The year 2022 has been significant for India’s electricity sector, with the government introducing policy reforms to ensure timely payment to generating companies (gencos) amid a record surge in the country’s peak power demand, resulting in a renewed push for thermal power generation.
The year, though sluggish for renewable energy (RE), especially in the solar segment, saw the ground being laid to create storage and transmission infrastructure to support a future boom in green energy, which is expected to be further accelerated by India’s Green Hydrogen Mission. This is also in line with India’s target of having 500 gigawatt (GW) of RE generation capacity by 2030.
Moneycontrol looks at the major highlights (including crises) of India’s power sector in 2022.
Power crisis in April-May
In April-May this year, many states faced long hours of power outages because of an unrelenting surge in power demand due to a sudden heatwave, rapid economic recovery after two years of COVID-19-induced lockdowns, and shortage of coal to generate power. Almost a fourth of India’s power generation capacity was shut in April, mainly due to lack of coal. The government then ordered all generating companies to import coal to meet the gap.
India’s electricity demand touched a record high of 211.856 GW on June 10 this year, an increase of 5.6 percent from the peak demand of 200.570 GW recorded on July 7, 2021. To avert a similar crisis in 2023, the government is preparing to meet a projected peak electricity demand of 230.144 GW, Power Secretary Alok Kumar had told Moneycontrol on November 22.
Thrust on coal-fired electricity
Year 2022 was ironical. On the one hand, India notified its Nationally Determined Contribution (NDC) target to achieve about 50 percent cumulative electric power installed capacity from non-fossil fuel-based energy resources by 2030, while on the other, the Indian government declared at several forums that coal will remain the mainstay of the country’s power generation till about 2030-35.
Through the NDCs, India has also pledged to shift away from coal and curb emissions to hit net-zero by 2070.
As of now, during summers and monsoons, nearly 70 percent of the country’s peak demand is met through thermal power generation. According to the draft National Electricity Plan published in 2022 by the Central Electricity Authority (CEA), the projected new coal capacity addition requirement during the period 2022-32 is 35,014 MW, which includes under construction coal-based capacity totalling 25,580 MW.
A spokesperson of NTPC Ltd, the largest power generating company in India, said the state-run group has successfully added 1,762 MW this fiscal (2022-23). “This includes 1,142 MW of renewable capacity and remaining capacity 600 MW and 20 MW of Jhabua Power and NSPCL respectively. NTPC has also registered the best-ever performance in coal mining at a growth rate of 48 percent year-on-year (YoY), with coal production of 12.24 million metric tonnes (MMT) till November 2022,” the spokesperson told Moneycontrol.
The total installed capacity of the company is now 70,824 MW. Recently, NTPC crossed 3 GW operational renewable capacity as well.
Reforms to ensure financial health of power utilities
A major highlight of 2022 in terms of bringing financial discipline among power utilities is the Electricity (Late Payment Surcharge and Related Matters) Rules, 2022, issued by the Ministry of Power on June 3.
The purpose of these rules is to provide a mechanism for settlement of outstanding dues of gencos, inter-state transmission licensees and electricity trading licensees. Discoms have to pay a late payment surcharge (LPS) on the outstanding amount if they do not pay before the due date. Subsequently, the rate of LPS will increase by 0.5 percent for every month of delay, and if the delay is beyond 75 days, the state can be penalised.
“With the implementation of Electricity (LPS and Related Matters) Rules, 2022, a remarkable improvement has been seen in the recovery of outstanding dues. The total outstanding dues of states, which were at Rs 1,37,949 crore, as of June 3, 2022, have been reduced by Rs 29,857 crore to Rs 1,08,092 crore, with timely payment of just five monthly instalments,” Union Power Minister R K Singh informed Parliament on December 21.
In July, Prime Minister Narendra Modi formally launched the Revamped Distribution Sector Scheme (RDSS) with an outlay of over ₹3 lakh crore for a period of five years from FY2021-22 to FY2025-26. The scheme aims at providing financial assistance to discoms for modernisation and strengthening of distribution infrastructure, with focus on improving the reliability and quality of supply to end-consumers.
Modi on subsidies, dues and AT&C losses
On July 30, PM Modi for the first time spoke at length on the financial health of power utilities in India, and raised concerns about the high Aggregate Technical & Commercial (AT&C) losses in the country.
