In accordance with Section 3 (1) of the Electricity Act, 2003, the Ministry of Power (MoP) released the draft National Electricity Policy (NEP) in April 2021 after a long gap of sixteen years, since the NEP 2005. The policy report was prepared by a committee, chaired by Gireesh Pradhan, retired chairperson of Central Electricity Regulatory Commission (CERC) and comprised members from state governments, the Ministry of New and Renewable Energy (MNRE), NITI Aayog, the Central Electricity Authority (CEA), and central public sector undertakings (CPSEs). The Central Electricity Authority frames the national electricity plan once in five years and revises it from time to time according to the national electricity policy.
The draft policy aims to provide electricity connection to all households in the next five years. It makes provisions to supply reliable and quality power of specified standards in an efficient manner at reasonable rates. It lays emphasis on distribution reforms, power quality and reliability, large-scale integration of renewable energy, flexibility of existing and future generating plants, empowering load despatch centres, light-touch regulation, expansion of power markets, creation of electric vehicle (EV) charging infrastructure, and greater overall reforms at the state level.
The objectives of the draft include: (i) promotion of clean and sustainable generation of electricity; (ii) development of adequate and efficient transmission system; (iii) strengthening of discoms; (iv) development of efficient markets for electricity; and (v) promotion of domestic manufacturing of goods and services under the Make in India initiative and the Aatmanirbhar Bharat Abhiyaan.
Areas Covered
The draft policy covers different areas as given below.
Optimal Generation Mix In order to meet the peak demand of the country, there are alternatives like adequate hydro power, combined cycle power plants, battery storage and emerging technologies such as hydrogen storage, which are capable of quickly increasing and decreasing as well as storing energy with higher efficiency for a long duration.
The draft encourages electricity generation from renewable sources due to their environmental benefits and energy security offered by them. It also encourages hybrid renewable energy like wind-solar, solar-biomass, solar mini-hydel, etc., with or without energy storage systems. As such, the policy proposes promotional measures for hybrid renewable energy generation and energy storage systems.
As per Report on Optimal Generation Capacity Mix for 2029–30 by the Ministry of Power, optimal generation capacity mix aims at finding out the least cost optimal generation capacity mix, which may be required to meet the projected peak electricity demand and electrical energy requirement of the year 2029–30 as per 19th electric power survey. The strategy will minimise the total system cost of generation, including the cost of anticipated future investments while fulfilling all the technical/financial constraints associated with various power generation technologies.
However, the draft underlines the importance of coal-based power and notes, “While India is committed to add more capacity through non-fissile sources of generation, coal-based generation capacity may still be required to be added in country, as it continues to be the cheapest source of generation, though compliance to stricter environment norms remain a challenge, particularly for older stations.”
Recommendations
Renewable Energy Tariff The draft recommends that a two-part tariff mechanism should be adopted for certain renewable sources of energy such as wind and solar. Two-part tariff mechanism refers to tariffs having fixed and variable charge components. It may be helpful particularly in medium or long-term procurement of renewable energy for hybrid operations. However, there will be certain practical challenges like determination of the variable cost for wind and solar assets. The tariff of the renewable energy generators must cover the risk of curtailment of power by discoms for reasons other than grid security or transmission constraints.
The policy also recommends swift implementation of differential tariffs between peak and off-peak hours for consumers and generating stations to appreciate the peaking power value.
Transmission Projects The draft policy recommends that the transmission projects must be classified into two categories: (i) the generator or drawing customer-specific projects for catering to their specific needs, and (ii) system strengthening projects. The system strengthening projects may be used for supporting transmission of power from a region with high availability of power and low demand to a region with a high demand of power and low supply. It is needed to streamline the approval process for transmission projects. National committee on transmission approves the plans of central transmission utility (CTU) for central level and the policy draft recommends a similar mechanism for the states. State regulators can adopt a transmission pricing framework. The draft policy encourages promotion of cross-border electricity trade.
