Changing Course: Policy and regulatory developments in the past one year

Policy and regulatory developments in the past one year

In the past one year, the power sector has witnessed several policy and regulatory measures being taken by the central government. Several of these we­re focused on the generation segment. A key policy development was the notification of the Draft National Elec­tricity Plan for generation, outlining the capacity addition requirements for the coming years. Further, in a key relief measure for power producers, the environment ministry notified revised deadlines for emission compliance by thermal power plants (TPPs), giving them an extension for meeting the SOx norms.

On the transmission side, the key policy moves included the launching of the Gr­een Energy Corridors (GEC) Phase II programme and the Connectivity and Gene­ral Network Access (GNA) to the Inter­state Transmission System (ISTS) Regu­lations, 2022. In a significant move, the pri­me minister formally launched the Mi­nistry of Power’s (MoP) Revamped Dis­tribution Sector Scheme (RDSS) to overhaul the ailing distribution segment. This is the biggest distribution scheme so far and is a key policy highlight in the power distribution space. Also, to accelerate the pace of achieving India’s net-ze­ro goals, the government passed the im­portant Energy Conse­rvation (Amend­ment) Bill and notified new renewable purchase obligation (RPO) and energy storage obligation targets.

Power Line presents a round-up of the policy and regulatory developments in the power sector in the past one year…


  • In September 2022, the Central Electricity Authority (CEA) issued the draft National Electricity Plan for generation. The projected electrical energy requirement and peak electricity demand on all-India basis is estimated as 1,874 BU and 272 GW for the ye­ar 2026-27. To meet this peak demand and energy requirement for the year 2026-27, the plan estimates that the capacity addition required during 2022-27 will be 228,541 MW. Apart from under-construction coal-based capacity of 25 GW, the additional coal-based capacity required till 2031-32 may vary from 17 GW to around 28 GW, as per the CEA. Further, for 2022-2027, the CEA has projected the total fund re­quirement to be Rs 14.31 trillion.
  • In a major relief for TPPs, the Ministry of Environment, Forest and Climate Change (MoEFCC) issued the Envi­ro­n­­ment (Protection) Second Amend­ment Rules, 2022 in September, under which it has extended the deadlines for TPPs to install equipment to cut sulphur emissions by two years. The deadline for TPPs within a 10-km radius of Delhi-NCR and cities with a population of more than 1 million has been extended from December 31, 2022 to December 31, 2024. For TPPs in a 10-km radius of critically-polluted areas or non-attainment cities, the deadline has been pushed from Dec­ember 31, 2023 to December 31, 2025. For all other TPPs across the country, the deadline has been pushed from December 31, 2024 to December 31, 2026. The power plant units declared to retire before December 31, 2027 will not be required to meet the specified norms for sulphur dioxide (SO2) emissions in case such plants submit an undertaking to the Central Pollution Control Board and the CEA for exemption on the ground of retirement.
  • In August 2022, MoP issued new gui­delines on bundling renewables and storage with thermal and hydro­power. The guidelines have been issued un­der the scheme for flexibility in gene­ration. The guidelines aim to promote competitive procurement of ele­ctri­city from renewable energy power plants by thermal/hydropower generators through bundling with renewable energy and storage power, to reduce emissions.
  • During the same month, MoP also issued key amendments to the guidelines for the tariff-based competitive bidding process for procurement of round-the-clock power from grid-connected renewable energy power projects. The amendment provides that the generator will supply despat­chable renewable energy power complemented with “power from any ot­her source”, thus replacing the unidirectional approach of bundling rene­wable energy with only thermal po­wer. Further, the amendments permit renewable energy producers to combine storage to meet the requirement of maintaining at least 90 per cent availability annually, along with maintaining at least 90 per cent availability on a monthly basis for at least 11 mon­ths in a year and at least 90 per cent availability during peak hours.
  • In July 2022, the CEA notified the draft Central Electricity Authority (Flexible operation of TPPs) Regulations, 2022 for all coal and lignite-based TPPs and load despatch centres. The key features of the draft regulations are specifying a technical minimum load of 55 per cent for all TPPs; 40 per cent minimum power level to support must-run status; a ramp rate of 3 per cent per minute for all TPPs; and a minimum rate of loading or unloading of 5 per cent per minute for supercritical and ultra-super-critical units.
  • In May 2022, MoP issued a year-wise trajectory for the replacement of 58,000 MUs of thermal generation with rene­wable energy by 2025-26. An exercise has been carried out to assess the amount of energy from TPPs that can be replaced. Based on this, it was found that about 58,000 MUs of thermal generation in the central, state and private sectors can be substituted with renewable generation. A renewable energy capacity of about 30,000 MW (at 22 per cent capacity utilisation factor) would be required for the purpose.
  • During the same month, in view of enhancing coal availability at power plants, MoP issued directions to TPPs to compulsorily use 10 per cent imported coal for coal blending purposes and directed all imported coal-based power plants to operate to their full capacity. The MoP also invoked Section 11 of the Electricity Act, thereby allowing coal price to be passed through. However, following improvement in coal availability at TPPs, in August 2022, the order was partially rolled back. States and independent power producers can now decide the blending percentage after assessing the domestic coal availability.
  • In March 2022, the cabinet commi­ttee on economic affairs (CCEA) app­roved the amendments to the mega policy and extended the time to 36 months to identify 10 provisional mega certified projects for furnishing the final mega certificates to the tax authorities. As a result, the time period for the 10 provisional mega projects, which are commissioned or partly commissioned for furnishing the final mega certificates to the tax authorities has been extended to 156 months instead of 120 months from the date of import.
  • In October 2021, MoP issued a revised policy for power generation through co-firing in coal-based TPPs, in which it advised that coal-based TPPs (whe­ther with bowl mill, ball and race mill, or ball and tube mill) should mandatorily use 5 per cent blend of biomass pellets, made primarily of agro resid­ue, along with coal, on an annual basis.
  • In October 2021, MoP issued guidelines for operationalising the optimum utilisation of generating stations. The order stated that MoP has noticed some power plants were not generating to their full capacity at any given time and the unutilised capacity remains idle as they are tied up under power purchase agreements. However, in the public interest, such power needs to be supplied if there is a requirement in the grid by other consumers.


