Renewables, Deserted?

Renewables, Deserted?

we are always the first to start. Invariably the last to finish. This is also, possibly, the story of renewables in the country. Way back in 1980, the government created the commission on additional sources of energy. In September 1982, the department of non-conventional energy sources was set up, and then in July 1992, it grew into a full-fledged ministry of non-conventional energy sources (mnes). India is the only country in the world to have a dedicated ministry responsible for implementing a non-conventional energy trajectory in India. Yet 20 years later, India produces just 3 per cent of the total installed capacity from renewables.

The renewable energy sector has always been the stepchild of power. Investments in renewables have been a niggardly 0.4 per cent of the plan outlay in the Ninth Plan. The government might argue that total outlay of mnes increased from Rs 1,465 crore in the Eighth Plan to Rs 3,800 crore in the Ninth Plan. But this increase is tiny when compared with the investment needed or the subsidies doled out to conventional power. The losses of the state electricity boards (sebs) -- because of subsidies provided to agriculture, domestic and every other sector -- is projected to be an incredible Rs 38,836 crore by 2003. In other words, the five-year investment in the renewable sector is less than 10 per cent of the losses of the electricity boards in just one year.

The Union power ministry's blueprint for power development envisages doubling the present capacity by 2012 and ensuring 100 per cent electrification of villages by 2007. It plans to invest Rs 800,000 crore in the coal and hydel sector to meet this "conventional" energy target. And the 10 per cent renewable energy target would be met by deriving 6,000 mw from wind, 2,000 mw from biomass, including co-generation, and approximately 2,000 mw from small hydropower, according to A K Mangotra, joint secretary, mnes. "This would require an estimated us $12 billion, (Rs 57,600 crore), 90 per cent of which is expected to come from the private sector," adds Mangotra.

But this is easier said than done. There are more than 80,000 unelectrified villages in India today, 18,000 of which cannot be connected to the grid. The mnes aims to light up these remote villages by 2012 using solar photovoltaic cells and biomass gasifiers, small hydropower and hybrid systems.

Renewables hold the key to our energy needs in the future. Even the mnes acknowledges this. Renewables can generate up to 100,000 mw of power -- equivalent to our current power generation. What then is the problem in rapidly disseminating this technology? It is more than just lack of money or investment, say energy experts. They point out that the ministry does not even have a national policy on renewable energy. As a result, entrepreneurs bear the brunt of inconsistent state policies and bottlenecks imposed by cash-starved sebs.

"For any significant change to take place, the mnes will have to tighten its belt and chart out its priorities," says Santosh Mohan Dev, chairperson, parliamentary standing committee on energy. In its 2001 report, the standing committee noted, " mnes failed to undertake planning and coordination of non-conventional energy projects." It urged the ministry to take a more 'pro-active role', to generate interest in state governments.

Renewable energy can also become the source of power for the rural marginalised in India. But the government sees this energy as the last resort for the low end users. There is no doubt that high cost and ultra-modern renewable technologies can be disseminated in the poorest, most marginalised, remote areas of India. But how our "fossilised" bureaucracies will do this, is yet another matter. It is easier for a camel to go through the eye of a needle than for the Indian government to keep its commitments.The Indian government has a set a target for renewable energy: 10,000 megawatt by 2012. So far so good. Renewables can electrify the rural marginalised who cannot be connected to the national grid. But how will it meet this target? Especially, when it took 20 years to generate just 3,500 megawatt. Lian Chawii analyses the obstacles confronting renewable energy penetration in the country and searches the way out.

Technologies

solar
wasted sunshine

Solar energy is by far the best option for remote areas where connection to the power grid is not viable. Solar photovoltaic (spv) technology enables the direct conversion of solar energy into electricity, while solar thermal technologies tap solar energy for thermal applications like water heating, cooking and power generation. Though technological developments in spv have been impressive, the high cost of the silicon wafers used in the solar pv modules hinders the development of solar energy worldwide. An investment in spv requires about Rs 30-40 crore per mw as compared to thermal power, which is about Rs 4-6 crore per mw. "Till a technological breakthrough is achieved, solar energy will remain viable only for inaccessible areas. There will be no mass production and distribution will be niche-based," says P V Ramana, assistant resident representative, United Nations Development Programme (undp).

