DISCOM’s overhaul plan could speed up payments and strengthen transport network
The Ministry of Power (Swab) last month released detailed guidelines for the reform-based results-based power distribution program over the next five years.
The program aims to reduce overall technical and commercial (AT&C) losses across India to 12-15% and improve the quality and reliability of consumers’ power supply through a financially and operationally efficient distribution sector.
Through this program, MoP will provide grants to DISCOMs to install prepaid smart meters, take advantage of artificial intelligence, machine learning and blockchain technology, and provide financial assistance to upgrade distribution networks. .
In June 2021, Union Finance Minister Nirmala Sitharaman announced expenditure of 3.03 billion yen (approximately $ 40.82 billion) for the reform-based electricity distribution program.
Distribution companies (DISCOM) and solar developers are optimistic that the program would help improve the financial conditions of DISCOMs and strengthen the transmission network to reduce losses.
Improve the transport network
According to the directives, an interministerial committee will be set up under the chairmanship of the secretary of the MoP. The committee will design and approve all operational guidelines and review and monitor the implementation of the program.
DISCOM will receive financial assistance of up to 60% to upgrade distribution systems under this program. For special category states, DISCOMs will receive up to 90% assistance in upgrading distribution networks.
Commenting on the program, the technical director of a DISCOM in Karnataka said the funding would help them upgrade redundant transformers and other technologies.
âWith this funding, we can reach the last mile to provide electricity to consumers. In addition, modernizing transmission networks would help us reduce transmission and financial losses, âsaid the DISCOM official.
Shishir Singh, Deputy Managing Director of Tata Power Delhi Distribution Limited, said: âThe government should support the electricity sector to improve the electricity distribution sector, as it is a subsidized and regulated industry. If the government does not support DISCOMs to improve distribution infrastructure, overall economic development will be hampered as all industries need efficient power supply. Government financial aid and soft loans have helped DISCOM to improve the distribution network in the past; otherwise, DISCOM networks would have faced a difficult situation.
Echoing similar thoughts, a senior executive at private Delhi-based DISCOM said the funding would help modernize distribution networks and reduce distribution losses. The transformers of many DISCOMs are in poor condition leading to technical losses.
He suggested that the government include private DISCOMs in the program with different criteria for them.
Animesh Damani, Managing Partner, Artha energy resources, said: âThe program will not have a direct impact on renewable energy developers. However, if the program is implemented correctly, DISCOMs can improve transmission systems, which would benefit renewable energy producers. If DISCOMs can improve their financial situation and reduce AT&C losses, then renewable energy producers can receive their payments on time.
Financing of prepaid smart meters
To roll out prepaid smart meters by December 2023, the program will fund a lump sum of 15% of the cost per meter across the entire project, up to a maximum of â¹ 900 (~ $ 12). Funding will be 22.5% for special category states up to 1,350 (~ 18) per meter.
DISCOMs – which launched calls for tenders for prepaid smart meters after January 1, 2020 – will be eligible for funding if they carry out prepaid smart meter work in TOTEX mode (capital expenditure + operating expenses) after approval of the monitoring committee.
Uttar Pradesh DISCOM’s technical director said the 15% grant was not enough. Paying the rest would be a burden on DISCOMS and hamper the deployment of smart meters.
Echoing similar thoughts, the technical director of Karnataka-based DISCOM said at least 50% grant should be extended to DISCOM to deploy prepaid smart meters.
Vinay Pabba, Founder and Managing Director of Varp Power, said: âIf DISCOM manages to get the balance of funding after the Union Government grant funding has been funded, it could fundamentally change the DISCOM working capital cycle. . The paradigm shift from the post-paid model to the prepaid model can reduce the working capital gap. As a solar developer this is great news for me as it translates into quick payouts.
Artificial intelligence and blockchain technology
According to MoP guidelines, artificial intelligence, blockchain technology, and machine learning will be leveraged to implement actionable management information systems to help DISCOMs make loss reduction decisions , demand forecasting, asset management, hourly pricing, renewable energy integration and other predictive tools. analysis.
As part of the program, Power Grid Corporation of India’s Smart Grid Knowledge Center, Manesar, will be developed as a resource center for smart grid activities in the country. The ministry earmarked 300 million yen (~ $ 4.03 million) to expand the centre’s activities with 100% gross budget support. The fund will be used to create applications related to artificial intelligence in the distribution sector.
Commenting on this, a senior executive at a Delhi-based private company said, âArtificial intelligence is a wide range of technologies. Currently, we are using artificial intelligence and machine learning for demand forecasting. We also use it for asset health management and forecast customer demand and peak load. DISCOMs can import data through smart meters. With this data, artificial intelligence and machine learning can help DISCOMs predict demand through behavioral demand response techniques.
Echoing similar ideas, Singh said the introduction of new technology and data analytics would help DISCOMs reduce losses and better forecast demand.
DISCOM owed 121.91 billion yen (~ $ 1.63 billion) to renewable energy producers (excluding litigation amounts) overdue on 256 bills pending at the end of June 2021, according to data published by the Ministry of Energy.
The financial health of DISCOMs has consequences for all electricity producers, including renewable energies. DISCOMs are buyers of produced electricity and are essential to the growth of renewable energy with a target of 450 GW of installations by 2030. Buyer risk is one of the main obstacles to investment in the sector. DISCOM’s overhaul plan leaves stakeholders hoping for positive change.
Harsh is a journalist at Mercom India. Previously with Indian Express, he covered stories of general interest. He holds an MA in Journalism from the Symbiosis Institute of Media and Communication in Pune.
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