  • In June 2022, the Central Electricity Re­gulatory Commission (CERC) issued the Connectivity and GNA to ISTS Regulations, 2022. The rules provide for a regulatory framework to facilitate non-discriminatory open access to lic­ensees or generating companies or con­sumers for use of the ISTS system through GNA. These regulations facilitate connectivity and access for renewable energy generators.
  • In June 2022, the CERC notified the dra­ft Indian Electricity Grid Code (IEGC) Regulations, 2022. The regulations contain provisions for roles, functions and responsibilities of the concerned statutory bodies, generating co­mpanies, licensees and any other person connected with the operation of power systems. Long-term integrated re­source planning is one of the key aspects in the draft IEGC regulations to ensure resource adequacy.
  • In February 2022, the CERC notified the Ancillary Services Regulations, 2022, which aim to provide mechani­sms for procurement through administered as well as market-based mechanisms, deployment and payment of ancillary services at the regional and national levels. The regulations aim to maintain grid frequency close to 50 Hz and restore the grid frequency within the allowable band as specified in the grid code.
  • Earlier in December 2021, the CCEA approved the GEC Phase II programme for the intra-state transmission system (In-STS). Around 20 GW of renewable energy projects in Gujarat, Himachal Pradesh, Karnataka, Kerala, Rajasthan, Tamil Nadu and Uttar Pradesh will be­nefit from the programme’s grid integration and electricity evacuation. The intrastate transmission system under GEC II will be built over a five-year period, from 2021-22 to 2025-26.


  • The Electricity (Amendment) Bill, 2022 was introduced in the Lok Sabha in August 2022. The bill seeks to facilitate the use of distribution networks by all licensees under provisions of non-discriminatory open access. It seeks to enable management of power purchase and cross-subsidy in the case of multiple distribution licensees in the same supply area. Further, the bill seeks to amend Section 62 of the act so as to make a provision regarding graded revisions in tariff over a year and for mandatory fixing of maximum ceiling as well as minimum tariff by an appropriate commission, among other provisions. The bill, after its introduction, was referred to the parliamentary sta­nding committee on energy.
  • In June 2022, in order to tackle the problem of mounting discom dues, MoP issued the Electricity (Late Pay­ment Surcharge and Related Matt­ers) Rules, 2022. This scheme allows discoms to clear outstanding dues in a ma­­ximum of 48 equated monthly in­stalments. These rules are expected to incentivise timely payment of dues and aim to bring in financial discipline among power utilities.
  • During the same month, the prime minister formally launched the RDSS to revamp the ailing power distribution segment. The scheme, with an outlay of Rs 3,037.58 billion for a period of five years (2021-22 to 2025-26), consists of two components. Part A co­mprises metering and distribution infrastructure works and Part B inclu­des training and capacity building as well as other enabling and supporting activities. The scheme aims to achieve 100 per cent prepaid smart metering at all levels and eliminate the average cost of supply (ACS)-average revenue realised gap by 2024-25, while reducing pan-India aggregate technical and commercial losses to 12-15 per cent.
  • In November 2021, the MoP issued new rules asking states to allow automatic pass-through of fuel and power procurement costs in tariffs for discoms upon occurrence of a change-in-law event. The automatic pass-th­rough will be computed based on a suitable formula approved by the regulatory commission. The pass-throu­gh in costs and tariffs will be verified later by the commission.
  • In October 2021, the MoP released the framework for the implementation of market-based economic despatch Pha­se I from April 1, 2022, to bring down the cost of power for distribution companies and consumers. The CERC was advised to align their regulations and carry out a mock drill to ensure that the system runs smoothly.


