The C-Suite Intelligence

CERC DSM 2024: Suo-Motu Order on Recovery of Legacy Dues and Its Impact on Discoms and Ancillary Services

By  Ravi Shekhar
1 min read

Eninrac’s insights upon Recovery of legacy dues in the Deviation Settlement Mechanism (DSM) Pool Account in pursuance of DSM Regulations, 2024. NLDC’s communication reflects ambiguity in the minds of some of the discoms about the order dated 15.10.2024 of the Commission approving the detailed procedure for recovery of charges in case of deficit in the DSM Pool Account. For the sake of clarity and to ensure timely payment of the DSM dues, the Commission clarifies that the methodology approved in the detailed procedure vide the Order dated 15.10.2024 is applicable for recovery of charges in case of the deficits in the DSM Pool Account "as on and from 16th September 2024."

Eninrac Insights: Non-Payment of Dues and Its Impact on Ancillary Service Providers

1. Ancillary Service Providers:

  • Delayed Payments: The non-payment of dues directly leads to delays in compensating ancillary service providers, potentially creating financial stress for entities reliant on timely payments for operational continuity.

  • Erosion of Trust: Persistent delays may reduce trust in the regulatory framework and discourage ancillary service providers from actively participating in the grid security market.

  • Reduced Capacity for Services: Financial uncertainty could limit the ability of ancillary service providers to maintain or scale their operations, affecting their capability to support grid stability during high-demand periods.

2. Grid Reliability and Security:

  • Operational Risks: Ancillary service providers play a critical role in managing grid deviations and ensuring stability. Any financial disincentive may result in fewer ancillary services being available, increasing the risk of grid instability.

  • Emergency Preparedness: In times of peak demand or unexpected outages, the lack of robust ancillary service support could jeopardize emergency response capabilities.

3. Consumers:

  • Service Reliability: A shortage of ancillary services may lead to more frequent and prolonged outages, impacting industries, households, and essential services.

  • Economic Impact: Industries reliant on consistent electricity supply may face operational disruptions, indirectly affecting employment and economic productivity.

4. Distribution Companies (Discoms):

  • Operational Challenges: Discoms might face reputational and operational issues if ancillary service providers refuse or limit their services due to delayed payments.

  • Increased Costs: Discoms may need to resort to more expensive alternatives to manage grid deviations, further straining their financial resources.

5. Regulatory Framework:

Cascading Deficit Issues: Non-payment of dues creates a feedback loop of financial stress, undermining the stability of the DSM Pool Account and necessitating additional interventions from CERC.

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India union Budget 2025-26

  • The Union Budget 2025-26 outlines a significant push towards nuclear energy as part of India's long-term energy transition strategy. The government has set an ambitious target of 100 GW nuclear power capacity by 2047, positioning nuclear energy as a major pillar in India's energy mix. The government has introduced the Nuclear Energy Mission for Viksit Bharat. This initiative aims to enhance domestic nuclear capabilities, promote private sector participation, and accelerate the deployment of advanced nuclear technologies such as Small Modular Reactors (SMRs).

  • The budgetary support for nuclear fuel complex under union budget 2025-26 is INR 3243.25 crores. This is 13.2% more than that announced in the budget of 2024-25. Revised allocation for 2024-25 are also higher than the budget announced during that period which is indicative of increased government focus on developing nuclear energy in the country and help diversify country’s energy mix which is crucial for transition towards sustainable energy.

  • A heavy water production facility is used in the nuclear industry to create heavy water (D2O), which serves as a moderator and coolant in nuclear reactors, primarily in Pressurized Heavy Water Reactors (PHWRs), allowing them to operate efficiently using natural uranium fuel by slowing down neutrons effectively while absorbing minimal neutrons itself. There is slight increase in the gross budgetary allocation for heavy water production facility for 2025-26 i.e. INR 1733.07 crores. This is 16.6% more than that announced in the budget of 2024-25. Revised allocation for 2024-25 are also higher than the budget announced during that period.