Addressing the closing ceremony of the ‘Ujjwal Bharat Ujjwal Bhavishya - Power @2047’ programme in virtual mode, the Prime Minister asked if the common man could pay his electricity dues regularly, why was it that some states failed to paying their dues.
“I request the states whose dues are pending to clear them as soon as possible. I want to remind all the stakeholders that the health of the electricity sector is everyone’s responsibility,” Modi said.
Referring to the trend of offering subsidies on electricity bills, the PM said, “With the passage of time, a serious disorder has come into our politics... This strategy may sound like good politics in the short term. But it is like postponing today’s challenges for tomorrow, for our future generations. This thought process has pushed the power sector in many states into huge problems.”
The Prime Minister said losses in India’s power distribution sector are in double digits, whereas in developed countries across the world, it is in single digit. “This means we have a lot of wastage of electricity, and therefore, we have to generate more electricity than we actually need to meet the demand. There is a lack of investment in reducing distribution and transmission losses in many states,” he said.
Push for renewable energy continues
Much ground was covered in the renewable energy sector in 2022. Till October, India added 14.21 GW of renewable energy and is now the world’s fourth-largest in terms of installed capacity. The government released the second tranche of Productivity-Linked Incentive (PLI) scheme worth Rs 19,500 crore for manufacturing high-efficiency solar photovoltaic (PV) modules and also released new renewable purchase obligation (RPO) targets by creating an exclusive category of wind energy to boost the segment.
On December 7, the government unveiled a transmission system plan to achieve the country's goal of 500 GW of non-fossil fuel-based installed capacity by 2030.
According to the plan, the transmission system includes 8,120 circuit kilometre (ckm) of High Voltage Direct Current Transmission corridors (+800 kV and +350 kV), 25,960 ckm of 765 kV ac lines, 15,758 ckm of 400 kV lines, and 1,052 ckm of 220 kV cable at an estimated cost of Rs 2.44 lakh crore.
It also envisages a battery energy storage capacity of 51.5 GW by 2030 to provide round-the-clock power to end-consumers.
However, in 2022, engineering, procurement and construction (EPC) in the solar energy sector was hit by rising commodity prices, which resulted in increased cost of solar manufacturing in the past few months forcing firms to put projects on hold or delay the upcoming ones.
Apart from the Russia-Ukraine war, this was also because from April, the government had imposed a basic customs duty of 25 percent on solar cells and 40 percent on modules.
Later, in October, the government excluded solar power projects from the list of goods that can avail a concessional 7.5 percent duty under the project imports scheme, much to the disappointment of power developers. The government said the exclusion plugged a loophole that allowed developers to bypass the 40 percent import duty imposed on solar projects to encourage local manufacturing.
2023 and the power sector: An outlook
Experts say, 2023 will be about PLIs for green hydrogen manufacturing, getting about 76.37 GW of under-construction RE capacity implemented, creating an open market for carbon credits, and focusing on a more robust transmission and distribution (T&D) network, while further reducing AT&C losses which have declined to 17 percent in 2021-22 from 22 percent in 2020-21.
While delayed solar projects are likely to gain momentum, a number of tenders and bidding will also be witnessed in the wind energy sector with the government making it mandatory under RPO obligations.
According to Sumant Sinha, Chairman and CEO, ReNew Power, India’s largest RE company, the Indian RE sector braved the effects of the lockdowns and supply chain disruptions and has emerged more resilient than ever before.
“By 2026-27, India’s power generation capacity will be close to 620 GW, out of which 38 percent will be from coal and 44 percent from renewable energy sources. Looking at the increased demand in the sector, wind energy too will see its fair share of growth, apart from solar,” Sinha told Moneycontrol.
“Our manufacturing systems are strong, and aided by government initiatives, we can produce components for solar power, batteries, electric vehicles (EVs) and green hydrogen and compete with the world. With regard to green hydrogen, India is at a great advantage with availability of round-the-clock power solutions. Moving ahead, green hydrogen will be the space where companies will focus their efforts and install larger plants to achieve benefits of economies of scale,” he said.
Not to forget, the Electricity (Amendment) Bill, 2022 which was referred to the Parliamentary Standing Committee on Energy in August this year will also be taken up in 2023.
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