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

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.

 

 

Policy Wise: India’s Power Sector

Power ministry mandates use of smart prepaid meters from April 2019

Note4students

Mains Paper 3: Economy | Infrastructure: Energy, Ports, Roads, Airports, Railways etc.

From UPSC perspective, the following things are important:

Prelims level: Saubhagya scheme

Mains level: Utility of smart meters


News

  • The government has mandated the use of smart prepaid electricity meters in the country beginning April next year, as it looks to complete the transition over the next three years.

Utility of Smart Prepaid Meters

  1. Smart meters are a part of the overall advanced metering infrastructure solutions (AMI) aimed at better demand response designed to reduce energy consumption during peak hours.
  2. Manufacturing of smart prepaid meters will also generate skilled employment for the youth.
  3. Other benefits include:
  • Reduction in AT&C losses
  • Better health of DISCOMs
  • Incentivizing energy conservation
  • Ease of bill payments and doing away with the paper bills

Initiatives so far

  1. The government is procuring smart and prepaid meters to be deployed across the country.
  2. State-owned Energy Efficiency Services Limited (EESL) has floated two global tenders for procuring a total of 10 million smart meters.
  3. The government also plans to install 10 million prepaid meters in Uttar Pradesh as part of the Saubhagya scheme which aims to electrify over four crore households till March 2019.

States gearing up

  1. State governments had earlier signed the Power for All documents and had agreed to supply power round the clock to their consumers.
  2. Under this, the distribution licensee shall provide 24×7 power to their consumers by 1st April, 2019 or earlier.

Policy Wise: India’s Power Sector

[op-ed snap] Power politics at play

Note4students

Mains Paper 3: Economy | Infrastructure: Energy, Ports, Roads, Airports, Railways etc.

From UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: Proposed amendments in electricity act and their implications


Context

Changes in electricity act

  1. The Central government has proposed a set of changes to the Electricity Act 2003
  2. The amendments seek to enable a market transformation in electricity
  3. The idea is that while a single public utility will run the wires through which electricity flows, multiple supply licensees (both public and private) will be allowed to compete for consumers
  4. The intent is that the discipline of competing for customers will lead to improved supply and lower bills

Proposed amendments

  1. The amendment (along with changes in the National Tariff Policy) aims to get the price right — a long-standing aspiration — by capping cross-subsidies at 20% immediately and eliminating them within three years
  2. The cross-subsidy surcharge on open access customers — the fee that holds back customers from leaving the grid — would be eliminated within two years
  3. Subsidies will not be allowed across consumer categories like industry and agriculture, but will be allowed across consumption categories — big consumers can subsidise small ones
  4. The amendments include many other provisions, notably around making the Act more up to date with regard to renewable energy, which is a worthy objective

Effects of the proposals

  1. The discipline of competing for customers will lead to improved supply and lower bills
  2. India could have an electricity distribution sector with pockets of competition for wealthy consumers in a sea of monopoly inhabited by the poorest
  3. Private suppliers could cherry-pick profitable locations and consumers; the state-owned incumbent supplier will be left with the obligation to serve low-paying consumers
  4. This shift could be highly disruptive if the profit-making side is allowed to flee, without devising a transition pathway for the loss-making side of electricity

Onus on states

  1. While an earlier 2014 reform effort proposed mandatory and time-bound implementation of these reforms and therefore was resisted by States, the current amendment allows them discretion on the timing of implementation
  2. The combination of time discretion and the improved presence of the ruling coalition in State governments may facilitate passage this time around

Increased power to centre

  1. The Centre may have access to enhanced tax revenues from electricity because it stands to gain from additional tax revenue from profitable new wires companies and private suppliers
  2. The Centre could become a new fulcrum of redistribution from wealthy areas in wealthy States, to needy customers that are concentrated in a few States
  3. It provides greater control to the Centre and limits the States’ and regional political parties’ capability to make electoral use of electricity pricing
  4. The amendment proposes a re-formulation of the selection committee for State regulators, from a majority of State representatives to a majority of Central representatives
  5. The Centre will also gain more oversight on capacity addition, through the requirement of a detailed project report submission to the Central Electricity Authority

Challenge of low demand

  1. Many generating companies have been in the news recently due to decreasing demand for their power and consequently their stranded assets
  2. The amendments potentially provide comfort to them at the expense of distribution companies
  3. They mandate that suppliers sign power purchase agreements (PPAs) to meet the annual average demand, ostensibly to ensure 24×7 power for all, which will be subject to review and compliance measures
  4. The gain to generators could come at the cost of customers, who, through the PPAs signed by supply companies, have to ultimately bear the risk of uncertain load growth, prices and migration

Way forward

  1. India’s electricity sector remains beset with problems
  2. Disruptive change in Indian electricity may be needed, even inevitable
  3. But the amendments risk placing the cost of disruption on the backs of the poorest and shifts the potential for ameliorative measures to the hands of the Centre, rather than the States

Policy Wise: India’s Power Sector

Power Ministry may make 24°C as default setting air conditioners

Note4students

Mains Paper 3: Environment | Conservation, environmental pollution and degradation, environmental impact assessment

From UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: Various initiatives by the government to tackle increasing energy demand and to counter climate change


News

Promoting energy efficiency

  1. The government will consider making 24°C as a mandatory default setting for air conditioners (ACs)
  2. The temperatures settings in ACs will be in the range of 24°C to 26°C
  3. AC makers have also been advised to have labelling indicating the optimum temperature setting for the benefit of consumers both from financial and health points of view

Why such move?

  1. Every 1°C increase in the air conditioner temperature setting results in saving of 6% of electricity consumed
  2. Normal human body temperature is approximately 36-37°C, but large number of commercial establishments, hotels and offices maintain temperature around 18-21°C
  3. This is not only uncomfortable but is actually unhealthy
  4. Some countries like Japan have put in place regulation to keep the temperature at 28°C

Impact of the campaign

  1. Total connected load in India due to air conditioning will be 200 GW by 2030 and this may further increase as today only about 6% of households use ACs
  2. Considering this huge demand, India can save about 40 million units of electricity usage every day
  3. The new campaign will result in substantial energy savings and also reduce greenhouse gas emission
  4. Power Ministry estimates indicate that if all the consumers adopt the norm, this will result in savings of 20 billion units of electricity in one year alone

Policy Wise: India’s Power Sector

Govt plans ‘Pariwartan’ scheme for power sector revival

Note4students

Mains Paper 3: Economy | Infrastructure: Energy, Ports, Roads, Airports, Railways etc.

