Gujarat’s Power Sector: Strengths and Emerging Challenges

Gujarat has been a leader in India's power sector, consistently ensuring reliable electricity supply and pioneering renewable energy adoption. With a well-balanced energy mix that includes coal, gas, hydro, nuclear and an increasing share of renewables, the state has built a robust power infrastructure. The proactive regulatory framework and investments in transmission and distribution networks have further strengthened Gujarat’s position as a model for other states.

However, as the power sector continues to evolve, new challenges have emerged. The integration of renewable energy, increasing power purchase costs, financial sustainability of distribution companies (DISCOMs), increasing options for consumers via green open access and the growing demand for quick decision-making are some of the critical issues that need urgent attention. While Gujarat's DISCOMs have performed better than their counterparts in many other states, they still face challenges related to revenue recovery gaps, procurement inefficiencies and distribution losses. To ensure the continued success of Gujarat’s power sector, a structured, data-driven planning approach is essential. 

The Financial Health of Gujarat’s DISCOMs

Gujarat’s four state-owned DISCOMs (UGVCL, PGVCL, MGVCL and DGVCL) are responsible for electricity distribution across different regions of the state. While they have made significant progress in reducing Aggregate Technical and Commercial (AT&C) losses and improving operational efficiency, financial sustainability remains a key concern.

One of the biggest cost components for DISCOMs is power procurement. As the state transitions towards a higher share of renewables, managing procurement costs while ensuring a stable and reliable power supply, while high value consumers migrate to open access options is becoming increasingly complex. Additionally, the transmission and distribution (T&D) losses continue to impact financial viability, although all the four state owned discoms have considerably reduced these losses in the past decade. The emerging gap between the Average Cost of Supply (ACS) and the Average Revenue Realized (ARR) further highlights the need for a systematic planning approach to optimize costs, improve revenue recovery and maintain financial stability.

Need for the GPSPT:

To address these challenges, the Gujarat Power Sector Planning Tool (GPSPT) has been developed as a fully open source comprehensive decision-support dashboard for power sector stakeholders. It is an extension and data visualisation of RATE-GJ tool; a modelling  built by Prayas Energy Group & Gujarat Energy Research and Management Institute (GERMI). This tool provides data-driven insights to improve power sector planning, optimize procurement strategies and enhance financial sustainability.

The primary objectives of the GPSPT are:

• Enhancing Power Sector Planning: The tool provides structured insights into demand forecasting, power procurement strategies and renewable energy integration.

• Optimizing Financial and Operational Decisions: By analyzing procurement costs, DISCOM expenditures and revenue allocation, the tool enables better financial planning.

• Supporting Renewable Energy Integration: As Gujarat increases its renewable energy capacity, the GPSPT will help assess the economic viability of large-scale RE integration.

• Bridging the Revenue Gap: The tool facilitates tariff analysis and planning,  revenue requirement calculations and subsidy impact assessments to ensure financial sustainability.

• Providing Transparency and Data Accessibility: The GPSPT serves as a unified platform to visualize sectoral data, making it easier for policymakers, utilities and consumers to understand Gujarat’s power sector dynamics.

The Architecture and Functionality of the GPSPT

The GPSPT is designed as an energy planning and decision-support tool that consolidates key data points from across Gujarat’s power sector. It integrates multiple data sources to provide a comprehensive view of power generation, procurement, sales and financials.

1. Inputs & Assumptions: This section of the tool collects and organizes all foundational parameters regarding generation, capacities, fuel prices, cost escalation rates, sales projections, tariff schedules and policy targets. This drives every subsequent calculation in the model.

2. Energy Generation Model: It combines thermal, hydro, nuclear, renewables and other generation capacities with respective load factors and growth assumptions to estimate annual energy output, producing a consolidated annual energy generation and cost summary.

3. Transmission & Cost Modeling: Applies transmission tariffs, allocates losses, and apportions network charges across DISCOMs, integrating these costs into the broader procurement framework.

4. DISCOM Sales & Migration Analysis: This section pre-processes category-wise sales data and deducts open-access and captive consumption to determine net energy requirements for each distribution company.

5. DISCOM Energy Procurement & Financial Modeling: Calculates total power purchase, O&M, depreciation, and other expenses. It applies consumer tariffs and adjustments to derive DISCOM-level revenues and expenditures.

6. Model Outputs & Reporting: Synthesizes all inputs and calculations into key indicators such as energy balance, annual merit order dispatch, average cost of supply vs. billing rate gap, revenue requirements and DISCOM-level revenue gaps. It can be used for informed policy and tariff decisions.

   

Who Can Benefit from the GPSPT?

The Gujarat Power Sector Planning Tool is designed  to be a fully open source modelling tool to support multiple stakeholders in Gujarat’s power sector, providing them with real-time insights and strategic planning capabilities.

Key Users and Their Benefits:

• Policymakers & Regulators: GPSPT enables government agencies and regulatory bodies to evaluate policy effectiveness, optimize tariff structures and ensure compliance with power sector regulations.

• DISCOMs & Utility Companies: Distribution companies can use the tool to optimize procurement strategies, improve financial sustainability, reduce revenue gaps and enhance operational efficiency.

• Industries & Large Consumers: Industrial users can assess tariff trends, demand forecasts, and energy cost projections for better procurement planning.

• Academics & Researchers: Universities, think tanks and researchers can leverage GPSPT for sectoral analysis, financial modeling, and policy research on Gujarat’s power sector.

The Gujarat Power Sector Planning Tool (GPSPT) aims for better understanding at long-term forecasting of distribution companies' financial and technical parameters by organizing, modelling and visualizing data in accessible formats. Our long-term goal is to replicate this tool across all states & UTs in India.