Policy Prescriptions

NITI Aayog releases three-year action agenda

Policy think tank NITI Aayog, or the National Institution for Transforming India, is bringing about a paradigm shift in the government’s planning approach for the country. Formed in 2015 to replace the erstwhile Planning Commission, NITI Aayog is working to substitute the five-year plans adopted since Independence with a 15-year vision, seven-year strategy and three-year action agenda. In line with this, on August 1, 2017, it published the three-year action agenda for the period 2017-18 to 2019-20, following widespread consultations on its draft version released earlier on April 23, 2017. The vision and strategy document is currently under preparation.

The Twelfth Five Year Plan, therefore, was the last of the five-year plans under the previously followed method. The idea behind the new process is to rethink the tools and approaches for conceptualising the development process in an increasingly open and liberalised economy. The advantages of such a system are greater accountability of the incumbent government for its actions on the plan and a greater focus on short-term goals, with flexibility to change them from time to time in a dynamic environment, keeping in mind the long-term policy objectives under the seven-year strategy paper and 15-year vision document.

Focusing on the energy sector, in June 2017, NITI Aayog released the draft version of the National Energy Policy (NEP), which will replace the Integrated Energy Policy prepared by the Planning Commission. The policy focuses on two horizons: short term (up to 2022) and medium term (up to 2040). The NEP proposes early actions to achieve the government’s targets in the energy sector for 2022 as well as India’s intended nationally determined contributions (INDCs) committed for 2030 as a signatory to the United Nations Framework Convention on Climate Change. It proposes actions to meet the four main policy objectives – access at affordable prices, improved security and independence, greater sustainability and economic growth (see box).

Renewable Watch presents the key highlights of the latest action agenda for the energy sector for the next three years…

  • The document reiterates the country’s commitment to electrify all villages by May 2018 and all households by 2022. In order to accelerate growth and ensure electricity for all at the earliest, several steps are needed to increase generation, overhaul transmission and improve distribution.
  • In the generation segment, by March 2020, capacity addition through conventional sources is expected at 61.6 GW including 2.8 GW of nuclear power capacity. The latter is expected to support India’s ambition of achieving 63 GW of nuclear capacity by 2032 (from 5.8 GW at present). Another 6.9 GW of large hydro capacity is expected to be added. In the renewable energy space, 15.8 GW of wind power and 53 GW of solar power capacities are to be added.
  • There is emphasis on renewable capacity addition, as it will help meet the multiple objectives of energy security, energy efficiency, decarbonisation and sustainability. In particular, 100 GW must be added by 2019-20 to be able to achieve the target of 175 GW by 2022. Financial support to renewables must be aimed at promoting generation and creating infrastructure rather than mere capacity addition.
  • Half of the target of 40 GW of off-grid solar energy by 2022 must be achieved by 2019-20. The residential off-grid capacity should be developed through a robust regulatory and policy framework, including a remunerative net metering policy. Two phases of the Green Energy Corridors project must be completed to evacuate the renewable generation available in 2019-20.
  • The Solar Energy Corporation of India is tasked with developing storage solutions within three years to help bring down prices through demand aggregation of both household and grid-scale batteries. At the institutional level, all eight renewable energy management centres should be operationalised to activate grid planning between Power System Operation Corporation Limited and the state load despatch centres to ensure smooth despatch of renewable electricity. By 2019-20, a robust market for renewable power should be created through effective implementation of renewable purchase obligations.
  • Given the declining plant load factors (PLFs) of the existing coal-based fleet (60 per cent in 2016-17), the government has to ensure that the new capacity that comes up beyond 2019-20 is based on electricity demand and operational viability. Meanwhile, the PLFs of gas-based capacity (24.8 per cent in 2015-16) must be raised to achieve grid balance. For this, government support will be needed for inducting liquefied natural gas (LNG) in power generation.
  • Efforts must also be made to leverage regional connectivity to boost generation by enhancing cross-border electricity trade. The joint venture hydro projects in Bhutan have to be expedited and the transmission corridor on the Indian side developed for evacuation from these projects.
  • A complete overhaul of the transmission and distribution (T&D) networks across the country is required to reduce T&D losses (23 per cent) and aggregate technical and commercial losses (25 per cent), both of which are among the highest in the world.
  • For a robust national grid, the transmission capacity to southern India must be increased to 18.4 GW by March 2020. In the distribution segment, 100 per cent metering, indexing and real-time monitoring of all 11 kV feeders must be achieved for all electricity consumers and feeders. Efforts must be made to achieve the targets of the Ujwal Discom Assurance Yojana (UDAY) through cooperation between the centre and the states. Cross-subsidy in the power sector must be substantially reduced so that electricity is supplied to the industry at competitive prices.
  • To extend the reach of the energy efficiency programmes to sectors not covered at present, a thorough cost-benefit analysis of the available energy-efficient technologies and products across sectors must be conducted under the National Mission for Enhanced Energy Efficiency. There must be a focus on continuing the success of Cycle I of the Perform, Achieve and Trade (PAT) policy into Cycle II (2016-19), which covers 621 designated consumers in 11 sectors and targets an energy saving of 8.869 million tonnes of oil equivalent. Cycle II consists of three additional sectors including electricity discoms. The agenda recommends the commencement of trading of energy saving certificates (approved by the Central Electricity Regulatory Commission in February 2017) at the earliest.
  • Given that thermal plants account for the majority of the country’s generation, even small efficiency improvements would yield large gains. The majority of the coal-based capacity operates on 30-32 per cent energy efficiency and results in average carbon dioxide emissions of 1.08 kg per kWh. Both these indicators put India on the lower band of the world comparison table. By 2019, the agenda lists actions to improve thermal plants’ efficiency including renovation and modernisation measures, phasing out of old stations with high heat rate, research and development on integrated gasification combined cycle (IGCC) technology and the use of the more efficient ultra-supercritical technology for new projects near heavily populated areas.
  • About three-quarters of India’s power is generated from coal-based capacity – a scenario that is not expected to change significantly over the coming decades. Therefore, domestic coal production has to be ramped up to ensure energy security and reduce import dependence. For this, the agenda suggests several measures for the next three years. This includes the exploration of 25 per cent of the untapped 5,100 square km balance coal-bearing area to ensure availability of more mining blocks. Coal India Limited (CIL) has to raise its production from the current level of 536.5 million tonnes (mt) in 2015-16 to 1 bt by 2019-20, depending on coal demand. The production from captive blocks is targeted at 400 mt by 2020.
  • At the institutional level, an independent organisation will be created to develop and maintain a repository of all coal-related geological information. Further, a coal regulator will be created for fostering competition and advising the government on the determination of coal prices. The agenda recommends the use of market mechanisms to open up the coal mining sector for commercial mining.
  • The agenda entrusts the government to take steps to reduce the use of low-quality coal along the lines of China. India uses 650 gm of coal per kWh of electricity generation due to its high ash and low energy content. China, in comparison, used 308 gm of coal per kWh in 2015. Steps need to be taken to adopt clean coal technologies including coal gasification. Another measure to augment coal production is to complete the ongoing auction process and transfer the mining lease of captive mines to the new bidders by 2018.
  • Similarly, in the oil and gas sector, the agenda lists measures for augmenting the supply of oil and gas through domestic exploration and production as well as overseas acreages.

Despite the shift in the planning approach, the broad targets and action plans remain the same for the power sector. The timely execution of these plans will be key for the development of the sector.

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