Future of electricity in India lies in local solutions

Utilities in India have a mandate to supply power, which becomes increasingly difficult through the centralised grid and is technically and economically challenging for more remote places

By Pratha Jhawar
Published: Thursday 03 September 2020

Utilities in India have a mandate to supply power. Despite the Union government’s electrification spree, the availability of quality electricity is a far-fetched dream in rural areas. Supply of electricity through centralised grid becomes increasingly difficult and technically and economically challenging for more remote places. Local, self-controlled electric systems capable of producing power are, thus, a way out.

“Electricity is one of the greatest gifts to mankind. But the supply in India has its shortcomings in terms of equity — economic, ecological, qualitative and quantitative — which are much desired,”  said Pavan Choudary, managing director of Vygon India Pvt Ltd. Choudary spoke at a webinar, ‘The future of micro-grids in India’, organised by Singapore-based Blue Circle Pte Ltd.

“Discoms are bleeding financially. They cannot comply with supply mandates and the consumers left out are the ones with lowest paying capacity,” said Sunil Wadhwa, senior advisor, Ernst and Young Global Ltd.

Renewable Energy (RE) is seen as key to reducing the cost of power. The actual cost of delivering RE from a utility-scale plant including the transmission and distribution costs, however, is more than twice the tariffs realised during auctions.

RE is best served local, as excessive transmission costs are eliminated, according to Purandar Chakravarty, head of innovation and alternate energy at Nayara Energy Ltd. Centralisation, therefore, does not make sense. The best case would be to generate power where it is needed, including in rural areas.

Micro- and mini-grids are decentralised electricity generation systems with capacities less than and of 10 kilowatts and up to a few megawatts respectively.

Nano / micro- / mini-grids could be standalone or connected to the grid, according to Adrian Panow, director of Australia-based Decca Building Group Pty Ltd. “These provide energy in the form of gas, bio-fuel, etc in addition to electricity,” Panow added. Such grids are usually powered by RE sources — including solar, wind and biomass  in any combination — along with batteries.

Atem S Ramsundersing, founder and chief executive officer of Singapore-based WEnergy Global Pte Ltd said 900 million people in the world and about two million in India required electricity.

“This will require 100,000 local grids. An investment of about $30 billion is required for the south-east Asia region only for expanding the grid,” Ramsundersing added. It is, thus, time to rejuvenate interest in micro- / mini-grids. The challenges in their implementation, however, are immense.

India, Myanmar and the Philippines lack policies for mini-grid and hence rationalisation of technologies and configuration and methods to engage with the private sector are not developed,” said Ramsundersing.

“The irony is investments in diesel and coal are available, while financial institutes failed to develop evaluation methodologies for micro- / mini-grids. The local grid market is not mature and scalability is a big concern,” he added.

The issue of non-availability of appropriate and sufficient equipment for setting up micro- / mini-grids was pointed out by him. 

“Commercial viability is paramount. So far, mini / micro-grid projects are done as either corporate social responsibility, pilots or demonstration projects, without any policy and regulations in place,” said Wadhwa.

The projects were bilateral in nature, with just two stakeholders — the owner and consumers — making it a risky affair for the owner, according to Wadhwa. “This added risk adds up in the final tariff which sometimes comes to about Rs 20. Such high tariffs are not fair for the remotest consumers,” he added.

Distributed energy solutions are important. They provide flexibility and resilience and can recover fast, reduce cycle time for power reach to consumers, maintain seamless supply, diminish the requirement of the additional transmission network and deploy a mix of technologies together. The grid-connected mini / micro-grids can add to the flexibility of the centralised grid.

A way forward for this sector to quickly take up a key role would encompass the following efforts on the part of the government and other stakeholders:

  • Policy and regulations: In general, the power / energy space is greatly dominated by regulations. It is a collective responsibility to bring proper regulations, govern properly to de-risk investments of private players and structure tariffs. This necessitated defining the role of discoms and the arrangement between the owner, consumer and discoms.
  • Demand creation and optimisation: If demand is there, competitive bidding can bring down pricing and consequentially, business models based on best sizing and technology would cut down on capital expenditure and an optimised solution can be achieved.
  • Financing: The RE sector attracts finances even during the novel coronavirus disease (COVID-19) pandemic. It is important to streamline funds from various sources, including crowdfunding. Defining climate change as a business case can tap commercial viability. Bundling small projects can make financing easier and make the private sector’s engagement profitable.

The distributed generation system — by breaking the legacy of cost and affordability — can potentially be a technical alternative to large-scale RE and be a viable solution. These are environment and public friendly solutions, which can be employed as a mode for fighting climate change and providing clean energy to all.

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