February 18, 2015
POWER PROBLEM: "India's energy grid is weak and unstable. This is why concerns remain about handling renewable energy."
Renewables can play a greater role in a sustainable energy future, but proper accounting and specialised effort to understand their grid implications and scalability are necessary
The Renewable Energy (RE) Global Investor’s Meet inaugurated by Prime Minister Narendra Modi on February 15 invited participation in funding India’s RE growth ambitions, which include almost 1,00,000 MW of growth in solar power in just seven years (about 40 per cent of today’s total installed capacity) and some 50,000 MW of wind power. This is bold and ambitious to say the least. The event was a success, finding investment commitments for some 2, 60,000 MW of RE!
But a serious question facing Indians is whether at a time when most people are struggling to keep the lights on at home, because of the shortage of power, do citizens really care about carbon emissions and climate change, which have become the primary rationale for pushing green energy? Also if Indians are as notoriously price-sensitive as pundits claim, how much of a premium will they be willing to pay for RE?
Let’s not beat around the bush — RE, attractive as it might sound and improving in price performance every year, does require support. Support isn’t inappropriate, especially given the benefits of RE, but there are also externalities of another kind including implications for the rest of the grid. This needs deeper analysis.
In the West, utilities are already worrying about the Utility Death Spiral, where RE and storage and smart grids mean some consumers reduce, if not cut off, their utility purchases. This raises costs for the rest of the grid, which must still keep the system in balance and stable, and also serve the least profitable consumers. This prompts others to exit the system, and so on. While India isn’t quite there yet, we must first understand that an end consumer opting for RE and finding it worthwhile is based on his/her comparing retail tariff with generation costs, which aren’t comparable. First, distribution has its own costs, even after accounting for savings in distribution losses. Second, retail tariffs for so-called paying customers (especially commercial and industrial) are artificially high, since they cross-subsidise other users.