  • A key highlight of the Union Budget 2025-26 is the launch of a Nuclear Energy Mission, which is focused on research and development (R&D) of Small Modular Reactors (SMRs). The government has allocated ₹20,000 crore for this initiative, aiming to develop at least five indigenously designed and operational SMRs by 2033. The R&D funds for all the research centres has remained constant over the years reflecting constant efforts for innovation in the nuclear energy sector. The budgetary allocation for fuel recycle projects has seen decline over the past two years and has declined by 38% from FY 2024-25 to FY 2025-26.


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Eninrac Insights on India’s Green Hydrogen Market:

It is indeed true that the initial excitement or buzz around green hydrogen business in India stands reduced with the initial enthusiasm from companies of all sizes entering India's green hydrogen sector has diminished, leading to a landscape increasingly dominated by large corporations. Although there are many contributing factors but some prominent one’s are enlisted as below:


1. High Capital Expenditure and Technological Barriers:

The production of green hydrogen requires substantial investments in advanced technologies like electrolysers. These high capital expenditures pose significant challenges for small and medium-sized enterprises (SMEs). For instance, the India Green Hydrogen Market is projected to be worth $8 billion by 2030 and $340 billion by 2050, indicating substantial investments primarily from major players.

2. Economies of Scale Favoring Large Corporations:

Large corporations benefit from economies of scale, enabling them to distribute high initial costs over extensive operations, thereby reducing the per-unit cost of green hydrogen production. Companies like Reliance Industries and Adani Group have announced significant investments in green hydrogen, leveraging their scale to achieve cost efficiencies. For example, Reliance Industries invested $10 billion to generate 100 GW of solar electricity from renewable sources to produce green hydrogen by 2025.

Factsheet-India’s Green Hydrogen Development Roadmap


Source: eninrac consulting

3. Infrastructure and Supply Chain Challenges:

Developing a robust infrastructure for the production, storage, and distribution of green hydrogen demands significant investment, which is more accessible to large corporations. Challenges such as land allocation issues, high investment burdens, connectivity problems, and delays in government clearances have deterred smaller companies from participating in green hydrogen tenders.

4. Net Worth Criterion for Players Participating in RfS for SECI Bids:

The Request for Selection (RFS) mandates a minimum net worth of ₹10 million per MW (approximately USD 120,000) and a performance bank guarantee of ₹1.48 million per MW (around USD 18,048). With a minimum bid capacity set at 100 MW under Bucket 1, bidders are required to demonstrate a net worth of ₹1 billion (USD 12 million) and provide a performance bank guarantee of ₹148 million (USD 1.8 million).
These stringent financial requirements create significant barriers for micro, small, and medium enterprises (MSMEs), as their investment in plant and machinery is capped at ₹500 million (USD 6 million). This effectively excludes many manufacturing businesses and start-ups from entering the electrolyzer manufacturing sector. Furthermore, the substantial financial burden of the bank guarantee requirement poses an additional challenge for entities without established credit lines, making it even more difficult for them to participate in the bidding process.

5. Access to Financing:

Large corporations often have better access to financing options, enabling them to undertake significant projects in the green hydrogen sector. For example, Adani New Industries invested $50 billion in green hydrogen in collaboration with TotalEnergies to create the world’s largest green hydrogen ecosystem.

6. Technological Advancements and Expertise

The development and deployment of green hydrogen technologies require advanced expertise and research capabilities. Large corporations typically have dedicated research and development departments, allowing them to innovate and stay ahead in the sector. For instance, companies like Siemens and Thyssenkrupp are investing in research and development to expand their product lines in the green hydrogen market.

7.    Market Dynamics and Competitive Pressures

The competitive landscape of the green hydrogen sector favors entities that can operate at scale and absorb market fluctuations. Large corporations can leverage their diversified portfolios to mitigate risks associated with the nascent green hydrogen market, a flexibility that smaller companies often lack.

