Even in the long-term, demand growth is expected to remain high with demand expected to reach 1908 BU by FY27 and a staggering 2474 BU by FY32 (Source: 20th Electric Power Survey of India).

Thermal capacity to balance the increasing share of renewable to support demand growth India has set ambitious goals for a cleaner future, achieving 50% renewable energy by 2030 and carbon neutrality by 2070. On the back of technological advancements in renewables and with continued government support, the total generation capacity has reached 442 GW as of March 2024, of this around 52% is contributed by the private sector.

A strategic increase in renewable capacity combined with focus on thermal and other dispatchable power sources, India can achieve an optimal balance in its energy sector. This will ensure consistent power supply to meet growing energy demands paving way for an economical, clean, and reliable power supply for its growing economy.

Major policy initiatives to address the ongoing issues and provide new opportunities in the sector

Enforcing financial discipline in power sector through payment security mechanism To address the issue of high receivables from the Discoms, the Ministry of Power in 2022 issued Late Payment Surcharge Rules. These rules provided for a time bound EMI plan for payment of outstanding dues. Further, to regularise future payments for power procurement, discoms are required to maintain adequate payment security mechanism (PSM) or make advance payments. Implementation of these rules has smoothened the payments process and is helping to bring down the receivables from the Discoms. Since the implementation of these Rules in June 2022, as of March 2024, Discom’s dues have significantly reduced from 1.2 lakh crore to 0.8 lakh crore i.e. a drop of 34%.

Important regulatory developments

DSM Regulations

Recently the central regulator has issued an amendment to Regulation on Deviation Settlement Mechanism (DSM), making it stringent compared to earlier DSM regulations. While the deviation bands have been made stricter, Regulations now also allow aggregated schedule at the grid substation. Such a change in the DSM Regulations will push the renewable generators to forecast and schedule generation more accurately on a day-ahead basis.

Draft Indian Electricity Grid Code (IEGC):

CERC came up with Indian Electricity Grid Code Regulation (IEGC), it has aligned these regulations with multiple developments in the sector including the Security constraints economic despatch (SCED), DSM & Ancillary services, GNA & Connectivity Regulations etc.

IEGC also provides for the roles, functions, and responsibilities of the concerned stakeholders connected with the operation of the power system as per the Act, Rules and Notifications issued by the Central Government. All these will help in achieving maximum efficiency of the power system.

Regulatory developments in Exchange Market

From time to time, Regulator has come out with several regulatory changes, making the power exchange market more vibrant. Last year, witnessing a sudden increase in electricity demand, the exchange market price saw a sharp increase in prices. To balance the interests of developers and the consumers, a price ceiling of Rs. 12 per unit was introduced. Such a ceiling on tariff has been further revised to Rs. 10 per unit. Such ceiling tariff for the HP-DAM which has been introduced recently has been fixed at Rs. 20 per unit. Overall, the Indian power exchange market has come a long way over the past decade. Exchange which had power trade segments only up to 11 days now have been allowed a segment with longer duration contracts of up to 90 days. This will provide incremental trading volumes enabling opportunities for both sellers as well as buyers.

CEA has issued phasing plan for implementation of 40% technical minimum load by thermal power plants:

The CEA’s plan is a significant step towards a more renewable-powered and stable Indian grid. It presents both opportunities and challenges. By carefully managing the transition, India can leverage the benefits of this plan while mitigating potential drawbacks. Success will depend on factors like technological advancements to improve thermal plant flexibility, the development of cost-effective energy storage solutions, and implementing policies that incentivize clean energy integration.

Obligation of generating company to offer un-requisitioned power in power exchange.

MoP has recently issued an Amendment in Electricity LPS Rules as per which in case power under a PPA is not requisitioned by a Discom, the same must be offered in exchange at a price not exceeding 120% of its energy charge, as determined or adopted by the Appropriate Commission. Gains after accounting arrears, FC, and other incidental costs are to be shared with the generating company (with a cap of 6 paisa per unit). In case the generating company fails to offer such URS power in the power exchange(s), the proportionate fixed charges shall not be paid by Discoms.