India’s power demand saw a 25-28 per cent dip during the lockdown
period, which was necessitated by the Covid-19 pandemic. The impact on the revenues of discoms
(or, power distribution companies) is even higher, since the demand contraction is largely from the higher-tariff-paying industrial and commercial customers. Due to the lockdown, regular discom activities of meter reading, billing and collection have also been hampered. Discoms
will face an estimated additional liquidity shortfall of Rs 45,000-50,000 crore, on top of the Rs 90,000 crore already owed to generators before Covid.
As the Indian economy and power sector
chart a recovery path out of the Covid crisis, this is an opportune time to accelerate the adoption of smart metering and digital systems for collection and monitoring of electricity usage. Smart meters
can capture a customer’s electricity usage at regular intervals and transmit data in real time, thereby eliminating the need for monthly physical meter reading. Smart meters
can also enable remote connection/disconnection, pinpointing abnormal usage or discrepancies between sanctioned load and connected load. Smart meters
are the basis for implementation of differentiated tariffs, depending on time-of-day, and accounting for excess generation with rooftop solar which can be sold back to the grid.
In the post-Covid paradigm of social distancing, smart meters can enable near-real time meter reading without the need for human interaction. A digital infrastructure enabled by prepaid smart meters can help shore up discom finances through loss reduction, revenue enhancement, and improved planning. We estimate that a nationwide deployment of smart meters can enable a bottomline impact of Rs 20,000-30,000 crore per annum for discoms.
The experience of other countries suggests that discoms have started using smart meter data to provide value-added services to customers, unlocking further revenues.
In this article we examine two of the issues which have hindered progress — how to develop a viable financing model for the investment, and how to get actionable insights from smart meter data through advanced analytics.
A national smart meter rollout is estimated to require of Rs 1.5 trillion of investment over four to five years. Most discoms lack the financial strength for such investment, hence innovative financing models are required. India should evaluate the Meter Asset Provider (MAP) model which was implemented in the United Kingdom. MAPs deploy, own and operate metering assets, providing meter maintenance, reading and data management services to energy providers. Eventually, if end-customers could be free to choose their energy supplier, separation of metering from supply is essential. An example of such a model in India is IntelliSmart, a joint venture between Energy Efficiency Services Limited (EESL) and (National Investment and Infrastructure Fund (NIIF).
Private investment in this sector has been hindered by the payment and collection risk from discoms. A payment guarantee mechanism which is underwritten by public sector financial institutions, with enablers such as escrow and first loss guarantee, will be required. As smart meters help discoms increase revenue and collections, deferred funding for capital expenditure can be explored, to match outflows with savings generated. For example, the Central government can provide viability gap funding in the form of equity or bridging debt. Smart metering rollouts in the United States and Italy have seen governments providing “stimulus grants”.
Metering infrastructure is also suited for monetisation through models such as the Investment Trust (InvIT) model, which could be attractive to long-term investors, such as pension funds, and infrastructure funds.
The business benefits of universal smart metering will be unlocked through effective use of data analytics to support timely and high-quality decision-making. Smart metering experience from other countries suggests that as discoms transition to an automatically generated reading at 15-minute (or shorter) intervals, the result is a “data tsunami”. Most Indian discoms lack the capabilities to manage the massive datasets generated, and are far behind in advanced analytics capabilities required to generate actionable insights from them.
India should consider the creation of a national digital infrastructure for tracking smart meter installations, organising massive real time data, and advanced data analytics shared across multiple discoms. Our proposed name for such a platform is DEEPTI (Data-enabled Enhancement of Electricity Performance and Transparency through Informatics). We envisage DEEPTI as a national digital infrastructure backbone along the lines of Aadhaar or the GST platform. A national infrastructure such as DEEPTI can ensure full transparency, standardised benchmarking and sharing of best practices across different discoms, leading to insights and solutions for improving the efficiency of the sector. It can massively reduce investment in data infrastructure, compared to each discom investing individually (estimated national savings Rs 5,000-7,000 crore).
A nationwide smart metering infrastructure is essential for the long-term viability of the power sector, and for enabling future reforms. The Covid-19 crisis is also an opportunity for accelerating the rollout and adoption of smart metering.