Revenue increase in DISCOM operation, to relieve GENCO of debts

UDAY 2.0 maybe expected to involve funds outflow provision linked to achieving operational and financial targets by DISCOMs.

N . Yuvaraj Dinesh Babu, Senior Advisor, EY India in an interaction with Athira Bejoy discusses how solar can be the major source of power; also keeping in check the integration challenges of distributed renewable energy.

Moving away from power generation and focusing on supply. Your take?
Can’t agree more that focus should be on affordable supply, optimum source mix, and T&D reforms.. The government is planning no new investment in the thermal sector, apart from the 20,000-MW plan of state-owned NTPC Ltd. There is 40,000 MW of privately-owned capacity that is under stress. CEA has already stated in its National Electricity Plan (NEP) that India would need 6,440 MW of thermal power during 2017-22. So, for now, there is no additional need for any new private investment.

A recent plan submitted to the Prime Minister’s office (in Aug 2019) indicates a halt in power generation through conventional sources and a halt in any new private investment in thermal power. Moreover, it is also the need of the hour in times of rising carbon footprint and global warming that the generation mix needs to be altered, with the larger share going to green projects. Given the geography of India, solar power can be seen as a major source of power. But again, more distributed renewable energy will bring in more challenges of integration. Thanks to the evolving Gen Next technologies fired by Artificial Intelligence/Machine Learning , data analytics and fast computing and decision-making algorithms that could make the transition and future smooth and secure.

According to PRAAPTI portal, there has been a rise in the outstanding dues to GENCOs by the DISCOMs. Would this move to focus on supply, will bring any relief to the debts?
Focusing on supply is directly linked with the DISCOMs. The technical and operational interventions on supply side management will boost the financial status of DISCOMs. Outstanding dues to GENCOs are due to high Average Cost of Supply – Annual Revenue Requirement (ACS-ARR) gap and wrong operational practices. Therefore, better reforms and smart infrastructure is the focus of our government and this move will bring relief to the debts. Increase in dues to GENCOs by DISCOMs is leading to a rise in receivables and hence hurting cash flow of GENCOs. This situation can be tackled if DISCOMs work to increase its revenue from operations i.e.power supply. Under Saubhagya Scheme, 7 lakh houses were energised per week and power supply to them created huge opportunity as a source of revenue collection. Such collected revenue can be used to offset GENCOs outstanding dues. But supply can act as a winning strategy only if it is complemented with efficient metering, billing and collection activity for such houses resulting in increased revenue. Even industrial consumers are keen to pay more for higher quality power supply. Hence, reliable supply would be a relief against piling GENCO debts.

What policy or tariff changes are you expecting to come under the UDAY 2.0 as it is supposedly aimed at improving operations?
Improvement in operation can be facilitated by incentives. Hence, UDAY 2.0 maybe expected to involve funds outflow provision linked to achieving operational and financial targets by DISCOMs. Policy interventions such as increased private participation focus on short-term or long-term credit instead of working capital loans, distribution franchisee model modification and adoption and penalty norms for load shedding have to be encouraged. On tariff front, frequent rational tariff revision, restriction of over 15 per cent loss to be reflected into tariff and decrease in cross-subsidy charges are expected.

What kind of transmission infrastructure should be in place for an efficient supply?
CEA to create a pan India network that supports bulk transportation of power in longer hops and strategically develop 400 kV and 220 kV level networks that will work as arteries connecting these mega corridors to the load centre and at the same time to have the ability to interconnect with distributed renewable energy systems. With such bulk load corridors, it also becomes important to have higher level of security and control for such corridors.

With distributed renewable energy (DER) gaining prominence in recent years, integration (both at system and control level) also need to evolve and grid codes and technical standards around the transmission infrastructure need to be modified to ensure seamless interconnection. I believe a national development plan for power transmission needs to be instituted taking into consideration geographical and population related constraints. The transmission infra once commissioned becomes a very important asset, and asset monetisation through enhanced utilisation of asset must be certainly looked into. For instance, the pan India transmission network will be a huge game changer for setting up communication fiber network. Therefore, policy decisions like mandating use of optical ground wire (OPGW) can be a good point to look at.

What are your thoughts on how to curb a cyber attack on the energy sector?
Cyber attacks are no more uncommon incidents in the energy sector. There are instances in the history that have rung the alarm bell. The issue has assumed greater importance as the country now has an integrated national power grid, with south India joining the national electricity grid in January 2014. Therefore, a grid collapse which is the worst-case scenario for any transmission utility may create a black-out scenario across India. Now with RE and DER integration, the grid has become ever more dense. Higher density means higher nodes or more points from where the systems can be hacked.

It’s also worth mentioning a case in which Saudi Aramco’s systems were attacked. This case is noteworthy because the devastation to the companies’ computers was such that Aramco was forced, over the five following months, to disconnect all their devices from the internet and conduct business via the use of typewriters and fax machines. Just goes to show how devastating such attacks could be.

I believe there are only two solutions to such problems. Either go back to paper-pen era and manually operated system or resort to more capable technologies like blockchain and cloud computing. Blockchains or distributed ledgers are emerging technologies that have drawn considerable interest from energy supply firms. Blockchains promise transparent, tamper-proof and secure systems that can enable novel business solutions, especially when combined with smart contracts. Cloud migration is yet another space that can be explored as it will pave way for moving from legacy-based systems (old and vulnerable IT infra) to cloud systems which have stringent security mechanisms fool-proofed by global technology giants like Google, Microsoft and Amazon.

N. Yuvaraj Dinesh Babu, Senior Advisor,EY India