Why DISCOM-Level Capacity Expansion Planning Matters: The Case of APEPDCL

With growing electricity demand, renewable energy penetration, and storage requirements, Indian distribution companies (DISCOMs) face increasingly complex long-term power procurement decisions. DISCOMs, often operating with financial constraints, must not focus solely on procuring more power to meet future demand. They must also optimise the timing, type, and cost of new capacity additions.

 

Long-term planning is essential for anticipating future demand, storage requirements, and technology costs. Such deliberation enables timely procurement and infrastructure investments, ensuring that the power distribution network reliably supports economic growth and the clean energy transition.

Andhra Pradesh’s Eastern Power Distribution Company (APEPDCL), a major DISCOM in the region, serves 11 districts. Through rapid industrialisation, green hydrogen projects, and data centre expansion, particularly in the high-growth Visakhapatnam region, APEPDCL is experiencing unprecedented growth in electricity demand, which is projected to increase by an additional 128%, from 30,629 MU in FY 2023–24 to 69,982 MU by FY 2039–40. Despite this growth, evidence of detailed least-cost capacity expansion planning at the individual DISCOM level in Andhra Pradesh remains limited. Such planning would need to look at hourly operations, regional differences in demand and resources, and the optimal timing and mix of generation and storage investments.

A Regulatory Push Towards Better Planning

Recognising the significance of fostering planning capacity at the DISCOM level, the Ministry of Power first introduced guidelines for resource adequacy planning in 2022. These guidelines establish a framework for planning electricity resources from the national level down to individual DISCOMs, indicating a regulatory shift. Moreover, conventional capacity planning primarily focuses on ensuring sufficient generation to meet projected demand. The new framework puts forth an integrated, data-driven resource planning approach.

The Andhra Pradesh Electricity Regulatory Commission implemented these guidelines at the state level through its draft Framework for Resource Adequacy Regulation, 2026, stating that DISCOMs must undertake long-term resource adequacy assessments. Through such planning, DISCOMs are expected to identify the optimal mix of generation, energy storage, and procurement resources needed to meet future electricity demand. This optimal mix must also comply with Renewable Consumption Obligation (RCO) targets and reliability standards. This is where least-cost capacity planning comes in.

 

What a Least-Cost Capacity Expansion Study Can Do

Least-cost capacity expansion helps DISCOMs balance two competing priorities: maintaining a reliable electricity supply while keeping long-term procurement and investment costs as low as possible. The optimisation accounts for projected demand and transmission constraints, regulatory requirements such as RCOs, technology and cost characteristics (capital, operating, and fuel costs), and plant availability. Capacity expansion planning tools, such as GridPath (an open-source power system optimisation model), enable utilities to identify the least-cost combination of generation and storage resources under multiple future conditions, thus reducing planning uncertainty.

In a least-cost capacity expansion study on APEPDCL conducted by CSTEP, this kind of modelling enabled the identification of distinct investment pathways to meet long-term demand effectively. Such analysis enables utilities to evaluate alternative capacity expansion pathways alongside national and state planning assumptions. It can also help answer more granular questions, such as how much to rely on battery energy storage systems (BESS) versus pumped hydro energy storage (PHES), where geographically and technically feasible, as renewable energy penetration increases. Moreover, by adopting a robust planning framework, DISCOMs can avoid underutilised resources and minimise consumer power purchase costs.

 

However, because such planning interventions are in the early stages, several challenges affect least-cost optimisation, including data unavailability, uncertainty in long-term demand forecasting, and limited institutional capacity (Figure 2).

 

From Long-Term Planning to Hourly Dispatch Simulations

Identifying the least-cost portfolio is only the first step. The next question is whether that portfolio can actually operate reliably every hour of the year. Comprehensive hourly production cost simulations (short-term) conducted for a target year (FY 2039–40, in APEPDCL’s case) can add a valuable analytical layer. Such simulations capture the hour-to-hour variability of electricity demand and renewable energy (RE) generation. This becomes increasingly important as RE and BESS become more prevalent. Solar and wind intermittency requires flexible dispatch and storage operation to maintain system reliability and minimise operating costs.

Hourly simulations provide insights into operational parameters under different capacity expansion planning scenarios. These parameters include optimal dispatch of generation resources, RE curtailment, unserved energy, and storage charge and discharge patterns. Hourly simulations help determine whether the expansion model’s capacity mix can operate reliably and economically under real-world conditions.

For APEPDCL, the results highlight the central role of energy storage in supporting high RE penetration. Solar, distributed renewable energy, BESS, and PHES meet a large share of future electricity needs, while a hybrid storage portfolio enables flexibility through fast response and intraday balancing from BESS and long-duration energy shifting from PHES.

The Broader Argument

As electricity demand becomes more decentralised and renewable generation increases, utility-level planning will become increasingly important alongside national resource planning. Long-term capacity expansion planning and short-term hourly dispatch simulation studies provide complementary approaches for identifying optimal future investment pathways and assessing system operations. APEPDCL’s case shows the potential for optimisation-based long-term capacity expansion planning as a practical tool for balancing reliability, affordability, and clean energy targets. Before making long-term procurement decisions, such planning allows utilities to assess possible trade-offs. In line with national and state-level policy, DISCOMs must conduct long-term resource adequacy planning; building this required capacity early will allow them to integrate renewable energy, manage future demand growth, and make evidence-based investment and procurement decisions.