  • In August 2022, the Lok Sabha passed the Energy Conservation (Amend­ment) Bill. The bill mandates the consumption of non-fossil fuel sources, in­cluding green hydrogen, green ammonia, biomass and ethanol for energy and feedstock by designated consu­mers; proposes the introduction of a carbon credit market; and brings large residential buildings under the energy conservation regime.
  • In July 2022, the MoP issued the RPO and energy storage obligation (ESO) trajectory till 2029-30. According to this order, the total prescribed RPO will increase progressively from 24.61 per cent in 2022-23 to 43.33 per cent by 2029-30, including a wind RPO, a hy­d­ropower purchase obligation and other RPOs. The ESO targets will inc­rease from 1 per cent during 2023-24 to 4 per cent by 2029-30, which wo­uld be met through solar and wind power projects with energy storage. Power System Operation Corporation Limit­ed has been given the responsibility to maintain data related to RPO compliance.
  • In June 2022, in a major leg up for the commercial and industrial (C&I) segment, MoP notified the Green Open Access Rules, 2022. Under these rules, green open access is allowed to any consumer and the open access transaction limit has been reduced from 1 MW to 100 kW of green energy to en­able small consumers to purchase re­ne­wable power. The rules also en­able a simplified procedure and faster ap­proval for open access to green power, uniform banking, voluntary purchase of renewable power by C&I consu­me­rs, applicability of open ac­cess charges, etc.
  • In February 2022, MoP notified the Green Hydrogen Policy to facilitate the transition from fossil fuel/fossil fuel-based feedstock to green hydro­gen/green ammonia. A key measure that the policy provides is the waiver of ISTS charges for a period of 25 years to manufacturers of green hydrogen/ammonia for projects commissioned before June 30, 2025. Further, the policy provides that open access for sourcing renewable energy will be granted within 15 days of the receipt of application.
  • In May 2022, the Ministry of New and Renewable Energy (MNRE) released draft guidelines for implementing the second phase (Tranche II) of the PLI (production-linked incentive) programme under the “National Progra­mme on High-Efficiency Solar Modu­les”. Under the guidelines, Rs 120 billion has been reserved for companies developing vertically integrated polysilicon, wafer, cell and module capacities. For wafers, cells and module capacity, the allocation is Rs 45 billion, while for cells and module capacity, the allocation is Rs 30 billion.
  • In March 2022, the MoP notified gui­delines for the procurement and utilisation of battery energy storage systems (BESSs) as part of generation, tra­nsmission and distribution assets, along with ancillary services. In accordance with the guidelines, energy can be procured from BESSs through competitive bidding for grid-connected pr­ojects, to be set up on a build-own-op­e­­rate or build-own-operate-transfer basis. The minimum project size and bid capacity requirement for intra-sta­te projects has been fixed at 1 MW, wh­ile that for interstate projects is fixed at 50 MW. The guidelines are applicable to and are binding on the BESS developer, procurer, intermediary procurer, end-procurer and implementing agen­cy.


In May 2022, the CERC directed power exchanges to put a price cap on market segments in the power trading market. It directed the exchanges to redesign their software such that members can quote prices in the range of Rs 0-12 per kWh in the day-ahead market (DAM) (including green DAM), real-time market, intra-day, day-ahead contingency and term-ahead market (TAM) (including green TAM) contracts. In order to protect consumer interests, the commission decided to extend the applicability of the or­der till September 30, 2022. In January 2022, the MoP released up­dated guidelines and standards for charging infrastructure for electric vehicles. Under the guidelines, the tariff for electricity supply for a public charging station will be a single-part tariff and will not exceed the ACS till March 31, 2025 and discoms can leverage funding from the RDSS under Part A – Distri­bution Infrastructure for the general up­stream network augmentation nece­ssitated by the upcoming charging in­fra­structure in various areas.

To conclude, a number of policy and re­gulatory initiatives have been taken in the past one year to address outstanding issues and drive sector growth. With the draft National Electricity Plan for generation; the Green Open Access Ru­les, 2022; and the Green Hydrogen Po­licy; exciting changes can be expected in the sector.