable and challenges it faces

The article is based on the book by Daniel Yergin, titled ” The New Map: Energy, Climate and the Clash of Nations”. The book throws some questions to countries dependent on oil and suggests the framework for their transition to renewable.

Six broad themes underlying the energy transition

  • The first is the US shale revolution, which transformed the US from a major importer of oil and gas to a significant exporter.
  • The second is the leveraging by Russia of its gas exports to compel former members of the Soviet Union to stay within its sphere of influence and to embrace China into an energy partnership.
  • The third is China’s assertion of its rights over the South China Seas — a critical maritime route for its energy imports and the Belt and Road initiative;
  • The fourth is sectarian strife (Sunni/Shia) in the Middle East which, compounded by volatile and falling oil prices, has brought the region to the edge;
  • The fifth is the Paris climate summit and its impact on public sentiment, investment decisions, corporate governance and regulatory norms.
  • Sixth is the consequential impact of the manifold and impressive advancement of clean energy technologies.

Questions for India

  • The ongoing transition in the energy world raises several questions for India.
  • How might they impact its objective to provide reliable, affordable, clean and universal access to energy?
  • Who will bear the costs of the transition — in particular, the costs of retrofitting industrial infrastructure and upgrading the power grids.
  • How can it prevent the “perfect storm” of high unemployment due to laid-off coal workers and stranded assets thermal power plants, slowed economic growth and environmental degradation?
  • How realistic is a green transition for an economy almost totally dependent on fossil fuels?

Three policy initiatives for the government

1) Securing favourable terms with oil suppliers

  • The government leverage its buyer strength to secure “most favoured” terms of trade for crude supplies.
  • In this regard, they bring out one development that plays to India’s advantage — the onset of “peak oil demand” (that is, demand will plateau before supply depletes).
  • However, there is no consensus on the timing of peak demand.

2) Develop own systems for photovoltaics (PVs) and batteries

  • India must develop its own world-scale, competitive, manufacturing systems for photovoltaics (PVs) and battery storage.
  • Otherwise, India will not be able to provide affordable solar units unless it accepts the further deepening of dependence on Chinese imports.
  • Currently, China manufactures 75 per cent of the world’s lithium batteries; 70 per cent of solar cells; 95 per cent of solar wafers and it controls 60 per cent of the production of poly silica.
  • China is also looking to secure a chokehold over several strategic minerals (cobalt, nickel).

3) Prepare a clean energy technology strategy

  • Technology is the answer to the energy transition.
  • That is what will bring the system to the tipping point of radical change.
  • China has placed clean energy R&D at the forefront of its “Plan 2025”.
  • The India strategy should identify relevant “breakthrough technologies”, establish the funding mechanisms and create the ecosystem for partnerships (domestic and international).

Conclusion

As an economy which is energy import-dependent, fossil-fuel-based India must balance between the rising demand for energy and an unhealthily strong linkage between this demand and environmental pollution.

Policy Wise: India’s Power Sector

Power sector reforms: UK lessons for India

Note4Students

From UPSC perspective, the following things are important :

Prelims level : CERC

Mains level : Paper 3- India's power sector and issues

Reforms in power sector in the UK were extensive and offers some important lessons for India. This article elaborates on the issue of reforms the challenges in introducing such reforms in India.

Background of the power sector reforms in UK

  • After living with vertically integrated utilities till 1989, they unbundled.
  • Unbundling created markets both at generation and retail end.
  • Today, they are back to a situation where 70% of the power generated is sold outside the wholesale market.
  • The Electricity Act, 1989, which paved the way for the appointment of a regulator and thereafter, leading to unbundling, both vertical and horizontal.
  • Twelve distribution utilities were set up (called RECs) along with three-generation companies and also a national wires company (called NGC).
  • All of them were privatised barring Nuclear Electricity.
  • Retail competition was introduced in 1990 and was extended to all consumers in 1998.
  • A wholesale market was set up for generators.
  • The next major step was to fragment the generators because the regulator felt that they were colluding.
  • NETA in 2001 was primarily a tie-up between gencos and their consumers with long-term power purchase agreements.
  • The Energy Act, 2012, was enacted, which envisaged further changes.

Issues with Power sector reform in India

  • The Electricity Act, 2003 is a very cautious and timid exercise compared to what has been done in the UK.
  • Through the Act, we have merely unbundled and ring-fenced our utilities so that there is transparency in the accounts; this itself took us several years.
  • There has been no attempt to create a wholesale market or a full-fledged retail market where the consumer chooses the supplier.
  • Large consumers, having loads in excess of 1 MW, however, have the option of open-access where they can opt to receive supply from some other entity, instead of his incumbent utility.
  • The road to open access though has been bumpy, and discoms have opposed it tooth and nail.
  • Besides what was possible in the UK may not be possible in India.
  • The UK did not have a regime of cross-subsidies where the commercial and industrial sectors subsidise agriculture and low-end domestic consumers and also did not have high commercial loss levels.
  • Moreover, in the UK, all consumers were metered, unlike India.
  • There is yet another factor: ‘Power’ falls in the Concurrent List.
  • The Centre and states rarely see eye-to-eye on several issues concerning the sector, especially on matters relating to distribution.
  • Consequently, any major change does not get accepted.

Issues in introducing reform in India

  • The CERC floated a discussion paper in December 2018 about the creation of a wholesale market in India.
  • This amounts to retrofitting, and retrofitting in an existing architecture has its limitations.
  • But the issue is whether India should attempt creating a wholesale market or for that matter a full-fledged retail market in India, especially after the experience of the UK.
  • The UK is almost back to the era of vertically integrated utilities, and consumers barely switch their retailer.

