National Electricity Plan for 2022-27

Context

The National Electricity Plan (NEP) 2022-27 has been rolled out which marks a discernible reversal in the policy thrust from its last edition.

Need of the initiative:

India is now amongst the fastest developing countries in the world in terms of GDP as well as electricity consumption.
The challenge is to meet the energy needs of high economic growth & electricity consumption of about 1.3 billion people.
The development of an efficient, coordinated, economical and robust electricity system is essential for the smooth flow of electricity from generating stations to load centres (as per the Electricity Act, 2003).
Also, optimum utilization of resources in the country, to provide reliable, affordable, uninterruptible (24x7) and Quality Power for All.

Highlights of the draft:

The coal energy thrust: The fresh draft, in a tacit admission of the ground realities, cites the need for fresh coal-based capacity ranging from 17 GW to nearly 28 GW till 2031-32.
- This would be over and above an under-construction coal-based capacity of 25GW (1 gigawatt or GW is equal to 1000 megawatts or MW).
- An increase in the plant load factor (PLF) of coal-fired plants from 55% up to 2026-27 to 62% in 2031-32.
The renewable energy thrust: A projected battery storage requirement in 2031-32 of between 51 GW to 84GW with a daily usage rate of 5 hours.
- Estimated to be Rs.10 crore per MW, this could translate into investments into battery storage between Rs.5 - 8 lakh crore over the next ten years as a backup for renewable capacity.
Battery Energy Storage System: Battery Energy Storage systems (BESS) especially based on Lithium-ion batteries are one of the storage options.
Hybrid generation models: This will perform solar energy shifts and provide backup power.
Hydro-based plants:
It also said that in the event of delay in the achievement of hydro-based plants, which are in concurred/under construction stage, there is an additional requirement of coal of around 4 GW in the capacity mix in 2026-27.

What are the Challenges Ahead?

The continued reliance on old, inflexible coal-fired plants for base load capacity.
- India’s vast fleet of coal-fired thermal power plants of 200 MW series is more than 25 years old, run-on old technology and does not promise robust reliability.
Lack of clarity on how the renewables-dominated grid will be actually managed, despite a pronounced reliance on renewable generation for meeting capacity additions.
The inertia, which imparts stability to the grid, has been declining due to poor progress of hydropower and zero inertia solar generators.
There is also no assessment of ramping rate for thermal plants under various scenarios of solar generation going out.
If battery storage is to be relied on, the total fund requirement for the period 2022-27 is estimated to be 30 lakh crore.
- However, the CEA report has given a budget of 8 lakhs crore for BESS for a 10-year period.

The Electricity Act, 2003:

About:
- The Electricity Act, of 2003 is the central law regulating the electricity sector.
- The Act provides for Electricity Regulatory Commissions at both the central and state levels (CERC and SERCs).
The Electricity (Amendment) Bill, 2022 :
The bill amends the Electricity Act, 2003
Key provisions under the Bill:
- Multiple discoms in the same area:
  - The Act provides for multiple distribution licensees (discoms) to operate in the same area of supply.
  - The Act requires discoms to distribute electricity through their own network. The Bill removes this requirement.
- Power procurement and tariff:
  - Upon grant of multiple licenses for the same area, the power and associated costs as per the existing power purchase agreements (PPAs) of the existing discoms will be shared between all discoms.
- Cross-subsidy Balancing Fund:
  - The Bill adds that upon the grant of multiple licenses for the same area, the state government will set up a Cross-subsidy Balancing Fund.
  - Any surplus with a distribution licensee on account of cross-subsidy will be deposited into the fund.
  - The fund will be used to finance deficits in cross-subsidy for other discoms in the same area or any other area.
- Renewable purchase obligation:
  - The Act empowers SERCs to specify renewable purchase obligations (RPO) for discoms.
  - The Bill adds that RPO should not be below a minimum percentage prescribed by the central government.