In a recent interview with Power Line, Anil Sardana, Managing Director, Adani Energy Solutions Limited, and Managing Director, Adani Power Limited, shared his views on the current state of the power sector, the key unresolved issues and challenges as well as the outlook going forward. He also discussed the plans and priorities for Adani’s energy divisions over the next one to two years. Edited excerpts…
What is your perspective on the current state of the power sector?
Over the past one decade, India’s power sector has seen a major transformation, marked by noteworthy achievements, in scale, service reliability and quality. Foremost among the accomplishments is the country’s transition towards renewable energy, leading to a significant increase in capacity and competitive tariffs in solar, wind and storage energy. This shift towards renewable energy aligns well with India’s ambitious target of achieving 500 GW of non-fossil fuel capacity by 2030. This, coupled with enhanced discipline at the grid level (insignificant excursions in grid health parameters of frequency and voltage) as also continuing improvements at the discom level (in terms of bridging the cost of electricity and tariff, reducing aggregate technical and commercial [AT&C] losses, and improving receivables), has led to a great deal of improvement. Also, the technology advent into all areas of supply and demand offers tremendous opportunities in the times ahead, thus enabling enhanced efficiency and improved deliverables to customers.
The energy requirement has been on a steady rise and is likely to increase further. The country’s economic growth, urbanisation and quality of life imperatives will push the demand further. The energy requirement is expected to grow at 8 per cent, with a rise in demand from manufacturing, infrastructure, transport and households.
Government interventions have played a pivotal role in this transformation. Programmes such as 100 per cent electrification, the Ujwal Discom Assurance Yojana (UDAY) and the Revamped Distribution Sector Scheme (RDSS) as well as amendments to the Electricity Act, 2003, and numerous progressive rules, regulations and guidelines have had a profound and positive impact in terms of both fostering economic growth and enabling improved services to customers. Energy efficiency measures through the Perform, Achieve and Trade scheme as well as the promotion of electric vehicles and associated charging infrastructure, green hydrogen, etc., through the production linked incentive scheme, and changes/additions to regulations have all accelerated electrification and the greening of the grid, at the same time bringing in energy security and transition. Furthermore, the implementation of grid modernisation efforts, including the deployment of smart grid technologies, the move towards general network access with better grid reliability and seamless integration of renewable energy sources, has had a positive rub-off effect.
That said, India faces challenges in reducing coal dependency and ensuring energy equity across all regions and in securing a sustainable energy future, duly maintaining competitiveness
of services.
What are the biggest challenges facing the power sector? How can these be resolved?
The power sector, particularly in India, faces a complex set of challenges as the country stands at the intersection of multi-decadal growth and transition towards becoming a developed nation. These challenges include India’s ambitious growth trajectory, implying a substantial increase in power demand in the coming years. Meeting this soaring demand and providing reliable electricity while adhering to renewable energy targets and grid stability is a
significant challenge.
The unexpected spikes in peak demand, as evidenced by the peak demand of 250 GW on May 30, 2024, emphasises 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.
Upgrading the transmission infrastructure to keep pace with renewable energy deployment is a challenge that needs attention. Minimising transmission and distribution 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. However, government institutions and NGOs need to be integrated into this intervention, lest vested interest elements keep spreading misinformation.
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 sector challenges demands a comprehensive strategy encompassing a balanced energy mix, grid resilience, technology adoption, faster implementation and financial reforms. Collaboration amongst the government, industry and civil society is crucial to surmount these obstacles and ensure a reliable and sustainable power sector for India’s bright future.
What is your outlook for power generation in light of the country’s energy security and energy transition goals?
As of August 2024, India’s total installed capacity stands at about 451 GW, consisting of about 243 GW of fossil fuel and about 208 GW of non-fossil fuel capacity, amounting to over 46 per cent of green energy capacity. The consistent growth in renewable energy installations (18 GW in FY 2024) and declining costs reflect the sector’s commitment to clean energy sources. Now there is an added spurt in home-grown storage solutions in terms of pumped hydro storage (PSP) and battery energy storage systems (BESSs), which will gradually enable round-the-clock green electricity availability.
To meet the 8-10 per cent growth in energy demand, renewable energy installations must increase multifold in the next five years. Nuclear energy is increasingly valued for its stable, reliable and clean electricity; however, nuclear power plants have long gestation periods and are embroiled in geopolitical issues. Given the supply chain, land acquisition and grid integration challenges, especially with PSPs and BESS at the initial stages, thermal (coal) power plants will have to play a critical role in not just meeting peak demand but also in increasing the baseload. In this respect, the government too has emphasised the importance of increasing domestic coal production, from both Coal India Limited mines and commercial mines, to meet the growing demand and reduce imports. Hence, the government’s call to add 60-80 GW of thermal capacity on a most immediate basis.
What more needs to be done to accelerate the green energy transition?
India’s path to a sustainable energy future is both ambitious and crucial, driven by the need to mitigate the environmental impact of rapid economic growth. The scale of this challenge demands unparalleled innovation, collaboration and investment from the public and private sectors.
Success in this endeavour relies on effective policymaking, strong regulatory frameworks and innovative financing. The key measures include establishing an autonomous task force to oversee renewable energy projects, implementing technology licensing to reduce costs, and boosting funding for R&D. Adopting innovative financing models, such as concessional interest rates and virtual power purchase agreements, can attract private investment and address funding gaps. Market reforms such as time-of-day pricing could also optimise demand and pricing.