Way forward

  • We need to privatise our distribution sector by creating joint ventures with the government.
  • the government will have to undertake initial hand-holding till such time commercial losses are wiped out.
  • This is the model which was followed in the case of Delhi and has proven successful.
  • Commercial losses have come down from 50% to single-digit figures within a span of 10 to 12 years.
  • Once we reach that stage, we can think of creating a full-fledged retail market where a consumer can choose her supplier.

Consider the question “Despite several reforms in the power sector, India still lacks full-fledged retail. What are the challenges in the creation of such a market. Suggest the ways to deal with the challenges.”

Conclusion

The Indian consumer is only interested in good quality power supply at a reasonable price. We only need to take policy measures so that the incumbent utilities can provide this, since, this will be the least costly path.


Source:-

https://www.financialexpress.com/opinion/power-reforms-uk-lessons-for-india/2127560/

Policy Wise: India’s Power Sector

[pib] Electricity Access & Utility Benchmarking Report

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Highlights of the report

Mains level : Household electricity supply in India

NITI Aayog, Ministry of Power, Rockefeller Foundation, and Smart Power India have together launched the ‘Electricity Access in India and Benchmarking Distribution Utilities’ report.

About the report

  • It is based on a primary survey conducted across 10 states––representing about 65% of the total rural population of India.
  • Aimed at capturing insights from the demand (electricity customers) as well as supply-side (electricity distribution utilities), the report seeks to:
  1. Evaluate the status of electricity access in India across these states and distribution utilities along all dimensions that constitute meaningful access
  2. Benchmark utilities’ capacity to provide electricity access and identify the drivers of sustainable access
  3. Develop recommendations for enhancing sustainable electricity access

Key findings of the report:

  • As much as 92% of customers reported the overall availability of electricity infrastructure within 50 metres of their premises; however, not all have connections, the primary reason being the distance of households from the nearest pole.
  • Overall, 87% of customers have access to grid-based electricity. The remaining 13% either use non-grid sources or don’t use any electricity at all.
  • The hours of supply have improved significantly across the customer categories to nearly 17 hours per day.
  • Nearly 85% of customers reported to have a metered electricity connection.
  • Access to electricity is observed in 83% of household customers.
  • Considering the overall satisfaction level, a total of 66% of those surveyed were satisfied––74% of customers in urban areas and 60% in rural areas.

Recommendations made

The key recommendations provided in the report are in the areas of policy and regulation, process improvement, infrastructure and capacity-building of utilities. Other recommendations included:

  • prioritizing the release of new connections for non-household customers
  • transfer of subsidies or other benefits directly into a customer’s account
  • enhanced technology-driven customer service; ensuring 100% metering of customers
  • segregation of feeder lines

Policy Wise: India’s Power Sector

How to improve the financial picture of the DisComs

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Schemes for DisComs

Mains level : Paper 3- Financial issues faced by the DisComs

The article analyses the factors responsible for financial difficulties faced by the DisComs and suggests the ways to deal with the issues.

Important role of the DisComs

  • Distribution Companies (DisComs) are the utilities that typically buy power from generators and retail these to consumers.
  • For all of India’s global leadership for growth of renewable energy, or ambitions of smart energy, the buck stops with the DisComs.
  • The days of scarcity of power are over.
  • The physical supply situation has mostly improved.
  • But the financial picture has not brightened much.

Analysing the data on liabilities of the DisComs

  •  ₹90,000 crore (later upgraded to  ₹1,25,000 crore) was earmarked for DisComs in ₹20-lakh crore package announced in the wake of Covid-19’s economic shock.
  • The Power Finance Corporation (PFC)’s Report on Utility Workings for 2018-19 showed dues to generators were ₹2,27,000 crore, and this is well before COVID-19.
  • It also showed similar Other Current Liabilities.
  • DisComs have delayed their payments upstream (not just to generators but others as well) — in essence, treating payables like an informal loan.

But why do DisComs not pay on time?

  • Ideally, DisComs should not incur losses as they enjoy a regulated rate of return.
  • While AT&C losses can explain part of any gap. Major reasons are as discussed below:

1) Regulatory issue and cash-flow gap due to it

  • The first problem starts at the regulatory level where even if DisComs performed as targeted, across India, they would face a considerable cash flow gap.
  • This cash flow gap was ₹60,000-plus crore in FY18-19 compared to their then annual cost structure of ₹7.23-lakh crore.

2) Payabeles issue: Due from consumers, state and regulatory gap

  •  These dues are of three types.
  • First, regulators themselves have failed to fix cost-reflective tariffs thus creating Regulatory Assets,which are to be recovered through future tariff hikes.
  • Second, about a seventh of DisCom cost structures is meant to be covered through explicit subsidies by State governments.
  • Third, consumers owed DisComs over ₹1.8 lakh crore in FY 2018-19, booked as trade receivables.
  • State governments are the biggest defaulters, responsible for an estimated a third of trade receivables, besides not paying subsidies in full or on time.

3) Challenge of renewable energy

  • The rise of renewable energy means that premium customers will leave the system partly first by reducing their daytime usage.
  • And as battery technologies mature, their dependence on DisComs may wane entirely.
  • Even without batteries, regulations permitting, they may want to find third party suppliers under competitive models.

Impact of Covid pandemic

  • COVID-19 has completely shattered incoming cash flows to utilities.
  •  The revenue implications were far worse since the lockdown disproportionately impacted revenues from so-termed paying customers, commercial and industrial segments.
  • Reduced demand for electricity did not save as much because a large fraction of DisCom cost structures are locked in through Power Purchase Agreements (PPAs) that obligate capital cost payments, leaving only fuel savings with lower offtake.

