Draft National Electricity Policy 2026: A Complete Overview of India's New Power Blueprint

Background: From NEP 2005 to NEP 2026

The National Electricity Policy (NEP) is issued by the Central Government under Section 3 of the Electricity Act, 2003, which mandates the Central Government to formulate a national electricity policy in consultation with the State Governments and the Central Electricity Authority (CEA). The first NEP was notified in February 2005.

The 2005 NEP was crafted to address the fundamental challenges of that era: acute demand-supply deficits, limited access to electricity, inadequate private sector participation, and weak transmission infrastructure. It succeeded on many fronts. Over the two decades since 2005, India's installed generation capacity has grown nearly fourfold; universal household electrification was achieved by March 2021; a unified national grid became operational in December 2013; and per capita electricity consumption reached approximately 1,460 kWh in 2024-25.

Yet despite this progress, significant challenges persist — particularly in electricity distribution, where DISCOMs continue to accumulate losses and debt; tariffs in several segments remain non-cost-reflective; industrial tariffs are elevated by cross-subsidisation; and the sector faces the immense challenge of integrating variable renewable energy at scale.

On 20 January 2026, the Ministry of Power released the Draft National Electricity Policy (NEP) 2026 for public consultation, inviting stakeholder comments until 19 February 2026. The 40-page draft replaces the 2005 NEP and establishes a comprehensive framework for the sector to 2047 — India's centenary of independence.

Vision and Overarching Goals

The central vision of NEP 2026 is:

"Reliable 24×7 quality power through a financially viable and environmentally sustainable power sector furthering energy security at an affordable price."

This vision is anchored in three dimensions:

Reliability: 24×7, uninterrupted, quality power supply for all
Sustainability: Alignment with India's climate commitments and clean energy transition
Affordability: Cost-reflective but accessible pricing for all consumer categories

Quantitative Targets

| Indicator | 2024-25 (Current) | Target 2030 | Target 2047 | |---|---|---|---| | Per capita electricity consumption | ~1,460 kWh | 2,000 kWh | Over 4,000 kWh | | Emissions intensity reduction | Baseline | 45% below 2005 levels | Net-zero by 2070 | | Nuclear capacity | ~8 GW | — | 100 GW | | AT&C losses | ~15-18% | Single digits | — | | Investment required | — | ₹50 trillion by 2032 | ₹2,00,000 billion by 2047 |

The per capita consumption targets reflect India's development ambitions — a 2.7x increase by 2047, consistent with a rapidly industrialising and urbanising economy.

Major Reform Area 1 — Resource Adequacy and Capacity Planning

A persistent weakness in India's power sector planning has been the gap between the CEA's national plans and actual state-level investment and procurement decisions. NEP 2026 proposes to address this through a decentralised resource adequacy (RA) planning framework:

DISCOMs and State Load Despatch Centres (SLDCs) shall prepare utility- and state-level RA plans under SERC regulations
The Central Electricity Authority (CEA) shall consolidate these into a national RA plan
RA plans shall ensure capacity adequacy, optimise the resource mix, and guide scientifically assessed capacity additions

This bottom-up planning approach — anchored at the DISCOM level but consolidated nationally — is intended to ensure that capacity planning is aligned with local demand patterns and network characteristics rather than being driven purely by top-down central planning.

Major Reform Area 2 — Renewable Energy and Energy Storage

NEP 2026 makes renewable energy integration its central generation priority, reflecting India's commitments under the Paris Agreement and its domestic target of 500 GW of non-fossil fuel capacity by 2030.

Market-Based Expansion

The policy favours market-based capacity addition mechanisms — primarily tariff-based competitive bidding (TBCB) — for renewable energy procurement, rather than administrative allocation.

Storage Deployment

The policy emphasises deployment of:

Battery Energy Storage Systems (BESS) for short-duration storage and grid services
Pumped Storage Projects (PSP) for long-duration storage and grid balancing

Scheduling Parity

A significant and long-overdue reform: the policy proposes achieving parity between renewable and conventional energy sources in scheduling and deviation settlement by 2030. Currently, renewable energy enjoys certain scheduling exemptions that create distortions in the power markets. Parity will make the electricity markets more efficient and accurate.

Peer-to-Peer Trading

The policy envisages enabling peer-to-peer trading of surplus distributed renewable energy — allowing prosumers to sell surplus solar power directly to neighbours rather than only through the DISCOM. This requires a Distribution System Operator (DSO) framework to manage distributed energy resources.

