A CHANGE IN INDIA’S POWER EXPORT RULES

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Context: India amended power export rules to allow rerouting power to domestic grids if partner countries delay payments.

Details

• India’s energy sector is undergoing a significant transformation with recent changes in its power export regulations. This amendment impacts how India handles its international power supply agreements, particularly with Bangladesh.
• In the fiscal year 2023-24, power exports from India to Bangladesh reached over $1 billion, accounting for 9.3% of India’s total exports to its neighbour. This is a considerable increase from just 3% two years prior, reflecting the growing importance of electricity in the bilateral trade between the two countries.
• India’s surplus energy capacity has enabled it to become a net exporter of electricity. Currently, power is exported to Bangladesh, Nepal, and Bhutan. For example, during periods of low hydropower generation in Bhutan, India steps in to supply electricity, ensuring a stable energy supply for its neighbours.

The Godda Project ●The Godda power plant, located in Jharkhand, is the country's first transnational power project, where the entire power output is supplied to another nation—in this case, Bangladesh. ●The plant, operated by Adani Power, has a net capacity of 1,496 megawatts (MW) and started operating under a 25-year Power Purchase Agreement (PPA) with the Bangladesh Power Development Board (BPDB) in 2017. ●Issues surrounding the Godda project High Costs: The BPDB has expressed concerns over the high cost of coal used at the Godda plant, imported from Australia’s Carmichael mine. Reports indicate that the price of coal was significantly higher than what the BPDB pays for coal at its own plants. Maintenance Charges: The PPA includes high capacity and maintenance charges, regardless of the actual power generated, which BPDB has found excessive compared to industry standards. Payment Delays: There have been delays in payments to Adani Power, partly due to the BPDB’s internal auditing process. This has led to further complications and the need for regulatory flexibility.

Why the Recent Regulatory Change?

• In August 2024, India introduced a significant amendment to its power export rules. This change allows Indian power exporters to reroute their electricity to domestic grids if there are delays in payments from partner countries.
  • • This adjustment primarily aims to mitigate risks associated with political and economic instability in neighbouring countries like Bangladesh.
• Bangladesh, despite making progress in expanding electricity access, has faced challenges. Despite its substantial power generation capacity, the country struggles with fuel and gas supply issues, leading to an underutilization of its power plants.
  • • For example, Bangladesh’s installed generation capacity was around 28,098 MW as of June 2024, yet there was an idle capacity of approximately 11,621 MW.

The new amendment is designed to offer greater flexibility for Indian power exporters:

• Reduced Dependency: It reduces reliance on external markets and provides the ability to redirect power to the domestic market if needed. These safeguards against potential financial or political risks in partner countries.
• Operational Stability: It ensures that Indian power exporters are not left in a difficult position due to delays or payment issues from other nations.

Impact of the Amendment

• Flexibility and Security: The amendment provides Indian power plants with greater flexibility. If there are payment delays or other issues in Bangladesh, these plants can now sell their power to the Indian grid. This reduces the financial risk associated with international transactions.
• Continued Commitment: Despite these changes, Adani Power has reaffirmed its commitment to supplying electricity to Bangladesh. The company’s spokesperson stated that the recent amendment does not affect the existing contract, which means that Bangladesh will continue to receive power from the Godda plant.
• Economic Benefits for India: The surge in power exports has contributed significantly to India’s economy. With over $1 billion in power exports, this sector has become a vital part of India’s trade with Bangladesh, reflecting the growing economic ties between the two nations.
• Strategic Energy Partnership: For Bangladesh, the Godda Power Project represents a crucial energy source. Despite having a large power generation capacity, Bangladesh has struggled with fuel supply issues and underutilization of its own power plants. The imported electricity helps meet its energy demands and stabilize its power supply.

Power Sector

• The power sector is crucial for the economic growth of India. The country has made significant efforts to transition from a power shortage to a surplus by establishing a national grid, strengthening distribution networks, and achieving universal household electrification.
• India's power sector is highly diversified, with sources including coal, natural gas, hydro, nuclear power, as well as wind, solar, and other non-conventional sources.
• Electricity demand in India is rapidly increasing, requiring a substantial increase in generating capacity. As of 2021, India ranks fourth in wind power capacity, solar power capacity, and renewable power installed capacity globally.
• India is also the only G20 country on track to meet the Paris Agreement targets. The Ministry of Power continues to work towards providing universal access to affordable and sustainable power, supporting the country's economic growth and welfare.

