Draft NEP 2026 Pushes RE, Storage and Grid Reforms, Targets 4,000 kWh Per Capita Power Use by 2047

The Ministry of Power has released the Draft National Electricity Policy (NEP) 2026 for public consultation, outlining a comprehensive reform roadmap for India’s power sector in line with the government’s Viksit Bharat 2047 vision. Once finalised, the policy will replace the existing National Electricity Policy notified in 2005.

The draft policy comes at a time when India’s power sector has undergone significant transformation over the past two decades. Installed generation capacity has increased nearly fourfold since 2005, driven by substantial private sector participation. Universal electrification was achieved by March 2021, the unified national grid became operational in December 2013, and per capita electricity consumption rose to 1,460 kWh in 2024–25. The expansion of power markets and exchanges has also improved flexibility and efficiency in electricity procurement across the country.

However, the ministry acknowledged that structural challenges persist, particularly in the distribution segment. High accumulated losses and outstanding debt continue to weigh on the financial health of distribution companies, while tariffs in several consumer categories remain non-cost reflective. Elevated levels of cross-subsidisation have resulted in higher industrial electricity tariffs, affecting the global competitiveness of Indian manufacturing and industry.

Against this backdrop, the Draft NEP 2026 sets ambitious consumption and sustainability targets, aiming to increase per capita electricity consumption to 2,000 kWh by 2030 and over 4,000 kWh by 2047. The policy also aligns with India’s climate commitments, including reducing emissions intensity by 45 percent from 2005 levels by 2030 and achieving net-zero emissions by 2070, requiring a decisive shift towards low-carbon and cleaner energy pathways.

The draft proposes decentralised advance planning to ensure resource adequacy, with distribution companies and state load despatch centres mandated to prepare utility- and state-level capacity plans, while the Central Electricity Authority will prepare a corresponding national plan. To improve financial viability, the policy recommends automatic annual tariff revisions linked to suitable indices if state regulators fail to issue tariff orders, a gradual shift towards recovering fixed costs through demand charges, and exemptions from cross-subsidy surcharges for manufacturing units, railways and metro systems.

Regulatory commissions may also exempt distribution licensees from universal service obligations for consumers with contracted loads of 1 MW and above, while strengthening dispute resolution mechanisms to reduce regulatory and financial burdens.

In renewable energy, the policy promotes capacity addition through market-based mechanisms and captive power plants, along with large-scale deployment of energy storage. Distribution companies are encouraged to install storage systems on behalf of small consumers to achieve economies of scale, while bulk consumers may deploy their own storage to facilitate distributed renewable energy adoption.

The draft allows trading of surplus power from distributed renewable sources and storage systems, including peer-to-peer transactions and aggregator-based models, and targets parity between renewable and conventional power in scheduling and deviation mechanisms by 2030. Market-driven deployment of battery energy storage systems, domestic manufacturing of storage components, and demand-side incentives such as viability gap funding for battery and pumped storage projects have also been proposed.

The policy also addresses the role of conventional generation, proposing integration of storage with thermal plants and repurposing of older units to support grid stability and renewable integration. It suggests exploring direct industrial and district cooling applications using steam generated from thermal power plants. In the nuclear sector, in line with the SHANTI Act, 2025, the draft envisages adoption of advanced nuclear technologies, including modular and small reactors, and enabling commercial and industrial use of nuclear energy to achieve a target of 100 GW capacity by 2047. Accelerated development of storage-based hydroelectric projects has also been proposed to support energy security, flood moderation, irrigation and water management.

On power markets, the draft calls for a stronger regulatory framework to enhance market monitoring and surveillance and prevent collusion or market dominance. Transmission reforms include adoption of advanced technologies, compensation mechanisms to address right-of-way challenges, parity of transmission tariffs for renewable energy with conventional power by 2030, and a utilisation-based framework for allocating transmission connectivity to prevent speculative holding.

In distribution, the policy targets single-digit aggregate technical and commercial losses, shared distribution networks to enhance efficiency and competition, and the establishment of a Distribution System Operator to facilitate network sharing and integration of distributed renewables, storage and vehicle-to-grid systems. Cities with populations above 10 lakh are proposed to have N-1 redundancy at the distribution transformer level by 2032, with underground cabling in congested areas.

The draft further proposes functional unbundling of state transmission utilities and creation of independent state-level entities for load despatch and transmission planning, alignment of state grid codes with the Indian Electricity Grid Code, establishment of a robust cybersecurity framework, mandatory localisation of power sector data within India, real-time visibility of distributed energy resources for utilities, and a transition to indigenously developed SCADA systems and domestic software solutions for critical power system applications by 2030.

Overall, the Draft NEP 2026 lays out a detailed policy blueprint aimed at creating a future-ready, financially sustainable and environmentally responsible power sector capable of delivering reliable and affordable electricity to meet India’s long-term development goals.