Problems surrounding India’s energy sector are so complex and voluminous that the immediate need is for a policy environment that can push the country ahead on the innovation curve. Hopefully, this can help the nation seize leadership of an industry segment in the future, says Saurabh Biswas
The energy sector, electricity in particular, is undergoing a phase of rapid change. Provisional data from the Central Electricity Authority (CEA) showed that up to October 2018, electricity supply deficit was only 0.6 per cent of the total energy demand and deficit at peak was only 0.8 per cent. This in itself is suggestive of the fact that our country has come a long way since a decade. In fact, for the entire financial year of 2018-19, CEA’s Load Generation Balance Report anticipated 4.6 per cent overall energy surplus and 2.5 per cent surplus at peak demand. However, below the surface, there is a long list of challenges already being faced and even bigger ones looming ahead.
India’s electricity demand is projected to more than quadruple by 2035-36. Its demand grows concomitant with economic development, which is aided by increased penetration of necessary and discretionary goods powered by electricity, rise of disposable income and access to credit. One particular item, air-conditioners, is of special interest. It has already lead to a temporal shift in demand patterns. The situation will only get heightened in the future due to increased market penetration of the product and growing demand for cooling, given the rising temperatures.
A further spurt in demand is expected due to the electrification of the transport sector that is now almost inevitable. Even the Saubhagya scheme is expected to unlock latent demand by bringing electricity connection to a multitude of homes. Planning to meet the shifting demand is of essence. We are in a situation where we are constrained about our choice of electricity generation because of the conditions set by global climate change. Quite rightly, therefore, the Government has declared its intention to increase the share of renewable energy to 40 per cent by 2030.
Efforts to incentivise renewables are also palpable in the National Tariff Policy 2016 and the proposed amendments to the Electricity Act. Most industry watchers have expressed hope in meeting the 175GW renewable target. However, certain things demand attention. The intermittency of renewables and challenges of grid integration underscore heightened risk of curtailment, both of technical nature and misalignment with demand-supply forecast. These problems will keep exacerbating as the quantum of renewable power available for grid injection increases as planned.
At this point, technical challenges of renewable power evacuation are compounded by flexible operations requirement of base power plants. Immediate focus is needed on storage that can smoothen out intermittence of renewables and longer-term network infrastructure planning.
Notably, conventional power sources, particularly thermal, is now at 64.1 per cent of the installed capacity (CEA: October 2018 provisional figures) that is predominantly coal-fed. Discussions are already rife about the financial debacle lurking in many of these assets as their cost-competitiveness vis-à-vis renewables has eroded and policy thrust is shifting away. This needs attention since there is no prudence in thinking that a collapse of investments made in this sector will not have collateral damage for investor sentiment in renewable sector.
Overall, the power sector needs to demonstrate policy reliability due to long-time horizon of investments. Therefore, a carefully managed decrease in share of thermal power needs to be staged, including looking at technologies, that can reduce negative impact of these power plants and, therefore, provide cushion for managing the transition.
Well none of the challenges in generation can be compared to what is brewing on the distribution side. The Ujjwal DISCOM Assurance Yojana (UDAY) continues to be in a perilous economic condition. Their tottering health emanates from both revenue realisation deficit as well as aggregate technical and commercial (AT&C) losses, which is about 19 per cent. As rural electrification becomes more pervasive due to policy prerogatives, there is a growth of subsidised customers entering the fray and ultimately deepening the ongoing crisis.
There is also a lingering threat from the prospect of rooftop solar and net-metering as this increases the chance of net revenue from paying customer base falling rapidly. Though Uday has provided a pathway for shifting the burden of losses, it hasn’t really come up with a roadmap to reduce the burden.
Overall, India can benefit from foresight in planning the transition to a sustainable generation paradigm. Planning should have place for technology discovery, upgradation of transmission and distribution networks to handle load patterns of a new era and solutions for plugging revenue leakages. Immediate focus on research and development (R&D) in areas of local importance, like dust sustaining solar panels, storage solutions that work in extreme weather while hopefully being less dependent on import-oriented minerals, economically meaningful solutions for dramatic reduction in emissions form thermal power plants, and smart metering will help alleviate the financial stress on DISCOMS.
That the Government isn’t oblivious to boosting a local ecosystem is evident in its efforts to support local manufacturing in solar industry. The approach, however, has been reliant on erecting trade barriers which remains a contentious and politically thorny strategy. One often thinks whether such policy decisions focus on attracting investments in R&D. Ultimately, what is needed is a policy environment that will push the country ahead on the innovation curve and hopefully help the nation seize leadership of an industry segment in the future.
(The writer is Practice Lead, Climate, Environment and Sustainability, Chase India)