Energy sector is going through disruption caused by digitalization. Power is no exception but there are two more factors that are driving disruptions in the power sector came out during discussion with Trans India law Associates (TILA) and with many partners & other legal associates from across India. Mr. Rohit Sharma, Head-Corporate Legal Affairs at BSES Yamuna Power Limited, New Delhi was the part of webinar, the series of talks on the future of energy followed by interaction with Mr. Raj Singh Niranjan, India partner, TILA. Mr Sharma explained the aspects that are driving the disruptions in energy sector.
One of the most famous and prolific inventors of all time, Thomas Alva Edison exerted a tremendous influence on modern life, contributing inventions such as the incandescent light bulb, the phonograph, and the motion picture camera, as well as improving the telegraph and telephone. Almost after a century, we have started witnessing disruptions in Energy sector and moving towards common goal i.e. Energy for All. The following three major disruptions have been felt by the sector quite firmly.
- Decentralised Renewable Energy
Electricity systems across the globe are undergoing a paradigm shift towards decentralization. This shift is being brought about by technological disruptions, coupled with innovations in business models.
In India, Decentralized Renewable Energy (DRE) has already been energizing lives of millions of people in rural areas through solutions such as solar lanterns, solar lighting systems and micro-grids, while also making deep inroads into urban regions through utility renewable markets and solar rooftops. Illustratively, according to a report by GOGLA, India is one of the largest off-grid solar markets in the cash segment with 1.3 million products sold in the first half of 2018. In rural settings, the first wave of DRE was fuelled by a lack of access to electricity for basic lighting needs. Around 300 million people in rural India have been connected to the grid over the last four years. With the laudable expansion of the utility infrastructure to rural households, the next frontier of electrification in India is to guarantee uninterrupted and quality power to all households, and to power rural enterprises and livelihoods. In response, DRE is already innovating productive applications in rural and agriculture value chain, to include solar pumps, solar dryers, solar-powered micro cold storage, solar-powered sewing machines and such. Specifically, irrigation and cold storage are two key rural markets ripe for solarisation as these are being re-energized by a top-down policy push to meet bottom-up needs. For instance, as part of the Kisan Urja Suraksha evam Utthaan Mahabhiyan (KUSUM) scheme, 1.75 million off-grid solar pumps will be installed by 2022 to support farmers. Even as newer DRE segments emerge, more established ones, such as the mini-grids, are not reaching their full potential. In light of the expanded utility infrastructure, any growth projections for mini-grids are linked to limited geographies where it’s not feasible for the utility grid to reach. This is even as DISCOMs, encumbered by huge AT&C losses, struggle to manage expanded service areas. Since the answers to local problems generally lie in nurturing local solutions and capacities, decentralized electricity systems present a way forward. Decentralization is sweeping the landscape of electricity systems globally. In India, DRE is catching on and evolving in both rural and urban settings. It’s time the entire gamut of stakeholders – policymakers, DISCOMs, financiers, entrepreneurs – made concerted efforts to integrate DRE into the country’s electricity architecture. In doing so, we will not only be keeping pace with the global shift to decentralization, but also powering growth that is clean and sustainable.
- Decarbonisation
Electricity supply is one of the biggest CO2 emitters globally. To keep global warming well below 2°C, several paths lead to zero emissions in the energy sector, and each has its potential environmental impacts — such as air and water pollution, land-use or water demand. Using a first-time combination of multiple modelling systems, an international team of researchers led by the Potsdam Institute for Climate Impact Research (PIK) has now quantified the actual benefits and downsides of three main roads to decarbonisation. They show that relying mainly on wind and solar would bring most co-benefits for the health of people and planet. Switching to carbon capture and storage in combination with fossil and biomass resources, in turn, is likely to convey significant environmental costs by devouring large areas at the cost of biodiversity, and by releasing pollutants to the environment. For a long period of time, we haven’t taken care of nature. We have used all this planet to meet our energy needs even when they have toxic emissions. whether it is air or gas or solid emission, there is now an opportunity that one can generate power through renewable sources like wind, solar, biomass etc. European countries like Austria, Switzerland and others have already moved in the direction by moving away from coal based plans this is largely possible for them as they are small country.
