Traditional ways of managing utilities and grids, systems and controls will be disrupted, with risks and opportunities mounting. Managing such significant, interdependent changes will demand flexibility from energy companies as they adjust to the new normal. The energy transitions will be a major challenge for developing counties like India which needs to double its installed capacity to 700 GW in the next decade.

The challenge of fuel substitution (from coal to gas) coupled with integrating renewables and EVs, is likely to constrain the stated policy vision of providing affordable energy to consumers. There is a need for innovative ways of shaping the transitions that could:

(a) Scale up integration of renewable energy in the grid;

(b) Provide sustainable energy to power the growth in rural areas;

(c) Include energy efficiency along with renewables to optimise demand;

(d) Seamlessly integrate energy storage to enable grid services, demand response and a host of other services for a sustainable, digitised and smart grid.

Convergence: One such innovative concept is what we call Convergence which is a unique concept that brings together the supply side and demand side efficiency under one platform and uses the instrument of Power Purchase Agreement (PPA) to deliver an optimised decentralised solution for DISCOMs. The concept allows host of efficient services to be delivered to rural areas like efficient lighting (domestic and public), replacement of pumps with energy efficient ones for farmers, electric cooking, efficient fans, etc.

The value of the equipment/services is added to the decentralised solar PPA and the same is delivered free of cost to rural areas enabling clean, efficient, reliable energy at costs to DISCOMs that is almost 50 per cent of their current cost of delivery of electricity in these areas. Another aspect of the concept is to usher in new policies and regulations that enable multiple revenue streams on a same asset class, much in the same manner conceptually as the time honoured PPA being ‘enlarged’ to provide energy efficiency. The concept is illustrated below:

As the figure illustrates, regulations that allow multiple revenue streams from the same investment could have the effect of making all the services affordable and create a virtuous cycle where the capital costs will go down making private investments more attractive. The services include energy arbitrage and charging which are necessary for integration of renewables as well as for promoting e-mobility at affordable costs which, as noted earlier, on standalone basis do not make commercial prudence. 

To put this in perspective, at current cost of batteries (Lithium Ion) of $320/ KWh (including balance of plant), the cost of storage works out to Rs5.5/ KWh to provide a reasonable return to any investor over the life of battery. This is simply unviable as even the cheapest solar power of Rs2.44/ KWh would become Rs8/ KWh which is not commercially viable. However, as the figure illustrates, if regulations could enable three revenue streams on the same battery, the cost of storage would decline to Rs1.8 (and so will the other services cost) and everything becomes viable. One does not need to wait for battery costs to decline to scale up its implementation.

Convergence of Policies and Regulations are the key drivers for this transition to be sustainable, scalable and affordable in our quest for a decarbonised world. This will also stimulate private investment in the sector. Digitisation will help in real time operations and flexibility that is the new normal for the new energy. These regulations could convert the challenges and vulnerabilities into opportunities and value additions as summarised below:

Getting to a democratised energy market, or just getting some of its elements off the ground will require at least a few major changes:

i) More renewables: Increased use of renewables at a commercial a residential level, increased energy storage and more demand side management.

ii) Data science: What are the usage patterns? When and where will there be capacity, and how much? Data on demand volumes and patterns at a granular level for each usage types would be needed along with procurement mechanisms through connected systems, smart-meters and behind-the-meter solutions with the right incentives. If the consumer is allowed to choose and switch suppliers (have a base, bulk and peak supplier) without restrictions or lock in periods, the consumer can shift between the different suppliers based on expected significant load pattern changes and prices offered, thereby creating a flatter load curve for DISCOMS and revenue models for competitive generators and aggregators. For example, the consumer can have one supplier for its base load, say, a state DISCOM, a competitive supplier for peak loads (say, a supplier who also undertakes DR aggregation with the consumers) and an agreement with a bulk load supplier for occasional high consumption expectations (can be like a subscription with a large generator with minimum load requirements when called).

iii) Procurement methods: The development of a technology agnostic market where the flexibility and demand response services can be priced and procured in a free, fair and competitive manner.

iv) Transparent and secure trading system: Blockchain technology can be utilised where every smart-meter can enter demand reduction data into the shared ledger, the same secured data can be used to issuance of ESCerts and sale of this Megawatt Capacity.

v) And finally, supporting policy and regulation to facilitate the functioning and growth of markets and reduce the entry barriers.