Prices of spv has fallen globally - by 5 per cent each year over the last 20 years. But the problem is that the price of fossil fuel energy has also fallen over the same period. spv remains uncompetitive without large investments in research to cut costs. Researchers in Japan, Germany and the us are working to reduce the cost and increase efficiency of solar cells. According to an assessment done by Greenpeace and the European Photovoltaic Industry Association, the capital cost of installing a pv system ranges from us $5-12 per watt. As a result, the life cycle costs for pv generated electricity ranges from us $0.25 kilowatt hour (kwh) up to us $1 kwh.

In India, the pv cost has declined from Rs 225 per watt in 1992-93 to Rs 160 per watt in 2002, says B Bhargava, director, ministry of non conventional energy sources (mnes). "However, as long as silicon is used as a raw material, the lowest limit would be Rs 120 per watt," he adds. Currently r&d is focused on thin film alternatives, which are more suitable for making solar cells and can help to reduce the price to Rs 40-60 per watt.

India is a manufacturer of solar cells and modules - in 2000, it produced 31 mw and domestic production is expected to cross 100 mw during 2002. To protect the domestic manufacturers, government imposes an import duty for wafers (cells) and finished solar panels in the range of 15 per cent. Even while the cost of solar panels is decreasing globally, this advantage is not fully reflected in India, says Harish Hande, managing director of selco, a Bangalore-based solar energy services company.

Over the years, thousands of solar lanterns and lights - typical lantern is 10 watt module with a battery designed to work for about 3-4 hours a day - have been installed across the country. If it runs well, solar lantern can save 100 litres of kerosene each year. Power generating systems - stand alone or interactive with the grid - hold a tremendous technological opportunity. The most remarkable are the nine power plants with combined capacity of 252 kw in Sagar island and Sunderban area of West Bengal. Here each plant provides electricity to 100-120 households.

Solar thermal heating systems are also becoming popular in industries, hotels and hospitals. For instance, the Kerala-based Casino Group of Hotels, with hotel chains dispersed in many south Indian states have installed solar thermal water heating systems with a total capacity of about 43,700 litres per day. Says Jose Dominic, its proprietor: "We use solar thermal water heaters not only because it is environment-friendly, but because it is also very economical." A study done by Solar Tech, a Cochin-based agency, shows that heaters save 717,373 kwh of electricity amounting to Rs 55 lakh per year.

On the other hand, solar cookers have not fared well, mainly due to the availability of other energy options, the need for cooking outdoors and their bulkiness. "The solar cookers failed mainly because the ministry focused on design specification, rather than performance," says Ashok Khosla of Development Alternatives, a Delhi-based non-governmental organisation (ngo).

biogas
Where's the muck?

This clean, cheap and efficient energy, which contains about 55 to 70 per cent methane, is one of the most widely disseminated technologies. "This is a proven technology and is one of the most successful programmes undertaken by the mnes," says Ramana. Under the National Project on Biogas Development (npbd) programme, mnes promotes family-type biogas plants and has a small component of community plants. The most popular design is the Khadi and Village Industries Commission model, with a floating metal drum. A low-cost variant, called the Deenbandhu model with a bottom made of concrete and dome of ferro-cement, is gaining ground. A standard biogas plant costs between Rs 8,000-10,000 and generates 2 cubic metres of gas per day.

Though tremendous progress has been made in this technology, the water intensive nature of biogas is a hurdle for many parts of the country. The technology requires equal amount of water and cattle dung with temperature about 30c to generate gas. "If water is insufficient, the slurry cannot flow out and clogs the pipe, rendering the plant non-functional," says Kailash C Khandelwal, advisor and head, rural energy, mnes. This causes operational problems in areas with water scarcity and low temperatures even if there is sufficient cattle population. "This is why in many states only half the number of districts can fully utilise this technology," adds Khandelwal.

Even availability of dung is a problem. One kg of fresh dung produces 35 litres of biogas. A 2-cubic metre size plant needs dung from 5-7 cattle. In villages dung is a precious resource -- used for manure or cooking. Research is being done to find alternative feedstock. Like the centre for Application of Science and Technology for Rural Areas (astra) in Bangalore, which is designing a leaf biomass-based biogas system.