Way forward

  • We will probably need a much larger liquidity infusion than has been announced thus far, but it also must go hand-in-hand with credible plans to pay down growing debt.
  • We need a complete overhaul of the regulation of electricity companies and their deliverables.
  • We need to apply common sense metrics of lifeline electricity supply instead of the political doleout of free electricity even for those who may not deserve such support.
  • For the rest, regulators must allow cost-covering tariffs.

Consider the question “Examine the factor responsible for making the DisComs financial unviable? Sugget the pathways to deal with the issues faced by the DisComs”

Conclusion

The financial problems of DisComs have been brewing for many yearsHowever, if business as usual was not even good enough before COVID-19, it will not be workable for the current national needs of quality, affordable, and sustainable power.

Policy Wise: India’s Power Sector

Power sector reforms

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 3- Affordability of electricity

This article analyses the issue of affordability of electricity in the country and the factors making it expensive.

How recent changes increased subsidy burden

  •  Recent policy measures like the the “Saubhagya” scheme have remarkably improved the first 3 ‘A’s, i.e., awareness, accessibility and availability.
  •  It has also increased the cost of supply due to an increase in LT distribution network length necessitating more conductors, meters, transformers, etc.
  • Most of the newly-added consumers are from rural areas of low-income states like UP and Bihar.
  • They belong to subsidised consumer categories, viz. agriculture, rural-domestic, etc.
  • Thus, the subsidy burden of respective state governments has increased.

Affordability of subsidy by States

  • The state’s capacity to service power subsidy of its BPL consumers is dependent on its per capita income which varies from state to state.
  •  The central government provides no subsidy for this purpose.
  • Therefore, making electricity affordable for consumers becomes a priority for the power sector.
  •  Limiting focus only to reduction of the cross-subsidy burden of industries may not be fruitful.

Policy steps to make electricity affordable

1) Expedite overdue distribution reforms

  • While generation and transmission sectors have been unbundled, unbundling (segregation of carrier and content business) of distribution has been started yet.
  • Privatisation of, and governance reforms in, state-owned distribution companies are likely to unlock huge value and provide efficiency gains through loss reduction for making power affordable.

2) Capping of stranded capacity charges

  • As of now, we have surplus installed capacity of around 370 GW against a peak demand of 183 GW.
  • So, any fresh capacity addition should be limited to projected load demand growth and replacement of retiring power plants.
  • This will reduce the stranded capacity charges the discoms are currently paying to gencos under their long-term power purchase agreements without taking any power from them under availability-based tariff regime.

3) Scrap cost-plus regime

  • Now, when the country has sufficient installed capacity, it makes no sense to provide a risk-free 15.5% tax-free (or 22% after-tax) return on equity to the power companies.
  • No new project (except hydro and nuclear) should be allowed on cost-plus route or MoU route under section 62 of the Electricity Act.

4) Restructure normative debt-equity financing to 80:20

  • At present, the regulatory norm used for tariff computation of projects is 70:30 debt: equity.
  • Debt servicing is limited only to the term of the loan, i.e., up to 12 years, but Return of Equity is allowed in perpetuity even after the plant has fully depreciated.
  • This needs to be limited to the useful life of the unit.

5) No double-whammy for consumers:

  • National Clean Energy Fund was created as a non-lapsable fund in 2010 for promoting clean technology, and since then around Rs 1 lakh crore has been collected from coal cess.
  • However, most of it has been diverted and used for other purposes like funding to states for their GST losses, etc.
  • Asking gencos to install Fuel Gas Desulfurization and pass on the cost to the consumer amounts to a double whammy for the consumers who first paid the coal-cess and now will have to bear the FGD cost also.
  • We should stop using cess as a tax and NCEF should be used to fund the clean energy initiative and FGD installation etc.

Consider the question “What are the factors responsible for making the electricity costly in India. Suggest the pathways to make it affordable to all.”

Conclusion

Making electricity affordable following these steps would be instrumental in the progress of the nation.


Source: https://www.financialexpress.com/opinion/powering-reforms-bringing-power-psus-under-competitive-bidding-will-help-in-tariff-reduction/2057940/

B2BASICS

Electricty generation,transmission and Distribution

Saubhagya scheme

Policy Wise: India’s Power Sector

“Healthy and Energy Efficient Buildings” Initiative

Note4Students

From UPSC perspective, the following things are important :

Prelims level : EESL, MAITREE

Mains level : Energy saving and its significance in carbon emissions reduction

The Energy Efficiency Services Limited (EESL) has launched the “Healthy and Energy Efficient Buildings” initiative that will pioneer ways to make workplaces healthier and greener.

Possible prelims question:

Q. The MAITREE programme recently seen in news is related to: Trade/Energy Efficiency/Climate Change/ Strategic Relations

About the Initiative

  • The initiative has been launched by EESL in partnership with the U.S. Agency for International Development’s (USAID) MAITREE program.
  • As part of this initiative, EESL has taken the leadership by being the first to implement this framework in its own offices.
  • This initiative addresses the challenges of retrofitting existing buildings and air conditioning systems so that they are both healthy and energy-efficient.
  • It will pave the way for other buildings to take appropriate steps to be healthy and energy-efficient.

What is the MAITREE program,?

  • The Market Integration and Transformation Program for Energy Efficiency (MAITREE) is a part of the US-India bilateral Partnership between the Ministry of Power and USAID.
  • It is aimed at accelerating the adoption of cost-effective energy efficiency as a standard practice within buildings and specifically focuses on cooling.

Significance of the initiative

  • Poor air quality has been a concern in India for quite some time and has become more important in light of the COVID pandemic.
  • As people return to their offices and public spaces, maintaining good indoor air quality is essential for occupant comfort, well-being, productivity and the overall public health.
  • Most buildings in India are not equipped to establish and maintain healthy indoor air quality and need to be upgraded.
  • The EESL office pilot will address this problem by developing specifications for future use in other buildings throughout the country.
  • It will aid in evaluating the effectiveness and cost benefits of various technologies and their short and long-term impacts on air quality, comfort, and energy use.

