Electricity

Webinar on Electricity Sector Competition

Tue, 01/03/2022 - 13:11
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Webinar 2: Electricity Sector Competition 

February 15th, 2022

Post Webinar Note

Context

Competition in power markets enhances efficiency in the sector, while bringing in additional finance and capital to strengthen the sector. Consumers are provided with greater choices in service providers and business models such as Opex and open access as per their energy requirements, load patterns and economic and financial considerations. This has also led to a greater number of players in the market which makes it more competitive, increases choices for the consumer and widens the scale of deployment of such solutions. 

As Tamil Nadu embarks on this journey of strengthening the electricity sector by promoting competition in the sector and introducing new business models, the ‘Citizen consumer and Civic Action Group (CAG)’ in collaboration with MP Ensystems Advisory Pvt. Ltd organized a webinar to discuss the considerations, implications and relevance of ‘Electricity Sector Competition’. 

Key Discussion Points

Presentation on electricity sector competition: Dr Mahesh Patankar, MP Ensystems 

  • Electricity sector has a political economy of its own and the sector has long suffered due to inefficient administration. Most of the state-owned utilities continue to bleed financially as mounting losses continue to affect the reforms that have been undertaken in recent years.
  • India is now on a clear path of decarbonisation which was also on display during the Prime Minister’s announcements at the UN COP-26 Summit, where he declared the Panchamrit targets:
  • India will get its non-fossil energy capacity to 500 GW by 2030
  • India will meet 50% of its energy requirements till 2030 with RE
  • India will reduce its projected carbon emission by one billion tons by 2030
  • India will reduce the carbon intensity of its economy by 45 % by 2030
  • India will achieve net zero by 2070
  • The Electricity Act, 2003 which was a landmark Act for the electricity sector in India included provisions of introduction of power exchanges and the facility of availing open access in India. These steps have been fundamental to the strengthening of competition in the electricity sector. The uptake in the number of consumers and volume of electricity availed through open access is a testament to that.
  • Various models have been tried in different parts of the country in the electricity sector. Some of the notable examples are Bhiwandi model, which was a distribution franchisee model, New Delhi model, etc which have achieved varying levels of success in promoting efficiency in the electricity sector.
  • Tamil Nadu has been an active participant in implementing energy sector reforms and striving for universal access to energy as the state has already achieved 100% electrification of households. It also has the highest number of open access consumers in the country. In this perspective, promoting efficiency and competition in the electricity sector is vital.  

Panel Discussion: Promoting Electricity Sector Competition

Ashwini Swain, Centre for Policy Research

  • There have already been numerous models that have been tried throughout the country to promote efficiency in the retail sector but judging by the degree of success achieved by different models, it cannot be said that privatisation is the cure to all maladies. 
  • Despite going down the privatisation path, Bhiwandi and Odisha models achieved contrasting results. While Delhi saw an improvement in efficiency, provision of quality supply and reduction in Transmission and Distribution losses, the same was not the case in Odisha. Hence, it is essential to take a holistic view of the issues in the sector in different geographies instead of taking a one size fits all approach.
  • The case of Punjab is different than the other two cases as Punjab State Power Corporation Limited became financially crippled not on account of operational inefficiency but due to delays in provision of subsidy requirement. Thus, there are many issues that plague the power sector distributed throughout the whole ecosystem and there is a need to analyse all aspects before finalising a particular approach for reforms.

Ann Josey, Prayas Energy Group 

  • Just a change in ownership is not the solution to improving efficiency in the electricity sector. The current model followed predominantly in India is based on a cost-plus framework, which has no incentives for the organisations for improvement of efficiency. 
  • Prayas Group’s analysis of private sector distribution companies illustrates that there is no real competition when it comes to power procurement by these companies. These Discoms go through the route of competitive bidding for their power procurement, but it was found that most of these companies had contracted power with their own sister concerns, thus rendering the competitive bidding meaningless. Example- Torrent Power.
  • To promote efficiency in the sector, there is a need to promote competition in the entire supply chain. The retail structural model of California is a good case study in this regard. 
  • There is a need to share the risk as well as the rewards for the players in the electricity ecosystem, with a focus on the consumers. 

Netra Walawalkar, Customized Energy Solutions

  • Many large commercial and industrial consumers are now willing to explore open access to reduce their electricity cost, as it is a fixed structure with Discoms, and manage their power requirements as per demand projections. There is also a growing interest in Renewable energy purchase. 
  • Short term power trade through power exchanges has also increased, but has stagnated in recent years, and there is scope to increase participation through this medium.
  • For consumers signing third party power agreements via PPAs with generators, the landed cost for the consumer often does not make sense due to cross subsidy and other charges. Even though Electricity Act says cross subsidy and other charges should increase, this is not happening practically.
  • Despite these charges, there has been an increase in availing through Open access by industrial and commercial consumers who have been able to reduce their electricity costs.

