Indian Power Sector: Year End Review 2021

Major highlights of the year 2021 for the Indian Power Sector of Reforms and Restructuring (R&R), Power Market Reforms, Hydro Power Development, Thermal Power and Transmission infrastructure.

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Reforms and Restructuring (R&R)

Electricity (Rights of Consumers) Rules, 2020

The Ministry of Power has notified Electricity (Rights of Consumers) Rules, 2020 on 31 December, 2020 under section 176 of the Electricity Act, 2003. These Rules shall empower the consumers of electricity and emanate from the conviction that the power systems exist to serve the consumers and the consumers have rights to get the reliable services and quality electricity.

Implementation of these Rules shall ensure that new electricity connections, refunds and other services are given in a time bound manner.

An amendment to Electricity (Rights of Consumers) Rules, 2020 was also notified on 29 September, 2021 wherein the limit for net metering was increased to 500KW from 10KW.

Late Payment Surcharge Rules 2021

Electricity (Late Payment Surcharge) Rules, 2021 have been notified by the Central Government on 22 February, 2021. Late Payment Surcharge means the charges payable by a distribution company to a generating company or electricity trader for power procured from it, or by a user of a transmission system to a transmission licensee on account of delay in payment of monthly charges beyond the due date. Late Payment Surcharge shall be payable on the payment outstanding after the due date at the base rate of Late Payment Surcharge applicable for the period for the first month of default.

Waiver of ISTS Transmission Charges and Losses for Solar & Wind Power

In Order to promote generation from renewable sources of energy, Ministry of Power has issued an Order on 5 August 2020 for extension of waiver of Inter State Transmission System (ISTS) charges and losses for transmission of the electricity generated from solar and wind projects commissioned till 30 June 2023.

Further an order was issued on 21 June, 2021 for extension of waiver of Inter State Transmission System (ISTS) charges for transmission of the electricity generated from solar and wind projects up to 30 June, 2025. Moreover vide this order the waiver of ISTS charges shall also be allowed for Hydro Pumped Storage Plant(PSP) and Battery Energy Storage System (BESS).

Issuance of Renewable Purchase Obligations (RPO) Trajectory

Long term RPO growth trajectory for the period 2016-17 to 2018-19 has been notified by Ministry of Power on 22 July, 2016. An order on RPO Trajectory for a further period of three years i.e. from 2019-20 to 2021-22 under the provisions of Tariff Policy has been issued on 14 June, 2018.

In super-session of orders, the Ministry of Power has specified new RPO trajectory vide order dated 29 January, 2021. Trajectory for HPO has also been issued through this order. This would help in meeting the renewable energy generation targets set by the Central Government.

Introduction of Green Day Ahead Market (GDAM)

Green Day Ahead Market (GDAM) is a marketplace for trading of renewable power on a day-ahead basis. This would facilitate accomplishment of green targets as well as support integration of green energy in a most efficient, competitive and transparent manner. GDAM was launched on 25 October, 2021.

The Green day Ahead Market will be available through the Power Exchanges. The GDAM market structure will be within the existing Day Ahead Market (DAM) structure but will create a separate clearing mechanism and price discovery for renewable and conventional energy sources.

It will give opportunity to the RE generators to sell their power and reduce curtailment and also the buyer of RE to transparently purchase green power from the market. It would also facilitate the obligated entities to meet its Renewable Purchase Obligation (RPO).

Electricity (Timely Recovery of Costs due to Change in Law) Rules, 2021

Timely recovery of the costs due to change in law is having importance as the investment in the power sector largely depends upon the timely payments. At present the pass through under change of law is taking a lot of time, forcing the drying of the investment in the power sector. If payment is not made in time, it impacts the viability of the sector and the developers get financially stressed. If this is not addressed now, the investment will not come and the electricity consumers may face shortages of power once again. In order to address this issue, Ministry of Power has notified Electricity (Timely Recovery of Costs due to Change in Law) Rules, 2021 on 22 October, 2021.

Electricity (Promotion of generation of Electricity from Must-Run Power Plant) Rules, 2021

The Ministry of Power has notified Electricity (Promotion of generation of Electricity from Must-Run Power Plant) Rules, 2021 on 22 October, 2021. This rule is mainly to achieve this goal and will help in promotion of the generation from renewable sources. This will ensure that the consumers get green and clean power and secure a healthy environment for the future generation. 

Implementation of Phase-1 of Market Based Economic Despatch (MBED)

With the objective of Redesigning of present market mechanism for lowering the cost of power purchase to Consumers, Framework for Implementation of Phase1 of Market Based Economic Despatch (MBED) wherein mandatory participation by ISGS (Inter State Generation Stations) plants and voluntary participation by other generators, was communicated to CERC for implementation from 1st April, 2022.

