Challenges and opportunities in distribution of electricity
By : Editorial Team - (Spicos)

The power sector in India is in a state of flux at the moment, with many challenges facing it. On the financial side, a Standard Committee on Energy reported last year that non-performing assets (NPAs) in the sector has reached over Rs 37,941 crore; a big worry for banks and investors. Apart from this, the non-availability of fuel (coal/natural gas), the inability of the promoter to infuse equity and working capital, and lack of enough power purchase agreements (PPAs) by states have contributed to the crisis. Currently, thermal power plants contribute 66 per cent of the electricity consumed in India, and the fact that a large chunk of  stressed assets is from the thermal sector is a big worry.

The power ministry is aware of these problems. Former minister of power, coal and new and renewable energy Piyush Goyal has assessed the power sector investment potential to be to the tune of $250 billion by 2019. But with 2019 having come,  it’s time to reassess, revisit investment fundamentals, and look at new strategies to revive the power sector.

Due to this downward price spiralling, multiple issues related to PPA have started to surface. Suddenly, earlier prices as determined by the Central/State Electricity Regulatory Commissions have now started to look irrational to the power purchasers and on many occasions these buyers have created problems for producers. Such developments have created bottlenecks in power purchase and have forced power producers to be cautious about their future investments and recalibrate their operational strategy. The financial health of power distribution companies (discoms) is a major worry for the whole country.

Major challenges can be taken up as:

Lack of credible information: Improper consumer database is the biggest obstacle for the discoms for proper billing and collection of revenues. There is a need for implementation of comprehensive IT interface system that can provide exact baseline data about their assets , consumers and finances. Lack of proper information hinders decisions in estimating losses, arresting theft or making investments.

There is a need to depoliticize the sector to stop any political intervention in the working of discoms and the regulator. The regulator needs to set tariff regularly according the fuel price change and must do it under universal service obligation i.e. considering all consumers (rural and urban) together. There should be disciplined standards of performance and penalties for service deficiencies.

Better technology for discoms: All the discoms need better and energy efficient technology and govt. needs to finance good amount of funds in this direction rather than focusing the funds in subsidies and cross subsidies. Better infra, equipments, automation, consumer interfaces and services will lead to huge reduction in losses.  

Segregation across business elements: According the Shunglu report, the unbundling and restructuring of the SEBs was done across the country after Electricity act 2003, but it was majorly done on papers, but not in true sense. There is a need for proper segregation of generation, transmission and distribution sectors for proper energy accounting  and loss calculation. Apart from that this will be the base for implementation on IT interface for moving the Smart grids in the future ahead.

Agriculture and rural consumption segregation: Apart from unbuldling,the discoms need the focus on segregation of agriculture and rural feeders. 

The load segregation can be used to estimate accurate agricultural and rural consumption in states impacting loss calculations as well as agricultural consumption will help subsidy estimations for the state discoms.

With the aim of reducing losses and improving the power distribution sector of state utilities, the Union Government has launched the Restructured Accelerated Power Development and Reforms Programme (R-APDRP). IT-enabled system has been introduced for energy accounting and Supervisory Control and Data Acquisition (SCADA) for big cities. In broad terms, the power sector is expected to achieve break-even at T&D loss levels of around 20 per cent or so for the utilities to make profits.

Withdrawing free and unmetered power supply to agriculture sector is very difficult politically. Charging flat rates and metered supply is assured with high quality power. Separate feeder to agriculture is provided in a roster of farm power supply through separate feeder along with high quality power. Implementing High Voltage Distribution System (HVDS) as segregated feeder to farmers has been attempted as free and subsidised power to agriculture. HVDS feeder provides quality power and stops theft or illegal tapping of power.

In the cities, distribution companies intent on modernising— and getting customers to actually pay for their power rather than steal it—have been forced to broaden their scope. In any case, reducing power theft among the urban poor will solve only one of the many problems for India’s grid. Expanding the grid to reach every home and business would require many trillions of rupees. For many, gaining access to electricity through solar micro-grids and other local power sources that bypass the traditional utility model is a far more practical option.

Electricity conservation at home is possible by proper education to consumers. Power theft is widespread in developing countries and important economically as well as politically. Power theft is politically correlated. It occurs more often around election time when well-off farmers are allowed to exceed their allotted usage for private tube-wells.

Smart grid is one of the key components of this transformation. A smart grid is a digital electrical grid with an information network that facilitates the gathering and distribution of information with regard to the usage of power by suppliers and consumers. This will lead to electricity services becoming reliable, efficient, cost effective, and environmentally conscious.

The other key component is smart metering which not only reduces theft and pilferage, but also helps the distribution companies collect data which can help in better load planning and management. There needs to be implementation of energy audit schemes for all big industries and utilities. It is important to set bench-marks for yearly reduction of T&D losses. Measures for reducing technical losses are identification of the weakest areas in the distribution system and strengthening or improving them so as to draw the maximum benefits of the limited resources. The central and the state governments should draw plans to provide financial support to the utilities for installation of meters at all the distribution transformers. The financial institutions should be encouraged to provide easy loans to utilities for taking remedial measures to reduce the T&D losses. It is a very important factor for efficient utilisation of energy.

Five key challenges facing the power distribution 

Fuel Security Concerns: Thermal capacity addition is plagued by the growing fuel availability concerns faced by the Industry. While a significant gas based capacity of more than 20,000 MW is idle due to non-availability of gas. Coal supplies by CIL is restricted to around 65% of actual coal requirement by coal based thermal plants, leading to increased dependence on imported coal with the cascading result of high power generation costs.