Arijit Maitra, Independent Counsel and Lawyer

  • Indian Electricity Act, 1910 provided for private licensees, which led to the existence of Tata Power, India Power Company, BSES, etc. In 1948, State Electricity Boards were formed. Between 1948-1998, there was a huge mismanagement by state Discoms and a high level of inefficiency.
  • The burning issues in the power sector are:
  • Failure to pay the outstanding dues to suppliers
  • Failure to have tariffs fixed rationally and scientifically
  • Failure to arrest arrears

Due to these issues, there is a need to bring in efficient private players, Delhi being a good example. 

  • Privatisation can have various models. 
  1. In Shrirampur of Maharashtra, Mula Pravara Electric Cooperative Society were rejected renewal of license on the ground that they failed to pay the bulk supply tariff to MSEDCL, and they were supplying to the rich consumers without recovering tariffs. Now the assets of Mula Pravara are with MSEDCL, for which it is paying user charges. Thus, despite not being a licensee, it is not being paid for the assets.
  2. Delhi model is another model of privatisation. Delhi DISCOMs have regulatory assets exceeding Rs 10,000 crore but are still unable to clear the outstanding dues of the suppliers.
  3. Chandigarh presents another model for privatisation.
  • Many states are currently failing. Even in Tamil Nadu, the outstanding dues with generators have been increasing consistently, while there has also been an inability to assess the grid situation. Hence, there is a need for efficient players to be brought onboard.  

Concluding Remarks: Vishnu Rao, CAG

  • The corporate governance of electricity sector warrants adequate scrutiny as well. Utilities can be private or public, but procedural safeguards in the corporate governance structure helps ensure more accountability and transparency in the operational setup. 
  • More transparency akin to share markets where investors’ presentations are put online can be thought of to provide the company some value. A push towards sustainability and governance can be given more priority to make utilities more accountable. This type of an alternate approach where competition not just in the sector, but also in the governance part as well can improve the electricity ecosystems. 
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Webinar on Just Transition in the Electricity Sector in India

Mon, 22/11/2021 - 16:57

With increasing demand for electricity in urban and rural areas, impending shortages in electricity supply due to unavailability of coal and increasing penetration of renewable energy in India, it is imperative to ensure a Just Transition for electricity consumers. It is important that the impact of the benefits and challenges are distributed Justly’ between the rural and urban sectors and across consumers categories. 

As Tamil Nadu embarks on this journey of decarbonization and strengthening the electricity sector for its consumers, the ‘Citizen consumer and civic Action Group (CAG)’ in collaboration with MP Ensystems Advisory Pvt. Ltd organized a webinar to discuss the importance, relevance and challenges related to ‘Just Transition in the Electricity Sector in India.’ The webinar can be viewed here.

Key Discussion Points

Context of Just Transition in India and Tamil Nadu: Vishnu Rao, CAG

  • Energy transition has been looked at from the renewable integration aspect, but we need to address social and economic aspects from the consumer perspective. 
  • This discussion is a beginning stage to map out next steps that Tamil Nadu can take to enable a Just energy transition scenario in the future. We are looking at options including sustainable commercial utilities that provides affordable power for all as well as utility-scale solar plants. On the financial aspects of the Just transition, we need to understand whether it is feasible and commercially viable for a utility to accelerate a Just energy transition scenario in the state.
  • We need to look at the role of marginalised people in Just transition to ensure equitable inclusion. 

Presentation on an overview of Just Transition: Meghana Rao Pahlajani, MP Ensystems

  • Just transition related to a low carbon economy has three key focus areas:
  • Climate Justice concerns sharing the benefits and burden of climate change from my human rights perspective
  • Energy Justice refers to the application of human rights across the energy life cycle
  • Environmental Justice aims to treat all citizens equally and to involve them in development, implementation and enforcement of environmental laws, regulations and policies
  • Key drivers of an accelerated transition away from fossil fuels in India include:
    • Renewable and Storage getting cheaper
    • Emission Intensity commitment in NDC
    • Stranded assets and reluctance of finance institutions to fund new coal: 
    • Increasing, yet lower than expected demand
    • High cost of transport
    • Competing demand for limited land
  • With a total installation capacity of around 34,000 MW, Tamil Nadu has one of the highest installations of Renewable Energy in the country. Tamil Nadu also has the highest borrowings of distribution utilities amongst states in 2019-20. Tamil Nadu is well poised to shift from a thermal base system to a renewable energy-based system. Projections from NREL model RE capacity reaching close to 34 GW in 2030 and the Tamil Government has announced high targets and relevant policies to support decarbonization in the State.  

Panel Discussion 1: Reflections on Just Transition in Energy and Global perspective

Dr Mahesh Patankar, MP Ensystems

  • Developing countries have to focus on Just transition to account for adequate electricity supply to meet the growing demand whilst maximising livelihood opportunities in the rural sector. 
  • With an ecosystem of renewables integrating to Tamil Nadu’s energy infrastructure, we need to look at how to balance this with the current strength of utilities. We need to make sure we have abundance of electricity available to vulnerable populations for not just their domestic needs but also industrial and agricultural requirements in urban and rural areas.
  • During the Covid-19 pandemic, we saw a reverse migration from urban to rural areas, increasing demand from agriculture, rural industries, and small businesses. To enable equitable distribution of social and economic objectives for all, we need to provide adequate and reliable power supply throughout the country. 
  • Several aspects of the energy system need to be carefully analysed. It is important to look at designing power markets effectively to ensure decarbonised electricity is available for all distribution companies. 

