GOVERNANCE/ ECONOMY/ ENVIRONMENT
Topic: General Studies 2 & 3:
- Government policies and interventions for development in various sectors
- Indian Economy and challenges with regard to resource mobilization
COVID-19: Opportunity for Energy Sector reforms
Context: The 9-minute event on April 5th was one PM asked to switch-off lights and light lamps to show respect to COVID-19 warriors. It was interesting for the extent of public participation and expert management of National Electricity grid
Pre-Covid, India’s power sector has been facing a mounting financial crisis which has made it more prominent in recent times caused by an expected slowdown.
Challenges in Energy Sector
- The trend of low power demand, now furthered in the post-Covid economy
- Idle, old, and inefficient coal plants.
- Plant load factors of Coal plants for the 2019-20 period are at 56%, down from 78% a decade ago.
- High Industrial Power tariffs –one of the highest in world
- Heavily subsidised agricultural power tariffs leading to Cross-Subsidisation – High industrial power tariffs to lower the cost of agricultural power
- Financial health of the DISCOMs (Power Distribution Companies who purchase power from generators & distribute it consumers).
- They now owe over Rs 8.8 billion to generators.
- Challenges with Renewable Energy (RE)
- Difficulties of integrating it with National grid given its peak productions & falls.
- Uncertainty with RE: Weather patterns change and forecasting is never 100% accurate.
- Electricity management of RE will be difficult given its fluctuating nature
- A market-based, automatic mechanism for integration of infirm renewable power into the grid is non-negotiable.
- Use of Li-ion battery storage to manage power spikes associated with the 175GW of RE planned by 2022
- Restructuring of Coal Plants: Some of these old units could be restructured and shut down, based on their generation costs, remaining plant life & modernisation
- Improving Efficiency: Retrofit power units with flue gas desulphurisation (FGD) to improve the environmental efficiency of old power plants
- Lower industrial power tariffs to meet the competition. Industrial power in Vietnam is, for example, 40% cheaper than in India
- Adoption of DBT framework for providing subsidy to agricultural power consumers
- Utilize the Crisis: Now is an opportunity to bring in fresh Covid-influenced industrial investment from Korea and Japan, which are diversifying away from China.
- New Legislative Framework: Enactment of proposed Electricity Amendment Bill,2020 and adoption by States with suitable modifications
The proposed Electricity Amendment Bill, 2020, is an ambitious step in the right direction—with bold moves to
- Institute cost-reflective tariffs,
- Remove subsidies, and
- Strengthen the sanctity of contracts through greater enforcement
- Provision of payment security to generators
Connecting the dots:
- UDAY Scheme
- Paris Climate Goals and India’s commitment towards it