Cement, Energy and Environment

Discoms also suffer from significant operational deficiencies - both in technical terms and in collecting cash in part due to the underinvestment in back-end support systems. On the technical front, transmission and distribution (T&D) losses are high, reflecting issues such as low metering efficiency and power theft. Even when the discoms accurately bill the end user for the power consumed, their ability to collect money is poor in many cases. Moody's said government measures taken over the last two years have provided temporary relief to the banks. These include the substitution of some impaired loans with government obligations and operational improvements in electricity distribution and tariffs . However, Moody's believes that the structural issues have not been fully addressed and unless more fundamental reforms are undertaken, discoms will continue to pose a threat to the banks. This risk and uncertainty of long term power offtake is indirectly is passed onto the power generation companies, who in turn have to pay a higher cost of capital for their projects. The risk of a payment default is even more amplified in case of renewable energy projects which has one of the highest unit cost of generation. DISCOMs Need Time To Go Green CARE rates the power distribution company (discom) in Uttar Pradesh the worst in the country, with the state's DWNL (Dakshinanchal Vidyut Vitran Nigam) scoring the lowest at 3.28, and Gujarat's DJVCL top-scoring at 7.63. Tamil Nadu's TANGEDCO, also among the worst in the country, does marginally better than DWNL with 3.79. Madhya Pradesh, the new rising star, finds its discom scoring 5.59 thanks to its biggest reform - like that of Maharashtra and Gujarat - of separating feeders for rural domestic and agricultural customers. The Centre might be pushing for more renewable energy, but country' power distribution companies do not appear to be in any hurry. While Tata Power Delhi has said in its public notice for determining the 2015-16 tariff that renewable purchase obligations (RPO) should be deferred for the next four-five years, the Reliance discoms-BSES Yamuna and BSES Rajdhani– wants it to be waived off for at least two years. All three discoms said this was critical to control rising power purchase costs and keep tariffs in check. Recently the BSES discoms said they had invited bids to procure renewable energy at competitive rates, so that it doesn't unduly burden the consumers. Immediate implementation of RPOs, it said, will increase the tariff as power purchase cost is the main component of retail tariff here. DISCOMs want to implement it after two years so that it does not add to the consumer tariff as prices of renewables are expected to become competitive by then. Tata Power Delhi said it would start getting solar power by 2018-19. Fa lling Cost Of Solar PowerSolar power now costs Rs 7.5-8.5 per unit. Experts say that it's comparable with imported coal power; even domestic conventional power costs Rs 4.5-6.5 per unit. Discoms should embrace renewable energy now so that once fossil fuel becomes expensive, they can quickly shift to solar and wind resources.The Power Ministry wants State regulators to regularly revise electricity tariff so that there are no financial outages for generation companies or distribution utilities. This will also protect consumers from sudden, steep hikes in their electricity bills. The Ministry will propose this in its presentation planned for Prime Minister Narendra Modi. It is part of the next wave of reforms the Ministry wants to usher in through amendments to the Electricity Act, 2003. The Ministry's emphasis is on State regulators because power is a Concurrent subject. The Ministry also wants the State regulators to permit automatic fuel cost adjustments to avoid any lag impact on tariff. Coal-based power plants account for over 57 per cent of electricity generated in India and over the last three years, Coal India has raised prices by over 30 per cent. The variable cost component in a consumer's electricity bill is nearly 70 per cent and variable costs account for items such as fuel. According to a CRISIL report, power tariffs increased less than 5 per cent in the five years while in the same period annual per capita incomes rose 13.4 per cent. Some of the State Electricity Regulatory Commissions have shied away from increasing tariffs due to political reasons. Today financially bleeding distribution utilities that are unable to buy electricity which has also turned expensive, leaving homes in darkness and industries fuming. The Modi Government has plans to ramp up solar energy by one lakh megawatts and nuclear energy by 60,000 MW. Almost a year after the Modi Government-nearly 30,000 MW of power-generating capacity involving investments of over Rs 2 lakh crore languish without fuel because SEBs cannot pay. Many renewable energy developers are already facing payment issues in some states including Tamil Nadu and Madhya Pradesh. If India has to continue increasing the investments in solar energy sector, it needs to clean up the financial mess of the DISCOMs. There won't be supply without credit-worthy demand. To make it happen, government must insulate electricity generation and distribution from political shocks. Courtesy: www.Solarquaretr.com , :fd July, 2015 15