Ground realities about renewable power

India is undoubtedly doing well in increasing the share of renewable sources in power generation. Almost 5 per cent of the country’s energy requirements now come from renewable power. This is a fairly respectable number, given the pressure on keeping electricity prices affordable.

The renewed thrust on renewables is also welcome and the interest shown by all stakeholders in the value chain has been overwhelming. But how do we make renewable power truly mainstream and meaningful in fulfilling our energy needs?

The big 'elephant in the room' that still remains is the infirm nature of renewable power and the consequent challenges in keeping the grid stable. The grid becomes increasingly unstable if the share of infirm power increases beyond 20 per cent to 25 per cent of the total generation capacity.

There is no doubt that the basic cost of renewable power has been dropping sharply (around ₹4.5 to ₹7 per unit) and almost approaching grid parity, that cost however is notional. If this renewable power has to be made useful and more meaningful, then the cost of storage or some form of 'back-up generation' has to be added.

The present back-up costs range from ₹13 per unit for diesel generation to over ₹20 per unit for battery storage. The total cost of 'useful' renewable power, therefore, is currently anywhere between ₹17 per unit to ₹27 per unit.

In fact, the more we add renewable power to the grid, the more we will increase the financial losses of the utilities, because we still lack the political will to increase power tariffs, commensurate with increase in costs.

We would be doing immense disservice to the renewable sector if we do not address this elephant in the room and take up this challenge squarely. The good news is that we do have solutions available and we need to focus on implementing them alongside adding generation capacity.

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. For example, the speed of wind is good in Tamil Nadu, Maharashtra and Gujarat. Solar intensity is good in States such as Rajasthan and Gujarat.

Renewable power generation therefore tends to get concentrated in these areas. If the local grid has to absorb all the renewable power then it certainly gets to be a major challenge.

For example, the Tamil Nadu grid faces serious grid balancing issues when the wind suddenly dies, and almost 20 per cent of the State’s total generation comes down. In the absence of any back-up form of generation, the only way to balance the grid is to then shed load which can cause major disruption.

One way to address this is to interconnect grids so that the share of infirm power as a proportion of the total power generated in the country is smaller and grid management becomes easier. Given the concurrent nature of the power sector it would be necessary for various States and their power regulators to come together to make this happen.

From a policy perspective, we need to shift focus on energy (units or kWh) generation and not just on capacity (kW) addition. For some strange reason, India is obsessed with the name plate capacity (KW) of the renewable generation facility without really focusing on how much of electricity (kWh) the facility actually produces.

Further, the incentivisation regime for renewable power is focused on a capital subsidy (depreciation benefit) rather than incentivising actual generation (GBI).

The more electricity any power generation facility generates, the lower will be the cost of generation and ultimately, the cost of electricity in terms of ₹/kWh is more relevant than just capital cost in terms of ₹/KW.

Globally, technology development in renewables is focused on increasing generation and making it more predictable rather than just the nameplate capacity rating. In India, the entire emphasis is on increasing the nameplate capacity of the equipment even at the cost of inferior utilisation.

As a global leader in renewable power, India too needs to encourage the right behaviour in both technology development and power generation. This can be achieved encouraging efficient generation over the long term rather than only giving initial capital subsidies.

Given the scale at which India wants to develop renewable power, there is no substitute for a spinning reserve or some form of energy storage. Energy storage is clearly an area where India can take the global lead in encouraging innovation. The country uses diesel generation as the “spinning reserve” in the form back up generation.

Any form of electricity storage, that is cheaper than diesel generation at ₹13 per kWh, can replace polluting diesel. Globally, Gas is the preferred fuel for “back up / peaking / spinning reserve”, given its lower cost and far cleaner composition. Gas based peaking power would cost around ₹7 to ₹9 per unit.

There is no clear policy in India to address peaking power demand and it’s high time the country formulated one rather than resort to load shedding or diesel generation.

Peaking power solutions will also be able to address the back up requirement for renewable generation. Gas based generation is the cleanest and most affordable of all peaking power solutions.

Lack of distribution reforms can stall the renewable sector. A lot of focus is being put on clearing the bottlenecks in increasing generation. But for every additional unit that is generated, it adds ₹1 per unit of loss on to the distribution company.

This is because the average realisation of revenue from consumers is lower than the cost of electricity production. Over the last few years, additions to coal-based generation capacity have been negligible.

Renewable capacity however did get added which, in turn, has further increased the average cost of power generated. We see renewable power being regularly backed down and developers not being paid for power generated. This situation will only worsen, unless distribution reforms are undertaken on an immediate basis.

We must not wait for a China- like smog situation to arise in our cities and then we sit up and take notice. We must bite the bullet to address the issue of appropriate tariffs.

The writer is President & CEO of GE South Asia

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