From UPSC perspective, the following things are important:

Prelims level: SAMADHAN, Pariwartan Schemes

Mains level: Read the attached story


News

Stressed Power Projects

  1. Stressed projects have drawn bids for around Rs 1-2 crore per MW under the insolvency and bankruptcy code, a fraction of the Rs 5 crore per MW needed to build them.
  2. Issues faced by the stressed projects include a paucity of funds, lack of power purchase agreements and fuel shortages.

Plan for PARIWARTAN

  1. The government plans to warehouse stressed power projects totaling 25,000 MW under an asset management firm to protect the value of the assets (Similar to SAMADHAN Scheme)
  2. This will prevent their distress sale under the insolvency and bankruptcy code until the demand for power picks up.
  3. State-run Rural Electrification Corp. Ltd (REC) has identified projects with a total debt of around Rs 1.8 trillion as part of the scheme, which is under government consideration
  4. It has been tentatively named Power Asset Revival through Warehousing and Rehabilitation, or ‘Pariwartan’.
  5. The ‘Pariwartan’ scheme is inspired by the Troubled Asset Relief Programme, or TARP, which was introduced in the US during the 2008 financial crisis.
  6. The proposed plan also aims to stem the rise in bad loans in the power sector.

Key Propositions

  1. These stressed power projects will be housed under an asset management and rehabilitation company (AMRC) that will be owned by financial institutions.
  2. While the promoter’s equity will be reduced to facilitate a transfer of management control to the financial institutions, the lenders will convert their debt into equity.
  3. The AMRC will manage the projects and may ask utilities such as NTPC Ltd to operate and maintain them. The AMRC will charge a fee and help complete projects that are stranded for lack of funds.
  4. These projects will be transferred to the AMRC at net book value, wherein it will own a 51% stake in the projects and the balance 49% will be held by the lenders,” said the government official cited above.

Back2Basics

Scheme of Asset Management and Debt Change Structure (SAMADHAN)

  1. Under Samadhan, the bankers’ consortium shortlisted 11 power plants with an overall capacity of over 12 gigawatts, which are either complete or nearing completion.
  2. The debt order will be reduced to a manageable level and converted into equities which are held by banks.
  3. That equity would be bid out to any players who want to buy those assets.

Policy Wise: India’s Power Sector

Govt. launches Pilot scheme Procurement of Aggregate Power of 2500 MW for three years

Note4students

Mains Paper 3: Economy | Infrastructure: Energy, Ports, Roads, Airports, Railways etc.

From UPSC perspective, the following things are important:

Prelims level: Nodal agency

Mains level: Expectations from the pilot scheme.


News

Pilot Scheme for Procurement of Power

  1. The Government has kicked off a Pilot Scheme for Procurement of Aggregate Power of 2500 MW on competitive basis for 3 years under medium term
  2. i.e. from generators with commissioned projects but without Power Purchase Agreement
  3. The Ministry of Power had recently issued the model bid documents on 6th April, 2018
  4. The Guidelines for the said scheme were issued on 10th April, 2018
  5. Under the scheme a single entity can be allotted maximum capacity of 600 MW
  6. The Tariff will be fixed for three years without any escalation

Nodal agency for the pilot scheme

  1. PFC Consulting Limited (A wholly owned subsidiary of PFC Ltd) has been appointed as Nodal Agency and PTC India Limited as the Aggregator

Expectations from the scheme

  1. This scheme is expected to revive the power demand which has affected the generators not having Power Purchase Agreements

Policy Wise: India’s Power Sector

[op-ed snap] Meeting India’s electricity needs

Note4students

Mains Paper 3: Economy | Infrastructure: Energy, Ports, Roads, Airports, Railways etc.

From UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: The newscard talks about the importance of grid system(including the micro-grid system). And suggest ways to deploy these systems effectively.


Context

  1. One often comes across news about variable renewable energy sources like solar photovoltaic and wind having reached ‘grid parity’
  2. The article primarily talks about the importance of the ‘grid parity’

What is the concept of grid parity? 

  1. Electricity grid is a very complex system
  2. It involves long-distance transmission of electricity at high voltage, step-up and step-down transformers, and a distribution network at load centres
  3. Various electricity generators and consumers are connected to it

Solar and wind energy sources are suitable for isolated deployment

  1. Appropriate ways to deploy solar and wind can be decided by recognising their three characteristics — zero fuelling cost, low capacity factors and intermittency
  2. Solar and wind are eminently suitable for isolated deployment such as for powering irrigation pumps
  3. An irrigation pump directly connected to a solar panel can be useful for a farmer as he doesn’t have to depend on the grid. In this application, intermittency of solar is of no consequence

The concept of Micro-grid

  1. In India, there are still communities that have no access to the central electricity grid, or the supply from the central grid is unreliable
  2. A microgrid getting electricity supply from solar and wind, and connected to consumers in an isolated remote community, is helpful in providing electricity for lighting, in charging mobile phones, and small livelihood applications
  3. A storage battery is an integral part of such an isolated microgrid and this increases the cost of electricity
  4. Experience from such installations indicates that consumers are willing to pay for it in return for reliable electric supply
  5. Consumers connected to a community managed microgrid can meet their minimum needs
  6. Until the reliability of the central grid can be assured, solar- and wind-powered microgrid is the way forward for rural and remote communities

We can hope for better cirumstances

  1. Hopefully, ongoing research in battery technologies will bring down the cost of electricity storage and improve safety of storage, thereby paving the way for a large deployment of solar and wind
  2. One can expect the International Solar Alliance to direct technology development towards the needs of all developing countries

But solar and wind cannot meet even a quarter of India’s projected electricity requirements

  1. A major share has to come from large hydro, nuclear and coal. Out of these three technologies, one has to prefer low-carbon technologies that is hydro and nuclear
  2. Along with investment in solar and wind, the government must plan for increased investment in both hydro and nuclear

Policy Wise: India’s Power Sector

NTPC reports record electricity generation in December quarter

Note4students

Mains Paper 3: Economy | Infrastructure: Energy, Ports, Roads, Airports, Railways etc.

