The top priorities for the power ministry are ensuring effective implementation of the Revamped Distribution Sector Scheme (RDSS), making the state electricity regulatory commissions (SERCs) accountable within the statutory framework, and facilitating the expansion of generation and transmission grid capacity. In a recent interaction with Alok Brara, publisher, Indian Infrastructure, at the India Infrastructure Forum 2023, Alok Kumar, secretary, Ministry of Power (MoP), spoke about the progress of the power sector, new and upcoming opportunities, and the top priorities for the ministry going forward. Excerpts…
How would you assess the progress of the power sector over the past two to three years?
India has come a long way in developing its electricity infrastructure and improving electricity access. On the supply side, there has been significant growth in the transmission grid, distribution infrastructure, generation capacity, village electrification and universal electricity access for households. Electricity demand is growing very fast, and we need to add more generation capacity as well as expand the transmission grid continuously.
There are various challenges in the sector. A major issue is the financial viability of the power distribution companies. Electricity is a concurrent subject. The state governments and the SERCs have an important role to play. In India, about 90 per cent of the load and consumers are served by state-owned utilities. Timely payment of dues by the urban and rural local bodies and subsidies by the state governments are key to ensuring the financial viability of the state discoms. This concern is being addressed through the prequalification criteria stipulated under the RDSS. Besides, the SERCs need to be made accountable for the timely revision of tariffs, approval of true-ups and cost-reflective tariffs.
Fuel supply is another challenge facing the power sector. Coal is the main source of generation, and its supply is a challenge, which the government is trying to address. Apart from this, a lot remains to be done in the country for consumer services. The government has been coming out with consumer ratings for the last two years and it has been seen that consumers in cities as well as rural areas face problems of wrong and irregular billing. For this, metering and billing through prepaid smart metering are important.
Lastly, resource adequacy will become a challenge as distribution companies have almost stopped floating bids for long-term power purchase agreements and are depending very heavily on the power exchanges. There is a need for proper resource adequacy planning as things are going to be difficult in the future.
“The topmost priority for the MoP is effective impleme – n tation of the RDSS through prepaid smart metering, enforcement of pre-qualification conditions and implementation of the results-linked framework so that vi – able discoms provide the foundation for required investment in the sector.”
What is the progress on the commitments to the net zero goals?
The most important goal is 45 per cent reduction in the emissions intensity of GDP from the 2005 level. This includes most of the other subsidiary goals. India has achieved 29-30 per cent reduction in emissions so far and is on track to achieve 45 per cent reduction by 2030. Meanwhile, to achieve the net zero goal by 2070, the technologies are yet to evolve and mature.
On the consumption side, the India Cooling Action Plan and the Perform Achieve and Trade programme are doing quite well. Additionally, large residential buildings have been brought under the Energy Conservation Building Code. We are also at an advanced stage of rolling out a carbon market.
On the supply side, there are some challenges that the country is currently facing. One is with respect to the integration of 500 GW of non-fossil-fuel-based capacity by 2030, given that it is intermittent in nature and that energy storage is still very expensive. The second challenge pertains to creating demand for renewable power from distribution companies and for this, there is a need to enforce the renewable purchase obligations. Lastly, the local supply of modules and cells is an area that needs greater attention.
“Earlier, we had two categories of programmes. One dealt with investment in infrastructure, grid expansion and hous ehold connectivity. The other category of programmes, like UDAY, dealt with reforms. The RDSS is a unique scheme wherein the two objectives have been combined.”
What are the key focus areas to achieve the desired energy mix?
To achieve the desired optimal energy mix, solar power needs attention. We are expected to add 35-40 GW of solar every year, while we are currently adding 12-13 GW annually. Meanwhile, hydropower needs even greater attention because it is a firm resource. However, hydro has its own problems such as a long gestation period, geological surprises and high costs. Further, hydro cannot be developed without the full support and cooperation of the state governments. The state governments should be reasonable about extracting their share of profits from the hydro project in the initial years, in terms of staggering free power and no levy of cess on hydropower. The government is proposing a scheme to support the development of hydropower in the north-eastern states through equity participation. The scheme is expected to accelerate hydropower development in India.
From the current installed capacity of 416 GW, India aims to reach around 800 GW, most of which will be from non-fossil-fuel-based sources. There will not be any new capacity addition in gas in the near future. Meanwhile, coal-based projects of around 42 GW that are at different stages of construction or planning or development will be taken forward. Our coal- and gas-based plants are becoming more efficient in operation; as a result, the emission per unit of coal-based generation will come down, going forward.
What are the opportunities in new areas such as green hydrogen, offshore wind or energy storage in the near term?
To integrate renewable energy, and if we want to avoid new coal-based generation, storage is a must to provide firm power to meet the demand. While storage is a very mature technology, challenges pertain to the availability of lithium and other critical minerals, and the high cost of energy storage solutions.
Meanwhile, green hydrogen will be required for decarbonising the hard-to-abate sectors. However, there are several challenges with regard to manufacturing green hydrogen, especially because the pattern of production of renewable energy is very different from that required for operating electrolysers. We need to set up hybrid capacity – some wind, some solar and some battery – so that the banking requirements are kept to the bare minimum level.
“Green hydrogen will be required for decarbonising the hard-to-abate sectors. However, there are several
challen ges with regard to manufacturing green hydrogen, especi a lly because the pattern of production of renewable energy is very different from that required for operating electrolysers.”
What is different about the RDSS that will make it more effective than other programmes in the past?
Earlier, we had two categories of programmes. One dealt with the investment in infrastructure, grid expansion and household connectivity. The other category of programmes, like the UjwalDiscom Assurance Yojana (UDAY), dealt with reforms. UDAY did not succeed to the extent it was expected to, primarily because the states did not have any compulsion to join it. Some of the states did not join and even if they did, they did not meet the targets.
The RDSS is a unique scheme wherein the two objectives have been combined. The central government is committed to continue to support the states in terms of assistance for system augmentation and system expansion, along with reforms, to make the segment financially viable. Even though expenditure under the scheme has not really started (states are still awarding the work), the basic discipline that the RDSS has been able to bring in is evident. There has been a reduction in AT&C losses of more than 5 per cent in a year and significant improvement in collection efficiency. Most of the states are paying subsidies, and government dues are also being paid on time. The initial results for the first year of the scheme are outstanding.
What are the MoP’s priorities for the next 12 months?
The topmost priority for the MoP is full implementation of the RDSS through prepaid smart metering, enforcement of pre-qualification conditions and implementation of the results-linked framework so that discoms turn around. The second priority is to see that the SERCs are held accountable within the statutory framework and deliver as per the Electricity Act, 2003. The third important aspect is to continue to work on the expansion of generation capacity and the transmission grid.