Redesigning the Renewable Energy Certificate (REC) Mechanism

Ministry of Power assent was given to make amendment in the existing Renewable Energy Certificate (REC) mechanism, in order to  align the  present REC mechanism with the emerging changes in the power scenario and also to promote new renewable technologies.

Power Market Reforms

Green Term-Ahead Market (GTAM): Pan-India Green Term-Ahead Market in electricity was launched on 1 September, 2020. As a market segment, it has provided one more avenue to renewable to trade electricity which will, inter-alia, help to achieve ambitious renewable energy capacity addition targets of the Government of India.

GTAM Contracts will enable obligated entities to procure renewable power at competitive prices at the power exchanges and help meet RPOs. This would also reduce burden on renewable rich States which can trade the surplus renewable generation generated within the State pan-India. The total cleared volume in GTAM was 785.83 MU in 2020-2021. In 2021-22, till September, 2021, the total cleared volume was 2744 MU.

Green Day Ahead Market (GDAM): After the successful launch of Green Term-Ahead Market (GTAM) in August 2020, "Green Day Ahead Market (GDAM) - a Marketplace for trading of renewable power on a day-ahead basis" has been launched on 25 October, 2021. The intent is to promote merchant green power plants and provide additional sale avenues to existing renewable power plants that are either facing payment risk with the distribution companies (DISCOM) under the existing PPA or have surplus energy.

Expected Benefits from the introduction of GDAM are deepening the Green Market, Accelerating the addition of Renewable Capacity, Shift from PPA based Contract to Market-Based Models and Reduction of Curtailment of Green Power.

The Government has introduced Pan India Real Time Market (RTM) of electricity on 3 June 2020. The introduction of RTM as an organized platform for energy trade closer to real time to the buyers and sellers has not only facilitated grid integration of renewables but also brought greater market efficiency. With RTM, buyers and sellers have the option of placing buy/sell bids for each 15-minute time block.

RTM is benefitting all stakeholders - generators including renewable generators having opportunity to sell their surpluses, better management of variability of renewable generation, better utilization of transmission systems, opportunity for distribution utilities to buy or sell power closer to real time and finally consumer getting reliable power supply.

In FY 2020-21, the total cleared volume in Real Time Market was 9467.96 MU. In FY 2021-22, the total cleared volume in Real Time Market was 9933.4 MU till September, 2021. The highest daily volume of 98.334 MU was traded on 28 August, 2021.

Hydro Power Development

Guidelines for providing Budgetary support for Flood Moderation / Storage Hydro Electric Power projects and Cost of Enabling Infrastructure i.e. roads and bridges were issued by the Ministry on 28 September, 2021 to promote the Hydro Sector.

All the 4 units of Kameng Hydro Power Project (600 MW) constructed by NEEPCO in Arunachal Pradesh have been fully commissioned and have commenced their operation from 12 February, 2021.

Luhri Stage-I HEP (210 MW): Investment Approval accorded by GoI on 20 November, 2020. Award of EPC package for Civil and HM works awarded on 24 November, 2020 and EM works awarded on 16 July, 2021.

Dhaulasidh HEP (66 MW): Investment Approval accorded by GoI on 01 October, 2020. Award of EPC package for Civil and HM works awarded on 6 May, 2021.

The Model Contract Document for Dispute Avoidance Mechanism in Hydro CPSUs through "Independent Engineer" has been issued vide O.M. dated 27 September, 2021.

Kholongchhu (600 MW) Hydro Electric Project in Bhutan

The Concession Agreement for the project was signed between Royal Government of Bhutan (RGoB) and Kholongchhu Hydro Energy Limited (KHEL) [Joint Venture (JV) Company of SJVN Ltd (Indian CPSU) & DGPC Bhutan (RGoB PSU)] at Bhutan in the presence of Hon’ble Minister of External Affairs, GoI and Hon’ble Foreign Minister, RGoB on 29 June, 2020. All three main Civil works packages have been awarded on 04 March, 2021 & the project is scheduled to be commissioned by February, 2026.

Lower Arun Hydro Electric Project (679 MW) in Nepal

Lower Arun project was allotted to SJVN Ltd by Government of Nepal (GoN) on Build Own Operate and Transfer (BOOT) basis through international competitive bidding on 04 February, 2021. The MoU has been signed for the development of 679 MW Lower Arun HEP between SJVN Ltd and Investment Board Nepal (IBN) on 11 July, 2021. 

Investment approval for 850 MW Ratle Hydro Electric Project has been accorded on 11 February, 2021 with an estimated project cost of Rs. 5281.94 crore (November 2018 PL). The project is scheduled to be completed within 60 months from the date of investment approval.

Investment approval for 120 MW Rangit-IV Hydroelectric Project has been accorded on 30 March, 2021 with an estimated project cost of Rs. 938.29 crore (October 2019 PL). The project is scheduled to be completed within 60 months from the date of investment approval.