Major Reform Area 3 — Nuclear Energy

The draft NEP 2026 describes nuclear power as "a clean, reliable, and sustainable energy source with significant potential for India's long-term energy security" — marking a shift in the policy characterisation of nuclear energy from a niche option to a mainstream clean energy source.

The policy targets:

Nuclear capacity expansion to 100 GW by 2047, from approximately 8 GW currently
Development of Small Modular Reactors (SMRs) and Bharat Small Reactors in collaboration with the private sector under the SHANTI Act, 2025
Eligibility of nuclear projects for Green Bond funding
Brownfield expansion at existing nuclear sites
Fleet-mode implementation to establish domestic supply chains
Repurposing retired thermal plant sites for nuclear projects where feasible
Encouraging large C&I consumers to use nuclear-sourced power

The SHANTI Act, 2025 — the Specific, Harnessable, Affordable, Nimble, Transformative and Improved Nuclear Technology Act — enables private sector participation in nuclear power, which was previously restricted to public sector entities. NEP 2026 builds on this framework to chart a much more ambitious nuclear expansion programme.

Major Reform Area 4 — DISCOM Reforms and Financial Health

The financial distress of distribution companies is described in NEP 2026 as a "persistent challenge" — an understated characterisation of what is arguably the most critical structural problem in India's power sector. DISCOMs owe several lakh crore rupees in accumulated losses and debt.

NEP 2026 proposes:

Tariff Reforms

Indexed tariffs with automatic annual revisions where State Commissions delay tariff orders — removing the phenomenon of "regulatory gaps" where tariffs are frozen for years
Progressive recovery of fixed costs through demand charges, reducing cross-subsidisation
Exemption from cross-subsidies and surcharges for manufacturing industries, railways, and metro rail to improve their competitiveness

Distribution Competition

Phasing out the monopoly in distribution by allowing multiple licensees in the same area, encouraging public-private partnerships
Listing of distribution utilities to improve governance and access to capital markets

Technology and Efficiency

Reducing AT&C losses to single-digit levels through technology upgrades and strict financial discipline
Establishment of a Distribution System Operator (DSO) to manage distributed energy resources
Smart meter deployment to enable data-driven operations

Major Reform Area 5 — Transmission

NEP 2026 proposes several transmission reforms:

Parity of transmission tariff with conventional power by 2030 for all types of new RE capacity — addressing the cost disadvantage that currently makes renewable energy integration more expensive
Utilisation-based framework for allocation of transmission connectivity — preventing speculative holding of connectivity slots
Addressing Right-of-Way (RoW) challenges through latest technologies and suitable land-use compensation
Strengthening inter-regional transmission capacity to enable national balancing of renewable energy

Major Reform Area 6 — Grid Modernisation and Cybersecurity

Recognising the growing dependence of critical infrastructure on digital systems, NEP 2026 emphasises:

Mandatory data sovereignty: Power sector data must be stored within India
Transition to indigenously developed SCADA systems by 2030, reducing dependence on foreign technology in critical grid control systems
Development of domestic software solutions for all critical power system applications
Ensuring real-time visibility of Distributed Energy Resources to DISCOMs and SLDCs
A strong regulatory framework for market monitoring and surveillance to prevent collusion and gaming in electricity markets

Hydropower

NEP 2026 identifies geological risks, clearance delays, land acquisition hurdles, funding constraints, and procedural bottlenecks as the main barriers to hydropower development. It proposes a multi-pronged push including:

Accelerated development of storage-based hydroelectric projects for flood moderation, irrigation, and energy security
Streamlined clearance processes
Integration of hydropower in resource adequacy planning as a flexible, dispatchable resource

Investment Requirements

The scale of investment envisaged is staggering. NEP 2026 estimates that the power sector will require:

₹50 trillion (~$546 billion) by 2032 for generation capacity expansion, transmission, and distribution
₹2,00,000 billion by 2047

Meeting these investment requirements will necessitate significant private sector participation, innovative financing structures, and a regulatory environment that provides adequate returns to attract capital.

Conclusion

The Draft National Electricity Policy 2026 is an ambitious, comprehensive document that correctly diagnoses the challenges of India's power sector and proposes reforms that are broadly in the right direction. Its success will depend on implementation — particularly on the willingness of State Governments and SERCs to implement the DISCOM financial reforms, which are the most politically difficult but economically most necessary changes. The investment targets are achievable but require a stable, predictable regulatory framework that enables long-term capital commitment.