Draft National Electricity Policy 2026 Charts India’s Low-Carbon, High-Growth Power Future

Why in News?

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

Once finalised, the policy will replace the National Electricity Policy, 2005, reflecting two decades of transformation in energy demand, technology, market structures, and climate priorities.

From Shortages to Scale: How the Power Sector Has Evolved

Early Challenges (Pre-2005)

• The 2005 NEP focused on:
  • Chronic power shortages,
  • Limited electricity access,
  • Weak generation and transmission infrastructure.

Transformation Since 2005

• Installed generation capacity has grown nearly fourfold, driven by strong private sector participation.
• Universal electrification was achieved by March 2021.
• A unified national grid became operational in 2013, enabling seamless power transfers across regions.
• Per capita electricity consumption rose to 1,460 kWh in 2024–25.
• The emergence of power markets and exchanges improved procurement efficiency, flexibility, and price discovery.

Persistent Stress Points

Despite progress, structural issues remain, particularly in the distribution segment:

• High accumulated losses,
• Mounting debt of DISCOMs,
• Non–cost-reflective tariffs,
• Heavy cross-subsidisation, raising industrial tariffs and hurting global competitiveness.

Draft NEP 2026: Ambitious Consumption and Climate Goals

The Draft NEP 2026 sets forward-looking national targets:

• Per capita electricity consumption:
  • 2,000 kWh by 2030,
  • Over 4,000 kWh by 2047.
• Climate alignment:
  • 45% reduction in emissions intensity from 2005 levels by 2030,
  • Net-zero emissions by 2070.

These goals signal a decisive shift toward a low-carbon, reliable, and resilient power system.

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.

1. Resource Adequacy Planning

• Decentralised 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 countrywide capacity adequacy.

2. Financial Viability and Economic Competitiveness

• Automatic tariff revision: Linking tariffs to a suitable index for annual revision if State Commissions fail to issue tariff orders.
• Cost-reflective tariffs: Progressive recovery of fixed costs through demand charges to reduce cross-subsidisation.
• 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 dispute resolution: Strengthening mechanisms to reduce regulatory burden and lower costs.

3. Renewable Energy Generation and Storage

• Market-based capacity addition:
  • Greater reliance on markets and captive power plants for renewable expansion.
• Distributed Renewable Energy (DRE):
  • DISCOM-led storage for small consumers to achieve economies of scale.
  • Bulk consumers to install their own storage systems.
• 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 of storage:
  • Promotion of Battery Energy Storage Systems (BESS),
  • Domestic manufacturing of cells and components,
  • Incentives such as Viability Gap Funding (VGF) for BESS and pumped storage.

4. 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.

5. Nuclear Energy Expansion

• Advanced technologies:
  • Adoption of advanced nuclear technologies, modular reactors, and small reactors in line with the SHANTI Act, 2025.
• Long-term target:
  • Scaling nuclear capacity to 100 GW by 2047, including use by commercial and industrial consumers.

6. Hydropower Development

• Storage-based hydro:
  • Fast-tracking storage hydro projects for:
    • Flood moderation,
    • Irrigation,
    • Water security,
    • Energy security.

7. Power Markets and Competition

• Market oversight:
  • Strong regulatory framework for monitoring and surveillance to prevent:
    • Collusion,
    • Gaming,
    • Market dominance.

8. 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.

9. 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 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.

10. Grid Operations and Governance

• Institutional reform:
  • Functional unbundling of State Transmission Utilities.
  • Creation of independent entities for SLDC operations and transmission planning.
• Regulatory alignment:
  • Harmonisation of State Grid Codes with the Indian Electricity Grid Code issued by CERC.

11. 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.

12. 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.

13. 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.