The new Draft Energy Policy leaves several unanswered questions

As India's importance and role in the global energy markets continues to grow, it needs to be strategic in its energy planning.
The new Draft Energy Policy leaves several unanswered questions
The new Draft Energy Policy leaves several unanswered questions
Written by:

Anjali Viswamohanan & Kanika Chawla

The 2017 National Energy Policy (NEP), drafted by the NITI Aayog, takes the baton forward from the 2006 Integrated Energy Policy (IEP) in setting the trajectory of growth for the energy sector.

The value proposition of the NEP is to present a broad framework for the overall energy sector, taking into account the multiple technology and fuel options.

However, the NEP draft comes at a time when the energy sector is seeking clarity. In the face of claims of surplus power, even as rampant energy poverty continues to plague the country, the sector needs clear signals of the future pathways.

This need has become particularly pronounced with the rapid decline in renewable energy tariffs, and an associated and projected scaling up of grid-connected clean energy.

Highlighting the difference between the IEP and NEP, Piyush Goyal, Minister of Power, Coal, New and Renewable Energy and Mines, lauded the NEP for taking the sharp decline of crude oil prices, change in solar energy technology, heightened concern of climate change issues, and the government's rural electrification agenda into account.

However, apart from this, there is a stark difference in the broad approaches adopted by the erstwhile Planning Commission in framing the IEP and the NITI Aayog in framing the NEP. The IEP laid out a roadmap and provided a basket of specific measures to meet specific objectives.

For instance, the section in the IEP on the advancement of renewable energy recommended the conversion of the Indian Renewable Energy Development Agency (IREDA) into a national refinancing institution on the lines of NABARD, specifically to advance clean energy.

The NEP, however, contains a list of general courses of action for the government -- identified objectives that could be considered for implementation.

Going by the broad strokes of the NEP, credit is due to the NITI Aayog for recommending some revolutionary reforms, such as the opening up of the entire power sector value chain to private investment in order to create an efficient electricity market.

However, it fails to provide an adequate framework for a number of issues that have arisen and intensified over the course of India's ongoing energy transition, which is still in its nascent stage.

On the renewable energy front, the NEP disappoints by failing to address the rampant uncertainties, specifically on issues around renewable purchase obligations (RPO) and renewable energy certificates (REC). The only half-hearted consolation on offer is targeted at the distribution companies (Discoms) which have been assured of government support for implementation of RPO and REC obligations.

The RPO system has perhaps already served its purpose in nudging states with renewable energy potential to incorporate clean energy into their energy mix. As renewable power becomes more commercially viable, states could be left to decide how, when and what source of power to integrate into their system, as no clear measures are being adopted to provide the much-needed enforcement of the obligations.

Policy uncertainty is further highlighted in the NEP's focus on utilising coal powered thermal plants for securing the base load requirement to meet rising energy demand. The NEP's reliance on thermal power fuels scepticism about India's commitment to clean energy, and could distort investor confidence in the renewables sector.

From both an air quality and a climate leadership perspective, it would not be ideal for India to stress on expanding its thermal power capacity to 441 GW in 2040 from 125 GW in 2012, as proposed in the NEP, without having adequate technology in place for improving the efficiency and reducing the emissions from these plants.

The Ministry of Environment, Forests and Climate Change had come down hard on coal-fired thermal power producers in 2015, setting a December 2017 deadline for meeting revised norms on emissions. However, with developers being reluctant to absorb the high cost for retrofitting their projects to meet the new standards (around Rs 1 crore or $1.56 million per megawatt), the government is likely to push the deadline for compliance to December 2019.

The NEP makes broad recommendations on how India should work towards developing and acquiring technology needed for the energy sector. However, it does not recommend consistent and strong policy and budgetary support for technology development.

The NEP prescribes grid-based supply to all households to be India's primary endeavour, with renewable energy implemented to address the access issue only in cases where grid power is unavailable. The NITI Aayog in this instance has used the term renewable energy interchangeably with decentralised renewable energy. A rationale for this position has not been indicated, even as the government continues to promote decentralised electrification programmes.

Rather than promoting a particular means of electrification, the NEP could encourage context-specific electrification approaches, by considering economic viability, consumer demand and aspiration, affordability, as well as reliable provision of electricity.

As India's importance and role in the global energy markets continues to grow, it needs to be strategic in its energy planning.

(In arrangement with Views expressed are those of the website.)

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