In his very influential book “Small is Beautiful,” first published in 1973, British economist E.F. Schumacher championed the cause of small and appropriate technologies. He argued that such technologies can empower the people more than so-called modern technologies that are not sustainable in the long run.
The Union finance minister in her Budget speech on February 1, 2020, acknowledged that taking electricity to every household was a major achievement. She obviously was referring to the Saubhagya scheme that was launched on September 25, 2017 and envisaged complete electrification of all households (rural and urban) by December 2018.
In a very significant recent development, Odisha Electricity Regulatory Commission (OERC) awarded the letter of intent to Tata Power as the successful bidder to own the licence for the distribution and retail supply of electricity in Odisha’s five circles, together constituting Central Electricity Supply Utility of Odisha (CESU).
India has pledged to have 100 GW of grid-connected solar power capacity by December 31, 2022. Out of this, 60 GW is to come from ground-mounted solar plants while 40 GW is envisaged to come from rooftop solar (RTS). According to reliable estimates, India’s total solar capacity stood at 33.8 GW as of September 30, 2019. The worrisome issue is that the performance of RTS is belying even the most conservative expectations. The total quantum of RTS installations is today barely 4 GW, which is just about 10 per cent of the 2022-target.
Aggregate financial losses by state power distribution utilities (discoms) reportedly stood at Rs.28,369 crore as of March 31, 2019, nearly doubling from the corresponding Rs.15,049 crore in 2018. After the launch of the UDAY scheme in 2015, there was a secular trend of decline in such losses during FY16 and FY17. This reversal of trend is worrisome.
The Union power minister has reportedly cautioned seven states—Karnataka, Maharashtra, Andhra Pradesh, Telangana, Madhya Pradesh, Rajasthan and Tamil Nadu—that renewable energy developers could drag discoms of these states to the National Company Law Tribunal (NCLT) over the non-payment of dues. It is learnt that these seven states together owe around Rs.5,300 crore to RE developers, and that the total outstanding of RE developers, pan India, is around Rs.8,200 crore.
A recent report by Central Electricity Authority (CEA) states that renewable energy procurers, mainly state-owned distribution companies, owe over Rs.8,200 crore to power producers in the renewable energy space—solar, wind, small hydropower, etc. As of July 31, 2019, outstanding dues amounted to Rs.8,231 crore, the report states.
The Centre’s intention of revamping the power distribution sector—the weakest link in the power value chain—appears to be serious, in light of the various measures recently announced.
This move is very significant as it marks the entry of the Central government in power distribution—an area that has traditionally been handled by state governments.
On June 21, 2019, the foundation for what could be a defining phase for the country’s power distribution sector was laid. Two Central government companies—NTPC and Power Grid Corporation of India—signed an MoU to form an equal joint venture “National Electricity Distribution Company Ltd.” that would undertake the business of power distribution on a pan-India basis.
This move is very significant as it marks the entry of the Central government in power distribution—an area that has traditionally been handled by state governments, and in a limited way, by the private sector. Power is a part of the Concurrent List, which is to say is it part of both the Union and the State List. In other words, it is a subject that is handled by both Central and state government entities.
The Central government has for long been in the power generation sector with mega entities like NTPC, NHPC, Nuclear Power Corporation, etc. The Central government entered power transmission in 1989 through Power Grid Corporation of India, which took over all the power transmission-related assets of Central PSU power generators, especially NTPC and NHPC.
The Central government’s decision to get into power distribution stems from the fact that most state government utilities have just not been able to manage the situation. Power distribution is responsible for the unbridled losses of state discoms. Several Central governments have tried to resuscitate state discoms through bailout packages (seen in the UPA regime) or through schemes like UDAY (NDA regime). However, there has been no positive transformation on the operational aspect of state discoms. They continue to be in losses. It is estimated that in FY19, aggregate losses of discoms grew by over 40 per cent, year-on-year, to reach Rs.21,658 crore.
One more pending reform is the separation of “carriage” and “content”. Power distribution is today considered as a single activity. With the proposed separation, which will suitably incorporated in the Electricity Act, owning and maintenance of infrastructure (carriage) and supplying of electricity (content) will be regarded as two separate activities. There will also be a provision of having multiple service providers within the same area of service. This will bring in competition amongst different service providers. The proposed National Electricity Distribution Company Ltd will also be one such service provider. The “carriage-content” phenomenon is also referred to “wire” and “supply”.
Clearly, the entry of Central PSUs in power distribution is a welcome step. State government power distribution utilities have been provided ample opportunity to reform, but a true transformation has been elusive.
The author of this article, Venugopal Pillai, is Editor, T&D India, and may be reached on venugopal.pillai@tndindia.com. The views expressed here are personal.
Power Finance Corporation Ltd (PFC), a Central PSU and the leading public sector financing entity in the power sector, recently held a media conference in Mumbai to discuss the company’s performance in FY19.
While the main purpose of the event was to analyze the PFC’s financial performance, which incidentally was much better than what was widely expected, it also gave a glimpse of PFC’s future plans. It has become increasingly clear that PFC will be moving from its traditional avenues—largely financing conventional power generation plants—to newer areas. Modern ideologies like energy efficiency, low carbon footprint, etc is gradually getting imbibed into PFC’s financing culture.
Some of the new areas identified by PFC include smart cities, electric vehicle manufacturing, charging stations for e-vehicles, battery manufacturing for solar projects, mini and micro grids for distributed generation, energy efficient systems like co-generation, tri-generation (electricity, heat and cooling), CHP (combined heat and power), waste recovery systems, etc.
Energy efficiency, clean energy, lower carbon footprint, reduced use of natural resources like coal and even water, will influence PFC’s loan portfolio in the time to come.
One interesting that came about at the media briefing was that PFC is financing a sewage treatment plant. Prima facie, it seemed very odd that PFC would be involved in such a seemingly unrelated activity. However, the story, as it unfolded, was very interesting. There is a sewage treatment plant (STP) that is being set up at Nagpur—a traditionally water-starved region in Maharashtra. The STP will treat sewage in the area and the water so obtained will be supplied to conventional coal-fired power plants in the region. Thermal power plants—those that use heat to generate electricity—need plenty of water, for generation of steam that is in turn used to rotate the turbines. The equipment used to boil water to create steam is known as the steam turbine generator (STG) or simply boiler, while the turbine-generator (TG) is the place where the mechanical energy obtained by the rotation of turbines is converted into electrical energy.
This STP will create a supply of good water from wastewater, thus obviating the use of fresh water by the power generation plants. In doing so, it will conserve the supply of fresh water, and effectively, augment the availability of water for residential use. PFC is involved in this project due to the “power generation” connection.
The use of treated water from STPs for power generation is a novel idea that is born from the need to conserve water in deficient regions. In India, there are also instances where STPs are used gainfully to generate electricity. STPs generate methane—a greenhouse gas– that is used to generate electricity, through the combustion route.
PFC’s diversification into micro grids, e-vehicles, batteries for solar projects, etc. represent a new financing culture. Clearly, energy efficiency, clean energy, lower carbon footprint, reduced use of natural resources like coal and even water, will influence PFC’s loan portfolio in the time to come.
The author of this article, Venugopal Pillai, is Editor, T&D India, and may be reached on venugopal.pillai@tndindia.com. The views expressed here are personal.
