Why in news?

The Ministry of Power has released the Draft National Electricity Policy (NEP) 2026, outlining a roadmap to overhaul India’s power sector in line with the vision of Viksit Bharat @2047.

Once finalised, the new policy will replace the existing NEP 2005, reflecting two decades of changes in energy demand, technology, and climate priorities.

What’s in Today’s Article?

• From Shortages to Scale: How the Power Sector Has Evolved
• Draft National Electricity Policy 2026: Key Interventions at a Glance

From Shortages to Scale: How the Power Sector Has Evolved?

• The first National Electricity Policy (NEP), notified in 2005, focused on core issues such as power shortages, limited electricity access, and weak infrastructure.
• Since then, India’s power sector has transformed significantly.
• Installed generation capacity has grown fourfold with strong private sector participation, universal electrification was achieved by March 2021, and a unified national grid became operational in 2013.
• Per capita electricity consumption rose to 1,460 kWh in 2024–25, while power markets and exchanges improved flexibility and efficiency in procurement.
• Persistent Stress Points in Distribution and Tariffs
  • Despite these gains, structural problems persist, especially in the distribution segment.
  • High accumulated losses, mounting debt of discoms, and non–cost-reflective tariffs continue to strain the system.
  • Heavy cross-subsidisation has pushed up industrial power tariffs, hurting the global competitiveness of Indian industry.
• Draft NEP 2026: Ambitious Consumption and Climate Goals
  • Against this backdrop, the Draft National Electricity Policy 2026 sets forward-looking targets.
  • It aims to raise per capita electricity consumption to 2,000 kWh by 2030 and over 4,000 kWh by 2047.
  • The policy also aligns the power sector with India’s climate commitments, including a 45% reduction in emissions intensity from 2005 levels by 2030 and net-zero emissions by 2070, signalling a decisive shift towards low-carbon energy pathways.

Draft National Electricity Policy 2026: Key Interventions at a Glance

• The Draft NEP 2026 proposes wide-ranging reforms across planning, tariffs, markets, generation, grids, and technology to build a reliable, competitive, and low-carbon power system.
• Resource Adequacy Planning
  • Decentralised advance planning: DISCOMs and State Load Despatch Centres (SLDCs) to prepare utility- and state-level Resource Adequacy (RA) plans under State Commission regulations.
  • National coordination: Central Electricity Authority (CEA) to prepare a national RA plan to ensure capacity adequacy at the country level.
• Financial Viability and Economic Competitiveness
  • Automatic tariff revision: Linking tariffs to a suitable index for annual revision if State Commissions do not issue tariff orders.
  • Cost-reflective tariffs: Progressive recovery of fixed costs through demand charges to reduce cross-subsidisation across consumer categories.
  • Cross-subsidy exemptions: Removal of cross-subsidies and surcharges for manufacturing, railways and metro railways to lower logistics costs and improve industrial competitiveness.
  • Large consumers: Possible exemption of distribution licensees from Universal Service Obligation for consumers with contracted load of 1 MW and above.
  • Faster resolution: Strengthening dispute resolution mechanisms to reduce burden on regulators and lower costs for consumers.
• Renewable Energy Generation and Storage
  • Market-based capacity addition: Greater reliance on markets and captive power plants for RE expansion.
  • Distributed Renewable Energy (DRE): DISCOM-led storage for small consumers to gain economies of scale; bulk consumers to install their own storage.
  • Energy trading: Peer-to-peer (P2P) trading of surplus DRE and stored energy, directly or via aggregators.
  • Scheduling parity: Equal treatment of renewable and conventional power in scheduling and deviation mechanisms by 2030.
  • Market deployment: Market-based rollout of storage, promotion of Battery Energy Storage Systems (BESS), domestic manufacturing of cells and components, and incentives such as Viability Gap Funding (VGF) for BESS and pumped storage.
• Thermal Power: Supporting the Energy Transition
  • Grid support role: Integration of storage and repurposing of older thermal units to support grid stability and renewable integration.
  • Efficiency gains: Exploring direct use of steam from thermal plants for district cooling and industrial processes.
• Nuclear Energy Expansion
  • Advanced technologies: In line with the SHANTI Act, 2025, adoption of advanced nuclear technologies, modular reactors and small reactors.
  • Long-term target: Scaling nuclear capacity to 100 GW by 2047, including use by commercial and industrial consumers.
• Hydropower Development
  • Storage-based hydro: Fast-tracking storage hydro projects for flood moderation, irrigation, water security and energy security.
• Power Markets and Competition
  • Market oversight: Strong regulatory framework for monitoring and surveillance to prevent collusion, gaming and market dominance.
• Transmission Reforms
  • Right of Way (RoW): Use of advanced technologies and appropriate land-use compensation to address RoW challenges.
  • Tariff parity: Equal transmission tariff treatment for renewable and conventional power by 2030.
  • Efficient access: Utilisation-based allocation of transmission connectivity to prevent speculative hoarding.
• Distribution System Reforms
  • Loss reduction: Targeting single-digit Aggregate Technical and Commercial (AT&C) losses.
  • Network sharing: Shared distribution networks to enhance competition and avoid duplication of infrastructure.
  • Distribution System Operator (DSO): Establishment of DSOs to enable network sharing and integrate distributed renewables, storage and Vehicle-to-Grid (V2G) systems.
  • Urban reliability: N-1 redundancy at distribution transformer level in cities with population above 10 lakh by 2032; undergrounding of networks in congested urban areas.
• Grid Operations and Governance
  • Institutional reform: Functional unbundling of State Transmission Utilities and creation of independent entities for SLDC operations and transmission planning.
  • Regulatory alignment: Harmonising State Grid Codes with the Indian Electricity Grid Code issued by CERC.
• Cybersecurity and Data Sovereignty
  • Cyber resilience: Establishment of a robust cybersecurity framework for the power sector.
  • Data localisation: Mandatory storage of power sector data within India to ensure sovereignty and system security.
• Data Sharing and Visibility
  • Transparent data framework: Sharing of operational and market data under a central government-prescribed framework.
  • Real-time monitoring: Ensuring real-time visibility of Distributed Energy Resources for DISCOMs and SLDCs.
• Technology and Skill Development
  • Indigenous systems: Transition to domestically developed SCADA systems by 2030.
  • Software self-reliance: Development of Indian software solutions for all critical power system applications.