August 2019

The country’s power sector is evolving on almost every level. Electricity generation is increasing. The energy source mix is changing in favour of renewables. The regulatory framework is evolving and the transmission infrastructure is expanding.

The transmission segment is set to witness significant growth driven by demand under schemes such as 24×7 Power for All and a considerable expansion in renewable energy capacity.

On the generation front, reversing the trend of the past two years, the number of plants with critical and supercritical coal stocks has reduced from 28 as of March 2018 to just one as of March 2019. Further, India has become one of the top renewable energy markets globally with 80 GW of installed capacity. The country is running an ambitious programme with plans to achieve 175 GW of renewables by 2022 and 500 GW by 2030. Energy storage is also coming up in a big way with the government making efforts to drive both demand and supply.

However, the industry is hemmed in by legacy issues. There is also overconfidence on account of short-term policy successes. A big worry for the entire power sector at present is discom health. UDAY has largely failed to deliver on its promise. A recent industry report notes that AT&C losses came down by only 400 basis points and the average tariff increase was a mere 3 per cent per annum from pre-UDAY levels. If not addressed, discom health will become the single largest roadblock in India’s energy transition.

At present, the country is attracting only 3 per cent of the global investment in renewables. Risks such as low creditworthiness of discoms, and land and transmission constraints continue to plague the sector. Citing these concerns, a large number of tenders have been cancelled, or delayed. Each time a state government threatens to renegotiate contracts, the perceived risks increase, and potential investors drop out. Without tackling these risks, India will not be able to fulfil its COP21 commitments.

There is a need for cooperation between the centre and the states to resolve these issues. The absence of coordinated action has adversely impacted investor sentiment. The latest example is the Andhra Pradesh government backtracking on 21 wind PPAs signed during the FiT regime. If that was not enough, the state agencies have backed down generation despite the “must run” status of all renewable energy plants in the country under the Electricity Act, 2003. A state government reneging on its contract and
not honouring legislations sets a dangerous precedent for the country as a whole and
therefore calls for the urgent attention of policymakers and legislators.

GET ACCESS TO OUR ARTICLES

Enter your email address