From UPSC perspective, the following things are important:

Prelims level: Discoms, DBT, etc.

Mains level: It is important to know about country’s energy capacity. Also, the newscard discusses some of the possible benefits which we can get by increasing India’s electricity demand


News

Why in news?

  1.  India’s largest power generation utility NTPC Ltd recorded its highest ever quarterly generation in the three months ended 31 December, indicating a recovery in electricity demand

Data on electricity generation

  1. NTPC with installed capacity of 51,383MW (megawatt), has recorded its highest ever quarterly generation of 67,781MUs (million units) during Q3 of FY 2017-18
  2. It is 10.39% more than the generation of 61,400MUs recorded during the corresponding period of last year

Significance

  1.  The development assumes significance given that India’s largest power generator accounts for 16% or 51,635MW of the country’s installed power generation capacity of 331,117.58MW

Possible benefit of the development

  1. Government is trying to revive electricity demand in the country
  2. Any fresh demand for electricity(the lack of which is weighing down the entire power sector) will also help in resolving the stressed assets conundrum and improve their financial viability

Other future plans of the government

  1. The other power sector reforms in the works include a plan to implement the direct benefit transfer (DBT) scheme in the electricity sector for better targeting of subsidies and the proposed tariff slabs rationalization.
  2. Also, to make discoms more responsive, any disruption in electricity supplies post March 2019 will be penalized and the cross-subsidy will be limited to 20% to help usher in efficiency

Policy Wise: India’s Power Sector

Centre, states to implement direct benefit transfer scheme in power sector

Note4students

Mains Paper 2: Governance | Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

From UPSC perspective, the following things are important:

Prelims level: Discoms, Click2read

Mains level: Steps taken by the government


News

Direct benefit transfer (DBT) scheme in Power Sector

  1. The Union and state governments have agreed to implement the DBT scheme in the electricity sector for better targeting of subsidies

Steps taken by the government to improve services of the Power Sector

  1. To make discoms more responsive, any disruption in electricity supplies post March 2019 will be penalized
  2. Also, the discoms won’t be allowed to recoup more than 15% of their losses through any tariff increase post March 2019
  3. To improve efficiency and reduce losses, the Union and the state governments will be leveraging technology for 100% metering
  4. And doing away with any human interface in consumer facing functions such as metering, billing and collections

Electricity tariff slab rationalization 

  1. The proposed tariff slabs rationalization and limiting cross-subsidy to 20% will usher in efficiency
  2. And help improve India’s per capita power consumption of around 1,200 kilowatt hour (kWh), which is among the lowest in the world
  3. Electricity tariff slab rationalization to make them uniform across the country will help in reduction of cross-subsidies borne by the industry
  4. And make tariffs more competitive for businesses, thereby pushing the government’s Make in India drive

Policy Wise: India’s Power Sector

[op-ed snap] Rethinking open access in electricity

Note4student

Mains Paper 3: Economy | Infrastructure: Energy, Ports, Roads, Airports, Railways etc.

The following things are important from UPSC perspective:

Prelims Level: Not much

Mains level: Energy related topics are specially mentioned in the mains syllabus. The article explains the reasons behind limited success of open access of electricity


News

Context

  1. The article talks about open access of electricity and related concerns

Government advise to the Central Electricity Authority (CEA) 

  1. The government has advised the CEA to set up a committee to look into issues related to open access and brought out a consultation paper based on the committee’s findings

Why is open access necessary?

  1. Open access is one of the key measures to bring about competition in electricity, whereby large consumers have access to the transmission and distribution (T&D) network to obtain electricity from suppliers other than the local distribution company (discom)
  2. Open access was expected to encourage investment by private players in electricity supply

Why was the success of open access very limited?

  1. Unfortunately, the success of open access has been very limited in spite of numerous attempts to facilitate it
  2. Instead of being an avenue to allow large consumers choice of supplier on a sustained basis
  3. The open access has become a way to allow such consumers to move back and forth between the discom and the market as and when they want
  4. Not only is this phenomenon unfair to discoms, it also does not allow competitive suppliers to develop a stable customer base, defeating the purpose of open access

How can open access help to counter the burden of cross-subsidization?

  1. The current approach to open access may relieve, to some extent, the burden of cross-subsidization that falls on large consumers, by allowing them access to the market to get lower prices when they can
  2. The high degree of cross-subsidization certainly needs to be addressed
  3. But tariff rationalization is a political problem and, therefore, is best solved at the political level

Why should open access requests only come from suppliers, not consumers?

  1. Open access to the T&D network is required by generators and suppliers, but not by consumers
  2. Consumers need only to shop around for the best deal from competitive suppliers, and it should be the responsibility of the suppliers to obtain access so that the power can be transferred to consumers

How to re-conceptualize the open access?

  1. The first step in re-conceptualizing open access is to recognize that service to consumers exercising choice is a distinct service, and not an extension of regulated supply
  2. Large consumers should not be able to treat the discom as a mothership to which they can return whenever market prices rise
  3. In addition, consumers exercising choice should be required to get all their electricity from the supplier of their choice, not just part of it
  4. Otherwise the discom has to handle all the variability of load, and that increases the discom’s planning burden and cost, and is unfair

Other concerns related to the open access

  1. Open access for end-consumers should not be a short-term option. Discom tariffs are regulated and fixed for the entire year and thus represent an average over the year
  2. Even an efficient discom will have tariffs that are above the prevailing market price at some times and below it at other times
  3. If a very large consumer is able to cherry-pick the periods when it can get supply from the market, it would result in higher and higher costs for the discom
  4. These additional costs would have to be borne by non-open-access consumers, many of whom are small consumers

The way forward

  1. It is time to move beyond efforts to increase the volume of open access transactions by tinkering with how various open access charges are calculated
  2. Instead, the initiative by the power ministry should be taken as an opportunity to re-conceptualize open access along the lines discussed here, so that its objectives are achieved

Back2basics

What is open access– simple- open to access electricity from any seller i.e. consumers being able to purchase directly from power producers rather than distribution companies.

