Authored by Mani Gupta and Vedant Kumar, Sarthak Advocates & Solicitors.

The Ministry of Power has initiated the process for a new national electricity policy (NEP). The Electricity Act, 2003 (act), requires that the government prepares, revises and reviews the NEP. The policy was notified in 2005. The draft policy is now open for comments. The NEP sets out the policy direction for the electricity ecosystem, and governmental and regulatory authorities’ exercising, planning and regulatory functions under the act rely on it.

The draft NEP addresses the issues of clean and sustainable generation of electricity, efficient transmission systems, revitalisation of distribution utilities (discoms), development of an efficient electricity market, and promotion of domestic manufacturing of goods and services in line with the Aatmanirbhar Bharat Abhiyan or self-reliant India programme.

Recognising the role of renewable energy in the energy mix, the draft proposes to augment renewable generation and advocates hybrid generation models, such as wind-solar, solar-biomass and solar-mini hydel (hydroelectric). In view of the slow rate of addition of hydroelectric power capacity over the decades, the policy gives an impetus to hydropower generation. The draft policy acknowledges that coal is the cheapest source of power, but seeks to reduce the use of imported coal. In order to increase the share of renewable energy in the generation mix, it is important to manage peak demand and to create balancing capacity. The policy proposes the creation of adequate hydro-capacity with or without storage or pondage, pumped storage hydro plants, combined cycle power plants, and battery and emerging storage technologies such as hydrogen storage.

If translated into action, this may provide a faster transition to cleaner energy.

The draft suggests that a policy push will be required for distributed generation, particularly for solar roof-top generation. However, such a push must contend with the Electricity (Rights of Consumers) Rules, 2020 (consumer rules), which from December 2020 capped net metering benefits to consumers by allowing only up to 10kW of rooftop capacity. In the consumer rules, the government may have yielded to the demands of the discoms. However, it is to be hoped that the new NEP will aggressively push distributed generation without any caps on installed capacity. The proposed NEP recognises the problem of curtailment faced by renewable developers, despite the must-run status of such plants.

The proposed two-part tariff may address the risks associated with curtailment, where the offtaking discoms have to pay for capacity charges even where there is curtailment. The proposal is likely to meet resistance from state governments and its implementation will depend on how the performance of discoms is managed in the long term.

On the consumer side, the policy proposes a differentiated tariff structure for peak and off-peak electricity. If implemented, it may incentivise the calibration of demand by consumers especially during peak hours.

Measures have been suggested to address discom stress. Public-private partnerships and prepaid metering are perhaps the two most important factors in the proposed reforms, and feeder separation and the separation of carriage and content are the others. These solutions have long been available, so implementation may require wider consultation and consensus between state governments and the Ministry of Power.

Following India’s commitment to minimise carbon emissions, the draft policy recommends the strict implementation of government emission standards, including the sustainable use of water in coal-based power plants, and the use of air-cooled, in place of water-cooled condensers. The draft emphasises the robust recycling and disposal of electronic waste in solar photovoltaic power projects.

Electric vehicles (EV) have a place in the draft policy, with an emphasis on creating EV charging infrastructure and a separate tariff for EV charging. The policy recognises the role that EVs can play in balancing peak demand by acting as energy storage units to inject power into the grid when demand increases.

The electricity landscape has changed greatly since 2005 and the new NEP is welcome. It should, however, be concise with clear short, medium and long-term objectives. State governments should participate in the journey from policy to practice.

Mani Gupta is the senior partner and Vedant Kumar is an associate at Sarthak Advocates & Solicitors.

Published at India Business Law Journal.