 Back2Basics: EESL

  • Energy Efficiency Services Limited (EESL), under the administration of Ministry of Power, is working towards mainstreaming energy efficiency.
  • It is implementing the world’s largest energy efficiency portfolio in the country.
  • EESL aims to create market access for efficient and future-ready transformative solutions that create a win-win situation for every stakeholder.
  • About USAID: USAID is the world’s premier international development agency and a catalytic actor driving development results.

Policy Wise: India’s Power Sector

Proposed amendments could harm DISCOMs

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Electricity Act 2003.

Mains level : Paper 3- Problems of DISCOMs.

Despite several policy measures, DISCOMs continue to suffer from various issues. This article focuses on the comprehensive proposal to amend the Electricity Act 2003. But here’s a catch, we will be discussing some issues with proposed amendment. Let’s dive into our DISCOMs analysis.

Two-part tariff policy

  • At the core of DISCOM woes is the two-part tariff policy.
  • Two-part tariff policy was mandated by the Ministry of Power in the 1990s at the behest of the World Bank.
  • As more private developers came forward to invest in generation, DISCOMs were required to sign long-term power purchase agreements (PPA).
  • Under PPA, DISCOMs were committed to pay-  1) a fixed cost to the power generator, irrespective of whether the State draws the power or not, 2) a variable charge for fuel when it does.

How Over-optimistic projection led to losses?

  • The PPAs signed by DISCOMs were based on over-optimistic projection of power demand estimated by the Central Electricity Authority (CEA).
  •  The 18th Electric Power Survey (EPS) overestimated peak electricity demand for 2019-2020 by 70 GW.
  • The 19th EPS published in 2017, by 25 GW, both pre-Covid 19.
  • Thus, DISCOMs were locked into long-term contracts, ended up servicing perpetual fixed costs for power not drawn.
  • Due to the CEA’s overestimates, the all-India plant load factor of coal power plants is at an abysmal 56% even before COVID-19.
  • This means that coal power plants are generating electricity only 56% of what maximum these power plants are able to generate.

Renewable energy factor

  • Renewable impacted the power sector in the following 3 ways-
  • 1) From 2010, solar and wind power plants were declared as “must-run”.
  • This required DISCOMs to absorb all renewable power as long as there was sun or wind, in excess of mandatory renewable purchase obligations.
  • This means backing down thermal generation to accommodate all available green power.
  • This resulted in further idle fixed costs payable on account of two-part tariff PPAs.
  • 2)  Power demand peaks after sunset.
  • In the absence of viable storage, every megawatt of renewable power requires twice as much spinning reserves to keep lights on after sunset.
  • DISCOMs, especially in the southern region, have had to integrate large volumes of infirm power, mostly from solar and wind energy plants.
  • These renewable energy plants enjoy must-run status irrespective of their high tariffs.
  • The tariff is  ₹5/kwh in Karnataka and ₹6/kwh in Tamil Nadu for solar power.
  • All this even as the demand growth envisaged in the 18th EPS failed to materialise.
  • 3) In 2015 the Centre announced an ambitious target of 175 gigawatts of renewable power by 2022.
  • This followed with a slew of concessions to renewable energy developers, and aggravating the burden of DISCOMs.
  • Incidentally, China benefited by as much as $13 billion in the last five years from India’s solar panel imports.

So, what are the proposals in the Electricity Act-2020?

1. Sub-franchisees and  issues with it

  • The amendment proposes sub-franchisees, presumably private, in an attempt to usher in markets through the back door.
  • Issue:  Private sub-franchisees are likely to cherry-pick the more profitable segments of the DISCOM’s jurisdiction.
  • The Electricity Bill 2020 containing the proposed amendments is silent on whether a private sub-franchisee would be required to buy the expensive power from the DISCOM or procure cheaper power directly from power exchanges.
  • If it is the first, the gains from the move are doubtful since the room for efficiency improvements is rather restricted in the already profitable regions attractive to sub-franchisees.
  • If it is the second, DISCOMs will then be saddled with costly power purchase from locked-in PPAs and fewer profitable areas from which to recover it.

2. Concession to renewable

  • The amendment proposes even greater concessions to renewable power developers.
  • This would have a cascading impact on idling fixed charges, impacting the viability of DISCOMs even more.

3. Elimination of cross-subsidies

  • The most controversial amendment proposed, seeks to eliminate in one stroke, the cross-subsidies in retail power tariff.
  • This means each consumer category would be charged what it costs to service that category.
  • Rural consumers requiring long lines and numerous step-down transformers and the attendant higher line losses will pay the steepest tariffs.
  • The proposed amendments envisage that State governments will directly subsidise whichever category they want to, through direct benefit transfers.
  • Cross-subsidy is a fact of life in even private industries, soap, newspapers, or even utilities such as telecom.
  • But eliminating them in one stroke is bound to be ruinous to State finances.
  • There are also myriad problems with Direct Benefit Transfer.
  • This proposal is practically infeasible; if forcibly implemented, it will lead to chaos.

4. Selection of the State regulator

  • State regulators will henceforth be appointed by a central selection committee.
  • The composition of which inspires little confidence in its objectivity.
  • This could result in jeopardising not only regulatory autonomy and independence but also the concurrent status of the electricity sector.