Advantage– As it allows generators to sell power to the highest bidders while consumers can source their needs from the most economic seller, it promotes competition and efficiency

Open Access (OA) policy introduced under Electricity Act 2003, allows consumers with electricity load above 1 MW to procure electricity directly from electricity markets

Policy Wise: India’s Power Sector

Toxic sulphur dioxide norms: 90% coal power plants not compliant

Note4Students

Mains Paper 3: Economy | Infrastructure: Energy, Ports, Roads, Airports, Railways etc.

From UPSC perspective, the following things are important:

Prelims level: Flue Gas Desulphurisation (FGD) systems, Emission Norms

Mains level: Rising air pollution and its effect on health as well as economy


Non Compliance to norms

  1. Nearly 90 percent of the country’s coal-fired power generation capacity is in violation of Sulphur Dioxide (SO2) emission limits notified two years ago.
  2. These norms will kick in December this year.

What is Power ministry doing?

  1. Power Ministry has asked the Environment Ministry to defer implementing the NOX emission limits by three years (for coal-based units installed before December 2003).
  2. For units installed after December 2003, it has requested that it be allowed to operate them at higher NOX emission limit of 600 mg/Nm3 (milligrams per cubic metre) for three years.
  3. This is because the state-run NTPC Ltd is currently conducting a “pilot study” to test if “NOX control technology” will work for “Indian coal” that has “high ash content”.

Is compliance possible by December?

  1. The Power Ministry stated that it will take seven years to “retro-fit” Flue Gas Desulphurisation (FGD) systems — which remove SO2 from exhaust flue gases — in the existing capacity.

Effect of SO2 and NOX emissions

  1. Short-term exposures to SO2 can harm the human respiratory system and make breathing difficult.
  2. Children, the elderly, and those who suffer from asthma are particularly sensitive to effects of SO2.
  3. NOX, too, can trigger “serious respiratory problems”.
  4. Both SO2 and NOX can be easily oxidised within airborne water droplets to form acid precipitation or ‘acid rain’.

Back2Basics

Revised standards for coal-based Thermal Power Plants

  1. The Ministry of Environment, Forest & Climate Change had notified the revised standards for coal-based Thermal Power Plants on 22-December-2015.
  2. The new standards are aimed at reducing emission of PM10, sulphur dioxide and Oxide of nitrogen.
  3. The technology employed for the control of the proposed limit of Sulfur Dioxide – SO2 & Nitrogen Oxide – NOx will also help in control of mercury emission (at about 70-90%) as a co-benefit.
  4. These standards are based on the recommendation of the Central Pollution Control Board (CPCB) after consultations with stakeholders.

Flue Gas Desulphurisation (FGD) systems

  1. Flue-gas desulfurization (FGD) is a set of technologies used to remove sulfur dioxide (SO2) from exhaust flue gases of fossil-fuel power plants, and from the emissions of other sulfur oxide emitting processes.
  2. Most FGD systems employ two stages: one for fly ash removal and the other for SO2 removal.
  3. For a typical coal-fired power station, flue-gas desulfurization (FGD) may remove 90 percent or more of the SO
    2 in the flue gases.

Policy Wise: India’s Power Sector

[op-ed snap] A half-done reform: On LPG subsidy

Image result for subsidy cooking gas india

Image source 

Note4students

Mains Paper 2: Governance | Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

Op-ed discusses about governments new decision to do away with the subsidy for cooking gas and subsidy burden on government.

Once you are done reading this op-ed, you will be able to attempt the below.

Direct cash transfers have the potential to improve the economic lives of the poor by transferring benefits to households quickly and directly. Achieving these benefits requires thoughtful design of schemes, and careful, rigorous analysis of ongoing programmes is an important input to the design process. Discuss

From UPSC perspective, the following things are important:

Prelims level: DBT

 Mains level: Wasteful subsidies in India, Direct benefit transfer


News

Context:

  1. The government decided to completely do away with the subsidy offered to cooking gas used for household purposes
  2. Public sector oil companies were authorised to incrementally hike the “effective price” of LPG cylinders until the entire subsidy is wiped off by March next year.

Burden of government

  1. Fall in global crude oil prices, has already eased the burden on the government.
  2. In the latest Union budget, the government allocated about ₹25,000 crore towards oil subsidy, which is a fourth of the total oil subsidy bill (of almost ₹1 lakh crore) incurred in fiscal year 2013.
  3. The implementation of the direct transfer of cash benefits has already helped in the better targeting of subsidies to the poor, thus substantially reducing wasteful spending.

How cut in subsidies will help?

  • The cut in subsidy would further strengthen fiscal discipline.

Way forward?

  1. Sustainably lower the price of cooking gas once and for all, getting the government out of the business of managing subsidies.
  2. Deregulating the market for cooking gas, thus opening it up to more widespread market competition, would also help.

Back2basics

Direct benefit transfer 

Refer : Civilsdaily

 

Policy Wise: India’s Power Sector

[pib] 4 Objectives of New Energy Policy & its difference from the old one

  1. The 4 key objectives of the NEP are: Access at affordable prices,
  2. Improved energy security and independence,
  3. Greater sustainability and
  4. Economic growth
  5. Previous Policy = Integrated Energy Policy (IEP). What’s the difference?
  6. NEP includes the issues related to sharp decline of crude oil prices, change in solar energy technology, heightened concern of climate change issues, ambitious target of Renewable energy and rural electrification agenda
  7. The policy is being discussed by NITI Aayog with different stake holders

Policy Wise: India’s Power Sector

India to light up IEA’s global LED programme

  1. International Energy Agency: India, through its company Energy Efficiency Services Limited (EESL), has performed exceedingly well in terms of vastly improving access to LED lighting while reducing their cost drastically
  2. The LED programme by EESL has been so successful that IEA is partnering with it to take the programme global
  3. The price at which EESL has been purchasing LED lights to distribute under the government’s Unnat Jyoti by Affordable LEDs for All (Ujala) scheme has been consistently falling over the last couple of years
  4. The company purchased LEDs at Rs.310 per piece in 2014, and the price fell to Rs.55 as of March 2016
  5. Along with this, production has also been ramped up to about four crore per month from the 10 lakh a month that were produced two years ago

Discuss: Remember the UJALA scheme? What is it about?

