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Anil Razdan, Former Power Secretary, Government of India

29 Mar 2017

We are heading for a mismatch between renewables and balancing power

In an attempt to keep Infraline Energys’ readers abreast with the key issues and challenges engulfing the sector, Infraline Energy tries to bring forth the opinion of key personnel whose decisions and opinion play a vital role in shaping the sector. Please find below excerpts from the interview that Infraline Energy conducted:

Anil Razdan, former power secretary, Government of India, shares his views on the power sector scenario in India and future roadmap. Excerpts:

There has been a lot of talk on India being power surplus. How do you analyse this situation? Also share your outlook for the power sector.

The energy sector overall has shown comfort at the level of the consumer because shortages have come down to reasonable levels. But the worrying part is that the demand is not going up. Now if it is dueto demand side management it is a good thing. But the demand side management has not picked up to that extent yet. So we can probably assume that the industry and manufacturing demand has not picked up and this needs to pick up if the economy is to go on higher growth path. You see this year we have had a mismatch between thermal and hydro generation. Now we are heading for a mismatch between the renewables and balancing power as the power which is from hydro or gas-based sources cannot be ramped up and down at very short notice. Under the 12th Plan, the capacity addition for hydro has been weak and so has it been for gas, but gas is also troubled by a lot of idling capacity because of non-availability of gas. These are the areas that we have to seriously look at. We need to expedite hydro capacity addition because renewables will come up in very short time. The gestation period for new renewable is around one-tenth to that of hydro. So there could be a worrying factor on account of grid management and balancing issues. We ought to be working on piped gas also. Though TAPI and IPI have not picked up, I think we should be looking seriously at undersea pipeline from Iran or the Gulf region to India as these would give some assurance on a reasonable gas-based price. As far as cooking fuels are concerned, the government has come out with a very good scheme calledUjjwalayojana for LPG connections.Around 1.5 crore connections have already been given and the target is to reach 5 crore connections. While it is good that we are providing clean fuel for cooking particularly in rural areas, I feel we should probably move out of cylinders and move in a consolidated way through gas grids.The cylinder subsidy is huge. When you are talking of energy efficiency, this is a very wasteful way of conveying your energy. Now when we are in a situation where 80% of our hydrocarbons are being imported, particularly oil, this is a worrying scenario. We have been very lucky that the global oil prices have been less than half of what they were about two years ago. And the spurt may not be as much as was expected. But the fact remains that with weakening Rupee against the dollar, our forex out go will go up and we need to be careful on that account. Now we do have a commitment for providing clean cooking fuels. But I would say that given the present PLF of about 60% of the coal and lignite based plants, we could be looking at producing cheaper electricity and do a cost benefit analysis on whether it is cheaper to supply electricity for cooking in some areas or do we go for gas-based options. Coming to capacity addition of coal-based power, under the 12th plan, we will be adding only 39% from supercritical. Now this is not a very good figure considering the issue of emission control and also efficiency in managing fossil fuel resources. We should have added a higher proportion of supercritical and ultra supercritical ultimately, particularly in view of the new emission norms that are being implemented. Another question mark I find is our assessment of statistics on captive power capacity, both in terms of coal and diesel. Diesel-based capacity has implications of higher cost and environmental issues. If we have a proper Census of the captive power capacity we would also come to know how authentic the figures of energy and peaking shortage are. These require deeper analysis and study. It is very good that the energy and peaking shortage are stated to be between 1% and 2%, but we need to authenticate these figures.

How do you assess the UDAY scheme for power discoms?

The performance of distribution companies continues to be bad in spite of the UDAY scheme. What the scheme does is it transfers the liability to the state governments. Unless the A&T losses come down drastically in the distribution companies, we are in for trouble because how long can you keep subsidizing them or giving them grants which are going to be ultimately recovered from the consumers. We are also reaching a stage because of cross subsidy; the industry will probably find it more reasonable to buy new renewable power like wind which is available between Rs 4 to Rs 5 a unit. If we have grid connected power at above Rs 5 or 6, then these distribution companies would will be in a danger of losing those client once we have reasonable a good capacity of wind and solar. So looking at the economics of distribution companies and their business, if the better paying clients move away then they would be just left with the clients who need subsidy. But cross subsidy is certainly hurting the industry. I feel we need to take a very balanced and healthy view of the situation that industry is a highly desirable activity for providing employment and also giving impetus to growth and trade in the economy. It has to be competitive globally and power is a vital input, so you have to try and keep power cost low.

Don’t you feel that power tariffs across the country need to go up as well to improve financial performance of discoms?

There was about a situation about three to four years ago when tariff hikes were not taking place. Of late some tariffs hikes have taken place. Now if you push up the cost of this grid power too much and with renewable power also coming in at competitive rates, power discoms may be losing clients. So you cannot push power costs beyond a certain limit also. You have to tighten your own efficiency also and not put the burden on the consumer. These levels of 25 to 50% of AT&C losses in some states across the country are totally unacceptable. Unfortunately we had a certain political philosophy in many areas that you should not privatise distribution. The AT&C loss of privatised distribution entities is often much better than the state owned entities. In Delhi, for example, there has been a sea change. So why don't we look at distribution with a very strict focus on efficiency. We have to stop looking at power as a political tool.

The draft National electricity Plan talks of reducing dependence on coal based capacity in favour of renewable. What is your view?

We need to look at other sources. After all what does the plan say? That we do not need capacity addition from coal and fossil fuel sources. But the other side is that you have a huge idling manufacturing capacity of supercritical power equipment in the country. We have to look at export avenues for them else they may start turning into NPAs. I would seriously look at energy and peaking shortages in a manner which can be authenticated provided you have information on what are the captive power sources and how much are they being utilised and why are they being utilised in preference to grid-based power. Either it is cheaper or it is just not available to people. If you have surplus power on the one hand there should not be diesel-based electricity generators. This is absolutely criminal.

Are we banking too much on renewable in the long term?

Renewables has to advantages. Environmentally it is a relatively benign source. Secondly there are no fuel escalation costs or risks as in case of oil or gas-based power. So it is a zero inflation fuel like hydro. However, renewables is different cattle of fish as far as grid management is concerned. We have to look at grid balancing. Are we working simultaneously on this issues or no? It should not happen that the renewables land up first and the grid management is still waiting. As far as wind is concerned we are having good local manufacturing capacity but for solar PVs, we are reportedly importing 80 to 85% from China. Does that augur well for Make in India? We need to do some balancing between local components and importing.When we are talking about renewable capacity addition we got to think about energy storage. You also need to go in for electric vehicles in a big way. If that can reduce your oil imports then we need to utilise the surplus power that we have which will give us energy security.

Are we banking too much on renewable in the long term?

Renewables has to advantages. Environmentally it is a relatively benign source. Secondly there are no fuel escalation costs or risks as in case of oil or gas-based power. So it is a zero inflation fuel like hydro. However, renewables is different cattle of fish as far as grid management is concerned. We have to look at grid balancing. Are we working simultaneously on this issues or no? It should not happen that the renewables land up first and the grid management is still waiting. As far as wind is concerned we are having good local manufacturing capacity but for solar PVs, we are reportedly importing 80 to 85% from China. Does that augur well for Make in India? We need to do some balancing between local components and importing.When we are talking about renewable capacity addition we got to think about energy storage. You also need to go in for electric vehicles in a big way. If that can reduce your oil imports then we need to utilise the surplus power that we have which will give us energy security.

Infraline Energy would like to thank the contributor for his/her valuable time and opinion shared on the topic.