5. Electricity Contract Enforcement Authority

  • Its members and chairman will also be selected by the same selection committee referred to above.
  • The power to adjudicate upon disputes relating to contracts will be taken away from State Electricity Regulatory Commissions and vested in this new authority.
  • This is being done ostensibly to protect and foster the sanctity of contracts.
  • This is also to ensure that States saddled with high-priced PPAs and idling fixed costs, yet forced to keep increasing the share of renewables in their basket, have no room for manoeuvre.

Consider the question “Despite various policy interventions, DISCOMs continue to suffer from financial woes. Analyse the reasons for their woes. Examine the proposals in the Electricity Act (Amendment) Bill 2020.”

Conclusion

Beyond a doubt, the Electricity sector requires change but we must try to bring holistic and participatory approach to find solutions.


Back2Basics: Electricity Act 2003

  • The act covers major issues involving generation, distribution, transmission and trading in power.
  • Before Electricity Act, 2003, the Indian Electricity sector was guided by The Indian Electricity Act, 1910 and The Electricity (Supply) Act, 1948 and the Electricity Regulatory Commission Act, 1998.
  • The Electricity Act 2003 consolidates the position for existing laws and aims to provide for measures conducive to the development of electricity industry in the country.
  • The act attempted to address certain issues that have slowed down the reform process in the country and consequently had generated new hopes for the electricity industry.

 

Policy Wise: India’s Power Sector

[pib] Data on Energy Savings

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Various schemes mentioned in the newscard

Mains level : Energy saving and its significance in carbon emissions reduction

The Union Ministry of Power has released a Report on “Impact of energy efficiency measures for the year 2018-19”.

Things to note:

1) UJALA Scheme

2) PAT Scheme

3) Standards & Labeling Programme

Possible mains question:

Q. Discuss the role of Bureau of Energy Efficiency (BEE) in “institutionalizing” energy efficiency services in India.

About the report

  • This report was prepared by an Expert agency PWC Ltd, who was engaged by the Bureau of Energy Efficiency (BEE).
  • The objective of this study is to evaluate the performance and impact of all the key energy efficiency programmes in India, in terms of total energy saved and the related reduction in CO2 emissions.

Data on energy savings

  • With our energy efficiency initiatives, we have already reduced the energy intensity of our economy by 20% compared to 2005 levels. This includes both the Supply Side and Demand Side sectors of the economy.
  • The implementation of various energy efficiency schemes has led to total electricity savings to the tune of 113.16 Billion Units in 2018-19, which is 9.39% of the net electricity consumption.
  • Energy savings (electrical + thermal), achieved in the energy-consuming sectors is to the tune of 16.54 Mtoe, which is 2.84% of the net total energy consumption in 2018-19.
  • Overall this has translated into savings worth INR 89,122 crores against last year’s savings of INR 53,627 crore.
  • These efforts have also contributed to reducing 151.74 Million Tonnes of CO2 emissions, whereas last year this number was 108 MTCO2.

(Note: Mtoe= million Tonne of Oil Equivalent)

What led to this significant savings?

  • The study has identified the following major programmes, viz. Perform, Achieve and Trade Scheme, Standards &Labelling Programme, UJALA Programme, Municipal Demand Side Management Programme, etc.
  • There is huge capacity still for bringing efficiencies especially in MSME sector and a Housing sector that has now been taken up.

About the Bureau of Energy Efficiency (BEE)

  • The Bureau of Energy Efficiency is an agency under the Ministry of Power created in March 2002 under the provisions of the nation’s 2001 Energy Conservation Act.
  • Its function is to develop programs which will increase the conservation and efficient use of energy in India.
  • The mission of BEE is to “institutionalize” energy efficiency services, enable delivery mechanisms in the country and provide leadership to energy efficiency in all sectors of the country.

Back2Basics

1) PAT Scheme

  • Perform Achieve and Trade (PAT) scheme is a flagship programme of the Bureau of Energy Efficiency under the National Mission for Enhanced Energy Efficiency (NMEEE).
  • NMEEE is one of the eight national missions under the National Action Plan on Climate Change (NAPCC) launched in the year 2008.
  • The scheme aims to reduce specific energy consumption in energy-intensive industries through certification of excess energy saving which can be traded.
  • It refers to the calculation of Specific Energy Consumption (SEC) in the baseline year and projected SEC in the target year covering different forms of net energy going into the boundary of the designated consumers’ plant and the products leaving it over a particular cycle.
  • Those eight Energy Intensive Sectors included are Chlor-alkali, Pulp & Paper, Textile, Aluminum, and Thermal Power plants, Fertilizer, Iron & Steel and Cement.

2) Standards & Labeling Programme

  • It is one of the major thrust areas of BEE.
  • A key objective of this scheme is to provide the consumer with an informed choice about the energy-saving and thereby the cost-saving potential of the relevant marketed product.
  • The scheme targets display of energy performance labels on high energy end-use equipment & appliances and lay down minimum energy performance standards.

3) UJALA Scheme

  • Launched in 2015, the Unnat Jyoti by Affordable LEDs for All (UJALA), in a short span of time, has emerged as the world’s largest domestic lighting programme.
  • The main objective is to promote efficient lighting, enhance awareness on using efficient equipment which reduces electricity bills and helps preserve the environment.
  • The Electricity Distribution Company and Energy Efficiency Services Limited (EESL) a public sector body of the Ministry of Power is implementing the programme.

Policy Wise: India’s Power Sector

Global Energy Review 2020, Report

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Global Energy Review, 2020

Mains level : India's emergency demand

Covid-19 is having a ripple effect on the global energy space. Consistent lockdowns have reduced energy demand by almost 30 per cent in India.

Covid-19 shock global energy demand

  • The IEA’s Global Energy Review studies the impacts of the Covid-19 crisis on global energy demand and CO emissions.
  • The projections of energy demand and energy-related emissions for 2020 are based on assumptions that the lockdowns implemented around the world.
  • It projects a 6 per cent fall in energy demand in 2020 — seven times the decline after the 2008 global financial crisis.
  • Electricity demand is set to decline by 5 per cent in 2020, the largest drop since the Great Depression in the 1930s.