It is proposed to have an intra-state level cost-sharing mechanism to address issues concerning the flow of power from states where intermittent renewable sources of energy are concentrated. Power from these states is transmitted to other states, and the former is left to bear the variability of generation.
Distribution The draft policy recommends major reforms in the power distribution sector. The draft recommends taking into consideration factors affecting economy while planning the transmission system so as to make optimal capacity addition. These factors include variable cost of generators, congestion, transmission losses, and incremental investment in transmission. Further, the need to simplify the approval process for transmission projects. It is recommended to establish a mechanism at the state level which is similar to the mechanism of National Committee on Transmission at the central level. Similarly, it is proposed that state regulators adopt a transmission pricing framework similar to the one at the central level. The draft policy states that the sector is marred with many inefficiencies like high aggregate technical and commercial (AT&C) losses, inadequate system planning, poor upkeep and maintenance of equipment, etc., due to which there is negative impact on the financial health of the discoms and low consumer satisfaction. It is observed that despite the central government connecting 100 per cent households in the country with the national power supply grid, quality of power and duration remains an issue. In such a scenario, public-private partnership model such as franchisee and sub-licensee should be adopted in the distribution sector. This would be helpful in: (i) improving efficiency and customer satisfaction, and (ii) reducing financial losses of distribution companies.
The draft emphasises the need to strengthen the distribution system to ensure 24 × 7 reliable power supply.
Grid Operation To ensure supply, safety, and security, the system operators must be adequately equipped with modern technologies. In view of increasing variability of generation, measures like expansion of the balancing areas, combined operation of renewable energy source with conventional generation/storage systems, development of ancillary services, and assessment of transfer capability are suggested. The state regulatory electricity commissions must make forecasting and scheduling of renewables generation mandatory, along with a margin for error, beyond which deviation charges would become applicable. The states are required to implement automatic demand management systems and a scheme for intra-state deviation settlement to improve grid reliability and safety. The state load despatch centres must be converted into independent institutions to ensure non-discriminatory open access. They must be technically upgraded to ensure the availability of real-time data and requisite analytical tools.
Creation of EV Charging Infrastructure The lack of charging infrastructure is one of the major challenges in adoption of electric mobility. It is recommended that the tariff and rules of EV charging should be fixed by the concerned state electricity regulatory commission. Distribution companies should proactively identify the part of the distribution network that needs strengthening for the implementation of EV charging. Quick charging stations are expected to come up in malls, metro stations, and office complexes.
The policy also emphasises upon minimising land usage, using gas-insulated substations in urban areas and installing megawatt-scale batteries at substations to save land. It calls for water conservation, use of treated sewage water and air-cooled condensers in coal-based plants and robotic dry cleaning. A disposal policy for electronic waste, particularly waste generated by solar PV projects, as well as a recycling or disposal policy for batteries is recommended. It makes provisions for skill building of power sector institutions. There is stress on ‘Make in India and the Aatmanirbhar Bharat Abhiyaan’ and adoption and use of only ‘Make in India’ equipment and materials in the power sector. Foreign manufacturers should be invited through the technology transfer route, and provided suitable incentives to establish manufacturing units for items that are currently not being manufactured in India. An approved list of models and manufacturers is planned to ensure the quality and reliability of equipment. The draft policy also recommends the incorporation of measures for the reduction of disaster risks in the planning, design, construction, and operational aspects of power projects.
Criticism
The draft policy is being criticised on the ground that it lacks a fair and coherent approach to energy transition from coal to renewable. It refers to addition of coal capacity, even as thermal power is becoming unsustainable. The need is to introduce measures like combining solar and non-solar renewable power obligations as these will provide flexibility to states to procure renewable based on their resources and needs, rather than a statutory requirement. The draft national electricity policy should be made more consumer-friendly by adding provisions related to achieving similar quality of supply and service in rural and urban areas.
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