Making a smart energy grid work for India

Content from the Brookings Institution India Center is now archived. After seven years of an impactful partnership, as of September 11, 2020, Brookings India is now the Centre for Social and Economic Progress, an independent public policy institution based in India.

Editor's note:

This article first appeared in the Mint. The views are of the author(s). 

Newspapers are showcasing the dramatically lower costs of solar power, reportedly cheaper than coal power now, and we are told that smart grids (and smart cities) are just around the corner. While enormous strides have been made in making these solutions both available and cheaper, we have to focus on the next challenge of electricity evolution to ensure that costs and benefits are both equitable and captured at a systems level. We should not push subsidies for the rich putting solar panels on their roof, nor should we end up with smart cities that are elite havens or expensive.

From traditional grid to future grid

The power grid is a complex marvel of engineering that has had a profound impact on society. One reason alternating current (AC) power grids are complex is because they are always balancing supply and demand in real time, continuously. Unlike the internet, one cannot “retransmit” or “slow down” during congestion. This traditional grid is now evolving to become smart, or rather smarter, driven by an intersection of digital technology and the use of renewable energy (RE). How we manage this transition will determine not just our supply mix of fuels but the fundamental nature of the grid and the relationships among its stakeholders.

No longer should we think of power flows as one-way, from generation to transmission to distribution to consumers. Consumers who set up their own solar panels can now become producers (“prosumers”), and they can also voluntarily adapt their loads— if given a signal or incentive. In the old days, demand was the main aspect that varied by consumers’ unilateral actions, such as by time of day or season, and the grid always needed sufficient generation capability to meet any anticipated demand (plus a margin). That’s expensive.

Now, with growing RE, even generation becomes unpredictable. The old way of handling this was to supplement RE with more generation capacity of a type which could be called into service rapidly. That’s even more expensive. Hydropower and open-cycle gas turbines usually fit the bill. Unfortunately, hydropower is difficult to build out, and we have limited gas available. A new solution is to ask consumers to reduce their demand during the peak demand hours. This isn’t just by having time of day (ToD) pricing but an actual market with dynamic pricing, termed “demand response”.

Killer apps for an Indian smart grid

Theft (loss) reduction is a much-touted use for smart grids, where smart meters can help pinpoint leakages. But these can do much more—in addition to smarter demand control, one can even make supply much smarter. If one has a shortfall of power, we usually face feeder-level load-shedding. That’s an effective but horrible way to balance supply and demand! Instead, a smart system can offer a minimum supply, such as lifeline supply, to all consumers even during shortfalls. This helps avoid kerosene, batteries, diesel, or darkness. We could even move towards dynamic power pricing, including ToD pricing.

ToD pricing becomes critical for electric vehicles (EVs). There are government plans to make all public transport and personal vehicle sales only electric by 2030. The worst scenario is if consumers all come home in the evening and plug in their EVs simultaneously. The evening is when India’s grid is already at a peak and that is when solar’s output is almost zero. With proper pricing, not only will consumers not be a burden on stressed grids, they can even consume any “surplus” power, making EVs a win-win for consumers and utilities.

People want quality power, and contrary to popular belief, are willing to pay. Anyone on backup power already does. Our power prices are higher than prices in the US for commercial, industrial, and larger residential consumers, even before factoring in the poorer quality. If we create a system where power prices vary based on grid dynamics (e.g., in the middle of the day, solar power will create “surplus” power), technology, especially digital technology, can help make time-aware consumption worthwhile. This doesn’t have to be complicated or require us to alter our schedules—with a simple smartphone app and a little communication and control, one can focus on the top few time-shiftable uses of electricity, such as heating water, space cooling, pumping water, etc. The ingredients are mostly here—what is missing is a larger framework to make this happen.

Nimble frameworks

From consumers’ perspective, consumption is what matters—a “smart fridge” or “smart AC” has to be worthwhile. That does not just mean saving money—possible with ToD pricing—but also convenience. For instance, it can cool a room before we reach home. To make this work, systems need three things.

First, solutions have to be simple, or plug-and-play (easier said than done, especially keeping security in mind). One cannot mandate, say, a Samsung fridge is only smart with a Samsung smartphone.

Second, users need an incentive. Why should one invest in a smart appliance (or manually shift loads) if there is no electricity price benefit? Third, the consumer must remain in control. I really don’t care if the grid is congested—if I need to take a warm shower at 8 am, I will do so.

Our entire power system (pre-future grid) is based on averages and a lot of cross-subsidization. It is precisely the richer and larger consumers—who overpay and keep the system afloat—who will be the first to put up solar panels, and exit the grid. In reality, today’s RE is opportunistic RE (use it when you can), so they won’t exit entirely but come back to the grid during the evening peak period. This raises the grid costs further, prompting more people to reduce their grid usage. Dubbed the “utility death spiral”, this is a risk that is fast approaching.

To fix this problem, we have to stop treating all units of power the same, like we sell a basket of fruit (say Rs5 per kilo, or kilowatt-hour). This basket includes mangoes, bananas, lychees and other fruits—options of supply that include differences in costs, availability, predictability, ramping rates, etc. Blending and selling at an average masks the marginal costs, which is where there is scope for improvement. ToD pricing will encourage not just demand response but storage technologies, the next revolution which will also buttress the RE revolution (and push EVs).

In fact, if we get frameworks right, I predict the rise of storage as a service. Everyone should not put up their own storage; a few strategic locations of storage can serve reliability-focused users like tech parks, manage variability from RE, and even meet the broader needs of all users.

In some cities today, why do a quarter of users have backup power? If we even begin with such subsets of users, we have a large market—India’s niche is bigger than countries in Europe.

The human smart grid

Smart grids (and even RE) are only a means to an end, which includes not just sustainability but also efficiency, robustness, etc. Smart systems are more than adding technologies such as smart meters and solar panels: They represent a transformation along with an ecosystem of stakeholders and their incentives. In so many discussions on smart grids (and smart cities), the focus has been technology-heavy.

It is necessary to get the technology right (including price points, security, modularity and conformance to standards), but failures are more often at the regulatory, business, awareness, and incentive levels, plus the fact that any disruption creates winners and losers.

Why will this work in India, a developing region?

Unlike in the West, barring a few urban pockets, no one in India takes the grid for granted. In the US, if you tell someone that with a few lifestyle changes, and ToD pricing, they might save a few dollars a month (a slice of pizza), they won’t really care.

In contrast, if you tell someone in price-conscious India that they could save even Rs50 per month, and that by shifting their loads around they would avoid load-shedding, they would be much more interested. They are already quite engaged with the grid—though, unfortunately, not in the best of ways.

Getting the human element right starts with utilities, who have to accelerate their digitization and advanced metering rollouts. Ultimately, it all boils down to consumers. People want to be green and, even more than that, they want to save money. Utilities, on their part, want to be viable. Aligning incentives into a win-win-win (consumers, utilities, and the society overall) is when things will scale, hopefully at internet speed.