Global Energy Demands

  • The countries in full lockdown are experiencing an average decline of 25% in energy demand per week, while in those with a partial lockdown, the fall in energy demand is about 18% per week.
  • Global energy demand declined by 3.8% in the first quarter of 2020 compared to the first quarter of 2019.
  • Further, it is expected that the impact of Covid‑19 on energy demand in 2020 would be more than seven times larger than the impact of the 2008 financial crisis on global energy demand.

Considering the above scenario the global demand of various energy sources can be analysed as given below

   Coal Demand:

  • It has been declined by 8% compared with the first quarter of 2019.
  • The reasons for such decline include, China – a coal-based economy – was the country hardest hit by Covid‑19 in the first quarter and cheap gas and continued growth in renewables elsewhere challenged coal.

Oil Demand:

    • It has declined by 5% in the first quarter, majorly due to curtailment in mobility and aviation, which account for nearly 60% of global oil demand.
    • The report also estimates that the global demand for oil could further drop by 9% on average in 2020, which will return oil consumption to 2012 levels.
  •  Gas Demand:
    • The impact of the pandemic on gas demand has been moderate, at around 2%, as gas-based economies were not strongly affected in the first quarter of 2020.
  •  Renewables Energy Resources Demand:

    • It is the only source that has registered a growth in demand, driven by larger installed capacity.
    • Further, the demand for renewables is expected to rise by 1% by 2020 because of low operating costs and preferential access for many power systems.
  •  Electricity Demand:

    • It has been declined by 20% during periods of full lockdown in several countries.
    • However, the residential demand is outweighed by reductions in commercial and industrial operations.

Indian scenario

  • The declines in electricity and transport demand in India have been among the deepest globally, but the contractions over the full year are likely to be smaller than the global average.
  • The impact of the crisis on energy demand is heavily dependent on the duration and stringency of measures to curb the spread of the virus.
  • At the same time, lockdown measures are driving a major shift towards low-carbon sources of electricity including nuclear, hydropower, wind and solar PV.

Data on renewables

  • After overtaking for the first time ever in 2019, low-carbon sources are set to extend their lead this year to reach 40 per cent of global electricity generation — 6 percentage points ahead of coal.
  • Electricity generation from wind and solar PV continues to increase in 2020, lifted by new projects that were completed in 2019 and early 2020.

Back2Basics: International Energy Agency (IEA)

  • The IEA is an autonomous organisation which works to ensure reliable, affordable and clean energy, headquartered in Paris, France.
  • It was established in the wake of 1973 (set up in 1974) oil crisis after the OPEC cartel had shocked the world with a steep increase in oil prices.
  • India became an associate member of the International Energy Agency in 2017.

Policy Wise: India’s Power Sector

Explained: 9 minutes light-out and its impact on grids

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not Much

Mains level : 9 minutes light-out and its impact on grids

In his address to the nation, our PM has urged people across to turn off the lights in their homes for 9 minutes on April 5, starting at 9 pm. In response to this appeal, grid managers across states have flagged some risks.

Why is the 9-minute exercise a problem?

  • India is one of the largest synchronous interconnected grids in the world, with an installed capacity of about 370 GW (3,70,000 MW), and a normal baseload power demand of roughly 150 GW.
  • The big worry is that just before 9 pm there may be unprecedented load reduction, followed by a sudden increase in load post at 9.09 pm.
  • The concern is that grid frequency should not swing beyond permissible limits and that all generators across the country must give frequency response as per the Grid Code.
  • During this 9-minute lights out exercise, up to 10,000-15,000 MW of power demand could to drop suddenly and then come on stream a few minutes later.

How does grid function normally?

  • Power System Operation Corporation Ltd (POSOCO), the national electricity grid operator, projects daily demand for power and regulates supply from power generators based on these projections.
  • Frequency reflects the load generation balance in the grid at a particular instant and is one of the most important parameters for assessment of the security of the country’s power system.
  • The nominal frequency is 50 hertz and POSOCO endeavours to maintain frequency within a permissible band (49.9- 50.5 hertz), primarily by balancing the demand-supply equation.

Impacts of light-out

  • The frequency needs to be maintained within this range as all the electrical equipment and appliances at our homes are designed to perform safely and efficiently in a certain power supply band.
  • An increase in frequency results in an increase in the voltage and a decrease in frequency results in a decrease in voltage.
  • Exigency does occur during an outage at a power plant or the tripping of a transmission line or a sudden change in electrical demand.
  • The grid operator needs to ensure that there is an automatic corrective response manually by curtailing demand or ramping generation from another source within a really short period of time.
  • Handling imbalances are the most crucial function of the grid operator.

What are the key areas of concern?

While the possibility of the grid tripping on account of this is highly unlikely, operators expect a “jerk”. While the system is generally planned for an outage of the single largest unit outage, there are two riders:

1) Lockdown has severed domestic consumption

  • One, the grid load is primarily on account of the domestic load now, especially since the lockdown implemented.
  • The normal baseload power demand of roughly 150 gigawatts has already dropped by 20 per cent since the lockdown announcement as most of the industry and commercial establishments are not operational.
  • With hotels and factories, malls, railway stations, airports closed, the domestic load is the predominant load.
  • So the lighting load as a percentage of total loads is much higher now and the impact of a sudden drop in lighting load could be more accentuated than during regular times.

