Draft electricity policy bats for pvt investment

The draft National Electricity Policy (NEP) — a guiding policy for planning power generation, supply, and investment, under the Electricity Act, 2003, — has laid emphasis on increasing private participation, especially in power distribution in its latest revision. The NEP has also introduced power quality, micro grids, pump hydro storage, real-time power markets in the draft policy statement as key focus areas.

Underlining the most pertinent issue of the sector, the draft has called for major reforms in distribution — “this sector is marred with many inefficiencies like high AT&C losses, inadequate system planning, poor upkeep and maintenance of equipment, etc, which are affecting the financial health of the discoms, and leading to poor consumer satisfaction.”

NEP has noted that despite the central government connecting 100 per cent households in the country with the national power supply grid, quality of power and duration remain an issue.

“There is a need to strengthen the distribution system to ensure 24x7 power supply. Also, evolve a unified scheme for development of adequate distribution infrastructure wherein central assistance is linked to reform milestones of the states,” said the draft NEP.

The Union Budget announced a revamped reform scheme for discoms, entailing an expenditure of ~3.05 trillion. The scheme would put the onus on the states to formulate their own action plans and funds would be disbursed accordingly.

The draft has stated that public-private partnership in electricity distribution is one of the effective ways to improve efficiency, enhance consumer satisfaction and reduce financial losses of the discoms. “Franchisee model being one of the PPP models has emerged as a preferred route for introduction of privatisation in the distribution sector. Another variant of the PPP model could be in the form of a sub-licensee power distributor for a particular area.”

The suggestions come months after the Centre amended the Electricity Act, 2003, to abolish power “distribution licence” and allowed any company to supply electricity in an area, after necessary regulatory approval. With this, the Centre has ended the monopoly of existing power distribution companies (discoms), which are mostly state-owned entities, and any and every area has been thrown open to be offered to private discoms.

This year’s draft NEP, like earlier versions, has underlined the importance of coal-based power and why it is still too early to retire it, despite growth in renewable power. “While India is committed to add more capacity through non-fossil sources of generation, coal-based generation capacity may still be required to be added in the country, as it continues to be the cheapest source of generation, though compliance to stricter environment norms remain a challenge, particularly for older stations,” said the draft NEP.

The draft was floated on a public forum by the ministry on Wednesday for stakeholder comments, which must be submitted within two months.

The NEP has introduced several new concepts, starting from the need for micro grids in remote areas to having a real-time power market and need for investment in pump hydro generation.

With the rising capacity of renewable energy generation and lack of balancing sources of energy such as gas and large hydro, the NEP has batted for realising the potential of pump hydro storage. The NEP noted that the country has a potential of 96,524 Mw of pump hydro storage and of that barely 4,785 Mw has been used.

For utilising power generation at the source and reducing wastage, the NEP has suggested that discoms explore the possibility of micro grids, especially in areas prone to natural disasters. The NEP has further said these grids should preferably be powered by renewable sources of energy.