Market Size

• Installed Power Capacity: India has an installed power capacity of 429.96 GW as of January 31, 2024. This places India among the top three largest producers and consumers of electricity globally.
• Renewable Energy Capacity: As of January 31, 2024, India’s installed renewable energy capacity (including hydro) is 182.05 GW, which constitutes 42.3% of the total installed power capacity.
  • • Breakdown of renewable energy sources as of April 30, 2024:
      • Solar Energy: 82.63 GW
      • Wind Power: 46.16 GW
      • Biomass: 10.35 GW
      • Small Hydropower: 5.00 GW
      • Waste to Energy: 0.59 GW
      • Hydropower: 46.93 GW
    • Renewable Energy Capacity Addition: Non-hydro renewable energy capacity increased by 15.27 GW in FY23, up from 14.07 GW in FY22. This indicates a growth trend in the addition of renewable energy capacity.

Power Generation and Demand

• Growth in Power Generation: Power generation in India saw its highest growth rate in over 30 years in FY23. Total power generation increased by 6.80%, reaching 1,452.43 billion kilowatt-hours (kWh) by January 2024.
• Power Consumption: India's power consumption was 1,503.65 billion units (BU) in April 2023, indicating a significant electricity demand.
• Peak Power Demand: The peak power demand reached 243.27 GW in January 2024. This peak demand reflects the maximum electricity load on the system at any given time.

Developments and Investments in the Power Sector

Foreign Direct Investment (FDI)

• Total Inflows: From April 2000 to March 2024, the power sector attracted FDI of US$ 18.28 billion, accounting for 2.69% of India's total FDI inflows.
• Renewable Energy: Between April 2020 and September 2023, the renewable energy sector alone drew US$ 6.1 billion in FDI equity investment.
• Solar Energy: Specifically, the solar energy sector received a cumulative FDI of US$ 3.8 billion over the past three fiscal years up to September 2023.

Major Projects and Collaborations

• NTPC’s Hydrogen and Solar Initiatives: National Thermal Power Corporation (NTPC) is making strides in green energy with projects like hydrogen fuelling station and a solar plant in Ladakh, and establishing a hydrogen hub in Andhra Pradesh.
• SJVN Projects: SJVN has been actively involved in expanding its renewable energy footprint with projects like the 500 MW Dugar Hydroelectric Project and significant agreements for solar projects in Rajasthan and Uttar Pradesh.
• Tata Power’s EV Charging: Tata Power EV Charging Solutions and Zoomcar collaborated in August 2023 to enhance electric vehicle infrastructure in India.
• Record Investments: In FY22, investment in India’s renewable energy sector soared to a record US$ 14.5 billion, marking a 125% year-over-year growth.
• Solar Projects: Significant solar projects include NTPC's Fatehgarh solar project in Rajasthan and the collaboration between Adani Solar and Smart Power India for promoting rooftop solar panels in rural areas.
• Investment and Workforce Needs: According to the National Electricity Plan 2022-32, India needs Rs. 33 lakh crore (US$ 400 billion) in investments and 3.78 million power professionals by 2032 to meet growing energy demands.

Government policies and initiatives

• PM-Surya Ghar: Muft Bijli Yojana: This scheme aims to install rooftop solar systems and provide up to 300 units of free electricity per month to one crore households.
• Increased Budget Allocation for the Power Sector: The 2024 Union Budget allocated funds that are 50% higher for green hydrogen, solar power, and green-energy corridors, reflecting a strong push towards meeting renewable energy targets for 2030.
• Green Energy Corridor Projects: To facilitate renewable power and reshape the grid for future needs.
• National Portal for Rooftop Solar: To simplify the process for residential consumers to apply for rooftop solar installations.
• Production Linked Incentive (PLI) Scheme: The National Programme on High-Efficiency Solar PV Modules was allocated Rs. 19,500 crores to boost domestic manufacturing of solar modules.
• National Smart Grid Mission (NSGM): Over 51.62 lakh smart meters have been deployed, with plans to deploy an additional 61.13 lakh.
• Electrification Schemes: Schemes like Deen Dayal Upadhyay Gram Jyoti Yojana (DDUGJY), Ujwal DISCOM Assurance Yojana (UDAY), and Integrated Power Development Scheme (IPDS) are focused on increasing electrification and improving distribution.
• Renewable Energy Targets: The Ministry of Power identified 81 thermal units to transition from coal to renewable energy by 2026, in line with the 500 GW renewable energy target.

Challenges for the Power Sector

• Transmission and Distribution Losses: Significant electricity is lost during transmission and distribution. As per the Economic Survey for 2020-21, In India, transmission and distribution losses can be as high as 20%, which is well above the global average of 10%.
• Financial Health of Discoms: Distribution companies (Discoms) often struggle with high levels of debt and the burden of subsidies. According to the Ministry of Power, Discoms owed around ₹4 lakh crore (US$ 50 billion) in debt as of 2022. This financial instability affects their ability to invest in new technologies and maintain infrastructure.
  • • The Ujwal DISCOM Assurance Yojana (UDAY) scheme was introduced to help Discoms reduce their debt and improve financial health, but results have been mixed due to implementation challenges and insufficient funding.
• Reliance on Fossil Fuels: Despite efforts to increase renewable energy capacity, fossil fuels still account for a large share of India's power generation. This reliance contributes to air pollution and greenhouse gas emissions.
  • • In 2023, thermal power plants produced more than 75% of India's electricity, which has raised concerns about environmental sustainability and health impacts on local communities.
• Renewable Energy Integration: Integrating renewable energy sources like solar and wind into the grid presents challenges due to their isolated nature. Managing grid stability while including these variable sources requires advanced technology and infrastructure.
• Regulatory and Policy Issues: Inconsistent policies and frequent changes in regulations can create uncertainty for investors and hinder long-term planning. This can impact the implementation of renewable energy projects and infrastructure upgrades.
  • • Changes in solar tariff regulations have affected the profitability of solar projects, causing delays and reducing investor confidence.

