On the Electricity (Amendment) Bill, 2022, and more — Issue #16
The Big Picture
We start with the Electricity (Amendment) Bill, 2022
Introduced in Parliament this week – and subsequently referred to a standing committee – the bill wants to allow more than one power distributor in an area. The bill also proposes power distribution licensees be allowed to use networks of other licensees. India’s business media welcomed the bill, saying it will boost competition, help new distributors overcome infrastructure hurdles and improve the efficiency of the power distribution network.
It isn’t that simple. After the centre attempts to privatise discoms – those in union territories are being privatised right now – this is another attempt to get the private sector into power distribution. The results need to be understood.
For some time now, as CarbonCopy has reported, India’s power sector has been ‘rebundling’. Its biggest players are vertically integrating, housing everything from coal blocks to powerplants, transmission lines to renewables to discoms in their business. An in-house discom is especially critical – it’s one way to get payments without delay.
The larger implications? One criticism of discom privatisation was that firms would bid only for the most profitable discoms, leaving the state government with less viable markets. Similar questions abound today. A discom tasked with supplying power to everyone in a set region will do some cross-subsidising – cheap power for some; costlier for others. If a new entrant is allowed into this setup – and allowed to use the discom’s networks – what stops it from focusing only on the most affluent customers, charging them a slightly lower rate than the discom, and weaning them away from the discom?
The National Coordination Committee of Electricity Employees and Engineers said: “The private companies will give electricity only to the profitable industrial and commercial consumers, and government distribution companies will suffer further losses by providing subsidised electricity to farmers and common consumers. Thus, the government distribution companies will by default become loss-making companies.
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PS: That is just one concern. For the rest, read the People’s Commission on the Electricity Bill statement. Members of the commission include former power secretary EAS. Sharma; former Kerala finance minister Thomas Isaac; former member of the Planning Commission S.P. Shukla; retired JNU professor C.P. Chandrasekhar; senior advocate Indira Jaising, and others.
News of the Week
Like most weeks, last week was also consequential on the energy front.
Hyderabad-headquartered Greenko has raised funds for India’s first “off-river” pumped storage project. Five PSUs have been told to push up investment into coal gasification. Ten expansion projects of Coal India have received the green nod.
After keeping environment editors guessing for long, India has finally approved the Nationally Determined Contributions (NDCs) it will send to the UNFCCC. An interesting sidelight here. Last year in Glasgow, Prime Minister Narendra Modi said India would produce 500 GW of Renewable energy by 2030 and draw half of its energy requirements from renewables. This resulted in questions: Given the country’s installed power generation capacity was 388 GW in November 2021, had India said it would touch 1,000 GW of generating capacity by 2030?
We have an answer now. The government has dropped the 500 GW bit from the NDCs.
When this newsletter started, South Asia was in the throes of a heatwave. Running flat out, thermal power plants were complaining of coal shortages. The government had cancelled passenger trains so that coal rakes could move faster. At that time, seeking to reduce demand for domestic coal, it had also passed an order making it mandatory for thermal power plants to ensure imported coal comprised 10% of the coal they burnt. Ensuing days kept energy reporters busy. Companies struggled to source coal on their own. Some sought clarifications. States pushed back, saying they wouldn’t pay higher tariffs for imported coal. Coal India floated a tender, which Adani bagged. Scams were alleged—a very eventful three months. And now, after all that, the order has been revoked.
The monsoons are here. Power demand is lower. Coal stocks are in control.
Carbon markets might be on their way in as well. The Energy Conservation Act, introduced in the Parliament on the same day as the Electricity (Amendment) Bill, 2022, wants to "mandate use of non-fossil sources, including green hydrogen, green ammonia, biomass and ethanol for energy and feedstock to achieve the twin target of reducing dependence on fossil fuel and achieving energy security." It also, as Moneycontrol wrote, wants to establish carbon markets.
In pollution-fighting circles, the announcement did not trigger wild whoops of joy. A prerequisite for carbon trading is an accurate sense of each firm's emissions. And Indian Pollution Control Boards' monitoring of emissions – and the emissions data put out by firms -- is laughable.