Though the ministry claims that 87.5 per cent of the biogas plants in the country are functional, Parliament's Standing Committee on Energy report counters by stating that a very small number of family-size plants are functional. "This is because most of the biogas plants lack proper monitoring and maintenance by the implementing agencies," says an official from Indian Rural Energy Network (irenet), a Delhi-based non-governmental organisation.

biomass gasifiers
Raw deal

Biomass gasification is one of the most promising energy technologies for rural applications, but only 2 per cent of the potential has been tapped. N H Ravindranath from centre for Application of Science and Technology for Rural Areas (astra), Bangalore, calculates the potential -- 57 mw of power could be generated by burning firewood, charcoal and crop residues in a gasifier which converts biomass in the first partial combustion into gas and charcoal and then to a combustible producer gas comprising mainly carbon monoxide and hydrogen. One of the oldest plants is designed and run by astra, in which a 4-8 hectare (ha) intensive energy plantation is used to generate 20 kw power in two gasifiers in two villages of Karnataka. mnes estimates that around 3,500 mw of power can be produced if 430 sugar mills in the country switched to co-generation technologies.

In India, gasification technology is now growing beyond the demonstration stage. Most gasifiers use gas and diesel in the ratio of 80:20. Ongoing research focuses on 100 per cent replacement of diesel. "This will be a tremendous relief for people in remote locations who need to travel great distances to obtain diesel," says Joe Madiath, executive director of Gram Vikas, an ngo based in Orissa, who intends to start a field demonstration project with 10 biomass gasifiers in villages across Orissa. Gram Vikas is involved in energy plantation on more than 4,046 ha of revenue wasteland across 250 villages in Orissa. "When the forest department refused to grant permission to use forestlands, we approached the revenue department, which granted permission after a series of 'advocacies'," says Madiath. The forest department has enormous wasteland, but local people are not permitted to use the land, he adds.

One of the cited successes is the biomass gasification project in Orchha, Madhya Pradesh of Development Alternatives (da). This 100-kw plant designed by the Indian Institute of Science, Bangalore, was set up with a capital investment of Rs 22 lakh and has been in operation for four years. It requires roughly one tonne of biomass per day to generate 80-100 kw supply of power to da's campus, Taragram, which employs more than 100 workers.

Under the recently-restructured National Biomass Gasifier Programme, the government plans to focus on village electrification and industrial applications by investing in larger plants -- from 100-250 mw capacity. But the key problem with most gasifiers remains supply of raw material. Projects fail because no study is done to understand the biomass availability and possibility of growing plantations, say energy experts.

wind
Blown away

Obstacles

#1. Subsidies on fossil fuels (both covert and overt) make renewables uncompetitive.
The biggest barrier to commercialisation of renewable energy is political. Politicians use subsidies as sops to retain power. The Electricity (Supply) Act, 1948, requires sebs to earn a minimum rate of return (ror) of 3 per cent on their net fixed assets in service after meeting the financial charges and depreciation. But on the contrary most sebs are running on losses. According to the Planning Commission, to achieve the ror, the average tariff should be increased by Rs 0.60 per unit throughout the country. During 2001-02, the net subsidy on electricity was Rs 26,613 crore. Transmission and distribution losses are also staggering: it was 22.8 per cent in 1991-92 and 22.0 per cent in 1999-2000.

To defuse this crisis, the Planning Commission set up the Central Electricity Regulatory Commission -- which sets the bulk tariffs for all central generating and transmission utilities -- and State Electricity Regulatory Commissions (serc) in the states to fix tariff rates. The serc is expected to introduce competitiveness within the sector and encourage energy efficiency.

But most renewable energy experts are not optimistic. "Since most serc members are keen on creating resource for sebs, they will not be interested in buying power from renewables, which is more expensive," says Saroj Mishra, senior programme officer, energy and environment, Winrock International India.

This cost disparity in turn affects the renewable energy producers, particularly in the wind sector as the cash-starved sebs refuse to buy power from them. For example, the wind power producers of Tamil Nadu faced this problem in 2000, when their five-year agreement with the mnes ended. According to the agreement, the tneb would pay Rs 2.20 per unit, which would increase by 5 per cent every year. By the time the agreement expired in 2000, the rate was Rs 2.76 per unit, but the tneb refused to renew the agreement. tneb's contention is that if it can buy thermal power at Rs 1.88 per unit, why should it buy wind energy at a cost of Rs 2.20 per unit?

However, if the cost of conventional energy is compared against renewable energy, energy from biomass cogeneration, biogas and wind work out to be competitive candidates.

