Section 4 in The National Electricity Policy, 2005
4. Issues Addressed.-
The policy seeks to address the following issues:-Rural ElectrificationGenerationTransmissionDistributionRecovery of Cost of Services & Targetted SubsidiesTechnology Development and Research and Development (R&D)Competition aimed at Consumer BenefitsFinancing Power Sector Programmes including Private Sector ParticipationEnergy ConservationEnvironmental IssuesTraining and Human Resource DevelopmentCogeneration and Non-ConverItional Energy SourcesProtection of Consumer Interests and Quality Standards.5.1Rural Electrification.-5.1.1The key development objective of the power sector is supply of electricity to all areas including rural areas as mandated in section 6 of the Electricity Act. Both the Central Government and State Governments would jointly endeavour to achieve this objective at the earliest. Consumers, particularly those who are ready to pay a tariff which reflects efficient costs have the right to get uninterrupted twenty-four hours supply of quality power. About 56% of rural households have not yet been electrified even though many of these households are willing to pay for electricity. Determined efforts should be made to ensure that the task of rural electrification for securing electricity access to all households and also ensuring that electricity reaches poor and marginal sections of the society at reasonable rates is completed within the next five years,5.1.2Reliable rural electrification system will aim at creating the following:(a)Rural Electrification Distribution Backbone (REDB) with at least one 33/11 kv (or 66/11 kv) sub-station in every Block and more if required as per load, networked and connected appropriately to the State transmission system.(b)Emanating from REDB would be supply feeders and one distribution transformer at least in every village settlement.(c)Household electrification from distribution transformer to connect every household on demand.(d)Wherever above is not feasible (it is neither cost effective nor the optimal solution to provide grid connectivity) decentralized distributed generation facilities together with local distribution network would be provided so that every household gets access to electricity. This would be done either through conventional or non-conventional methods of electricity generation whichever is more suitable and economical. Non-conventional sources of energy could be utilized even where grid conductivity exists provided it is found to be cost effective.(e)Development of infrastructure would also cater for requirement of agriculture and other economic activities including irrigation pump sets, small and medium industries, khadi and village industries, cold chain and social services like health and education.5.1.3Particular attention would be given in household electrification to dalit bastis, tribal areas and other weaker sections.5.1.4Rural Electrification Corporation of India, a Government of India enterprise will be the nodal agency at Central Government level to implement the programme for achieving the goal set by National Common Minimum Programme of giving access to electricity to all the households in next five years. Its role is being suitably enlarged to ensure timely implementation of rural electrification projects.5.1.5Targetted expansion in access to electricity for rural households in the desired time frame can be achieved if the distribution licensees recover at least the cost of electricity and related O&M expenses from consumers, except for lifeline support to households below the poverty line who would need to be adequately subsidized. Subsidies should be properly targetted at the intended beneficiaries in the most efficient manner. Government recognizes the need for providing necessary capital subsidy and soft longterm debt finances for investment in rural electrification as this would reduce the cost of supply in rural areas. Adequate funds would need to be made available for the same through the Plan process. Also commensurate organizational support would need to be created for timely implementation. The Central Government would assist the State Governments in achieving this.5.1.6Necessary institutional framework would need to be put in place not only to ensure creation of rural electrification infrastructure but also to operate and maintain supply system for securing reliable power supply to consumers. Responsibility of operation and maintenance and cost recovery could be discharged by utilities through appropriate arrangements with Panchayats, local authorities, NGOs and other franchisees, etc.5.1.7The gigantic task of rural electrification requires appropriate co-operation among various agencies of the State Governments, Central Government and participation of the community. Education and awareness programmes would be essential for creating demand for electricity and for achieving the objective of effective community participation.5.2Generation.-5.2.1Inadequacy of generation has characterized power sector operation in India. To provide availability of over 1000 units of per capita electricity by year 2012 it had been estimated that need based capacity addition of more than 1,00,000 MW would be required during the period 2002-12.5.2.2The Government of India has initiated several reform measures to create a favourable environment for addition of new generating capacity in the country. The Electricity Act, 2003 has put in place a highly liberal framework for generation, There is no requirement of licensing for generation. The requirement of techno-economic clearance of CEA for thermal generation project is no longer there. For hydroelectric generation also, the limit of capital expenditure, above which concurrence of CEA is required, would be raised suitably from the present level. Captive generation has been freed from all controls.5.2.3In order to fully meet both energy and peak demand by 2012, there is a need to create adequate reserve capacity margin. In addition to enhancing the overall availability of installed capacity to 85%, a spinning reserve of at least 5%, at national level, would need to be created to ensure grid security and quality and reliability of power supply.5.2.4The progress of implementation of capacity addition plans and growth of demand would need to be constantly monitored and necessary adjustments made from time to time. In creating new generation capacities, appropriate technology may be considered keeping in view the likely widening of the difference between peak demand and the base load.Hydro Generation5.2.5Hydroelectricity is a clean and renewable source of energy. Maximum emphasis would be laid on the full development of the feasible hydro potential in the country. The 50,000 MW hydro initiative has been already launched and is being vigorously pursued with DPRs for projects of 33,000 MW capacity already under preparation.5.2.6Harnessing hydro potential speedily will also facilitate economic development of States, particularly North-Eastern States, Sikkim, Uttaranchal, Himachal Pradesh and J & K, since a large proportion of our hydro power potential is located in these States. The