Super-critical thermal plants and renewable energy obligations of utilities can work as effective carbon mitigation measures.

As India fine-tunes its nuanced response to the global sustainable development agenda during the Rio Earth Summit later this month, it is mindful of the development challenges that lie ahead. A fair proportion of these challenges emerge from India's quest for energy security in an increasingly climate-constrained world.

India's energy supply needs to grow by 4-5 times in the next two decades to realise developmental goals. It is also certain that India will continue to be reliant on fossil fuel-based energy over the next two decades. Inevitably, the growth trajectory needs to usher in innovative approaches that reduce the overall carbon intensity of the energy sector, while at the same time providing affordable and reliable access to all.

CARBON INTENSITY

An appropriate policy response needs to be evolved to hedge against the volatility of global fossil fuel market, both in terms of availability and price.

Reducing carbon intensity in the supply side of energy value chain, improving efficiencies at the demand side, limiting leakages and promoting innovative decentralised, alternate energy systems, are some of the immediate tasks that policy makers will need to implement.

These challenges have already been articulated in the recent policy papers of the government, particularly those related to the XII Five Year Plan, and will probably find mention during the Rio conference.

Cognisant of the enormous challenges of sustainable development, India has, in the last few years, initiated a measured, yet significant, shift towards reducing carbon intensity in the energy sector, the power sector being a major contributor to the overall carbon emission of India.

The strategic shift commenced with the Electricity Act, 2003 that requires all electricity utilities to use a minimum percentage of renewable energy in their power mix, also known as the Renewable Portfolio Obligation (RPO). The implementation of the market-based instrument, Renewable Energy Certificate (REC), has made it possible for utilities to achieve their allocated RPOs in a cost effective manner, particularly those whose service area is not amendable to setting up renewable energy projects (Delhi for instance). The RECs have also helped in promoting private investments in renewable energy.

EFFICIENT THERMAL PLANTS

The second dimension of the shift is the promotion of super-critical thermal power technologies. This technology increases the efficiency of generation by at least 10-15 per cent, compared with the conventional power plant, and thereby uses lesser coal for same level of power generation.

The emissions from super-critical technology-based power plants are undeniably lower than from the conventional ones. The last Five Year Plan has seen commissioning of about 6,000 MW of thermal power plants (out of the achieved capacity addition of 55,000 MW) based on super-critical technologies.

The next Plan seeks to build on this modest beginning and increase the proportion of new thermal plants using super-critical technologies to about 40 per cent, a trend that could become the norm in subsequent years.

However, like any new technology, super-critical technology also comes with an incremental price tag, which could result in higher cost of electricity to the consumer. Contrary to popular belief, the affordability of energy is extremely low in India. Per litre cost of petrol in India is about $1.5, which is almost 180 per cent of cost of petrol in Thailand, and 150 per cent of the level in OECD countries. The average expenditure of a household on electricity in India as a proportion of the per capita income at 15 per cent, is at least 5-6 times more than OECD average of about 3 per cent. Thus, to achieve affordability of electricity from clean technology without further straining the burgeoning subsidy bill, innovative measures are necessary.

The Ultra Mega Power Policy (UMPP) unveiled by the Ministry of Power has been able to stitch together the two seemingly dichotomous issues of reducing carbon footprint, while still being affordable into a comprehensive package that has attracted private investment in power sector perhaps not seen before.

The Ministry of Power, under the UMPP, has undertaken most of the pre-construction activities, like obtaining regulatory clearances, enabling predictable fuel supply either by a captive coal mine or firm imported fuel linkage, ex-ante environment and forest clearance and land acquisition.

This has resulted in reduced risk perception among investors. Further, the fact that each of these plants are of 4,000 MW capacity has brought in economies to scale for seamless induction of super-critical technologies. Riding on the inherent investor confidence and interest in UMPPs, Ministry of Power has adopted competitive tariff-based bidding to make sure that the benefits to consumers accrue in form of lower tariffs. The private sector has committed tariffs as low as Rs. 1.25 per unit for domestic coal-based UMPP and and Rs. 2.50 per unit for imported coal ones for the next 20 years.

UMPPs have been successful in attracting clean generation technologies, while at the same time preserving affordability. The surge in demand for super-critical technologies has resulted in most of the international power equipment manufacturers setting up facilities in India, that augurs well for the long-term low carbon strategy in the power sector.

OTHER MEASURES

Another important policy direction to reduce carbon intensity of power sector is the phased retirement of old and inefficient power plants. Over the next few years, according to the Central Electricity Authority, almost 5000 MW of such plants will be retired.

A comprehensive programme for increasing the efficiency of other thermal power plants is under implementation.

India has been able to achieve modest success in greening the supply side of power sector. Innovative measures like the REC, UMPPs have started to yield the desired outcome of reducing carbon intensity while protecting consumers from high costs. These measures need to be replicated across the energy supply chain, while encouraging efficient use of energy on the demand side.

(The author is Programme Officer, Ozon Action Programme, UNEP, Bangkok. The views are personal.)

(This article was published on June 8, 2012)
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