2) Fear of complete power-offs

  • The second concern is if housing clusters and societies switch off mains, or if overzealous discoms switch off street lighting or even feeders to show compliance.
  • During this part of the year, domestic load peaks at about 9 pm.
  • This load could then be impacted much more than what’s being anticipated in the normal course, a concern that grid operators are flagging.

Why is this demand of significance in such a big grid?

  • The domestic load is about 30-32 per cent of total load during normal times.
  • Of India’s total electricity demand load pattern, industrial and agricultural consumption accounts for 40 per cent and 20 per cent load, while commercial electricity consumption accounts for 8 per cent of demand.
  • So, theoretically, if only lighting load goes off, it should not have a major impact on grid frequency during normal times.

Policy Wise: India’s Power Sector

[pib] State Energy Efficiency Index 2019

Note4Students

From UPSC perspective, the following things are important :

Prelims level : State Energy Efficiency Index

Mains level : Various initiatives for promotion of energy efficiency of power sector

The Ministry of Power and New & Renewable Energy has released the ‘State Energy Efficiency Index 2019’.

State Energy Efficiency Index

  • The first such Index, the “State Energy Efficiency Preparedness Index 2018”, was launched on August 1, 2018.
  • The index tracks the progress of Energy Efficiency (EE) initiatives in 36 states and union territories based on 97 significant indicators.
  • It is developed by Bureau of Energy Efficiency (BEE) in association with Alliance for an Energy Efficient Economy (AEEE).
  • It categorizes states as ‘Front Runner’, ‘Achiever’, ‘Contender’ and ‘Aspirant’ based on their efforts and achievements towards energy efficiency implementation.
  • It incorporates qualitative, quantitative and outcome-based indicators to assess energy efficiency initiatives, programs and outcomes in five distinct sectors – buildings, industry, municipalities, transport, agriculture, and DISCOMs.

Performance evaluation

  • For rational comparison, States/UTs are grouped into four groups based on aggregated Total Primary Energy Supply (TPES) required to meet the state’s actual energy demand (electricity, coal, oil, gas, etc.) across sectors.
  • TPES grouping shall help states compare performance and share best practices within their peer group.
  • Under four categories based on TPES, Haryana, Kerala, Karnataka, Maharashtra, Himachal Pradesh, Uttarakhand, Puducherry and Chandigarh have been evaluated as progressive states/UTs in the index.
  • The top performing states Haryana, Kerala and Karnataka – are in the ‘Achiever’ category.
  • Manipur, Jammu & Kashmir, Jharkhand and Rajasthan performed the worst in each of their groups.

Utilities of the index

  • It will help states contribute towards national goals on energy security and climate action by helping drive EE policies and program implementation.
  • It will help tracking progress in managing the states’ and India’s energy footprint and institutionalising the data capture and monitoring of EE activities by states.

Policy Wise: India’s Power Sector

[pib] UJALA & Street Lighting National Programme

Note4Students

From UPSC perspective, the following things are important :

Prelims level : UJALA and Street Lighting National Programme

Mains level : Success of these scheme

The Unnat Jyoti by Affordable LEDs for All (UJALA) and LED Street Lighting National Programme (SLNP) has completed five years of successful implementation.

UJALA and SLNP

  • SLNP is the world’s largest streetlight replacement programme and UJALA is the world’s largest domestic lighting project.
  • Both have been spearheaded and implemented by Energy Efficiency Services Limited (EESL), a joint venture of PSUs under the Ministry of Power.

Major accomplishments

UJALA

  • UJALA project brought the market transformation in energy efficiency sector.
  • Prices of LED bulbs being distributed under UJALA programme have fallen to one-tenth of their rates in 2015 from INR. 310 to INR 38 in 2018.
  • The switch from inefficient incandescent bulbs to LEDs is helping families reduce their electricity bills while also enabling them to access better brightness in homes.
  • Through the UJALA over 36.13 crore LED bulbs have been distributed across India.
  • This has resulted in estimated energy savings of 46.92 billion kWh per year, avoided peak demand of 9,394 MW, and an estimated GHG emission reduction of 38 million t CO2 annually.

SLNP

  • Under the SLNP programme, over 1.03 crore smart LED streetlights have been installed till date, enabling an estimated energy savings of 6.97 billion kWh per year with an avoided peak demand of 1,161 MW and an estimated GHG emission reduction of 4.80 million tonnes CO2 annually.
  • LED streetlights have been installed in various states across the country, helping generate approximately 13,000 jobs to support Make in India initiative.
  • This has enabled citizens to increase productivity at night and made roads safer for pedestrians and motorists due to enhanced brightness and reduced dark spots.
  • As these lights are automated, they switch on and off at sunrise and sunset thereby reducing wastage.
  • In the last five years, the LED streetlights installed have illuminated 3,00,000 km of roads in India, enabling public safety and energy efficient lighting.

Policy Wise: India’s Power Sector

One Nation, One Grid

Note4Students

From UPSC perspective, the following things are important :

Prelims level : National Grid

Mains level : One Nation, One Grid

One Nation, One Grid

  • In a move to improve India’s connectivity infrastructure, the government in its second term plans to build a model of ‘One Nation, One Grid’ to ensure availability of power to states at ‘affordable’ rates.
  • FM in his budget speech made available a blueprint for developing gas grids, water grids, i-ways, and regional airports.
  • The government is also examining the performance of its Ujjwal DISCOM Assurance Yojana (UDAY), aimed at financial and operational turnaround of power distribution companies.

Power grids in India

  • The Indian Power system for planning and operational purposes is divided into five regional grids.
  • The integration of regional grids, and thereby establishment of National Grid, was conceptualized in early nineties.
  • The initial inter-regional links were planned for exchange of operational surpluses amongst the regions.
  • However, later on when the planning philosophy had graduated from Regional self-sufficiency to National basis, the Inter-regional links were planned associated with the generation projects that had beneficiaries across the regional boundaries.