Conclusion

The dominance of large players in India's green hydrogen sector is a multifaceted issue stemming from high capital requirements, economies of scale, infrastructure challenges, policy uncertainties, financing access, technological expertise, and market dynamics. Addressing these challenges requires targeted policy interventions, financial incentives, and support mechanisms to enable smaller companies to participate meaningfully in the green hydrogen economy.

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INDIA UNION BUDGET 2025 -26

  • The budgetary support for on grid solar energy under union budget 2025-26 is INR 1500 crores. This is 85% less than that announced in the budget of 2024-25.
    Revised allocation for 2024-25 is significantly low which may be indicative of delay in realization of projects.


  • The allocations for PM Surya Ghar Muft Bijli Yojana and PM Kusum Scheme has seen increase from 2024-25 due to positive response for these scheme shown by the country.

    PM SGMBY has helped increase the adoption of solar rooftop across the country.



  • The budgetary support for wind energy under union budget 2025-26 is INR 500 crores. This is 37.5% less than that announced in the budget of 2024-25. GoI is giving impetus on increasing standalone onshore and offshore wind projects as well as hybrid projects. Does this decline in the support indicates a shift in the focus of government? The budgetary support for hydro energy under union budget 2025-26 is INR 50 crores.

    The allotment of funds to hydro energy have seen significant rise of 271% from 2023-24 to union budget of 2024-25 and 2025-26. This increase may be due to increase focus on developing pumped hydro storage projects in the country for supporting round the clock power supply.



  • The budgetary support for grid connected bio power under union budget 2025-26 is INR 30 crores.

    This is 62.5% less than that announced in the budget of 2024-25 while for off grid bio power the expenditure has seen an increase of 60% to 200 crores from that of 124 crores in budget of 2024-25.

  • The fund support for storage and transmission system and national green hydrogen mission has been consistent from FY 2024-25 to FY 2025-26 representing GoI’s efforts to diversify India’s energy mix promoting innovation in the sector of energy storage and making India world leader in the production and export of green hydrogen.


  • The increase in budgetary support for IREDA to ₹34,974.99 crore in FY 2025-26 signals a stronger commitment by the government to accelerate the growth of renewable energy in India. This boost reflects a focus on expanding renewable energy capacity, meeting climate targets, and enhancing financial support for clean energy projects.



    The funds are likely to strengthen IREDA’s role in financing innovation, and energy storage solutions, thus contributing to India’s transition towards a sustainable energy future. While decrease in the allocations for SECI may represent the trend of delay in progress of bids and realization and commission of the renewable projects which may be due to supply chain or land availability issues.

  • The increase in central spending on programs like Information and Public Advertising (I&PA), Human Resources Development and Training (HRDT), International Relations, and Research and Development (R&D), with a significant importance for R&D and HRDT, indicates a strong focus on strengthening the country’s knowledge economy, global presence, and human capital.

    The expenditure in R&D suggests a push for innovation and technological advancements, while allocation for HRDT reflects an emphasis on skill development, workforce training, and capacity building. Together, these efforts highlight the government’s intent to foster growth through enhanced research, global collaboration, and a more skilled workforce to drive national progress.


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India Union Budget 2025 Budgetary Allocations For Atomic Energy

India Union Budget 2025 Budgetary Allocations For Atomic Energy

The Union Budget 2025-26 outlines a significant push towards nuclear energy as part of India's long-...

Is Indian Hydrogen Market not fit for SME’s as Large Firms dominate?

Is Indian Hydrogen Market not fit for SME’s as Large Firms dominate?

It is indeed true that the initial excitement or buzz around green hydrogen business in India stands...

India Union Budget 2025 – Budgetary Allocations For MNRE

India Union Budget 2025 – Budgetary Allocations For MNRE

The allocations for PM Surya Ghar Muft Bijli Yojana and PM Kusum Scheme has seen increase from 2024-...