A study by Venkat Ramana, As if Institutions Matter: An Assessment of Renewable Energy Technologies in Rural India shows that thermal power becomes less viable with increasing distance from the grid. At a distance of five kilometres, thermal power costs Rs 4.77, whereas off grid application for agro-based biomass with subsidy, costs Rs 2.50 per unit and biogas costs only Rs 0.83 per unit.

#2. Regulations are a stranglehold. Entrepreneurs cannot sell the electricity they generate, except to government. Government is bankrupt.
The Central Electricity Act, 1948, does not permit individuals, communities or cooperatives to generate or distribute power, though participation from companies is allowed as long as power is sold to the government. However, the government fixes pre-determined rates, mostly at a subsidised cost, thus reducing the investment viability.

For instance, wind energy faces problems because of high wheeling -- amount given to the sebs by wind power developers for sharing the grid and banking charges (a wind power developer can deposit and store a certain percentage of the power production and withdraw that power during a certain time frame). This is done to compensate for the problem of intermittent quality of wind power. mnes guidelines ask for 2 per cent wheeling charges, but cash-strapped states often increase charges. Karnataka imposes a 20 per cent wheeling charge, while Gujarat recently increased its charges to 15 per cent. Key states -- Tamil Nadu and Andhra Pradesh -- do not allow wind manufacturers to sell to third parties -- that is, except to the state electricity boards.

Similarly, in Madhya Pradesh biomass plants generating less than 500 kw of power are prohibited from grid connection. "Even if the power produced is above 500 kw, a high wheeling charge of 15 per cent is imposed and to make matters worse, it prohibits third party sales," says P K Bhatnagar of Development Alternatives, an ngo.The losses in conventional energy are unaccounted for when renewables are pitted against fossil fuels. G S Sohal, managing director, National Thermal Power Corporation (ntpc) agrees, "Power theft, which accounts for 20 per cent of the power distributed, is never calculated. When the cost of power delivery to inaccessible rural areas is considered, solar energy works out cheaper.

The high tax imposed upon solar products remains an impediment. "Customs duty on silicon, a major component of the solar cell, is 65 per cent while the duty on all equipment for thermal power is only 25 per cent. The 30 per cent excise duty on battery should be done away with, in order to make solar energy compete with thermal energy," adds Sohal.

#3. Providing access to energy is not seen as an integral part of rural development strategies.
Bureaucratic red tape ensures that only the foolhardy survive. Setting up a small hydropower requires as much paperwork and procedure as big hydel powers. According to an ireda official, the entire procedure for even a small project takes as long as two to three years.

"Electrifying remote places through the grid involves huge transmission and distribution losses, so it is sensible to introduce decentralised, small hydro-power that can supply energy to the surrounding areas," says Mangotra. But India remains locked in bureaucratic mindsets, unlike Nepal. In 1985, the Nepalese government delicensed all electricity installations under 100 kw. Ever since, setting up small hydels does not require permission as long as the local people do not object to it. No license, royalty or income tax is required for setting up hydro power plants up to 1 mw. The private sector project developers are allowed to fix the tariff for the plants that are not grid connected. Help is provided in acquiring land for hydel power plants, while loans with interest rates of 17 per cent is also available for micro hydel installations.

Similarly, in the 1960s, China adopted the 'self-construction, self-management and self-consumption strategy' where the local administration owned and implemented small hydropower projects. The government only remained a facilitator by giving tax and duty benefits and subsidy on turbines and transmission lines.

In Nepal as well as China, decentralised electrification is seen as part of agriculture and rural development initiatives. But in India, there is no effort to integrate energy supply with land and water resources. Biomass gasification needs regular supply of raw material and this raw material can also become be a source of income generation for rural communities. But policies dissuade people from planting trees as regulations make it virtually impossible to cut or transport tree biomass.

Similarly, while large energy projects invariably get permission under the Forest Conservation Act -- which requires Union government's permission to convert forestland to other uses -- the energy projects of the poor gets a short shrift. For instance, while the Kudremukh Iron Ore Company Limited got permission to operate in a national park by the Karnataka forest department, the forest department turned down the request of Menasinahadya village, Chikmangalur district, which wanted to set up a micro-hydel project in the forested hills.