Way Forward

Upgrading Infrastructure	●Investing in smart grid technology can help reduce transmission losses and improve grid management. Smart grids use sensors and automated controls to monitor and manage electricity flows more efficiently. ●The Green Energy Corridor project aims to upgrade the transmission infrastructure to better handle renewable energy. By modernizing the grid, India can reduce losses and improve the reliability of its electricity supply.
Improving the Financial Health of Discoms	●Implementing comprehensive financial restructuring plans and better management practices can help Discoms reduce their debt. Improving revenue collection and reducing operational inefficiencies are crucial. ●The UDAY scheme has had mixed results, but it highlights the importance of financial restructuring. Successful implementation in some states shows that targeted support can lead to improvements.
Promoting Renewable Energy	●Developing energy storage solutions like batteries can help manage the intermittency of renewable energy sources. This will allow for a more stable and reliable supply of clean energy. ●The National Solar Mission is a key initiative to increase solar power capacity. By investing in storage technologies and supporting solar projects, India can reduce its reliance on fossil fuels and lower emissions.
Strengthening Policy and Regulation	●Establishing clear, consistent policies and regulatory frameworks can attract investment and support the growth of renewable energy. Transparent processes and long-term planning are essential for stability. ●The introduction of sovereign green bonds and the conferring of infrastructure status to energy storage systems are steps in the right direction. These measures provide clarity and support for green investments.
Promoting Innovation and Research	●Investing in research and development can drive innovation in energy technologies, improve efficiency, and reduce costs. Collaboration between government, industry, and academia can accelerate progress. ●The establishment of hydrogen hubs and advancements in energy storage technologies reflect India's commitment to innovation. These initiatives are crucial for achieving long-term energy goals.

Year-End Review of Ministry of Power 2023

• The government has successfully transformed the power sector from being power-deficient to power-sufficient by adding 194,394 MW of generation capacity in the past 9 years.
  • • The current installed capacity for power generation stands at approximately 426,132 MW.
• Every village and household in the country has been electrified, increasing the availability of power in rural areas from 12 hours to 20.6 hours, and in urban areas to 23.8 hours.
• In Arunachal Pradesh, efforts are being made to develop stalled hydroelectric projects to harness the immense hydroelectric potential of the region. Memorandums of Agreement have been signed for the development of 12 stalled hydroelectric projects with a capacity of 11,523 MW.
• The SAMARTH Mission focuses on biomass usage, with orders for biomass pellets reaching 31.50 LMT in the year 2023. A revised biomass policy has been issued to include bamboo and its by-products for manufacturing biomass pellets.
• The Unnat Jyoti by Affordable LEDs for All (UJALA) program, launched in 2015, is distributing LED bulbs, tube lights, and energy-efficient fans to consumers, resulting in significant energy savings and reduced GreenHouse Gas emissions.
• The Street Lighting National Programme (SLNP) has installed over 1.30 crore LED streetlights, leading to energy savings and cost reductions for municipalities.
• India ranks 4th globally in Renewable Energy Installed Capacity, 4th in Wind Power capacity, and 5th in Solar Power capacity.
• The National Green Hydrogen Mission aims to make India a Global Hub for the production, usage, and export of Green Hydrogen, with an outlay of ₹19,744 crore. The Strategic Interventions for Green Hydrogen Transition (SIGHT) Programme, under the Mission, supports the domestic manufacturing of electrolysers and the production of Green Hydrogen.
• Solar Parks are being developed to increase solar power generation capacity, with 50 solar parks approved so far.

Conclusion

• India’s adjustment to its power export regulations represents a proactive approach to managing international energy agreements. By allowing for the rerouting of electricity to domestic grids, the country safeguards its interests while continuing to support its neighbours' energy needs. This move highlights the importance of flexibility and strategic planning in managing transnational energy projects and addressing global energy challenges effectively.

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Source:

THE HINDU

Indian Express

Times of India

India Brand Equity Foundation

PIB

PRACTICE QUESTION Q. Which of the following power projects is India’s first transnational power project that supplies all its generated power to another country? A) Kahalgaon Power Plant B) Godda Power Plant C) Mundra Power Plant D) Sasan Power Plant Answer: B