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India will become a reliable energy exporter soon

February 3, 2023 11:49 am

India will become a reliable energy exporter soon

Apart from focusing on establishing a self-sufficient power sector to increase energy exports, Akhilesh Awasthy, COO of Hindustan Power Exchange, says that the view for 2023 includes a focus on green hydrogen and the creation of a separate market for carbon trading.
How do you rate the performance of the power sector in 2022?
2022 may be seen as a favourable year for the Indian power market. The government did introduce various regulatory and policy measures to drive the sector effectively. We saw the government initiating various policies to promote green power, strongly emphasising storage and green hydrogen. The government created the Late Payment Surcharge Rules, 2022 to ensure timely payments by the DISCOMs to the generators.
At the same time, the year was filled with quite a few challenges, particularly the power crisis in April–May 22 caused by fuel supply constraints. The effects were seen visibly over power exchange transactions, where the market clearing prices touched ₹20/kWh ceiling. The honourable commission had capped the day’s market prices at ₹12/kWh. Later, the prices in the term-ahead segment were also capped at Rs 12 per kWh.
India also increased its installed renewable energy capacity by 14.21 GW through October, moving it to fourth place globally. The government announced the second round of the Productivity-Linked Incentive (PLI) scheme, worth ₹19,500 crores, for the production of high-efficiency solar photovoltaic (PV) modules. Additionally, new renewable purchase obligation (RPO) targets were announced, with wind energy receiving a special category to help the sector grow. The outlook for 2023 further focuses on green hydrogen, and a separate market for carbon trading is envisaged. In this regard, the trading in ESCerts of power exchanges has resumed, and the trade is set to take place shortly.
What are the ongoing trends in India’s power trading and exchange business?
The power sector is expected to undergo a major transformation concerning demand growth, energy mix, and market operations. The term-ahead segment of the power exchange platform saw the introduction of several new contracts over the last year. The market saw the introduction of long-duration contracts with the extension of daily and weekly contracts beyond 11 days to a maximum of 90 days. The market also saw the introduction of monthly contracts and one-day single-sided contracts (based on E-Reverse Auctions) over the exchange platform.
Another major development on the power trading platform is the resumption of ESCert trading. With the talks for a carbon market intensifying and BEE proposing the carbon trading mechanism through its draught papers, we can thus see the trade of ESCerts and carbon becoming more profound in the coming months.
What are the major challenges confronting India’s power sector?
With India aiming to meet a large portion of its electricity needs through renewables, there will be a growing concern about integrating renewable energy into the grid. Sources are highly variable; it is paramount to have an adequate system to meet the sudden rise or fall in demand across the country. In other words, India would need a capacity market to meet the sudden rise or fall in demand. The honourable commission provided the draught guidelines for resource adequacy in 2022, and more developments are expected.
At the same time, high aggregate technical losses and distribution utilities’ poor financial health will always be challenging. Recently, the government introduced the Revamped Distribution Sector Scheme (RDSS) to provide financial support to distribution utilities to enhance the dependability and quality of power supply to end users.
What impact does the geopolitical situation have on the power tariffs?
As some generating companies import coal from Indonesia, the geopolitical crisis may have an impact; however, it is expected to be minimal. As India’s demand is met mainly by its domestic generation, geopolitical issues are not bound to harm the country’s energy market.
How do you look at the financial viability of DISCOMs in India?
The financial issues of DISCOMS in India have been a perennial problem in the power sector. The government has come out with various bailout packages time after time; however, the larger issue of poor financial health remains a challenge to most districts in the country.
The expert committee first recommended the bailout package under the chairmanship of Dr. Montek Singh Ahluwalia in 2001. In 2002, APDRP was introduced to control the technical and commercial losses of DISCOMs and to make them more efficient. An upgraded version of the same scheme was later introduced in 2008 and known as R-APDRP, where the emphasis was purely on using technology and IT-based solutions to bring down AT&C losses. However, as DISCOMs’ financial health deteriorated further, all schemes became less critical.
In 2015, the government introduced the UDAY scheme, and although the scheme did bring down the losses to an extent, the issue remained.
In July 2021, the government introduced the Revamped Distribution Sector Scheme (RDSS), which is a reform-based and results-linked scheme for bringing down AT&C losses to less than the national average of 15 percent and bolstering the distribution infrastructure with a focus on enhancing the dependability and quality of supply to end users.
On careful examination, it can be deduced that there are a lot of issues and challenges plaguing the distribution sector. Much deliberation will have to go into the power purchase planning by these DISCOMS, as it accounts for 75–80 percent of the overall cost. Much emphasis will also have to be placed on reducing AT&C’s losses. The role of private players in the distribution business can also be explored.
What is financial assistance required to stabilise the Indian energy sector?
India is on the verge of becoming self-sufficient in the power sector and a reliable energy exporter in the international market. India has to make strategic investments totalling more than $300 billion to reach its 500 GW clean energy capacity objective by 2030. With 165 GW of installed generation capacity, India is on track to meet 50 percent of its energy demands with renewable sources.
As per the budget for FY 22–23, the government had nearly set aside 23,000 crores of rupees for the energy sector, including 3365 crores for the solar power sector. The government also provided an additional Rs 19,500 crore for a production-linked incentive (PLI) scheme for solar cell and module manufacturing. The government is in a transition phase and is contemplating moving to low-cost energy sources. The government is further planning to step up green hydrogen initiatives, and similar PLI schemes may have to be used for promoting green hydrogen energy sources.
Further, the government aims to deepen the power markets by increasing the share of spot markets to 25 percent by 2023–24. India needs to take significant measures to change the systems that support the infrastructure and inculcate modern technology to harness the transition into clean energy truly.
For more details visit: https://www.hpxindia.com/

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