Evolution of National Grid

  • Grid management on regional basis started in sixties.
  • Initially, State grids were inter-connected to form regional grid and India was demarcated into 5 regions namely Northern, Eastern, Western, North Eastern and Southern region.
  • In October 1991 North Eastern and Eastern grids were connected.
  • In March 2003 WR and ER-NER were interconnected .
  • August 2006 North and East grids were interconnected thereby 4 regional grids Northern, Eastern, Western and North Eastern grids are synchronously connected forming central grid operating at one frequency.
  • On 31st December 2013, Southern Region was connected to Central Grid in Synchronous mode with the commissioning of 765kV Raichur-Solapur Transmission line thereby achieving ‘ONE NATION’-‘ONE GRID’-‘ONE FREQUENCY’.

About National Grid

  • The National Grid is the high-voltage electricity network in mainland India, connecting power stations and major substations and ensuring that electricity generated anywhere in mainland India can be used to satisfy demand elsewhere.
  • The National Grid is owned, operated, and maintained by state-owned Power Grid Corporation of India.
  • It is one of the largest operational synchronous grids in the world with 334.40 GW of installed power generation capacity as on 31 January 2018.

 Benefits of centralized power grid

  • Synchronization of all regional grids will help in optimal utilization of scarce natural resources by transfer of Power from Resource centric regions to Load centric regions.
  • Further, this shall pave way for establishment of vibrant Electricity market facilitating trading of power across regions.
  • One Nation One Grid shall synchronously connect all the regional grids and there will be one national frequency.

Policy Wise: India’s Power Sector

[op-ed snap]How to achieve 24×7 power for all

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Nothing Much

Mains level : Structural issues in the power sector

CONTEXT

The household electrification scheme, Pradhan Mantri Sahaj Bijli Har Ghar Yojana, or Saubhagya, has been implemented at an unprecedented pace. More than 45,000 households were electrified every day over the last 18 months.

Reasons behind the success of Saubhagya

  • The efforts under Saubhagya have come upon decades of hard work preceding it.
    1. The enactment of the Electricity Act, in 2003
    2. The introduction of the Rajiv Gandhi Grameen Vidyutikaran Yojana, in 2005
  • Over the last year, several engineers and managing directors in electricity distribution companies (discoms), their contractors, State- and Central-level bureaucrats, and possibly energy ministers have been working at fever pitch.
  • Discom engineers have evolved in their attitude from one of scepticism to that of determination.
  • CASE STUDY-Their efforts to meet targets even included crossing streams in Bihar on foot with electricity poles, and reaching far-flung areas in Manipur, through Myanmar, to electrify remote habitations with solar home systems.

Challenges Remaining

  • The erection of electricity poles and an extension of wires do not necessarily mean uninterrupted power flow to households.
  • By tracking more than 9,000 rural households, since 2015, across six major States (Bihar, Jharkhand, Madhya Pradesh, Odisha, Uttar Pradesh and West Bengal), the Access to Clean Cooking Energy and Electricity Survey of States (ACCESS) report by the Council on Energy, Environment and Water (CEEW) has highlighted the gap between a connection and reliable power supply. 
  • No 24*7 power supply-While the median hours of supply increased from 12 hours in 2015 to 16 hours a day in 2018, it is still far from the goal of 24×7.
  • Low voltage Issues-Similarly, while instances of low voltage and voltage surges have reduced in the last three years, about a quarter of rural households still report low voltage issues for at least five days in a month.

Vital Step Forward

  • In order to achieve 24×7 power for all, there is need to focus on three frontiers.

1.Monitoring of Supply

  • First, India needs real-time monitoring of supply at the end-user level.
  • While the government is bringing all feeders in the country online, we currently have no provision to monitor supply as experienced by households.
  • Only such granular monitoring can help track the evolving reality of electricity supply on the ground and guide discoms to act in areas with sub-optimal performance.
  • Eventually, smart meters (that the government plans to roll out) should help enable such monitoring.
  • However, in the interim, we could rely on interactive voice response systems (IVRS) and SMS-based reporting by end-users.

2. Quality and maintenance services

  • Second, discoms need to focus on improving the quality of supply as well as maintenance services.
  • Adequate demand estimation and respective power procurement will go a long way in reducing load shedding.
  • Moreover, about half the rural population across the six States reported at least two days of 24-hour-long unpredictable blackouts in a month.
  • Such incidents are indicative of poor maintenance, as opposed to intentional load-shedding.
  • Discoms need to identify novel cost-effective approaches to maintain infrastructure in these far-flung areas.
  • Some States have already taken a lead in this.
  • EXAMPLES-Odisha has outsourced infrastructure maintenance in some of its rural areas to franchisees, while Maharashtra has introduced village-level coordinators to address local-level challenges.

3.Customer Service

  • Finally, the improvement in supply should be complemented with a significant improvement in customer service,
  • which includes billing, metering and collection. Around 27% of the electrified rural households in the six States were not paying anything for their electricity.
  • Despite the subsidies, constant loss of revenue would make it unviable for discoms to continue servicing these households in the long run.
  • Low consumer density along with difficult accessibility mean that conventional approaches involving meter readers and payment collection centres will be unviable for many rural areas.
  • We need radically innovative approaches such as the proposed prepaid smart meters and last-mile rural franchisees to improve customer service and revenue collection.

Way Forward

  • Electricity is the driver for India’s development.
  • As we focus on granular monitoring, high-quality supply, better customer service and greater revenue realisation at the household level,we also need to prioritise electricity access for livelihoods and community services such as education and health care.
  • Only such a comprehensive effort will ensure that rural India reaps the socio-economic benefits of electricity.

 

 

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