Power Sector Outlook 2021:ADefining Year for India’s Clean Energy Future
The power sector outlook for the year 2021 looks bright despite the COVID-19 disruptions. The sector is currently on the path to recovery with a steady improvement in power demand and recovery in economic activities. The year 2020 witnessed a slew of powerful measures such as the announcement of privatization of DISCOMs in the Union Territories, the special liquidity infusion of INR 90,000 crores into the distribution utilities, and the increased focus on consumer rights that set the stage for greater structural reforms in the power. This trend is expected to continue in 2021.
Let us take a look at the top five developments/trends expected in 2021:
The march of renewables over coal will continue in 2021
The sun is shining bright on the Indian power sector. The share of renewable energy is constantly on the rise in the country's total energy mix. the union Power ministry’s directive to all the DISCOMs to purchase at least 21% of their total energy requirements from renewable energy sources by 2021-22 augurs well for the sector which came across as more resilient during the lockdown last year.
Even though the coal sector in the country is set to revive in 2021, the uptick in economic activities, the need of clean and resilient energy sources never appeared more pressing than in the pandemic year. Thermal power plants and coal mining appear to be losing their sheen in the world of energy and are investing in clean technology to stay relevant. For example, Coal India Limited, the State-owned behemoth is diversifying into clean energy and non-mining operations in 2021. Close to 30 coal plants are expected to retire in the coming years and the trend is getting clearer.
Improved investor sentiment
As the economy has gathered pace, the electricity demand is expected to grow at 6%– 7% this financial year. The number of projects that suffered the delay in commissioning and disruption in the supply chain in 2020 is likely to observe development or completion in 2021. As per the industry estimates, India is expected to add nearly 10 per cent renewable energy capacity addition in 2021.
The sector has seen around Rs 5 lakh crores or over 64 billion dollars investment in India in the last 6 years. The International Energy Agency has estimated that India would double its green energy capacity in 2021-22 from the 2020 levels.
The continued policy support by the government and the fall in PV prices, intermediation by the central body SECI in the sale of power increased the visibility of the sector. As per the Institute for Energy Economics and Financial Analysis (IEEFA), India received 73,480 crore-1.47 lakh crore (10-20 billion dollar) funding in the auction of the seven RE capacity addition and storage auctions that were held in India in despite the pandemic. The industry is bullish that it will be able to garner $18 billion investment per year to meet the target of 450 GW of RE by 2030.
Electricity Amendment Bill 2020
The industry is awaiting a nod for the electricity Amendment Bill 2020 which the government announced in April to carry out a set of key reforms and improve the future visibility of the sector for potential investors.
The creation of an Electricity Contract Enforcement Authority (ECEA), National Renewable Energy Policy, privatization of DISCOMs by way of sub-licensing & franchisees are the important ones the policy has proposed.
DISCOM Privatisation
The health of the ailing DISCOMs has become a serious concern for the power sector. In an effort to address the structural flaws, Finance Minister Nirmala Sitharaman announced the privatization of power DISCOMs in theUnion Territories (UTs) in May last year. Privatization of DISCOMs, along with other corrective measures, is expected to bring in greater operational efficiency, improved financial performance, and quality customer care services. The year 2021 is expected to see further reforms and privatization of state-owned DISCOMs.
Implementation of Production Linked Scheme
The PLI scheme was announced in 2020 and how well the scheme is implemented will be clearer in the days to come. The Atmanirbhar initiative for solar manufacturing is good but the reality is that the modules made in India are expected to be 15 to 20 per cent more expensive than those imported from China that has the 70% PV market in the world. We need key policies that make the homemade solar PV more affordable as it would have a direct impact on the generation cost and the power that consumers would pay for.
A well-rounded and robust power delivery system, that is scalable, market-based, and engaging the private sector stakeholders, will create a triple-win model in the long run, benefitting the DISCOMs, the franchisee, and the customer. This will further aid the government of India’s efforts to provide access to reliable and clean power for all.
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