In a recent interview with Power Line magazine, Anil Sardana, managing director, Adani Energy Solutions Limited, and managing director, Adani Power Limited, discussed the key recent achievements in the power sector, the advances in the energy transition as well as the future outlook for the power sector. Edited excerpts…
How has the sector evolved over time? What have been the key achievements?
Over the past decade, India’s power sector has witnessed a transformation, marked by noteworthy achievements. A key achievement is the country’s transition towards renewable energy, resulting in a significant increase in capacity and remarkably low tariffs in solar and wind energy. This shift towards renewable energy aligns with India’s ambitious target of achieving 500 GW of non-fossil capacity by 2030. Despite notable achievements such as enhanced grid discipline, with insignificant fluctuations in grid health parameters (such as frequency and voltage) and improvements at the discom level, including efforts to bridge the cost of electricity and tariffs and reduce AT&C losses and receivables, a lot more still needs to be done.
The government’s interventions have played a pivotal role in this transformation. Programmes such as 100 per cent electrification and the Ujwal Discom Assurance Yojana; amendments to the Electricity Act; several progressive rules, regulations and guidelines; and the Revamped Distribution Sector Scheme have had a profound impact on the sector’s growth. Energy efficiency measures such as the Perform, Achieve and Trade scheme have promoted responsible energy consumption, while the promotion of electric vehicles (EVs) and associated charging infrastructure has accelerated the electrification of mobility. Furthermore, grid modernisation efforts, including the deployment of smart grid technologies, have accelerated the move towards general network access with better grid reliability as well as the seamless integration of renewable energy sources.
Despite these achievements, India faces challenges in reducing coal dependency, ensuring energy equity across all regions, combating climate change, securing a sustainable energy future, and duly maintaining the competitiveness of services.
How has the performance of the sector been in advancing the energy transition?
The power sector in India has demonstrated commendable progress in advancing the energy transition over the years. In recent times, the sector’s performance in this regard has been noteworthy, owing to various initiatives, some of which are highlighted below.
Renewable energy growth: As of July 2023, the cumulative solar and wind capacity stands at 115 GW, with around 37 per cent of it commissioned in the past three years, indicating a clear acceleration in the adoption of renewable energy. The consistent growth in renewable energy installations and declining costs reflect the sector’s commitment to clean energy sources. Now there is an added spurt to homegrown storage solutions in terms of pumped hydro storage, which will enable round-the-clock green electricity.
Policy support: The government has introduced a series of policy support initiatives to catalyse the energy transition, such as renewable purchase obligations, renewable generation obligations, hydropower obligations, renewable energy targets, the National Solar Mission, and incentives for clean energy adoption. These policies have provided a favourable environment for renewable energy development. The influx of capital has fuelled the development of renewable energy projects and associated infrastructure. In addition, the waiver of interstate transmission charges for capacities built until June 2025, duly tapering it until June 2028, is a significant incentive for renewable energy capacities and their utilisation.
Electrification of transportation: Efforts to promote EVs through the introduction of policies (FAME and PLI schemes) and incentives across states are contributing to the reduction in fossil fuel consumption in the transportation sector.
However, challenges continue to emerge given the size of the sector and the legacy of challenges. The sector must address issues related to the integration of intermittent renewable energy sources into the grid and the reduction of coal dependency while prioritising affordability for all citizens.
“Our energy mix should evolve towards a harmonious blend of renewables, energy storage and responsive thermal power, with continuous investment in innovation and infrastructure.”
What is your view on the future energy mix in the country? What should be the key focus areas to achieve the desired energy mix?
The future energy mix in our country demands a strategic approach that addresses both immediate challenges and long-term sustainability. While renewable energy is pivotal for reducing emissions and ensuring a greener future, we must acknowledge the constraints of intermittency, supply chain, etc. Additionally, the unavailability of optimal sites (onshore) for wind and the high cost of offshore wind are challenges that we must address over the next decade.
Meeting the baseload requirements remains a pressing concern until energy storage solutions, particularly chemical battery technology, become economically viable. Pumped storage projects (PSPs), although promising, have a prolonged gestation period. Till then, thermal power will be necessary for meeting the baseload and grid balancing requirements; however, the associated environmental concerns will remain.
