Making power consumer a king

A household in the state of Maharashtra can now choose to consume 100 per cent green power. This is the first time in India that small power users in the residential category have got this option, though there will be a premium to be paid. 

If each retail consumer in India was given an option to consume 100 per cent clean power, how many do you think would switch? 

In response to this question, exactly one year ago, in an interview with BloombergNEF, Tata Power’s Managing Director and Chief Executive Officer, Praveer Sinha, said: “I have not done any survey. My guess would be about 50 per cent would shift. There are many youngsters (Millennials, GenerationZ) who would believe in doing it.”

This will now get tested in the market. Robust demand will have an impact on the supply side too.

Premium for green power

The premium to be paid for 100 per cent green power — over and above the normal tariff — has been fixed at Rs 0.66 ($0.01) per unit by the Maharashtra power regulator. 

Though renewable energy is the cheapest source of power today, plugging it into the power network adds costs. The more inefficient the network, the higher the transmission and distribution losses, and the higher the cost of delivered power. 

Tata Power expects the premium to decline: “We are confident that with development of new technologies and increased environmental consciousness, there would be a pull for clean energy and the premium would reduce over a period of time.” 

Draw of simplicity 

After being approached by consumers with requests for supply of 100 per cent green power, Tata Power Company (Distribution) filed a petition with the Maharashtra regulator in June 2020, seeking approval for such supply, and for green power tariffs. 

Companies opting to be fully powered by renewables have multiple options to procure the supply. Large commercial and industrial users can secure direct deals with clean power generators (open access), set up captive renewable energy plants or host solar plants on the roofs of their factories and offices. All these options would typically result in a lower electricity bill. Green power supply through the distributor however has the advantage of simplicity. 

“Many corporations do not wish to go through this process of sourcing renewable energy because either they are not eligible to avail open access under the current regulatory framework — or they do not have the resources, expertise and the bandwidth required for carrying out this activity. In view of this, these consumers have approached TPC-D to meet their requirement of 100 per cent green energy,” Tata Power said in the petition. 

Other distribution licensees in the state were subsequently included in the petition. 

A week after the order was issued by the Maharashtra regulator, Tata Power said that it was “ready” to provide this service, and some consumers were already in “initial discussions” to opt for it.

Next phase

India’s power market is out of the extreme deficit phase when customers had to routinely depend on private arrangements to ensure supply for large chunks of the day. That is what led to the addition of some 100,000 megawatts of diesel generators across the country, supplying pricey power.

The Indian power consumer, in addition to being given the choice of buying green electricity only, might also get to choose the supplier soon. 

“The distribution companies across the country are monopolies, either government or private. There is a need to provide choice to consumers by promoting competition. A framework will be put in place to give consumers alternatives to choose from among more than one distribution company,” said Finance Minister Nirmala Sitharaman in her Budget speech on February 1. 

Separately, in what could be a boon to the power buyer in the union territories at least, the government took a decision to privatise distribution. In response to a parliament question last month, Power Minister R K Singh explained that this was done “with the objectives of providing better services to consumers and an improvement in operational and financial efficiency of the distribution sector, which currently is beset with inefficiencies. This will also provide a model for emulation by other utilities across the country.”

There were multiple interested bidders, according to media reports, though the decision to privatise has been challenged in the courts. 

Almost 300 companies globally have pledged to be fully powered by renewables under the RE100 initiative, including big names such as Apple, Facebook and Google. A large number of firms in the Asia-Pacific region committed to RE100 in 2020.  Meanwhile, there are many power retailers around the world that supply only green energy. 

The writer is Editor – Global Policy for BloombergNEF. She can be reached at vgombar@bloomberg.net