Need to cure Discoms’ health first – The Hindu BusinessLine

Clipped from: https://www.thehindubusinessline.com/opinion/need-to-cure-discoms-health-first/article37460301.ece

The crucial imperative of raising the renewables’ share in the country’s energy mix may trip on Discoms’ parlous state

With the threat of climate change looming, nations have to relook and reconfigure their energy sourcing basket to ensure it is ‘Clean’ and ‘Green’. Though not buckling under global pressure as yet to move away from using coal as a fuel for electricity generation, India has been carving out its own strategy to make energy produced from other sources including renewable more accessible.

The effort is laudable indeed.

The Power Ministry has proposed amendments that include defining minimum share of renewable energy in the overall consumption by the industrial units or any establishment; also there will be provision to incentivise efforts on using clean energy sources by means of carbon saving certificate.

According to the Power Ministry, the proposed amendments would facilitate development of carbon market in India and prescribe minimum consumption of renewable energy either as direct consumption or indirect use through grid. This will help in reduction of fossil fuel based energy consumption and carbon emission to the atmosphere.

Sounds good! But critics feel that it all will depend on how the distribution utilities (Discoms) — the weakest link in the power space here — will respond to it. The Centre’s earlier attempts at strengthening the distribution side has not really succeeded.

While it is evident that with the latest decision, the Centre wants to deregulate the sector fully, but by not involving States and Discoms directly, is it possible to successfully implement the decision upon getting all the relevant nods? Clearly given the political implications of the earlier attempt, the government is slowly moving the market towards making it more consumer centric, but are we prepared for it?

Putting the record straight, Power Secretary, Alok Kumar, said “There is nothing like — not complying with the decision. Energy efficiency is the need of the hour. We do discuss with States and, Yes, States can work out their own systems. But, the central Act will have an overarching effect.”

Earlier initiatives

However, not all are convinced. After all Discoms are the key character in this play. It is a fact that the government has tried the bail-out option — UDAY and the recent ₹900 billion injection into the Discoms, which hasn’t really made a dent on the dues the Discoms owe to the power generators, said an industry observer.

The government also tried to plug the holes through Direct Benefit Transfer, cost reflecting tariffs, mandatory filling of average cost of supply (ACS)-average revenue realised (ARR) annually, contract enforcement, by proposing them in the draft Electricity Act, which has hit resistance from Discoms.

So, without fixing the health of the Discoms the solar target is tough to reach and process may not be easy.

The Power Ministry has time and again stated that the need for energy is inevitable and with the changing business landscape, it is has become even more imperative to address the nation’s need to become energy-efficient to prevent putting further pressure on the environment.

With the amendment to Energy Conservation Act, 2001, the focus is to empower institutions to contribute for the country’s Paris commitments and fully implement the Nationally Determined Contributions (NDCs) in a timely manner. The proposed changes to Energy Conservation Act will boost the adoption of clean technologies in various sectors of economy, Kumar said adding the provisions would facilitate promotion of green Hydrogen as an alternative to the existing fossil fuels used by industry.

COP26 pledge

At the ongoing CoP26, Prime Minister Narendra Modi announced enhanced targets for India to combat climate change. These were: Increase India’s non-fossil fuel energy capacity to 500 gigawatt (GW) by 2030; By 2030, meeting 50 per cent of its energy requirements from renewable sources; reducing its total projected carbon emissions by 1 billion tonne from now till 2030; bring down the carbon intensity of its economy to less than 45 per cent by 2030; and achieving its target of net zero by 2070.

According to the Centre for Science and Environment, the Prime Minister’s announcement was bold and ambitious, but immensely challenging as well to achieve.

Decoding the target it said, according to the Central Electricity Authority (CEA), in 2019, India was meeting 9.2 per cent of its electricity generation from renewables. By 2021, with an increase in renewable energy capacity 102 GW, the generation has increased to roughly 12 per cent — it means that India needs to increase this further to meet the 50 per cent electricity generation target by 2030.

CEA has done a projection for the country’s energy mix for 2030, which showed that in 2019, India’s installed capacity of non-fossil energy (solar, wind, hydel and nuclear) for generating electricity was 134 GW, by 2030 the capacity will reach 522 GW.

But, this will require the solar energy installed capacity in the country to go up to 280 GW, and wind energy capacity to rise to 140 GW. The total installed capacity will be 817 GW and power generation will be 2,518 billion units in 2030.

While capacity addition is one aspect, the last mile connect is another. And the challenge lies here. The only other option is to take a route which eliminates the critical involvement of Discoms in the sale of power.

The government is leaning towards trading of power (exchange-focused) but needs to keep a keen eye on it turning speculative.

It is trying to introduce the market mechanisms to do just that. This is new for the Indian power sector but this is an option that needs to be understood to reach the lofty target by 2030.

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