- Digitalization
Digital transformation in the energy industry is the single biggest enabler of that change. Increased use of renewables, resiliency issues and concerns of sustainability are just a few of the drivers behind the industry’s need to transform – and digitise. The ‘digital twin’ version of the physical power plant monitors every asset, and capable of providing an intelligent response with analytics that trigger the appropriate actions from a service and maintenance perspective. Cyber-physical systems, networking and real-time data enable the recording of dynamic states of the systems. The ability to develop plans based on real-time data analytics will be revolutionary, making plants smart, capable of reacting to change more efficiently, in terms of cost and capacity. Distributed generation, where companies can shift power production closer to the point of consumption through solar tiles or wind farms. This becomes possible because the technology is now intelligent enough to plan, service and manage even the remotest of assets 24×7. Data driven architecture. Data security and data management is a major challenge. Technical challenges- related with integration of several devices or resources with grid network and includes – Inadequacies in grid infrastructure, cyber security, energy storage concerns, data management, communication issues, stability concerns, energy management Social and economic challenges – The socio-economic challenges include – high capital investment, stakeholder’s engagement, system operation aspects, lack of awareness, and fear of obsolescence, new tariffs, regulation and policies, power theft, expertise of work force, business market, economists as well as consumers. Smart grid enables– loss reduction, real time granular level energy audit, precise interventions for power theft detection and load curtailment, making 24×7 power accessible by load limiters for rationing power supply, introducing dynamic pricing, rooftop solar generating green energy at user end and net metering using smart meters, value-added services for smart city such as 24×7 continuous monitoring of the system. Analytics for Demand Forecasting, Analytics for Energy Auditing, Analytics for fraud detection and loss reduction, Analytics for forecasting renewable generation, remote monitoring, control and operation, ensure a shift from unpredictable systems to predictable systems.
Legal challenges in fast changing & diverse Energy sector of India
The biggest legal challenges are created by uncertainty and the time required to mitigate, or at least manage, the risks arising from that uncertainty. Industry participants and stakeholders are now faced with changing legal and regulatory frameworks, changes in government and policy, shifting public opinion around climate change and renewable energy, increasing stakeholder engagement and activism, and fluctuating market prices for power and underlying resources. In this environment, it can seem impossible to get projects developed on time and on budget (or at all). In the time it takes to navigate through this complex maze, the market window may have closed, or the business case may have changed. And in some cases, our legal and regulatory frameworks have not yet changed enough to keep up with our pace of technological innovation. Going forward we will need these to accommodate advances in storage, electric vehicles, distributed generation and community energy systems, among others. The way we produce and consume power is changing. As an experienced legal counsel in this sector, we help our organisations identify and bridge these gaps by providing practical and timely advice, so they can understand the current landscape, how it is evolving, and take advantage of opportunities when they arise.
Risk management in such a critical scenario
Risk management is a critical and complex factor in every aspect of the energy sector, whether it be in relation to the health and safety of people or the environment or in relation to managing legal and business risk in commercial transactions, developing projects or business operations. Working with our organisation, our principal focus is to identify and mitigate the risks inherent in their business, often by identifying a comprehensive inventory of the risks associated with the particular mandate and developing a comprehensive strategy to manage or eliminate the risks identified. As legal counsel, we tend to focus on the legal and business risks associated with the mandate, paying particular attention to legal and regulatory compliance, contractual terms and dispute resolution. Our extensive experience advising a broad range of clients across all aspects of the energy sector allows us to help our clients successfully anticipate, identify and manage the risks inherent in their business.
Expected regulatory challenges
The key industry and regulatory change over the next 20+ years will be driven by the continuing emergence of renewable energy sources. This power shift to wind, solar, geothermal, biomass, hydroelectric and other sources will have a game changing impact on our clients, consumers and society as a whole. New technologies, such as hybrid and electric vehicles and others not yet invented, will place dramatic new demands on the power system. Grid technologies need to be invented to cope with intermittent power sources, and the intermittency requires diverse types of standby or base load power to exist, to offset when the renewable sources cannot generate. This all comes with a cost, requiring new regulatory models to set rates and pricing for these new interdependent renewables dominated grids. The regulators of the power sector must become nimbler and capable of adapting and integrating changing power sources and technology. This is a cultural and generational change for the regulators and industry and there is little time left to prepare for it.
It is becoming increasingly litigious (before and after the approval) and uncertain. India has had a number of projects that required years of public process to approve (or not), more years of judicial process to judicially review and hear appeals, and when it is finally done, the market has moved on. The regulatory system must change if society is to be successful at making the power shift to renewables and a greener grid. There must be timelines that are respected, and new methods to bring Indigenous concerns and local opposition into the process earlier, and dedication to new means to resolve issues. The current hearing oriented system struggles with this, and reinforces those “dug in” to their position, rewarding unwillingness to compromise. It is time to look for better ways.
In nut shell, we are on the right path. Energy Revolution has triggered & has started yielding result as well.
The Author Mr. Rohit Sharma is Head-Corporate Legal Affairs, BSES Yamuna Power Limited, New Delhi