Policy Wise: India’s Power Sector

Less light on subsidised LED bulbs: survey

  1. Context: Ujala, Govt’s LED distribution scheme, under which electricity board customers are eligible to buy LED bulbs at a subsidised rate
  2. Source: A survey conducted by citizen engagement platform LocalCircles
  3. 64% consumers still don’t know how to get the subsidised LED bulbs being made available by the Govt
  4. The situation was worst in West Bengal and Tamil Nadu, where around 96% of the respondents were not aware of this scheme
  5. Poor communication: One of the prime reasons for the lack of awareness about this scheme
  6. Every State Electricity Board communicates to customers by sending them bills via the post but not many have chosen to use the bills to communicate this offer to the consumer

Policy Wise: India’s Power Sector

Discoms turn to smart meters to manage power demand in Delhi

  1. Context: Rising energy consumption in cities is making power distribution companies change the way they manage energy demand
  2. Solar: Tata Power Delhi Distribution Ltd (TPDDL) is getting into solar power generation for large customers which will help address rising peak demand
  3. Smart meters: Will be installed for all its residential consumers & will facilitate billing of customers based on the time at which power is consumed

Policy Wise: India’s Power Sector

Grant for R&D project for AUSC technology

  1. News: Cabinet Committee on Economic Affairs approved a one-time grant of Rs.900 crores spread over three years
  2. For: An R&D project for the development of Advanced Ultra Super Critical (AUSC) technology for thermal power plants (TPPs)
  3. The Rs.900 crore, commencing from 2017-18, is to be provided as plan gross budgetary support to Bharat Heavy Electricals (BHEL) for the implementation of the R&D project

Policy Wise: India’s Power Sector

India’s power paradox- 2

  1. Power cuts: Though we have surplus power, there are power cuts because the State discoms are unable to buy electricity due to poor financial health, leading to unused power lying idle in the grid
  2. Transmission and distribution constraints are also responsible for power cuts – the government launched the Ujjawal Discom Assurance Yojana (UDAY) to solve this
  3. UDAY is expected to facilitate reliable, adequate and sufficient power supply to consumers through operational and financial turnaround of discoms
  4. Per capita consumption: India’s per capita consumption was 1,070 kWh in 2015-16, less than the world average and was the lowest among BRICS nations
  5. This is due to a large population, a low per capita income and a huge population not having access to electricity
  6. There are 6 States in India out of the 17 States expected to be in power-surplus in 2016-17, with per capita availability lower than the national average

Policy Wise: India’s Power Sector

India’s power paradox- 1

  1. Central Electricity Authority (CEA), under the Power Ministry, had earlier released the Load Generation and Balance Report (LGBR) 2016-17
  2. The report stated that India is likely to experience the energy surplus of 1.1% in 2016-17
  3. Paradox: Though there are 300 million people without access to electricity, rampant power cuts and one of the lowest per capita power consumption in the world, India’s Power Ministry says India is power-surplus
  4. Demand problem: Surplus or deficit is determined by calculating the difference between the demand for power and availability, and the demand definition lies at the base of this paradox
  5. While calculating power demand, only people who are connected to the grid and have access to electricity at present are taken into consideration
  6. Thus those who do not have access to electricity and the demand from them – latent demand – is not included in demand calculations
  7. The ‘real demand’ that encompasses all citizens would be known only when India achieves the goal of ‘Power for All’

Policy Wise: India’s Power Sector

What more does LGBR say?

  1. A generating capacity above 16,654.5 mw has been considered in the LGBR for 2016-17
  2. These measures are expected to help the deficit states reduce their shortfall.
  3. Surplus: Anticipated at 3.3% and 6.9% in the southern and western regions, respectively
  4. Shortage: Anticipated in Northern, eastern and northeastern regions at 1.8%, 10.3% & 8.3%, respectively
  5. Peaking shortages: Likely to prevail mainly in the northern, southern and northeastern regions at around 1.6%, 10.0% and 3.8%, respectively
  6. Power shortage: At 2.1% (last fiscal), it is the lowest level in a single year
  7. Surplus states (expected): Delhi, Madhya Pradesh, Maharashtra & Tamil Nadu
  8. Deficit states (expected): Jammu and Kashmir, Uttar Pradesh, Uttarakhand, Bihar and Jharkhand
  1. A generating capacity above 16,654.5 mw has been considered in the LGBR for 2016-17
  2. These measures are expected to help the deficit states reduce their shortfall.
  3. Surplus: Anticipated at 3.3% and 6.9% in the southern and western regions, respectively
  4. Shortage: Anticipated in Northern, eastern and northeastern regions at 1.8%, 10.3% & 8.3%, respectively
  5. Peaking shortages: Likely to prevail mainly in the northern, southern and northeastern regions at around 1.6%, 10.0% and 3.8%, respectively
  6. Power shortage: At 2.1% (last fiscal), it is the lowest level in a single year
  7. Surplus states (expected): Delhi, Madhya Pradesh, Maharashtra & Tamil Nadu
  8. Deficit states (expected): Jammu and Kashmir, Uttar Pradesh, Uttarakhand, Bihar and Jharkhand

Policy Wise: India’s Power Sector

India plans to be power surplus in 2016-17

  1. Context: Load Generation Balance Report (LGBR) for 2016-17
  2. The Govt is planning to make India an energy surplus country
  3. Target: Generating 1,178 billion units, leading to a 1.1% overall electricity surplus this fiscal & a peak surplus of 2.6%
  4. Earlier: The Govt used to plan generation with deficit of power in the past in its LGBRs
  5. Imports from power projects in Bhutan and availability from non-conventional and renewable energy sources in the country are also factored into the report
  6. With the commissioning of these transmission lines, the inter-State and intra-State capabilities of power transfer in the country enhanced considerably
  7. Rigorous monitoring is being done to add capacity in the 12th plan period
  1. Context: Load Generation Balance Report (LGBR) for 2016-17
  2. The Govt is planning to make India an energy surplus country
  3. Target: Generating 1,178 billion units, leading to a 1.1% overall electricity surplus this fiscal & a peak surplus of 2.6%
  4. Earlier: The Govt used to plan generation with deficit of power in the past in its LGBRs
  5. Imports from power projects in Bhutan and availability from non-conventional and renewable energy sources in the country are also factored into the report
  6. With the commissioning of these transmission lines, the inter-State and intra-State capabilities of power transfer in the country enhanced considerably
  7. Rigorous monitoring is being done to add capacity in the 12th plan period

