A dull year for renewable energy

The overhaul in the Power Ministry last year has resulted in a general quiet in the sector as it continues to grapple with discom issues, power purchase agreement renegotiation and a renewable sector that is struggling to revisit the momentum of the heady days in 2014-16.

The wait and watch sentiment is apparent in the Economic Survey 2018-19. The conversation has conspicuously steered clear of metrics regarding the performance of both the thermal and renewable sectors. While the increase in solar capacity has been stated clearly, it is unclear what direction the currently faltering renewable industry, which has seen significantly less solar capacity auctioned in the past year and the wind sector that is in turmoil due to winding down of the feed-in-tariff scheme and very few auctions subsequently, will take to meet the 175GW target.

Very little for renewable energy sector reform

Solar water pumps would now be allowed to connect to the grid and sell their excess power to the grid. This is a smart move considering the limited running hours of a water pump and using of the potentially wasted electricity. Unfortunately, only the idea was introduced in the budget, the designing of mechanism and the payment scheme has been left to the states.

The only other aspect covered for the renewable energy sector is the renegotiation of power purchase agreements (PPAs) of solar projects given the lower tariff bids in auctions of other states. While the survey does not have a clear solution for the threat of PPA renegotiation that has reared its head in the recent weeks, it does seem to signal that short term PPAs are out of the question on the grounds that it would further exacerbate legal issues where the older power plants are left in the lurch, with debt-ridden discoms favouring PPA terms with newer, cheaper plants and threatening the capital investments of the former with uncertainty over the possibility of tariff renegotiation and leaving them without the option of a temporary stop gap that the short term PPAs might have provided.

Focus on energy access

The emphasis on energy access is unabated, with the Pradhan Mantri Ujjwala Yojana expected to issue 80 million LPG connections to help women circumvent the many hazards of having to cook with biomass. This target has been increased from the previous 50 million connections to be awarded by 2019. Likewise, electricity access in rural India is now at increased to 78 per cent from the previous 55 per cent in 2011 due to the Deen Dayal Upadyaya Gram Jyoti Yojana (DDUGVY). DDUGVY was responsible for strengthening and augmenting sub-transmission & distribution (ST&D) infrastructure in rural areas. It was extended a budgetary support of Rs 33,453 crores.

According to the DDUGVY, out of 597,464 census villages, 596,267 villages (99.7%) have been connected to the electricity grid. This electrification means that the grid infrastructure has reached all the villages and is energised and at least 10 per cent of the households in all villages have electricity including panchayat centres and main areas of gathering.

Because the emphasis was only for the grid to reach the village, household electrification is only at 78 per cent. To mitigate this gap in policy, Pradhan Mantri Sahaj Bijli Har Ghar Yojana, or Saubhagya scheme was introduced last year with a total budget of Rs 16,320 crores for electrification of 40.6 million remaining households across the country.

This year the budget allocation of these schemes have been laid out. In comparison, the tasks ahead of the ministries that deal with these separate schemes is enormous given that the money allocated for the year seems to be little compared to the total budget. For 40 million households, the budgetary allocation for electrification is around Rs 16,000 crores and to meet 44 per cent of the target the money allocated is only 23 per cent of the total.

The Annual Budget 2018-19 speech appears to have largely taken its cues from the survey. There was conspicuous absence of any mention of the power ministry, save a large budgetary allocation of Rs 16 lakh crores for ear-marked Smart Cities (which have a varied and vague mandate, with solar rooftop being one of the many components). The infrastructure portion of the budget saw all energies and money directed to roads and railways.

While the actual budget may still have some surprises for the sector, at the outset it would appear that Piyush Goyal has taken the spirit of dynamism and reformation (and the finance ministry’s focus) with him when he moved from the Energy Ministries to the Railways.

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