Weekly Update: Privatization of power distribution can create a better atmosphere for adoption of solar power
Solar in India will, in the medium term, benefit mostly from the ongoing liberalisation and privatisation of the electricity market. In that respect, the state government of Bihar has just announced the process for the privatisation of power distribution in four towns (refer).
- Delhi and Mumbai were among the first cities to have privatized power distribution in the country
- In 2011-12, transmission and distribution (T&D) losses in the state stood at 39.2%
- In India, privatization of power distribution is usually associated with enhanced customer satisfaction levels due to improved service quality
It is also hoped that the ongoing privatisation of power infrastructure will further new infrastructure initiatives relevant to the spread of solar power: grid stability, net-metering and smarter grids. The transition can, however, have an adverse impact on some existing power purchase agreements (PPAs). PPAs for sale of solar power within states are usually signed with local distribution companies. Although, there is no available precedent with regards to solar PPAs, it is possible that privatisation of a distribution company may result in renegotiation of a signed long-term PPA.
Delhi and Mumbai were among the first cities to have privatized power distribution in the country. Thereafter, multiple cities across Madhya Pradesh, Odisha and Gujarat have either privatized power distribution or are planning for it. Given that most Indian state level distribution companies are in financial distress, it is possible that power distribution in many Indian cities will be privatized moving forward.
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