Policy Wise: India’s Power Sector

Delhi is the biggest power guzzler

  1. Context: Delhi recorded the highest power demands of electricity during peak hours among the capital cities
  2. It has become India’s biggest power consumer city
  3. Demand has increased by 20% compared to last year
  4. Delhi has also beaten Bihar who has population around 10 crore
  5. Demand may go up in July
  6. Reason: Delhi’s weather conditions and increase in humidity in July
  1. Context: Delhi recorded the highest power demands of electricity during peak hours among the capital cities
  2. It has become India’s biggest power consumer city
  3. Demand has increased by 20% compared to last year
  4. Delhi has also beaten Bihar who has population around 10 crore
  5. Demand may go up in July
  6. Reason: Delhi’s weather conditions and increase in humidity in July

Policy Wise: India’s Power Sector

National Led Bulbs Scheme Gets a New Face in UJALA

  1. Context: UJALA for the LED based Domestic Efficient Lighting Programme (DELP), which is currently running successfully in over 120 cities
  2. UJALA: an acronym for Unnat Jyoti by Affordable LEDs for All
  3. Agency: Energy Efficiency Services Limited (EESL)
  4. Background: National LED programme was launched by Hon’ble Prime Minister on January 2015
  5. Target: Replacing 77 crore incandescent lamps with LED bulbs
  6. Ujala States: Rajasthan, Maharashtra, Karnataka, Kerala, UP, Himachal Pradesh, Delhi, Andhra Pradesh, Puducherry, Jharkhand, Bihar and Uttarakhand
  1. Context: UJALA for the LED based Domestic Efficient Lighting Programme (DELP), which is currently running successfully in over 120 cities
  2. UJALA: an acronym for Unnat Jyoti by Affordable LEDs for All
  3. Agency: Energy Efficiency Services Limited (EESL)
  4. Background: National LED programme was launched by Hon’ble Prime Minister on January 2015
  5. Target: Replacing 77 crore incandescent lamps with LED bulbs
  6. Ujala States: Rajasthan, Maharashtra, Karnataka, Kerala, UP, Himachal Pradesh, Delhi, Andhra Pradesh, Puducherry, Jharkhand, Bihar and Uttarakhand

Policy Wise: India’s Power Sector

Our aim is to electrify every home, says Goyal

  1. Background: Prior to 2014, there was Rajiv Gandhi Rural Electrification Scheme , which provided power to villages that were easy to access
  2. Criticism: About 18,000 villages in dense forests and at the top of mountains remained un-electrified
  3. New Initiative: Deen Dayal Upadhyaya Rural Electrification Scheme
  4. Objective: To electrify every Indian home by May, 2018
  1. Background: Prior to 2014, there was Rajiv Gandhi Rural Electrification Scheme, which provided power to villages that were easy to access
  2. Criticism: About 18,000 villages in dense forests and at the top of mountains remained un-electrified
  3. New Initiative: Deen Dayal Upadhyaya Rural Electrification Scheme
  4. Objective: To electrify every Indian home by May, 2018

Policy Wise: India’s Power Sector

Panel for Hydro Power Policy

  1. Context: Power ministry has set up a 10-member panel chaired by Ashwin B. Pandya, former chairman of the Central Water Commission
  2. Purpose: To advise on framing a new hydropower policy that will help turn around stalled projects and attract fresh investments into the sector
  3. Terms of reference: Suggest policy measures on technical, financial, environmental and commercial aspects of the hydropower sector
  4. Why delay? Delays in environment and forest clearances, inter-state water-sharing disputes, technical and geological uncertainties and difficulties in securing financing due to long gestation periods
  1. Context: Power ministry has set up a 10-member panel chaired by Ashwin B. Pandya, former chairman of the Central Water Commission
  2. Purpose: To advise on framing a new hydropower policy that will help turn around stalled projects and attract fresh investments into the sector
  3. Terms of reference: Suggest policy measures on technical, financial, environmental and commercial aspects of the hydropower sector
  4. Why delay? Delays in environment and forest clearances, inter-state water-sharing disputes, technical and geological uncertainties and difficulties in securing financing due to long gestation periods

Policy Wise: India’s Power Sector

Drones for power sector from Finland

  1. Context: Finland’s Sharper Shape will provide UAV solutions for the power transmission sector in partnership with Sterlite Grid Ventures
  2. Sterlite Grid: India’s largest private developer of independent transmission systems
  3. Benefits: Business solutions to transmission line operators and help reduce delivery time of projects, and increase the uptime of power systems
  4. Background: Transmission companies had sought permission for using drones in monitoring project construction
  5. Why? Usually have to build infrastructure in inaccessible areas, thus to reduce its maintenance cost
  1. Context: Finland’s Sharper Shape will provide UAV solutions for the power transmission sector in partnership with Sterlite Grid Ventures
  2. Sterlite Grid: India’s largest private developer of independent transmission systems
  3. Benefits: Business solutions to transmission line operators and help reduce delivery time of projects, and increase the uptime of power systems
  4. Background: Transmission companies had sought permission for using drones in monitoring project construction
  5. Why? Usually have to build infrastructure in inaccessible areas, thus to reduce its maintenance cost

Policy Wise: India’s Power Sector

Govt asks states to Increase power tariff, cut theft

  1. Centre has urged state electricity regulators to increase power tariffs and ensure that power distribution companies cut power theft and operational costs.
  2. This is to prevent utilities being bailed out by state governments from slipping back into losses.
  3. Tariff revisions and steps to boost efficiency in power distribution are covered by the tripartite agreements.
  4. These are signed by states, power utilities and Union Ministry of Power under UDAY.

In states such as Rajasthan, Haryana, Jharkhand, Punjab, Tamil Nadu, Madhya Pradesh and Uttar Pradesh, power is provided below the cost of generation and delivery.

  1. Centre has urged state electricity regulators to increase power tariffs and ensure that power distribution companies cut power theft and operational costs.
  2. This is to prevent utilities being bailed out by state governments from slipping back into losses.
  3. Tariff revisions and steps to boost efficiency in power distribution are covered by the tripartite agreements.
  4. These are signed by states, power utilities and Union Ministry of Power under UDAY.

