India’s fossil fuel dependency is here to stay

Ashish Gupta, Observer Research Foundation

In recent years, the issue of electrifying households of the rural population has become a regular feature in the Indian media. In the ongoing climate debate rural populations are portrayed as vulnerable to climate change and they are advised to stay away from fossil fuel based electricity. They are told that they can save themselves from climate related disasters if they consume electricity from off-grid renewable sources. The idea appeals to them if grid based electricity is unavailable. Renewable energy is propagated as the best way forward for India in the name of climate change and environmental sustainability. This argument is becoming the basis for large projection for renewable energy in the fuel mix for the future. There is no doubt that the share of renewable energy will increase as developing nations succumb to the advise of western nation. But will this wipe out dependence on coal based electricity generation?

In India, financial sustainability for utilities has become a bigger challenge than environmental sustainability. Growing energy demand and declining public spending are contributing to further changing the roles of the government and private sector. This reallocation of responsibilities creates an uncertain business and political environment with frequently changing and sometimes contradictory regulations and, most often, excessive demands on utilities. The primary responsibility of the utilities is to provide reliable supply of power at affordable rates. Therefore the utilities not only have to provide power which is priced low but at the same time maintain their financial sustainability. Needless to say, this sustainability can only be maintained through cheap fossil fuel based electricity.

Secondly, renewable power by definition will be concentrated in those areas where the natural resource is available. These natural resources are usually concentrated in certain geographies. Wind power generation is concentrated in Rajasthan, Gujarat, and Tamil Nadu. However the local grid is often unable to absorb intermittent renewable power.

Thirdly, if energy access is to be provided with renewable energy then the whole transmission system will need a makeover. Given the current transmission infrastructure the integration of renewable power is not only difficult but also not viable. To erect such a transmission infrastructure huge investment will be required. As per the Power Trading Corporation of India the renewable sector will need an investment around Rs 12 lakh crore (Rs 12,000 billion) in the next five to seven years. Where will this money come from? This means additional support will come either from the government or from public utilities. This means that the financial burden on tax payers and electricity utilities will increase. They will be burdened twice, first on the investment front and secondly on the payment front. Given the price sensitive nature of Indian consumers, who is going to pay for costly power?  In fact, the more we add renewable power to the grid, the more will be the financial burden of the utilities.

India’s electricity sector is predominantly dependent on fossil fuels. 70% of the primary energy mix is from fossil fuels. Coal is the least expensive fossil fuel for power generation. This will continue and coal will remain the most important fuel for power generation in the years to come. India’s fossil fuel based dependency is not by choice but by compulsion. The best way forward is to improve the efficiency of coal mining, coal conversion and utilization process. Setting targets for energy efficiency and water consumption in the processing steps would result in a more cost-effective and environmentally sustainable coal sector. This will also help conserve coal. Investment in adaptation approach is more important than mitigation approach to address the climate challenge.

Views are those of the author                    

Author can be contacted at ashishgupta@orfonline.org

Courtesy: Energy News Monitor | Volume XII; Issue 14

 

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Renewable Forced Obligation

Ashish Gupta, Observer Research Foundation

The government has introduced various polices to increase renewable energy generation and Renewable Purchase Obligation (RPO) is one of them. As per Section 86 (1) (e) of Electricity Act, 2003, states are required to specify purchase of electricity from renewable sources, a percentage of the total consumption of the electricity in the area of the distribution licensee. Consequently, Renewable Energy Certificates have been introduced to enable resource poor states to comply with their RPO targets. But neither the resource rich states nor resource poor states have complied with their RPO targets because they do not find any incentive in fulfilling obligation. RPO which was once cited as a major force driving renewable energy in the country has failed to make any impact on national level. One of the reasons being that most of the state discoms are not convinced about the commercial viability of such obligation.

State RPO Regulation
Assam
  • The state has set a RPO target of 0.15 % till 2012-13 which was lower than the Tariff Policy targets.
  • The regulation does not specify minimum capacity for captive consumers for applicability of RPO.
Chhattisgarh
  • The state has set a very short trajectory for RPO targets.
Delhi
  • The regulator has defined a lower level of solar RPO target of 0.35 % by 2016-17.
  • Claiming that the renewable power available in Delhi is “limited” and “expensive”, the discoms had told the regulator that in the present scenario they were finding it “difficult” to meet the RPO obligations.
  • Most of the time discoms requested the regulator to either waive off their RPO or consider carrying forward the commitment to subsequent years.
Gujarat
  • RPO trajectory beyond 2012-13 is not provided.
  • State utility Gujarat Urja Vikas Nigam Ltd. and Ahmedabad-based Torrent Power Ltd. (TPW) had petitioned against a rule requiring them last fiscal year to source 7 % of their power from renewable sources or buy credits over the power exchanges to fulfil the obligation.
Haryana
  • In case of genuine difficulty, the obligated entity can approach the Commission for relaxation or carry forward of compliance requirement to the next year.
Himachal Pradesh
  • There is no provision requiring State Agency reporting to Commission regarding RPO compliance.
Jammu & Kashmir
  • No clarity on RPO targets beyond 2012-13.
  • RPO on any person owning standby captive generating plant facilities will not be subject to RPO.
Jharkhand
  • The state has defined a very short trajectory for RPO targets.
  • In case of genuine difficulty, the obligated entity can approach the Commission for relaxation or carry forward of compliance requirement to the next year.
Goa & UT ·         There is no long term trajectory of RPO target.
Manipur & Mizoram
  • There is no long term trajectory of RPO target.
Karnataka
  • There is no trajectory defined.
  • The state allotted 130 MW of projects in July 2013, but out of that PPAs could be signed only for 80 MW. The state recently announced a tendering process for the remaining 50 MW, but the allocation is mired in legal issues.
Meghalaya
  • The discoms are allowed to carry forward their unfulfilled RPO Targets.
  • The regulation does not specify minimum capacity for captive consumers for applicability of RPO.
Odisha
  • The state has a lower solar RPO target.
Punjab
  • The state has a lower RPO target for e.g. 0.07 % in 2012-13.
Rajasthan
  • There is no long term trajectory of RPO target.
  • In case of genuine difficulty, the obligated entity can approach the Commission for relaxation or carry forward of compliance requirement to the next year.
Uttarakhand
  • There is no long term RPO trajectory.
  • RPO target was very low at 0.05 % in 2012-13.
Uttar Pradesh
  • The Commission may, either on its own motion or on recommendation of the State Agency or on receipt of application from the obligated entity, revise for any year the percentage RPO targets as deemed appropriate.
Tripura
  • There is no long term RPO trajectory.
  • In case of genuine difficulty, the obligated entity can approach the Commission for relaxation or carry forward of compliance requirement to the next year.
West  Bengal
  • RPO targets are set till 2017-18 at 0.6 %.
  • There is no provision requiring State Agency reporting to Commission regarding RPO compliance.

It is quite evident from the table above that most of the States have allowed the flexibility to carry forward their RPO targets either through non – reporting or by having short term RPO trajectory or by not specifying minimum capacity for captive consumers for applicability of RPO. Why? The answer is simple and straight forward, that renewable energy is costly.

Views are those of the author                    

Author can be contacted at ashishgupta@orfonline.org

Courtesy: Energy News Monitor | Volume XII; Issue 12