India is facing the challenging task of providing affordable electricity to all industrial and commercial enterprises while addressing the persistent issues in the distribution sector. MSMEs are the backbone of employment and economic growth in India and will play a pivotal role in achieving the vision of ‘Aatmanirbhar Bharat.’
They require significant support to reduce costs and increase output. Good quality, reliable, and cost-effective power is essential to empower MSMEs. This can be achieved by introducing a new market participant – the Demand Aggregator.
The Demand Aggregator will:
*Note: The consolidated demand must exceed 1 MW.
The Electricity Amendment Bill 2020 (draft, potentially the act) proposes that sub-distribution licensees can improve the efficiency of distribution licensees. This may open up the possibility of recognising the Demand Aggregator as a service provider to MSMEs and distribution licensees. Additionally, CERC may develop a billing and settlement mechanism between licensees and Demand Aggregators.
Benefits for MSMEs and Licensees:
| MSME | License |
|---|---|
| Access to competitive electricity rates for MSMEs with demand below 1 MW. | Single point contact –Billing will be done by the Demand Aggregator who will also manage the downstream metering, billing, and collection services for MSMEs. |
| Improved viability: Cost of electricity /unit production would be lower. | Reduced burden on DisComs as aggregated demand will minimise the impact of forecast variability. |
| Competitive choice – MSMEs, like large open access customers, can choose to source power from either the licensee or Demand Aggregator. | Licensees or sub-licensees will have a choice to recruit a qualified Demand Aggregator, with definite SLAs. This shall improve competency, efficiency, and a sense of collaboration. |
Provisioning a Demand Aggregator shall be a win-win proposition for both MSMEs and distribution licensees. The licensee will save on servicing costs for multiple small consumers. It would need to interface with a single entity that is well-versed in managing demand forecasting, metering, billing, and collection. This allows the licensee to focus more on core business operations and optimisation.