Policy Wise: India’s Power Sector

Cabinet nod for power tariff policy

  1. To promote renewable energy and improve the ease of doing business for developers in the sector.
  2. By allowing power generators to sell their surplus power on the power exchange and sharing the proceeds with state government.
  3. The amendments are based on 4 Es — electricity for all, efficiency that will ensure affordable tariffs, the environment, and ease of doing business to attract greater investment in the sector.
  4. The new policy also mandates that no inter-state transmission charges will be levied until a time to be specified by the government.
  5. This automatic approval was earlier limited to 50 per cent capacity expansions.
  6. Towards the power for all initiative, the policy enables the creation of micro-grids in remote villages as yet unconnected to the grid.

In a major shift, power companies are allowed to pass costs on to consumers arising out of any changes in taxes, cesses and levies levied on them.

The amended policy said that the power regulator has to come up with a clear action plan to ensure 24x7 power supply to all consumers by 2021-22 or earlier.
The amended policy said that the power regulator has to come up with a clear action plan to ensure 24×7 power supply to all consumers by 2021-22 or earlier.

  1. To promote renewable energy and improve the ease of doing business for developers in the sector.
  2. By allowing power generators to sell their surplus power on the power exchange and sharing the proceeds with state government.
  3. The amendments are based on 4 Es — electricity for all, efficiency that will ensure affordable tariffs, the environment, and ease of doing business to attract greater investment in the sector.
  4. The new policy also mandates that no inter-state transmission charges will be levied until a time to be specified by the government.
  5. This automatic approval was earlier limited to 50 per cent capacity expansions.
  6. Towards the power for all initiative, the policy enables the creation of micro-grids in remote villages as yet unconnected to the grid.

Policy Wise: India’s Power Sector

The Future of Electricity in Fast Growing Economies: World Economic Forum

  1. India’s power sector is at an inflection point & it called for developing an integrated outlook for the country’s energy sector.
  2. Most of its electricity demand in the next 2 decades will be met by burning fossil fuels despite huge investments in renewables.
  3. Tariffs and rates for fuel pricing, costs that are passed through to customers, and peak power policies and pricing should all be transparent and consistent across states.
  4. Alignment between federal and state government objectives is critical, as India devolves significant power to the states.
  5. India’s plan to add 175 GW of capacity from renewables by 2022 can succeed only if the relevant stakeholders act in ways that encourage investment in this part of the sector.
  6. Critically, regulators should ensure long-term tariff consistency with no retroactive changes or flip-flops

The WEF report is titled: The Future of Electricity in Fast-Growing Economies Attracting Investment to Provide Affordable, Accessible and Sustainable Power.

  1. India’s power sector is at an inflection point & it called for developing an integrated outlook for the country’s energy sector.
  2. Most of its electricity demand in the next 2 decades will be met by burning fossil fuels despite huge investments in renewables.
  3. Tariffs and rates for fuel pricing, costs that are passed through to customers, and peak power policies and pricing should all be transparent and consistent across states.
  4. Alignment between federal and state government objectives is critical, as India devolves significant power to the states.
  5. India’s plan to add 175 GW of capacity from renewables by 2022 can succeed only if the relevant stakeholders act in ways that encourage investment in this part of the sector.
  6. Critically, regulators should ensure long-term tariff consistency with no retroactive changes or flip-flops

Policy Wise: India’s Power Sector

Power sector’s demands from upcoming budget

  1. The inclusion of power and coal sectors in GST regime will result in lowering of bulk power, retail tariff and support the Make In India.
  2. Inclusion of power, coal and natural gas in GST regime to subsume multiple taxes and thereby reduce the cost of power projects and the per-unit tariff.
  3. Infrastructure industry status to the T&D sector so that all related tax benefits can be availed.
  4. Even though generation is exempt from CENVAT, excise and VAT, taxes on power generation equipment and other inputs remain embedded in the cost of power.

The overall impact of present taxation regime at both Central and state levels leads to higher price of power.

  1. The inclusion of power and coal sectors in GST regime will result in lowering of bulk power, retail tariff and support the Make In India.
  2. Inclusion of power, coal and natural gas in GST regime to subsume multiple taxes and thereby reduce the cost of power projects and the per-unit tariff.
  3. Infrastructure industry status to the T&D sector so that all related tax benefits can be availed.
  4. Even though generation is exempt from CENVAT, excise and VAT, taxes on power generation equipment and other inputs remain embedded in the cost of power.

Policy Wise: India’s Power Sector

The Perspective Transmission Plan for 20 years

  1. Use of HVDC technology for large distance power transmission, made possible through large trunk transmission lines, technologically most advanced in the world.
  2. In around 3 years, India will see some 34,000 Mw of power being transported over long distances, primarily to the northern and the southern regions.
  3. The plan is in sync with the general network access (GNA).
  4. This is form of transmission network planning which aims at developing a transmission system such that available power can be smoothly transmitted.
  1. Use of HVDC technology for large distance power transmission, made possible through large trunk transmission lines, technologically most advanced in the world.
  2. In around 3 years, India will see some 34,000 Mw of power being transported over long distances, primarily to the northern and the southern regions.
  3. The plan is in sync with the general network access (GNA).
  4. This is form of transmission network planning which aims at developing a transmission system such that available power can be smoothly transmitted.

Policy Wise: India’s Power Sector

Government electrifies 20% more villages

  1. Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY) has revealed that the government has electrified 20% of the villages that were without power at the start of this financial year under this scheme.
  2. DDUGJY has electrified 3,656 or 20% of the 18,452 villages without power at the start of this financial year.
  3. In July last year, the DDUGJY said it aimed to provide round-the-clock power to rural households and adequate electricity to agricultural consumers.
  4. Of the remaining 14,796 villages that still had to get electricity, work has been started in only 1,843 (12%) of them.
  1. Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY) has revealed that the government has electrified 20% of the villages that were without power at the start of this financial year under this scheme.
  2. DDUGJY has electrified 3,656 or 20% of the 18,452 villages without power at the start of this financial year.
  3. In July last year, the DDUGJY said it aimed to provide round-the-clock power to rural households and adequate electricity to agricultural consumers.
  4. Of the remaining 14,796 villages that still had to get electricity, work has been started in only 1,843 (12%) of them.

