September 2022

With this issue, we celebrate our twenty-sixth anniversary. As before, we use this occasion to share our own take on the state of the sector.

It has been a difficult year for energy markets globally. Energy costs have been painful this summer and consumers are now bracing themselves for a harsh winter, with the oil and natural gas markets remaining tight and little relief in sight.

Back home, things held up for the better part of the year, notwithstanding the power crisis pre-monsoon that drove spot prices to Rs 20 per unit. The situation improved with the onset of the monsoons and a series of policy interventions, including putting the onus back on thermal power plants to meet the shortfall.

The good news last year was that energy demand quickly returned to pre-pandemic levels as the economy emerged from the lockdown. The load factors of coal-based power plants saw significant improvements, reversing the previous year’s trends. This trend is likely to continue and could lead to major improvements in credit profiles for IPP capacity as merchant power market prices continue to soar.

Keeping the 500 GW renewable energy aspiration in sight, renewable power capacity additions set yet another annual record. The country added more than 15 GW of non-hydro renewables in FY2022, the highest-ever annually and more than double the 7 GW it had added in the previous year.

Both energy storage and hydrogen – two key enablers of the clean energy goals – saw important developments. India announced its maiden Green Hydrogen Policy this year and its first phase touches on the right provisions such as banking (even though these require consent from state utilities). Established power majors and renewable companies announced bolder commitme­n­ts to scale up investments and develop manufacturing capacity (for electrolysers). Promising news emerged from the energy storage market, which saw the first major standalone storage auction being completed and another one being announced. New rules were also announced making it mandatory for discoms to meet energy storage obligation targets.

Yet, challenges lingered. The distribution segment returned to where it was. Despite reforms and bailouts, discom losses and outstanding dues swelled. Notwithstanding the few bright spots in Delhi, Gujarat and Haryana, AT&C losses remained broadly stagnant at 21 per cent in the last three years (UDAY’s target was to reduce them to 15 per cent).

Attempts to address these challenges were seen in recent months. A payment security mechanism was launched to introduce better payment discipline. Discoms did start paying soon after their access to short-term markets was cut. Also, the new lending scheme that was rolled out did create cautious optimism (given that sanctions and disbursements will now be subject to conditions).

Needless to say, there are still a large number of unaddressed issues in the power distribution segment. Going forward, as we head to a more dynamic market, one that has more renewables, storage, EVs, distributed generation, flexible grids, short-term power, fewer traditional contracts, etc., effective, time-bound reforms will be crucial to reap the gains from the post-pandemic demand recovery.

As these developments unfold in the electricity market in India, Power Line will be keenly watching and reporting them.

P.S.: We take this opportunity to rededicate ourselves to the mission of the magazine: to be the most trustworthy source of information and analysis for the Indian power sector. We would also like to thank our readers, editorial contributors and advertisers for their continued support.

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