National Electricity Policy 2021

The Draft National Electricity Policy 2021 policy aims to make electricity available to all households in the next five years.

NEP 2021 covers multiple areas- grid operation, power markets, regulatory process, energy efficiency, optimal generation mix, transmission, distribution and many more. The draft talks about the creation of Electric Vehicle charging stations, Smart meters, power markets, environment and more.

The Ministry of Power has created a committee of experts to submit suggestions to the draft NEP 2021 within two months of the release of the draft. The members of the committee include members from state governments, the Ministry of New and Renewable Energy (MNRE), NITI Aayog, and the Central Electricity Authority.

National Electricity Policy addresses various issues such as rural electrification, generation, transmission, distribution, recovery of the cost of services and targeted subsidies, technology development and research and development, energy conservation, environmental issues, protection of consumer interests and quality standards, a competition aimed at consumer benefits and more.

Central Electricity Authority or CEA frames the National Electricity Plan once every 5 years and revise it from time to time according to the National Electricity Policy.

The plan is approved by the Central Government to be used by the prospective generating companies, transmission utilities and more. While evolving NEP, CEA consults all the stakeholders including state governments. CEA also interacts with institutions and agencies having economic expertise, especially regarding demand forecasting.

Metered Supply

Paragraph 7.19 of the draft policy highlights the urgency for better metering, which is a critical requirement. Whilst most feeder lines are metered, only 70 percent are linked to the national portal to automatically record data; amongst distribution transformers, only 37 percent are metered. A three-year period has been proposed for the full metering of the grid and the sub-grid.

The metering of supply is a core responsibility of all licensees, and failure to comply should be severely penalised by the relevant commission by holding back the pass-through of the full cost of supply, including what should have been spent on effective metering and monitoring. More of the same micro-focused central assistance is not the answer, and state governments must step up and take responsibility.

India’s poor state of metering is not an outcome of financial stringency. Bulk purchase through a global tender, on the pattern of what Energy Efficiency Services Limited (EESL) did for LED bulbs, is being implemented as a Union government initiative. So far, approximately 1.5 million smart meters have been installed at a zero up-front cost to utilities in five out of 30 states, under the classic, energy services model, where the incremental revenues defray the capital costs. This top-down “win-win” techno-fix has yielded significant results. Billing from 1.1 million smart meters improved by 21 percent, with an increase in utility revenue of INR 2.6 billion and a reduction in ATC loss by 10–36 percent. The target of 250 million smart meters, however, is a difficult task and the implementation is likely to be stretched out significantly.

New Approach towards NEP

The expert committee faces an onerous task of drafting the NEP 2021. The committee must bind the fragmented structure of the draft electricity policy into a strategic framework for the next two decades, with tangible targets for the high-level objectives and defined milestones for the web of downstream activities.

India is close to achieving full access to electricity for all. The unfinished tasks now relate to the following:

(a) identifying the mid-term investment planning milestones for following a cost-effective, low-carbon path to net-zero and dealing with the issue of stranded assets as in gas generation, thermal projects based on imported coal or older RE generators with lower efficiencies, which face technological obsolescence;

(b) broadly indicating the respective roles for the public and the private sector;

(c) assessing the cost benefits of competition “for the market” and “in the market” for the electricity supply chain;

(d) weeding out the administrative and regulatory inefficiencies that keep supply costs higher than norms, constrain utility finances and burden customers with inflated bills; and (

e) rationalising the functional allocation of mandates for electricity generation, transmission and distribution across the Union government, state governments, and large cities on the principles of network efficiency, scale effect, and financial and managerial capacity.

To this end, the expert committee must be prescient in anticipating technological changes, compassionate in ensuring that no one is left behind during the transition, and ruthless with embedded interests that seek to preserve traditional privileges. Finally, adopting the private-sector lens to assess the economic and financial viability of options will be indispensable in marrying theory with pragmatism.
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