Policy Wise: India’s Power Sector

New coal linkage, tariff policies coming soon

  1. Govt. will soon come out with a coal linkage policy to ensure supply of fossil fuel.
  2. It will also bring out a new tariff policy to boost regulatory mechanism for discoms and attract investments.
  3. The policy will reflect a concern to environment and encourage renewable energy.
  4. It will strengthen the regulatory mechanism so that discoms become more efficient and conscious towards their duties to consumers.
  5. The central govt. in 2006 had approved the Tariff Policy under the provisions of Electricity Act, 2003.
  1. Govt. will soon come out with a coal linkage policy to ensure supply of fossil fuel.
  2. It will also bring out a new tariff policy to boost regulatory mechanism for discoms and attract investments.
  3. The policy will reflect a concern to environment and encourage renewable energy.
  4. It will strengthen the regulatory mechanism so that discoms become more efficient and conscious towards their duties to consumers.
  5. The central govt. in 2006 had approved the Tariff Policy under the provisions of Electricity Act, 2003.

Policy Wise: India’s Power Sector

Rajasthan Joins UDAY Scheme

  1. Rajasthan Government has conveyed its in-principle approval to Ministry of Power for joining UDAY Scheme (Ujwal Discom Assurance Yojana) .
  2. UDAY has been launched to improve financial and operational efficiencies of power distribution companies (DISCOMs).
  3. The scheme provides that States would take over 75% debt of Discoms, as on 30th September, 2015 in 2 years.
  4. UDAY has inbuilt incentives encouraging State Governments to voluntarily restructure their debts.
  5. UDAY also provides for measures that will reduce the cost of power generation, which would ultimately benefit consumers.

Rajasthan Government has conveyed its in-principle approval to Ministry of Power (MoP) for joining UDAY Scheme (Ujwal Discom Assurance Yojana).

  1. UDAY has been launched to improve financial and operational efficiencies of power distribution companies (DISCOMs).
  2. The scheme provides that States would take over 75% debt of Discoms, as on 30th September, 2015 in 2 years.
  3. UDAY has inbuilt incentives encouraging State Governments to voluntarily restructure their debts.
  4. UDAY also provides for measures that will reduce the cost of power generation, which would ultimately benefit consumers.

Policy Wise: India’s Power Sector

Bailouts galore in power sector: Where’s the plug

  1. The good thing this time is that UDAY promises no grants or upfront write down of losses for distribution utilities.
  2. The biggest question is that, whether the new scheme has enough incentives built in to draw state govts.
  3. These taken-over loans will not be counted for the states’ FRBM limits for the current fiscal year and the next.
  4. The new scheme hinges on the premise that with loans off their books and improved balance sheets, SEBs will be able to sell the rest of their outstanding debt as bonds backed by state govt. guarantee.

The new scheme hinges on the premise that with loans off their books and improved balance sheets, SEBs will be able to sell the rest of their outstanding debt as bonds backed by state govt. guarantee.

  1. The good thing about UDAY is that it promises no grants or upfront write down of losses for distribution utilities.
  2. The biggest question is that, whether the new scheme has enough incentives built in to draw state govt’s.
  3. These taken-over loans will not be counted for the states’ FRBM limits for the current fiscal year and the next.
  4. It is unclear whether there will be a substantial number of states that would actually come forward for taking up this scheme, as long as it remains a voluntary one.

Policy Wise: India’s Power Sector

Are there any side effects of the discom revival plan launched?

  1. Discoms = State electricity boards. We are talking about the latest plan launched, remember?
  2. Even though it is a center sponsored bailout, states will have to pay the interest, which could be interpreted as something eating into their finances.
  3. What will happen if the state governments continue to fund losses without rationalizing tariffs?
  4. This is another burden on the state govs. and they have failed last time when such a bailout was launched in 2012.
  1. Discoms = State electricity boards. We are talking about the latest plan launched, remember?
  2. Even though it is a center sponsored bailout, states will have to pay the interest, which could be interpreted as something eating into their finances.
  3. What will happen if the state governments continue to fund losses without rationalizing tariffs?
  4. This is another burden on the state govs. and they have failed last time when such a bailout was launched in 2012.

Policy Wise: India’s Power Sector

Cabinet clears financial reform package for discoms

  1. The Union Cabinet has approved a reform package for loss-making electricity utilities.
  2. This will allow for the transfer of 75% of the about Rs 4.3 lakh crore outstanding debt incurred by stressed discoms to States’ debt.
  3. The Centre aims to help states in wiping out the discoms’ losses by 2019.
  4. The decision is also expected to help the banks in managing their bad loans.
  5. The scheme is named Ujwal Discom Assurance Yojana and it will be optional for States.
  1. The Union Cabinet has approved a reform package for loss-making electricity utilities.
  2. This will allow for the transfer of 75% of the about Rs 4.3 lakh crore outstanding debt incurred by stressed discoms to States’ debt.
  3. The Centre aims to help states in wiping out the discoms’ losses by 2019.
  4. The decision is also expected to help the banks in managing their bad loans.
  5. The scheme is named Ujwal Discom Assurance Yojana and it will be optional for States.

Policy Wise: India’s Power Sector

Centre to sell 5% stake in Rural Electrification Corporation (REC)

  1. Taking the offer for sale (OFS) route, government will sell over 4.93 crore REC shares & make around Rs.1,600 crore.
  2. What is OFS?
  3. OFS or Offer For Sale = window provided by stock exchanges to the promoters/ non-promoters of listed entities to help them dilute holdings in a transparent way.
  4. Sebi had created 2 new routes for sale of shares – Institutional placement programme (IPP) & the Offer for sale (OFS) through stock exchanges.
  1. Taking the offer for sale (OFS) route, government will sell over 4.93 crore REC shares & make around Rs.1,600 crore.
  2. What is OFS?
  3. OFS or Offer For Sale = window provided by stock exchanges to the promoters/ non-promoters of listed entities to help them dilute holdings in a transparent way.
  4. Sebi had created 2 new routes for sale of shares – Institutional placement programme (IPP) & the Offer for sale (OFS) through stock exchanges.
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