The best possible solution to solve India´s energy crisis is to reduce the dependence on non-renewable resources and focus on renewables, primarily solar and wind, say Shisham Priyadarshini and Amish Shroff.
The government plans to increase renewable generation capacity to 175 GW by 2022. Is this a reasonable expectation, or will it fall short of requirement?
India has 275 GW of installed electricity generating capacity which is significantly higher than 140 GW of peak demand of electricity across the country. The energy generated through coal alone is higher than its peak demand. Despite the installed capacity exceeding power demand, some parts of the country face acute power shortages and more than 300 million people in India are still without access to power. Some of the reasons for this problem are coal supply shortages, high level of transmission & distribution losses, poor financial health of utilities, and volatility in the price of imported coal. The distribution companies that buy electricity generated with imported coal face significant and unpredictable upward pressure on tariffs. Adding to these problems, the rampant load-shedding and low-quality electricity supply forces people to resort to private, local, costly and alternative sub-standard solutions such as diesel generators, which pose both health and environmental concerns.
However, the major advantages India has today and going forward is that its renewable energy (RE) potential is vast and largely untapped. As on July 31, 2016, the renewable sources of energy in India - solar, wind, small hydro and bio-energy - contribute 14.7 per cent of the total installed capacity in the country. Earlier this year, the Prime Minister in his statement said that ´India is graduating from megawatts to gigawatts in renewable energy production.´ The quote itself sets up higher expectation of clean energy generation in the country.
The plan to increase renewable generation capacity to 175 GW by 2022 will not only address the problems faced in the power sector, but will also provide clean and cost-effective energy to the vast number of people across the country. India is the 4th largest importer of oil and the 15th largest importer of petroleum products and Liquefied Natural Gas (LNG) globally. The increased use of indigenous renewable resources is expected to reduce India´s dependence on expensive imported fossil fuels.
For the ambitious target of 175 GW of renewable power by 2022 (which includes 100 GW of solar power, 60 GW from wind power, 10 GW from biomass power and 5 GW from small hydropower), the Government of India is playing a proactive role in promoting the adoption of renewable energy resources by offering various incentives such as generation-based incentives, capital and interest subsidies, viability gap funding, concessional finance, fiscal incentives, and skill development of workforce under the ´Suryamitra Scheme´.
Hence, although the proposal to increase the renewable generation capacity to 175 GW by 2022 looks ambitious, it can be targeted to be achieved by the introduction of the various policy initiatives by the Ministry of New and Renewable Energy.
How are the challenges faced by India distinct from the developed world of energy producers?
Numerous policy reforms over the past few years have shifted India´s energy sector from a predominantly government-owned system towards the market based on changing economic dynamics. This has offered a more level playing field for both public and private sectors.
In India, renewable energy still remains unused and most of the energy comes from non-renewable sources like coal, which still remains the top choice to produce energy. Unless we give renewable energy a serious thought, the problem of energy crisis cannot be solved. India has 45 GW of hydropower and 23 GW of wind power capacity, but has barely tapped its huge potential for renewable energy. Renewable energy sources can reduce our dependence on fossil fuels and also help to reduce greenhouse gas emissions.
Aging infrastructure of power generating equipment in India is one of the other reasons for energy shortage. Most of the energy producing firms keep on using outdated equipment that restricts the production of energy.
Another unique problem that is peculiar to our country is that there is a significant delay in commissioning of new power plants that can fill the gap between demand and supply of energy.
Land being one of the most essential prerequisites for power generation projects, it is very difficult to secure land or get clearances from the governmental authorities on account of which many projects are either cancelled or delayed due to non-availability of land or issues in acquisition of land. Even otherwise after the land has been selected, there are a number of compliances and clearances which are mandated by law to be obtained from the authorities including the Ministry of Environment and Forests and Department of Forests.
While the power generation capacity has surged over recent years, the sector has been facing a precarious financial situation, especially the local distribution companies, due to large losses in the transmission and distribution networks. Frequent tripping and breakdown are the result of a poor distribution system. The major challenge which is common to all the countries is to invest enough to keep up with the growing demand for energy while keeping final energy costs under control without compromising the quality of the energy.
Despite the phenomenal growth in generation capacity over the past years, as the fourth largest producer of electricity in the world, India has over 15.5 million below the poverty line and 9,500 villages still devoid of electricity. How can this be turned around?
Power is one of the most critical components of infrastructure which is crucial for the economic growth and welfare of nations. Although there is substantial growth in generation capacity, India is currently facing an energy crisis due to its dependence on coal and imported crude oil to meet the sharply growing energy needs of the country.
Coal contributes to about 67 per cent of the generated power. As the source of generating energy, it will not exist forever and its price is bound to increase. The coal sector which is under the control of the government should be opened up to the private sector which will bring competitiveness in the sector and it will be possible to procure coal at a lower price. While the government can take measures to improve the supply of coal to the energy producers, the best possible solution to solve the energy crisis problem is to reduce the dependence of the country on non-renewable resources and invest required resources to develop this sector with the focus on renewable resources, primarily solar and wind. While one of the major concerns is certainly the limited availability of non-renewable energy resources like coal, gas and oil, the other challenges are increase in the pollution, destruction of the environment and biodiversity due to extraction and mining of the energy resources.
The Government of India has proposed a number of steps and initiatives like a 10-year tax exemption for solar energy projects in order to achieve India´s ambitious renewable energy targets of adding 175 GW of renewable energy by the year 2022.
The government has also sought to restart the stalled hydropower projects and increase the wind energy production target to 60 GW by 2022 from the current 20 GW. In this regard, efforts should be taken for proper implementation in order to achieve the desired objective. Besides this, the government should also give subsidy on solar panels to encourage more people to explore renewable options and ensure that the policies once announced are not rolled back, making them detrimental to the people involved in the projects.
Proper energy audits will also go a long way to tackle the problem of energy crisis. Energy audit is a process that helps one to identify the areas where your home or office is losing energy and what steps can be taken to improve energy efficiency. Energy audit when done by a professional can help to reduce the carbon footprint, save energy and money and avoid energy crisis.
A large percentage of power produced in the country is lost to inefficiencies in the state distribution networks. Hence, suitable measures should be taken to avoid such a situation.
There is also a strong need to push for wider-scale implementation of public-private partnership models.
Moreover, people in general need to be aware of energy conservation and should be taught about their duty of not stealing electricity and paying proper bills, failing which stringent punishment should be handed down to them.
All the above measures will have a significant impact to ensure that everyone has an access to cost effect and clean energy.
(Shisham Priyadarshini is Partner, and Amish Shroff is Principal Associate, Rajani Associates)