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Draft NEP 2026 Charts Roadmap for Clean Power Growth, Storage Expansion and Market Reforms Through 2047

The Ministry of Power has released the Draft National Electricity Policy (NEP) 2026 for public consultation, outlining a wide-ranging reform agenda for India’s power sector aligned with the government’s Viksit Bharat 2047 vision. Once finalised, the new policy will replace the National Electricity Policy issued in 2005.

The draft comes against the backdrop of major structural changes in India’s electricity sector over the last two decades. Since 2005, installed generation capacity has nearly quadrupled, supported by rising private sector participation. Universal household electrification was achieved by March 2021, the national grid became fully unified in 2013, and per capita electricity consumption reached about 1,460 kWh in FY 2024–25. The expansion of power exchanges and market-based procurement has also improved operational flexibility and efficiency.

Despite these gains, the Ministry acknowledged that persistent challenges remain, particularly in the distribution segment. Distribution companies continue to face high accumulated losses and debt, while tariffs for several consumer categories do not fully reflect costs. Heavy cross-subsidisation has pushed up industrial power tariffs, impacting the global competitiveness of Indian manufacturing.

Against this context, Draft NEP 2026 sets ambitious long-term consumption and sustainability goals, targeting per capita electricity consumption of 2,000 kWh by 2030 and over 4,000 kWh by 2047. The policy 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, necessitating a rapid shift toward low-carbon and cleaner energy systems.

To ensure resource adequacy, the draft proposes decentralised and advance planning, mandating distribution companies and state load despatch centres to prepare utility- and state-level capacity plans. The Central Electricity Authority would consolidate these into a national resource plan. To improve financial discipline, the policy recommends automatic annual tariff revisions linked to suitable indices if state regulators do not issue tariff orders, a gradual transition to recovering fixed costs through demand charges, and exemptions from cross-subsidy surcharges for manufacturing units, railways, and metro systems.

The draft also suggests allowing regulatory commissions to 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 uncertainty and financial stress.

On renewable energy, the policy promotes capacity addition through market-based procurement, captive generation, and large-scale energy storage deployment. Distribution companies are encouraged to deploy storage systems on behalf of small consumers to benefit from economies of scale, while large consumers may install storage independently to support distributed renewable adoption.

The draft enables trading of surplus electricity from distributed renewable and storage assets, including peer-to-peer transactions and aggregator-led models, and aims to bring parity between renewable and conventional power in scheduling and deviation settlement mechanisms by 2030. It also proposes 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.

Conventional generation continues to play a role under the policy framework. The draft recommends integrating storage with thermal power plants, repurposing older units to support grid flexibility, and exploring industrial and district cooling applications using thermal steam. In the nuclear segment, aligned with the SHANTI Act, 2025, the policy envisages adopting advanced nuclear technologies, including small and modular reactors, with a target of 100 GW nuclear capacity by 2047. Faster development of storage-based hydroelectric projects has also been proposed to enhance energy security, flood moderation, irrigation, and water management.

For power markets, the draft calls for a stronger regulatory oversight mechanism to prevent market manipulation and concentration. Transmission reforms include adoption of advanced technologies, compensation mechanisms for right-of-way challenges, parity in transmission tariffs for renewable and conventional power by 2030, and a utilisation-based framework to prevent speculative holding of transmission capacity.

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

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

Overall, the Draft NEP 2026 presents a comprehensive policy blueprint aimed at building a financially resilient, technologically advanced, and environmentally sustainable power sector capable of meeting India’s long-term growth and energy security objectives.