Right Legal Frameworks Catalyse Finance For Clean Energy Transition: Akshay Jaitly On Law & Energy Transition

As voices favouring a faster global shift towards cleaner energy, India must embrace green energy with an equal focus on its regulation to support both innovation and legal oversight, said Akshay Jaitly, founding partner at Trilegal and founder of TrustBridge, in a thought-provoking second episode of The Energy Transition Dialogues podcast series hosted by Vaibhav Chowdhary of ACPET. Jaitly emphasised that India's energy transition is not just a technological or financial challenge. It is fundamentally a legal and regulatory one.

In a conversation about the future of energy and law, Jaitly shared insights on the legal challenges confronting the energy sector, the role of AI, and the evolving regulatory landscape. He explored the legal complexities of the energy sector, shared historical insights, and discussed the future role of artificial intelligence in legal practice.

Q: What role do legal frameworks play in the energy sector?

A: "One of the examples I like to give is to think of electricity as any other commodity. It's produced, sold to a wholesaler, and ultimately delivered to consumers. The key difference is that we've not been able to store electricity at scale yet, which is why energy requires specific legal regulations," he said. "Electricity tends to be monopolistic in the way it is bought and sold and can breed potential monopolistic behaviour by market participants. Therefore, we need regulation through competition law in that sector."

Q: What were the main regulatory changes that helped stabilize the energy sector in the past?

Answer: "I am a big fan of deregulation, especially when done in the right way. In the past, we faced enormous amounts of debt in the books of the distribution companies. The Electricity Act of 2003 split distribution, generation, and transmission functions into three separate pieces, which helped stabilize the sector and provided a framework for states to move towards unbundling. This crucial move showcased the importance of legal oversight in keeping the energy market balanced. But we need to ask what the long-term vision for the sector in India is. To my mind, it should be a deregulated sector. If that is the goal, the steps one would take today would be clearer today," added Jaitly.

Q: As the world moves toward cleaner energy, what legal challenges do you see arising?

Answer: "The legal hurdles in transitioning to cleaner energy are complex and multifaceted. However, I'm not a big fan of ranking challenges with 'top five' or 'top ten' lists. That is a function of the internet age. I generally see these issues from the perspective of investors. Most of the money for the energy transition is going to come from the private sector. The question is who your policies are catering to and who are the investors you want. Policy thinking and lawmaking must be oriented to that type of investor. What's required is the certainty of contracts, predictability in the way law will be enforced, the timeframe within which disputes will be settled: really the building blocks of how a good economy functions. Policymaking needs to be clear, predictable, stable. The approach needs to be to make it easier for serious long-term investors to put large amounts of money into our country.

Q: How do you view the role of civil society and think tanks to ensure these policies see the light of day?

Answer: "As with any major issue in the economy, especially those significantly impacted by the politics and political economy around it, no stakeholder should be left out of this process. Because of entrenched views in the sector responding to the political economy in which stakeholders are located, these points must be made by think tanks and universities working in policy often and with greater depth. Power sector reform can be approached by policy thinkers outside of government by keeping the lens of political economy squarely in focus because politicians will respond to what the electorate wants. So solutions must be proposed in the realm of what might be possible for the politicians."

Q: Moving on to the role of AI in the future of law, how do you see artificial intelligence impacting the legal profession?

Answer: "AI is going to have a huge impact on the legal profession. However, it's important to remember that while AI can replace certain tasks, areas requiring specialized jurisprudence and legal expertise will still have a lot of scope for human input. AI can be used to develop tools to strengthen the hand of the regulator and write better quality regulatory orders. AI will change how lawyers work, but it won't replace the profession entirely," he said.

Q: Will AI replace lawyers, or will it merely change their roles?

Answer: "Lawyers won't be replaced by AI, but they'll be replaced by lawyers who work with AI. The idea is to take out the mechanical part of the work. It can free up people's time to do more intellectually challenging work and do it to a better quality because AI will pick up the kinds of mistakes humans are prone to."