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India received commitments for over 260,000 MW of renewable energy during RE-Invest. While this is a great supply-side achievement, there are several issues in terms of handling this, and implications for the grid, both technically and financially.
The Renewable Energy (RE) Global Investor’s Meet inaugurated by Prime Minister Narendra Modi on February 15 invited participation in funding India’s RE growth ambitions, which include almost 1,00,000 MW of growth in solar power in just seven years (about 40 per cent of today’s total installed capacity) and some 50,000 MW of wind power. This is bold and ambitious to say the least. The event was a success, finding investment commitments for some 2, 60,000 MW of RE!
But a serious question facing Indians is whether at a time when most people are struggling to keep the lights on at home, because of the shortage of power, do citizens really care about carbon emissions and climate change, which have become the primary rationale for pushing green energy? Also if Indians are as notoriously price-sensitive as pundits claim, how much of a premium will they be willing to pay for RE?
Let’s not beat around the bush — RE, attractive as it might sound and improving in price performance every year, does require support. Support isn’t inappropriate, especially given the benefits of RE, but there are also externalities of another kind including implications for the rest of the grid. This needs deeper analysis.
In the West, utilities are already worrying about the Utility Death Spiral, where RE and storage and smart grids mean some consumers reduce, if not cut off, their utility purchases. This raises costs for the rest of the grid, which must still keep the system in balance and stable, and also serve the least profitable consumers. This prompts others to exit the system, and so on. While India isn’t quite there yet, we must first understand that an end consumer opting for RE and finding it worthwhile is based on his/her comparing retail tariff with generation costs, which aren’t comparable. First, distribution has its own costs, even after accounting for savings in distribution losses. Second, retail tariffs for so-called paying customers (especially commercial and industrial) are artificially high, since they cross-subsidise other users.
Renewables in India are different from renewables deployed in the U.S. and Europe, and understanding the differences is the key to viable policies. The triad of “usual” challenges of renewables remains in India, such as: intermittency/variability; location-specific potential (concentrated in areas sometimes away from consumers or the grid); and higher costs. However, there are specific differences and needs that demand deeper analysis for the long-term viability of renewable energy.
In India, our peak demand is mostly in the evening, and the sun surely isn’t very bright at 7 p.m. Storage technologies are niche and expensive today, so solar power helps with energy (kilowatt-hour) needs, but not with our capacity needs. Wind is not much better, given its seasonality.
“Renewables in India are different from renewables deployed in the U.S. and Europe, and understanding the differences is the key to viable policies”
One of the typical calculations that power systems operators do is estimate how much RE the grid can handle. Typical figures from elsewhere are in the range of 20-30 per cent, with more requiring significant investments in transmission or peaker plants. India is different because its grid is very weak and unstable, and instead of having a reasonable reserve margin (which is typically 15-20 per cent in the West), there is a shortfall in the grid, officially in the range of 5 per cent or so, but actually much higher. The grid is kept afloat through massive “load-shedding” (feeder-level cut outs of supply).
There are other technical reasons why the Indian grid is weak, including lack of ancillary services (systems designed to keep the grid stable, instead of just pricing kilowatt-hours), and even a lack of time-of-day pricing for bulk procurement of power. There are few peaker plants (which would operate only some 5-10 per cent of hours in a year), since there isn’t sufficient incentive for these. Without incentives for plants that can ramp up quickly but may not get used much, how will the grid handle 20 per cent renewables?
Even worse, the types of plants capable of fast ramping are limited in near-term growth in India — hydropower (due to land and social/environmental challenges) and natural gas (due to supply constraints). Hydropower has an additional constraint when considering peaking or storage — its additional duty for water management (irrigation) limits when water can be stored versus released. Also, natural gas has overwhelmingly been built for baseload needs (with combined cycle plants), which cannot meet peaking requirements.
Making RE sustainable
Renewables can and should play a greater role in our sustainable energy future, but we need proper accounting and specialised effort to understand their grid implications and scalability. As part of a recent book on Making Renewable Power Sustainable in India, launched by Piyush Goyal, Minister for Power, Renewables, and Coal, we at Brookings India identified a number of policy imperatives for making RE sustainable. While the technical details need working out, especially in terms of regulations, support and incentive mechanisms, grid management, etc., we also identified a need to ramp up skills and innovation. All solar cells are imported today — this shouldn’t remain so. The first step towards making RE sustainable is a nuanced examination of the issues and trade-offs, and dialogue among all the stakeholders, especially state utilities, which ultimately deliver electricity to consumers.
Renewables have a bright future, and must play a leading role in India’s power security and growth. They aren’t a silver bullet, but a vital tool in the broader spectrum of India’s energy future. Most importantly, renewables should not be viewed in isolation, as a drop-in supply-side solution, but rather as part of a transition if not transformation of the grid, which includes variable and dynamic pricing, distributed generation, storage technologies and smart grids. If RE is referred to as the energy source of the future, that future is well-nigh.
This column first appeared in The Hindu, on February 18, 2015. Like other products of the Brookings Institution India Center, this is intended to contribute to discussion and stimulate debate on important issues. The views are those of the author.