INDIAN POWER SECTOR: Key Imperatives for Transformation.

The Aatmanirbhar Bharat Abhiyan and COP 21 have opened up a lot of opportunities for the private sector who can plan a key role in decentralization, decarburization and digitization of the power sector, writes Debasis Mohapatra.

The Electricity Act, 2003, has been instrumental in bringing about a major transformation in the Indian power sector. However, changes introduced in 2003 and subsequent amendments in 2005, have run their course. Policymakers, power sector experts and customers alike have felt the need for fresh reforms to make the sector more competitive, efficient and sustainable. While policymakers and industry forums are still debating the changes needed in the existing Electricity Act, global factors and the economic impact of Covid-19 have further accelerated the need to transform the sector.

Decarbonizing the Power Generation Sector

In FY 2015-16, the Government of India (GoI) had planned a roadmap to achieve 175 GW of renewable energy capacity by 2022, as part of its strategy to meet COP21 goals.  This roadmap also underlines India's pledge to grow as a low carbon emitter. By 2030, India's Intended Nationally Determined Contribution (INDC) commitments aim to reduce its emission intensity by 33-35% as compared to the 2005 level, thereby seeking for a Net Zero status and to achieve 40% of its installed capacity from non-fossil fuel by 2030.

The Union Budget 2020-21 provided for the decommissioning of highly polluting thermal power units within two years, with the primary objective of reducing carbon footprints. These inefficient generators with high tariffs have also been causing a massive strain on the bottom line of distribution utilities. The prudent economic approach was to replace these retiring thermal capacities with more efficient renewable power sources. With solar and wind tariffs dropping as low as Rs. 2.36/kWh in 2020, which is 20%-30% lower than the thermal power tariffs, these sources have become a commercially viable alternative to thermal power. The average cost advantage of solar power over coal-based power is 30% at present, which can result in a 20% increase in profits.  Decarbonizing the generation sector would create long-term value in the sector value chain by improving the profits of stressed distribution utilities by 10-15%.

However, considering the challenges of intermittency of solar and wind power and large-scale transmission of such power through an integrated grid, fossil fuel based thermal power plants are expected to exist for some more time.In this scenario, adopting technology that reduces fuel consumption, operating costs and carbon emissions will be critical and help in reducing carbon footprints.

Integration of Renewable Energy(RE) with the Existing Transmission Network

In the last few years, the Indian power sector has witnessed a surge in renewable capacity additions, particularly large-scale capacity additions. RE sources now account for about 23% of India's total installed capacity(89 GW as on 30th September 2020); and 8.6% of total generation. The Government of India has already planned to increase this to 450 GW by FY2030, which will be approximately 54% of the total installed capacity .

Integrating RE sources into the mainstream grid remains a challenge, especially in cases of larger capacities. Successfully addressing this challenge will help boost India's journey towards the Net Zero goal. Increasing penetration of renewables and their smooth integration into national and regional grids for consumption by end users have been facilitated by robust network infrastructure, necessary policies and standard operating procedures of transmission utilities.

Digitalization of Power Utilities

With the increasing complexity of the power system and need for constant efficiency improvement, digital transformation will be critical, not only to achieve the desired outcomes but also to make utility services more customer centric. The Covid-19 pandemic has further provided an opportunity for businesses across the world to explore automated and remote operations. The Indian power sector has felt a similar need. Utilities with a high degree of automation have been relatively less impacted by the pandemic. As we plan ahead, sophisticated automation and analytics will be crucial to manage the varied energy sources. Emerging technology such as predictive artificial intelligence, machine learning, the Internet of Things, and blockchain would further help maintain grid stability and reliability, by analysing demand and adjusting the amount of power to be drawn from time to time.

The growth in RE-based generation would require additional flexible reserves such as pumped storage, hydro, battery, and ancillary services to meet the energy demand and maintain grid security and stability. Utilities must also radically change their gridsystem planning approaches.

The GoI's Smart Meter National Programme (SMNP) plans to replace 25 crore conventional meters with smart meters across India. The programme has enabled the installation of 1.45 million smart meter as of October 2020, which has facilitated AT&C loss reduction between 11%-36% in the implemented areas, leading to a 21% increase in DISCOMs' revenues. Further, with 100% smart meter installation, billing efficiency is expected to improve by 75%-100%, thereby increasing the revenues of the utilities by INR 1,38,100 crore.

Along with automating their business processes, utilities also need to invest in data security. With the increase in the number of utility players in the near future, the involvement of real-time markets, virtual and dynamic data, and bidirectional flow of energy between the grid and users, the grid will become more vulnerable to cyberattacks. Adopting emerging technologies and deploying appropriate security measures will help in improving the reliability, resilience and customer centricity.

Public-Private Partnerships

Public-Private Partnership (PPP) avenues are crucial for the power sector in India, given the investment and expertise requirements for shifting the generation mix, increasing focus on sustainability and technological advancements. Significant coordination between policymakers, investors and consumers will be necessary to plan, design and implement successful PPP interventions. The Aatmanirbhar Bharat Abhiyanand COP 21 have opened up a lot of opportunities for the private sector. They can plan a key role in decentralization, decarburization and digitization of the power sector. Further, PPP projects will help in the production of critical components, leverage the sector's large consumer base and provide a competitive advantage.

Conclusion

Transformation of the Indian power sector will play a key role in reviving the economy. Given that India has almost achieved the goal of 100% household electrification, it is now imperative that necessary mechanisms are put in place to improve the operational efficiency and financial viability of utilities.

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