Dr. Zsuzsanna Pató, Regulatory Assistance Project 

  • Some of the issues raised in Eastern Europe are relevant in the Just transition context for India. The conversation at the EU at a policy level has only covered issues of energy poverty. However, as energy prices increase, we need to focus on ensuring equity for poor consumers.
  • In the case of net metering policies, PV consumers pay only for the net amount of energy produced. This creates a mismatch as poorer households, who usually cannot pay for PV installations, are paying the cost of upholding the distribution network. 
  • In EU, the transition is driven at the national level. A stronger push on regulations and policies at a sub-national and local level will be required to ensure equitable energy transition. 

Akanksha Golcha, Shakti Sustainable Energy Foundation

  • Transition pathways will vary depending upon geography. We need to consider social transition of not only direct coal-affected communities, but also indirect stakeholders located near coal mines. A data-centric approach and convergence between centralized and decentralised power supply approach is important to plan and streamline for a Just transition. 
  • Central policies are necessary to drive the overall national objectives, but we also need a bottom-up approach that considers multiple aspects such as gender. 
  • Saubhagya Scheme was successfully undertaken in rural areas. A similar approach is required for a Just transition to ensure economically poor households can benefit equitably. 

Panel Discussion 2: Just Energy transition in India

Dr. Kaveri Iychettira, School of Public Policy, Indian Institute of Technology Delhi

  • Much of the literature on energy has focused mainly on economic thinking to structure the power sector and utility regulation but has not considered equity thinking. This has led to only states with a strong capital being able to integrate renewables, highlighting the equity challenge in the sector. 
  • The regulatory framework is only directed at efficiency and not at equity which does not resolve cost-recovery issues. Therefore, we need to take a deeper look from the equity perspective to understand why there is a mismatch in states managing their power sector debt. 
  • We need better integrate markets to enable grid flexibility where short-term markets are going to be important to integrate renewables. A higher RE-integrated power systems needs to have inter-state exchange of electricity supply to meet the targets set for decarbonization.  

Sreekumar N, Prayas Energy Group

  • Electricity sector is now being looked at from diverse perspectives as we address challenges in the transport, agriculture, cooking, industry sectors that are transitioning towards electrification. 
  • Institutional strengthening needs to be supported for key stakeholders including:
    • Regulatory commissions who play a role in taking a holistic sectoral perspective 
    • Distribution companies who need to balance the mismatch between losses and new market instruments in renewables.   
    • Load dispatch centres so they have access to adequate resources 
    • Transmission investment focused on addressing grid security challenges.
  • Civil society organisations need to push for innovations that will direct a Just transition ensuring affordable, quality supply to all consumers.

Special Remarks: Role of regulators to facilitate Just Transition

Shri D. Radhakrishnan, Tripura Electricity Regulatory Commission

  • The Indian power sector is striving towards leading the renewable energy markets, so the transition towards renewables needs to take place in a Just and systematic manner with innovations emphasised in various sectors such as transport, consumer awareness and rural market access. We also need to ensure safety in the power sector by tackling local-level issues such as electricity overloading before going on to the transition phase. In the rural areas, the focus needs to be on ensuring ease of access to clean cooking.
  • Cities will transition towards electrification as Smart City Mission rolls out and transport means in the public (Metro) and private (e-vehicles) sectors expand.  It is expected that electricity consumption will rise from 18-19% to around 40% in next 10-12 years through the transport sector. 
  • At Tripura Electricity Regulatory Commission, Consumer Education Forum has been formed to consider consumers’ rights, opportunities, and rules.  
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Intersectionality of Competition Law and the Electricity Sector in India

Mon, 13/09/2021 - 12:43

Watch our panel of eminent speakers in a discussion around the existing electricity regulations and the several challenges to competition and consumer choice.

Panelists:

1. Mukund Unny - Advocate - Currently practicing at Supreme Court
2. Prashanth Sabeshan - Partner at AZB & Partners, Bangalore 
3. Mr. Ramani (Retired) - CEO of Energy Space and Windia Green Power Pvt. Ltd.
4. K. Vishnu Mohan Rao - Senior Researcher, CAG

Current News: Volume VI, Issue 6, June 2021

Mon, 02/08/2021 - 10:09

Highlights

  • Assessing TANGEDCO’s Compliance to Distribution Standards of Performance (DSOP): An Analysis of RTI Data for the Year 2016 (Part - 13)
  • Disruptions likely as EB plans 10-day State-wide maintenance work.
  • Power consumption grows 12.6% in first week of june.
  • U.S. solar capacity passes 100 gigawatts after strong first quarter, but Covid challenges persist
  • Consumer Focus - Electricity Ombudsman Order 
  • ECC Voice - Success story

Plus Publications/Regulations:

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