In addition, the government’s reverse auction concept has impacted the capacity addition programme. It would have been far more important for the government to fix an annualised rate card for solar and wind capacity on a zoning concept and allow investors to add capacities based on their own risk-taking ability. Meanwhile, discoms could continue to procure power through regulatory interventions or a simple bidding process.
What is your assessment of the performance of the T&D segment? What are the measures needed to address the challenges in this segment?
The power transmission segment will require far greater capacity additions to effectively transmit power from regions with high levels of renewable energy to consumption centres across the country. As per the Central Electricity Authority, the planned transmission system for 500 GW of renewable energy will require an investment of Rs 2.44 trillion. This would entail additional transmission lines of a total length of 50,890 ckt km and an additional transformation capacity of 433,000 MVA. Further, the interregional capacity will increase to about 150 GW by 2030 from 112 GW at present.
The transmission segment in India is becoming much more competitive. The growing involvement of new transmission players has reduced costs, introduced updated technologies, and encouraged timely completion of projects. The private sector is playing a critical role by investing significant capital in the creation of transmission networks, taking advantage of lower global interest rates, reduced risks, the annuity model and extended infrastructure yields. This approach will also free up significant state government resources that can now be allocated to strengthening other social sectors such as health or education. Furthermore, the central and state governments should stop the practice of undertaking projects with their own funding and should adopt the practice of undertaking them through the tariff-based competitive bidding (TBCB) or public-private partnership (PPP) processes only.
The distribution segment is burdened with challenges, including unreliable supply, fiscal indiscipline and lack of desired capital expenditure spend. Despite various reform programmes including the R-APDRP, IPDS, UDAY and the financial restructuring plan, and bailout packages of lakhs of crores, the accumulated discom debt increased to about Rs 6.87 lakh crore in 2022-23. However, the government’s recent efforts have led to a positive momentum with measures such as the RDSS and the LPS Rules, forcing states to make subsidy disbursements on time. AT&C losses have reduced to 15.4 per cent in 2022-23 — 6 per cent lower than the 21.2 per cent registered in 2020-21. This improvement was driven by an increase in both billing and collection efficiency. The ACS-ARR gap has reduced from Re 0.83 per unit in 2020-21 to Re 0.55 per unit in 2022-23, with most of the state regulators issuing timely tariff orders.
The key challenge is to make discoms financially viable and empower consumers. The annual integrated ratings and consumer service rating exercises play a crucial role in helping discoms assess their performance and take ownership of their actions. The enactment of the Electricity Amendment Bill, 2022, which has provisions for empowering consumers to choose from a variety of service providers, fostering sector competitiveness and introducing privatisation in the industry along with empowering discoms in decision-making will help in bringing in efficiency and financial independence. The sad commentary is that the state governments and state regulatory commissions have not given a fillip to the provisions of the act by allowing competition in the form of parallel licences.
What is your outlook for the power sector, going forward?
In the near to medium term, the power sector is poised for a dynamic transformation with energy transition becoming a compelling necessity. Renewable energy sources will continue to play a central role in the energy mix, driven by environmental concerns and climate change. In addition to this, the emergence of green hydrogen as a viable energy carrier, energy storage (battery, PSP, etc.), and advancements in nuclear technologies, especially small modular reactors (SMRs) will contribute to a more diverse and sustainable energy portfolio. Storage in the form of PSPs and chemical batteries 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 BESSs, PSPs and SMRs gaining prominence in the longer run, driven by technological advancements and market dynamics.
The government’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 green solutions. Evolving technologies for carbon capture, utilisation and storage will also pave the way for greener products and aid the efforts in achieving the net-zero goals. It is imperative that we adapt to these changes, invest in innovation and collaborate to ensure a resilient and environmentally responsible energy future.
What are your key plans and priorities for Adani’s energy divisions over the next one to two years? What opportunities is Adani exploring in the power sector?
Adani has emerged as the largest integrated energy company in India. Our emphasis is on expanding our supply-side fleet through both thermal and renewable energy options, to reach 30 GW-plus and 50 GW-plus respectively by FY 2030.
In the transmission business, the company has expanded its engagement beyond B2G to encompass B2B options, aiming to directly cater to commercial and industrial customers, thereby becoming a solution facilitator of choice. We continue to focus on differentiating services by providing cost-effective alternatives to grid electricity while assuming responsibility for meeting their 24×7 requirements and fulfilling renewable purchase obligations with traceable green electrons to the extent needed by such industries. On the transmission front, our focus is on faster implementation of critical networks to ensure connectivity with renewable energy hubs such as Gujarat (Khavda) and Rajasthan.
In electricity distribution, we are distinguishing ourselves by offering customers choices as also being competitive. We also hope the state governments will allow parallel licence options for customers to have a choice of more reliable and competitive supply. Notably, the incumbents run by state-owned enterprises should not be concerned about parallel licences being allowed if they are already efficient and in possession of depreciated assets and competitive old-time PPAs. Besides, the incoming licensee would also be governed by the same regulator.
Our smart meters business is aligned with the government’s RDSS mandate to install 250 million smart meters by 2025-26. Supported by our expertise in the customer distribution segment, we have secured 22.8 million smart meter orders so far with a market share of 20 per cent.
With new concepts of cooling-as-a-service and thermal storage emerging, we are offering differentiated solutions under a pay-per-use cooling-as-a-service model that is sustainable, low carbon and affordable for customers.
In parallel, we are focusing on enhancing the efficiency of the existing asset base through digital and technology interventions. In the coming times, this will be key for all of us to learn and integrate.