To navigate these challenges, a multifaceted approach is essential. Expediting research and development efforts is crucial to enhance the efficiency of existing technologies, introduce new technologies, support the transfer of new technologies and promote domestic manufacturing. Additionally, incentivising the deployment of PSP can provide much-needed grid stability. Ultimately, our energy mix should evolve towards a harmonious blend of renewables, energy storage and responsive thermal power, with continuous investment in innovation and infrastructure.
What is your assessment of the current state of the power distribution segment? Do you see signs of improvement?
The current state of the power distribution segment in India is characterised by persistent fiscal losses and debt challenges, which have been further exacerbated by the impact of the Covid-19 pandemic. However, there are promising signs of improvement in the segment, as indicated by the 11th Integrated Ratings Report.
AT&C loss reduction: The sector has shown progress, with AT&C losses improving from 19.9 per cent in FY2020 to 16.5 per cent in FY2022. This improvement can be attributed to enhanced collection efficiency, which rose from 93.1 per cent in FY2020 to 97.2 per cent in FY2022, along with subsidies disbursed by states.
Reduced cash gap: The sectoral cash gap decreased significantly, dropping from Rs 970 billion in FY2020 to Rs 530 billion in FY2022.
Loss reduction: Losses, measured at 79 paise per unit in FY2020, reduced to 40 paise per unit in FY2022.
Moreover, the power distribution segment is set to experience robust growth in electricity demand. The pre-Covid growth rate of around 5 per cent until FY2019 has increased to approximately 9 per cent in FY2023. This growth is driven by government initiatives such as the target of achieving a $5 trillion economy. With the Atmanirbhar Bharat and PLI schemes, power demand is going to increase in the manufacturing and industrial sectors. Additionally, changing consumer lifestyles, driven by factors such as the increased adoption of air conditioners and EVs, will contribute to higher residential demand.
With amendments to the Electricity Act, the government has prioritised smart metering, public-private partnerships, energy efficiency, and consumer-centric services. Regulatory reforms, such as the Power Market Regulations and Green Open Access Regulations, aim to increase competition and ensure grid discipline. These concerted efforts are expected to drive significant improvements in the power distribution segment over the near to medium term.
“Addressing discoms’ financial woes requires a multi-pronged approach, including tariff reforms, improved operational efficiency and prudent fiscal management.”
What are the biggest challenges facing the sector? How can these be resolved?
The unexpected spikes in peak demand, with the peak demand reaching 241 GW on September 1, 2023, emphasise the need for a resilient and flexible power system. Enhancing grid integration, upgrading transmission infrastructure and investing in energy storage solutions are essential steps to address this issue.
Minimising T&D losses remains a persistent challenge. The widespread implementation of smart meters across the country can significantly reduce these losses, enhance billing accuracy and empower consumers with real-time energy data.
The financial health of discoms continues to be a long-standing concern. Addressing discoms’ financial woes requires a multi-pronged approach, including tariff reforms, improved operational efficiency and prudent fiscal management. Resolving these challenges demands a comprehensive strategy encompassing a balanced energy mix, grid resilience, technology adoption and financial reforms. Collaboration among the government, industry and civil society is crucial for surmounting these obstacles and ensuring a reliable and sustainable power sector for India’s bright future.
What is your outlook for the sector for the near to medium term?
In the near to medium term, the power sector is poised for a dynamic transformation, with energy transition becoming a necessity. Renewable energy sources will continue to play a central role in the energy mix, driven by environmental and climate change concerns. In addition to this, the emergence of green hydrogen as a viable energy carrier and advancements in nuclear technologies, especially small modular reactors (SMRs), will contribute to a more diverse and sustainable energy portfolio. PSPs, another pivotal focus area, will gain prominence in the near to medium term as they offer a reliable means of grid balancing and storage, addressing the intermittency issue of renewable energy.
Coal is likely to remain a mainstream source for baseload requirements in the short to medium term. However, we can anticipate a gradual transition away from coal, with battery energy storage systems, PSPs and SMRs gaining prominence in the longer run, driven by technological advancements and changing market dynamics.
The Government of India’s strong commitment to renewable energy will drive exponential growth in green energy deployment over the coming years. This growth will likely be accompanied by the emergence of new and improved technologies, further enhancing the efficiency and affordability of greener solutions. As leaders, it is imperative that we adapt to these changes, invest in innovation, and collaborate to ensure a resilient and environmentally responsible energy future.