#4. Subsidies and incentives are nothing but instruments of corruption and tax-evading techniques.
Government support is essential. But misguided subsidies and incentives can hinder development. Take the case of wind energy. This source is one of the most successful renewable technologies worldwide that requires an investment of approximately Rs 4-6 crore per mw, making it competitive with thermal power. Wind energy generation reached its peak by the mid-1990s when the government offered attractive packages to private investors. As a result, the installed wind power capacity grew from 54 mw in 1993 to 900 mw in 1997. However, with the withdrawal of certain incentives, the sector recorded a slump in 1998. Private sector was given up to 100 per cent accelerated depreciation -- the value of the wind power equipment could be entirely deducted in the first year itself from tax. In 1995-1996, the government reduced the corporate tax, usually paid by profit making companies, and levied the minimum alternate tax (mat) for zero tax companies. Since then, the attractiveness of wind as a tax-management option reduced. Interestingly, most wind investments were made between January and March, so that companies could write off tax.

Similarly, the National Project on Biogas Development (npbd) programme is considered as the most successful programmes undertaken by mnes, but subsidies are still provided for biogas plants. The ministry provides subsidies ranging from Rs 1,800 to Rs 3,500 to families with four or more cattle heads, with four years warranty. In order to make any significant progress in the sector, Ramana suggests that the ministry should withdraw the npbd, decentralise the system and come out with a new approach and strategy. "Since it is already a proven technology, the ministry should terminate the npbd and instead divert the subsidy cost for r&d ," states Ramana.

An official from Indian Rural Energy Network (irenet) and member of the All India Women's Conference (aiwc) raises the question of the ministry's 'achievement' of 3 million biogas plants. "Many villages of Uttar Pradesh and Bihar recycle old family-type biogas plants and register them as new ones. In order to claim subsidy, it is circulated within the family under different names once the warranty period ceases." The aiwc is one of the agencies identified by the mnes to distribute biogas plants.

Subsidies on products for commercialisation can also be counter-productive. "They put barriers in marketing of renewable energy, reduce competition and only a few influential manufacturers get the deal," says Ashok Khosla, president, Development Alternatives, a Delhi-based ngo. He adds: "There should be a one-time capital investment subsidy, after which subsidies should be offered only on performance basis."

#5. Financial institutions have failed to make these technologies viable to poor people in remote areas.
"Financial intermediation needs to be carried out by local banks and institutions," suggests Ajay Narayanan, vice-president, Infrastructure Development Finance Company Limited (idfc), Chennai. Local entrepreneurs can also be trained to create a chain of markets in a decentralised manner. Says Mishra: "Many financial institutions are apprehensive about funding renewable energy projects because they are not proficient with the technology. There is a need to spread awareness." wii is disseminating information at the district and state level under the Solar Finance Capacity Building Initiative (sfcbi) programme where bank officials of different levels all over the country are trained to acquaint them with solar energy and to build projects for investments. wii has tied up with the Syndicate Bank and Bharathiya Vikas Trust to train officials under the sfcbi as a pilot programme.

At the Roundtable on Renewable Energy for Sustainable Development: Opportunities, Barriers and Solutions organised by Development Alternatives, financial institutions said a key apprehension was the lack of established technologies, the high-front cost and the high off-take risk. They pointed out "a lack of sustainable operation and maintenance plan, absence of a mechanism to evaluate the technology and innovative financial mechanisms are coming in the way of promoting renewables". Mentions Narayanan: "Lack of capacity in the rural areas and inaccessibility of fund to the small entrepreneurs is a major problem."

No doubt, solar products are unaffordable for the poor without subsidy. But with appropriate financial schemes the need will gradually decline. For instance, the solar home lighting systems, the most viable lighting source in remote areas, costs Rs 16,000 to Rs 18,000 in the market. But with subsidies, the beneficiary has to pay around Rs 10,000. Since this initial cost is high even with subsidies, it is imperative to have an affordable financing scheme, particularly at the village level.

This is where companies like the selco have done a commendable job by penetrating into many unelectrified villages of Karnataka through partnerships with local financing bodies like the Malaprabha Grameen Bank and the Syndicate Bank in Dharwad, without the subsidy (see Down to Earth Vol 10, No 11). "Even the low income people are willing to pay a high amount as long as they receive quality power," says Hande. Many energy experts support this belief: "It is a widespread misconception that the poor cannot pay for energy."