From Coal to Gas. There is mounting evidence that high energy prices are triggering an energy shortage in India. First, we had reports about households reverting from gas cylinders to firewood. Then came the reports from oilcos, complaining they were selling at a loss. Then came news from Chhattisgarh about inadequate petrol/diesel supply to petrol pumps. Last week came yet more evidence.
GAIL has begun rationing gas supplies to industrial users. The proximate reason is that Gazprom is struggling to make its gas deliveries, but high gas prices are also a reason. An unnamed source told Reuters: "We don't know where else we can cut supplies... Indian customers cannot afford costly spot gas." Like Pakistan, India, too, is unable to buy costly spot gas. "Supplies for use in CNG vehicles and homes are being maintained. But the industrial segments served by city gas companies are getting affected," reported Economic Times.
These are, on the whole, bad days for India's oilcos. They are posting losses – only some, however, can hike prices.
The Bigger Picture
The biggest news last week, however, came from the United States.
The Inflation Reduction Deal, brokered between senators Joe Manchin and Chuck Schumer, is done. It has passed the Senate. It includes, as historian Adam Tooze wrote on Substack, “$260 billion in clean-energy tax credits; $80 billion in new rebates for electric vehicles, green energy at home and more; $1.5 billion in rewards for cutting methane emissions; $27 billion ‘green bank’ for a federal green bank to complement the 23 that already exist across the US; support for coal miners with black lung...
All told, Democrats estimate the bill will bring in $739 billion in revenue and will invest $433 billion in spending. The result will be to reduce the deficit by in the order of $300 billion. The large-scale pledges on climate spending are flanked by provisions that will force through $288 billion in savings on Medicare expenditure, at the expense of the pharmaceutical industry, a three-year $64 billion subsidy to support Obamacare and a $2000 cap on out-of-pocket costs for seniors on Medicare.”
Tooze’s post is a must-read: “It turns out that though the US may since the 1990s have been where climate policy goes to die, the balance may finally be shifting. As Zack Colman, Josh Siegel and Kelsey Tamborrino reported in an important piece in Politico, Manchin’s threat to sink Build Back Better unleashed a furious lobbying effort on behalf of green business opportunities.”
It raises a big question for India. Across the world, countries are pivoting, trying to capture future industries. Even Australia, a defender of coal for long, seems to be
pivoting
. What is India doing?
PS: It’s not wholly good news on the climate front. China, smarting from Nancy Pelosi’s trip to Taiwan, has halted its talks with the USA on climate change.
Climate Long-Reads
“They built dams/Drowned villages and built factories/They cut down forests, dug out mines and built sanctuaries/Without water, land and forest, where do we go?
These are the lyrics of Gaon Chodab Nahi, easily the biggest hit in contemporary music environmentalism. Originally penned sometime in early 2000 in Odia by the Adivasi leader Bhagwan Majhi to protest bauxite mining in Kashipur, Odisha, the earthy tune has travelled far, inspiring the music protest videos of the Word Sound Power project led by reggae/dancehall artist Delhi Sultanate and electronic music producer Chris McGuinness.” Livemint, on musical environmentalism. While on Music, also see:
2. “The climate information website Carbon Brief compiled a new database of attribution studies of more than 500 (climate) events – every such study available – and shared it exclusively with the Guardian. The analysis of the database and interviews with the world’s leading attribution scientists shows beyond any doubt that we are already deep into the era of climate death and destruction.” How climate breakdown is supercharging toll of extreme weather.
3. In India, too, similar chaos. Even cricket might be affected.
4. I was waiting for this. And it has finally come. An evisceration of Neom, in the Financial Times. (Neom? The proposed 170-mile-long, 500 metres high, and just 200-metre-wide Saudi megacity).
Book of the Week
Panic at the Pump: The Energy Crisis and the Transformation of American Politics in the 1970s
, by Meg Jacobs.
Talking of books that presage our time, this one qualifies. In 1973, OPEC banned the export of oil to the USA, sending prices soaring across the country. Read this interview with the author.