The national smart grid mission proposes use of information technology and automation in control of power from generation till consumption. The mission has a three tier structure consisting of policy approving, policy preparing and technology advising bodies. The national smart grid mission has a budget of Rs 9.8 billion for the 12th Plan period including a budgetary support of Rs 3.4 billion. Thus the programme size is much smaller as compared to other flagship programme of the government in the power sector. However, this should not be the sole barometer of importance of this mission. The government has announced an investment of USD 4 billion towards smart meters alone which will ultimately be part of a smart grid.
Thus the need for smart grid is underscored by the existing power generating capacity of 230 GW in India which is a very large generation capacity. More importantly generation capacity is growing at a rate of 8-10% per annum to meet the ‘power for all’ objective. The growth in generation would also include a large contribution by the renewable energy as outlined by the 175 GW target for renewable energy by 2020. Going forward there could be a large population of electric vehicles which will also require the presence of a smart grid to enable charging of the same. Thus, a large power sector infrastructure suffering from inefficiencies and still needing large additions requires a smart grid mechanism to improve the efficiency and manage the scale and technological innovations.
The major reason for installing a smart grid is the very high transmission and distribution losses. As a result of these high losses the tariffs are artificially high for some categories of consumers whereas the many distribution companies (discoms) are under huge losses. These losses hinder investments in power sector value chain and pose a systemic risk to the financial sector as loss making discoms are unable to pay back their loans in a timely fashion. Smart grid solutions can help monitor and control the aggregate technical commercial (ATC) losses of discoms and help in sustained reduction in ATC losses. Reduction in power theft is also an objective and desired outcome of the smart grid mission as reduction in power theft aids in reduction in ATC losses.