June 2023

The power sector faces multiple challenges. First and foremost among these is the need to change the energy mix in order to reduce emission intensity. In addition, capacity has to grow steadily because power demand will increase in line with economic growth. Third, the sector must become financially stable and more operationally efficient with lower T&D losses, and timely payment of dues by discoms. Metering must also improve to prevent any instances of unbilled units.

Each of these challenges, in turn, presents additional ancillary challenges such as ensuring fuel and resource availability, adopting cost-effective energy storage solutions, effectively managing the grid in light of the intermittency of renewables, managing centre-state relations since power is a concurrent subject, and creating robust financing models.

The energy mix is still heavily dependent on thermal coal, but it is becoming more sustainable, with thermal now accounting for 58 per cent of the installed capacity versus 65 per cent in 2018-19. The CEA’s National Electricity Plan for 2022-32 envisages no new thermal plants (beyond those already cleared). Instead, the plan envisions non-fossil power capacity accounting for around 68 per cent of the energy mix by 2032, with the installed capacity projected to reach 900 GW versus around 418 GW in 2022.

Given the significant scale of solar, wind and hydro projects currently in progress, the energy mix is approaching sustainability, and if new technologies such as green hydrogen can be established at a commercial scale, the transition will accelerate even further.

There are also attempts to find cost-effective storage solutions. Guidelines for pumped storage solutions have been produced, and an interesting mandate has been introduced, requiring thermal generators to procure or create renewable capacity equivalent to 40 per cent of their thermal capacity.

Smart grids and smart metering are essential and the penetration of both is improving, though it will be a huge task to integrate 500 GW of mixed, intermittent, renewable capacity into the grid by 2030. Resource availability will always be a moving target – for example, policymakers must now think about lithium and rare earths as the energy mix changes.

The new scheme, the RDSS, seems to have delivered encouraging results in the first year of operation, having replaced UDAY in addressing the issue of receivables. Financial discipline seems to have improved across states and the fiscal deficit of discoms has dipped to Rs 530 billion (2021-22) from Rs 970 billion (2019-20). T&D losses have also reduced significantly.

Further, it is crucial to continue the effective implementation of the RDSS through prepaid smart me­tering, enforcement of pre-qualification conditions and implementation of the results-linked framework.

Financially viable discoms are fundamental to attracting the substantial investments required by the sector. The proposed amendments to the Electricity Act, 2003; the Electricity Rules, 2005; and the Electricity Rights of Consumers Amendment Rules, 2023 are in line with the goal of enabling stakeholders. The sector needs enormous investments and, therefore, it presents significant opportunities as well. There are obviously formidable challenges, but things seem to be moving in the right direction