The global economy had barely recovered from the pandemic’s economic blow when the energy crisis hit, stemming from the Russian military action against Ukraine. This created further supply chain disruptions and rising inflation. But India has weathered these economic storms well with adept policymaking by the Modi government. India has sprung back sharply: just look at our Q1 GDP growth of 13.5 per cent.
However, to accelerate robust future growth, the energy sector must expand, innovate, adapt, and become greener. Given its soaring aspirations to become a developed nation in 25 years, India’s power sector must be dramatically reformed. If India’s GDP has to grow at about 7 per cent till 2030, its electricity consumption should jump from about 1,350 BU to around 2,300 BU, which translates into a CAGR of 6.8 per cent.
Climate change imperatives
The urgency for action also comes from India’s crucial role in the global energy transition as the world’s third largest renewable energy market, and in the battle against climate change.
India’s sub-par power sector must shape up dramatically through greater competition, efficiencies, better financial management, and heightened customer focus across generation, transmission and, especially, distribution.
Unfortunately, the sector has not fulfilled its potential since independence. However, in recent years, matters have improved significantly with Union Power Minister RK Singh realising the need for dramatic change and driving it. The Centre’s Solar Energy Corporation of India has done stellar work in increasing the pace of auctions and ensuring timely payment to generators.
Given this backdrop, the tabling of the Electricity (Amendment) Bill, 2022 in the Lok Sabha by the Minister is welcome.
Discom choice
Firstly, the Bill proposes to allow multiple distribution licensees to function in a single area. This reform will allow all consumers to choose their electricity provider, a right previously exercised only by large consumers such as industrial units, through open access.
This will bring competition and distribution efficacy. While the existing Act does allow multiple licensees to operate, it does not give them access to the existing power distribution network, defeating the purpose of having multiple players.
Secondly, the Bill has a strong clean energy component with clear penalties (₹0.25 paise to ₹0.50 paise per kilowatt) for non-compliance of Renewable Purchase Obligations. Given India’s ambitious 500 GW target of non-fossil fuel electricity capacity by 2030 from 165-plus GW currently, penalties will boost energy self-sufficiency and accelerate the journey to net zero by 2070.
Thirdly, the focus on Energy Storage System (ESS), including the defining it under a power system, is prescient. Energy shifting and flexibility services provided by ESS are indispensable for system reliability to cope with low renewable energy generation moments and, also, to maximise RE utilisation in high-production periods.
Fourthly, the proposed legislation strengthens the regulatory framework, which will reduce delays and expedite dispute resolution. The Bill crucially states that electricity will not be scheduled or dispatched if State Discoms do not provide adequate payment security.
Tariff reform
Finally, State Electricity Regulatory Commissions will be able to ensure distribution tariffs progressively reflect electricity supply costs. As of August, the total outstanding dues owed by Discoms to producers was ₹1.2 trillion ($15.01 billion) — an unacceptable and unsustainable situation. Cost-reflective tariffs will help in the financial viability of Discoms.
The Electricity (Amendment) Bill 2022 must be passed for the power sector to play its crucial role in kickstarting India’s next 25-year growth journey to becoming a developed nation and in helping defeat climate change.
The writer is President, Assocham, and Chairman, Founder and CEO of ReNew Power