Thermal Power

Revised/New Coal Stocking Norms in Coal Based Thermal Power Plants

Central Electricity Authority (CEA), monitors the coal stocks being maintained at the power stations along with their daily coal consumption requirements. The earlier coal stocking norms were advisory in nature, at times; power plants do not maintain coal stock as per the norms, which is not desirable for a sustained plant operation.

In view of this, the existing coal stocking norms have been revised and issued by Central Electricity Authority (CEA) on 06 December, 2021 to ensure more fuel security to the power plants, reflect true picture of the stocks being maintained at each power stations and ensure sufficient coal stock even during the period of less supply by CIL/SCCL during the month of July to September.

The revised norms mandates 12 to 17 days of coal stock at pit head stations and 20 to 26 days coal stock at non-pit head stations with month-wise variation based on coal despatch/coal consumption pattern during the year corresponding to 85% PLF, and prescribes the coal stocks to be mandatorily maintained by the power plants and penalty mechanism for not maintaining the stocking norms. The coal stock for 17 days at pit head plants and 26 days stocks at non-pit head power plants have been made mandatory during February to June every year.

The power plants are graded as red, yellow and green for not maintaining the coal stocks; and would be penalized for not maintaining their normative availability due to reduced coal stocks and their fixed charges shall be reduced in a graded manner.

National Mission on use of Biomass in coal based power plants

The Ministry of Power on 17 November, 2017 issued Policy on biomass utilization for power generation through co-firing in coal based power plants. In this earlier Policy, it was advised in the policy that coal based thermal power plants, except those having ball and tube mill, of power generation utilities, to endeavor to use 5-10% blend of biomass pellets made, primarily, of agro residue along with coal after assessing the technical feasibility, viz. safety aspect etc.

In order to support the energy transition in the country and to achieve the target of cleaner energy sources, the policy has been modified and issued on 08 October, 2021. This modified policy would provide the necessary direction in achieving the desired goals.

Stressed Assets in Thermal Power Sector

Department of Financial Services (DFS) sent a list of stressed projects in the power sector on 22 March, 2017 to the Ministry of Power (MoP). The 34 non-captive coal based power projects mentioned in the DFS list are mostly private and have a total installed capacity of 40,130 MW. Status of 34 thermal power projects of capacity 40,130 MW which are under stress as reported by DFS is as follows:

  • 17 projects with a total capacity of 20,290 MW have been resolved.
  • 7 projects with a total capacity of 9,310 MW are at various stages of resolution.
  • 10 projects with a total capacity of 10,530 MW are at very initial stage of construction and are totally stalled. Such projects have either been ordered to be liquidated or heading towards liquidation.

Initiatives for strengthening Transmission infrastructure

Formation of Central Transmission Utility of lndia Ltd (CTUIL): Central Transmission Utility of lndia Ltd (CTUIL), a 100% subsidiary of Power Grid Corporation of lndia Ltd, has been notified as the Central Transmission Utility under Section 38 of the Electricity Act 2003 on 9 March, 2021 and CTUIL has started functioning w.e.f. 1 April, 2021. In due course it will be fully independent and 100% Government owned company.

Electricity (Transmission Planning, Development and Recovery of ISTS Transmission Charges) Rules, 2021 issued on 01 October, 2021

The Central Government has promulgated the above Rules paving the way for complete overhauling of transmission system planning to give power sector utilities easier access to electricity transmission network across the country. The rules underpin a system of transmission access which is termed as a General Network Access in the inter-state transmission system. This provides flexibility to the States as well as the generating stations to acquire, hold and transfer transmission capacity as per their requirements. Thus, the rules will bring in rationality, responsibility and fairness in the process of transmission planning as well as its costs. 

Dissolution of 5 Regional Power Committees (Transmission Planning)

Prior to this order, regional consultation for planning of ISTS system is done at Regional Power Committee (Transmission Planning) [RPC-TP] and Regional Power Committee [RPC]. In order to fast-track the ISTS planning process, it was agreed to have regional consultation on planning of ISTS system only with RPC and to dissolve RPC-TP. Accordingly, the order will facilitate doing away with dual consultation with regional constituents during ISTS planning process.

Re-constitution of the National Committee on Transmission (NCT)

As a part of energy transition goal, India has set a target of 500 GW of Renewable Energy capacity by 2030. In view of shorter gestation period required for construction of Renewable Energy Sources compared to that of transmission system, the transmission planning and approval process has been revamped by Ministry of Power to reduce the time taken for planning and approval of transmission system required for evacuation of power from Renewable Energy sources especially.

In order to simplify the process of Inter State Transmission System (ISTS) planning and approval to further facilitate RE development in the country in consonance with energy transition goal, Terms of reference of National Committee on Transmission (NCT) have been modified on 28 October, 2021 with delegation of powers to CTU and NCT among others to fast-track ISTS meant for RE.