States with hydro potential need to focus on the full development of these potentials at the earliest.5.2.7Hydel projects call for comparatively larger capital investment. Therefore, debt financing of longer tenure would need to be made available for hydro projects. Central Government is committed to policies that ensure financing of viable hydro projects.5.2.8State Governments need to review procedures for land acquisition, and other approvals/ clearances for speedy implementation of hydroelectric projects.5.2.9The Central Government will support the State Governments for expeditious development of their hydroelectric projects by offering services of Central Public Sector Undertakings like National Hydroelectric Power Corporation (NHPC).5.2.10Proper implementation of National Policy on Rehabilitation and Resettlement (R & R) would be essential in this regard so as to ensure that the concerns of project-affected families are addressed adequately.5.2.11Adequate safeguards for environmental protection with suitable mechanism for monitoring of implementation of Environmental Action Plan and R & R Schemes will be put in place.Thermal Generation5.2.12Even with full development of the feasible hydro potential in the country, coal would necessarily continue to remain the primary fuel for meeting future electricity demand.5.2.13Imported coal based thermal power stations, particularly at coastal locations, would be encouraged based on their economic viability. Use of low ash content coal would also help in reducing the problem of fly as emissions.5.2.14Significant lignite resources in the country are located in Tamil Nadu, Gujarat and Rajasthan and these should be increasingly utilized for power generation, Lignite mining technology needs to be improved to reduce costs.5.2.15Use of gas as a fuel for power generation would depend upon its availability at reasonable prices. Natural gas is being used in Gas Turbine/ Combined Cycle Gas Turbine (GT/CCGT) stations, which currently accounts for about 10% of total capacity. Power sector consumes about 40% of the total gas in the country. New power generation capacity could come up based on indigenous gas findings, which can emerge as a major source of power generation if prices are reasonable. A national gas grid covering various parts of the country could facilitate development of such capacities.5.2.16Imported LNG based power plants are also a potential source of electricity and the pace of their development would depend on their commercial viability. The existing power plants using liquid fuels should shift to use of Natural Gas/LNG at the earliest to reduce the cost of generation.5.2.17For thermal power, economics of generation and supply of electricity should be the basis for choice of fuel from among the options available. It would be economical for new generating stations to be located either near the fuel sources e.g. pithead locations or load centres.5.2.18Generating companies may enter into medium to long-term fuel supply agreements specially with respect to imported fuels for commercial viability and security of supply.Nuclear Power5.2.19Nuclear power is an established source of energy to meet base load demand. Nuclear power plants are being set up at locations away from coalmines. Share of nuclear power in the overall capacity profile will need to be increased significantly. Economics of generation and resultant tariff will be, among others, important considerations. Public sector investments to create nuclear generation capacity will need to be stepped up. Private sector partnership would also be facilitated to see that not only targets are achieved but exceeded.Non-conventional Energy Sources5.2.20Feasible potential of non-conventional energy resources, mainly small hydro, wind and bio-mass would also need to be exploited fully to createadditional power generation capacity. With a view to increase the overall share of non-conventional energy sources in the electricity mix, efforts will be made to encourage private sector participation through suitable promotional measures.Renovation and Modernization (R&M)5.2.21One of the major achievements of the power sector has been a significant increase in availability and plant load factor of thermal power stations specially over the last few years. Renovation and modernization for achieving higher efficiency levels needs to be pursued vigorously and all existing generation capacity should be brought to minimum acceptable standards. The Government of India is providing financial support for this purpose.5.2.22For projects performing below acceptable standards, R & M should be undertaken as per well-defined plans featuring necessary cost-benefit analysis. If economic operation does not appear feasible through R&M, then there may be no alternative to closure of such plants as the last resort.5.2.23In cases of plants with poor O&M record and persisting operational problems, alternative strategies including change of management may need to.. be considered so as to improve the efficiency to acceptable levels of these power stations.Captive Generation5.2.24The liberal provision in the Electricity Act, 2003 with respect to setting up of captive power plant has been made with a view to not only securing reliable, quality and cost-effective power but also to facilitate creation of employment opportunities through speedy and efficient growth of industry.5.2.25The provision relating to captive power plants to be set up by group of consumers is primarily aimed at enabling small and medium industries or other consumers that ma not individually be in a position to set up plant of optimal size in a cost-effective manner. It needs to be noted that efficient expansion of small and medium industries across the country would lead to creation of enormous employment opportunities.5.2.26A large number of captive and standby generating stations in India have surplus capacity that could be supplied to the grid continuously or during certain time periods. These plants offer a sizeable and potentially competitive capacity that could be harnessed for meeting demand for power. Under the Act, captive generators have access to licensees and would get access to consumers who are allowed open access. Grid interconnections for captive generators shall be facilitated as per section 30 of the Act. This should be done on priority basis to enable captive generation to become available as distributed generation along the grid. Towards this end, non-conventional energy sources including co-generation could also play a role. Appropriate commercial arrangements would need to be instituted between licensees and the captive generators for harnessing of spare capacity energy from captive power plants. The appropriate Regulatory Commission shall exercise regulatory oversight on such commercial arrangements between captive generators and licensees and determine tariffs when a licensee is the off-taker of power from captive plant.5.3Transmission.-5.3.1The Transmission System requires adequate and timely investments and also efficient and co-ordinated action to develop a robust and integrated power system for the country.
