Views on Amendments in Power Tariff Policy - Feedback

1. Electricity

  • 24X7 supply will be ensured to all consumers and State Governments and regulators will devise a power supply trajectory to achieve this.
  • Power to be provided to remote unconnected villages through micro grids with provision for purchase of power into the grid as and when the grid reaches there.
  • Affordable power for people near coal mines by enabling procurement of power from coal washery reject based plants.

Our view

  • 24X7 power supply to all has always been a welcome step and this would in general boost the demand and economic prosperity of one of the least per capita power consuming countries in the world i.e. India.
  • The regulator would need to devise a means of making power affordable for the BOP consumers.
  • Microgrid developers’ investment risk (at remote locations) has been minimized, this would help more investment and participation in the micro grid sector.

2. Efficiency

  • Reduce power cost to consumers through expansion of existing power plants.
  • Benefit from sale of un-requisitioned power to be shared allowing for reduction in overall power cost.
  • Transmission projects to be developed through competitive bidding process to ensure faster completion at lower cost.
  • Faster installation of Smart meters to enable “Time of Day” metering, reduce theft and allow net-metering.
  • Lower power cost by creating transmission capacity for accessing power from across India.

Our view

  • Higher focus has been given to the transmission sector and rightly so. These steps would help the sector transform into an enabler from a bottleneck. This would reduce congestion and share of unutilized or un requisitioned power in the system resulting in lower power cost.
  • Expansion of existing power plants is a welcome step. However the policy is silent on fuel availability, pricing and a mechanism to minimize impact of fuel price hike.
  • Lower power cost and implementation of UDAY scheme will see more PPAs which would finally reduce the investment risk of the developers and will help in the overall growth of the sector.
  • Selling additional power in the spot market will help generators increase PLF of the existing plants. This would help them recover energy cost and earn some profits as well.
  • Faster installation of smart meters and TOD metering will help in shaving peak demand. However the policy is silent on the implementation part and who will finally bear the cost for implementation of smart meters at such a large scale.

3. Environment

  • Renewable Power Obligation (RPO): In order to promote renewable energy and energy security, 8% of electricity consumption excluding hydro power, shall be from solar energy by March 2022.
  • Renewable Generation Obligation (RGO): New coal / lignite based thermal plants after specified date to also establish / procure / purchase renewable capacity.
  • Affordable renewable power through bundling of renewable power with power from plants who’s PPAs have expired or completed their useful life.
  • No inter-State transmission charges and losses to be levied for solar and wind power.
  • Swachh Bharat Mission to get a big boost with procurement of 100% power produced from Waste-to-Energy plants.
  • To release clean drinking water for cities and reduce pollution of rivers like Ganga, thermal plants within 50 km of sewage treatment facilities to use treated sewage water.
  • Promotion of Hydro projects through long term PPAs and exemption from competitive bidding till August 2022.
  • Ancillary services to support grid operation for expansion of renewable energy.

Our view

  • Overall, this is another push by the Govt. to increase renewable power installation in the country and improve share of renewable power in the energy mix. The Govt. is trying its best to make solar and wind power more affordable.
  • However, renewable power growth story will be halted without a proper policy on storage / banking. This policy is silent on that aspect.
  • Hydro power segment has always been inundated by regulatory parameters as compared to conventional power plants. Tariff forecast was quite difficult here. Cost plus method will help revive the sector and will reduce investment risk for the developers. This will also attract IPPs to invest in this segment. However the policy is silent on execution related challenges and its mitigations.

4. Ease of Doing Business

  • Generate employment in coal rich Eastern states like Odisha, West Bengal, Jharkhand, Chhattisgarh etc. by encouraging investments. States allowed to setup plants, with up to 35% of power procured by DSICOMs on regulated tariff.
  • Remove market uncertainty by allowing pass through for impact of any change in domestic duties, levies, cess and taxes in competitive bid projects.
  • Clarity on tariff setting authority for multi-State sales. Central Regulator to determine tariff for composite schemes where more than 10% power sold outside State.

Our view

  • Coal rich eastern states are also the states which are lagging in economic development. This would create more employment in those states and will finally help in inclusive growth.
  • Pass through mechanism will reduce the risk of bidders and we will see more participation in the future.
About Rudranil Roysharma

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