Energy Situation in Indiaby

Dr. Pramod Deo

Keynote Address @ National Energy Policy Seminar 2015 (NEPS2015) http://prashantkarhade.com/neps2015/

Organized by Urja Prabodhan Kendra

On 5th of August @ SP Jain Institute of Management and Research in Mumbai

© 2015 Prashant Karhade: http://prashantkarhade.com/blog/

• By 2033, considering the long-term energy plan, India will have to import 40% coal, 90% of oil, and 50% of gas that it needs. The erstwhile Planning Commission had prepared this report in 2008 and it was adopted by the central government.

• As the report was based on the official estimates of green energy resources known that time, it projected that the share of renewable energy sources will be as low as 3%.

• Based on the revised potential of various renewable energy sources like solar (both solar thermal and solar PV), and the ambitious target that the present NDA government has set – 100,000 MW of solar PV, 60,000 MW of wind energy, and 175,000 MW in all by 2022 – Indian might need to import less coal, oil, and gas. http://prashantkarhade.com/blog/

Key Highlights from the Keynote Address

Key Highlights from the Keynote Address

• As of today, the share of renewable energy is 12% of installed power capacity and 5% to 6% in energy terms. In the long term, India must increase the share of solar and wind for energy security, though coal will remain the mainstay of its energy needs.

• India’s power sector is completely controlled by central and state governments. Although the share of private sector in last six years has increased to 38%, their returns are dependent on the sale of power to state controlled distribution companies.

• Today, 46,000 MW of installed capacity is stranded; it includes 36,000 MW of coal-based thermal power plants and 10,000 MW of gas-based power plants. This capacity is stranded as either there are no power purchase agreements (PPAs) in place or the fuel linkage is missing. In last 2- 3 years coal production has picked up. But for thermal plants to run at full potential dependence on imported coal will continue for some time.

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Key Highlights from the Keynote Address

• There are 300 million people in India without access to electricity, primarily in the rural areas. On the other hand, we have ample generation capacity but low demand; the Plant Load Factor (PLF) of several thermal plants is below 55%. Since the cost of generation from new plants is in the range of Rs 4.5 to 5/unit, state controlled utilities are reluctant to buy power and resort to load-shedding instead. Due to political pressure, the regulator has carried out a small reduction in tariff for industries in Maharashtra by restricting power purchase budget of the supply company. This will lead to more “load-shedding”.

• How to manage supply to agriculture at low price is a big political challenge. Today, this is done by providing cross-subsidy from industrial and commercial consumers. On top of it, electricity supplied to agriculture is not metered! This leads to leakges and inefficiency. Treating electricity as a marketable commodity is therefore required but is politically challenging. In Maharashtra only 8% of consumers with demand above 1 MW generate 61% of revenue and have 46% share in sales. If these consumers stop buying power from the distribution company it will go bankrupt.

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Key Highlights from the Keynote Address

• Total accumulated losses of government power supply companies are more than Rs 3 lakh crores. As supply to rural areas, mainly to agriculture, cannot be managed by state utilities on commercial principles they are running huge losses. Bihar and Eastern UP are places where supply to non-electrified villages is managed on commercial principles by private entrepreneurs based on locally available biomass gasifiers or electricity generated from solar PV installations at a cost of Rs.10 per unit and above. This demonstrates willingness of rural people to pay for electricity. However, if later on grid reaches these villages the fate of private entrepreneurs will be difficult to imagine. Approach to rural electrification needs a re-think.

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Key Suggestions

• Electricity to farmers for agriculture must be with supplied with meteres. As individual metering is difficult, separation of feeders for agriculture can lead to proper auditing of energy.

• State Chief Ministers need to decide how much subsidy should be provided to agriculture and it cannot be at the cost of commercial operation of distribution companies.

• Prime Minister Narendra Modi’s “co-operative and competitive federalism model” can only improve the situation. Electricity is essentially a subject of political economy and centre-state dialogue is essential to address the issue of cost of supply to agriculture.

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Key Suggestions

• Today 8 states are in financially critical condition, where power tariffs were not increased due to political pressure. If this process is not reversed, others will soon join them.

• Independent functioning of regulatory authority is possible only if there is a political consensus that to improve the efficiency of power utilities they must be allowed to function as commercial entities.

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