India’s long term solution for its energy needs

While the Government has taken steps to augment coal availability via higher production through Coal India Ltd as well as coal mine bidding, these measures will be inadequate to meet the demands of stalled and under-construction thermal power plants.

Ratul Puri Hindustan Power India’s drive to ensure sustained development is largely dependent on the status of its infrastructure and the energy sector. Although the country has added significant power capacity after 2003, India still suffers from significant shortages of electricity with the country’s per capita energy consumption at 917 kWh in 2012-13 which is less than one-third that of China and one-tenth of the US. Multiple challenges faced by the energy sector – such as overcoming the energy deficit and defining a low-carbon development path – needs to be addressed in order to meet the nation’s aspirations. Large coal reserves meant that thermal energy would be the mainstay in the country’s energy mix. But despite such reserves, massive disruptions in domestic coal production have meant that supply has not been able to keep pace with the rapid increase in demand. During the past eight years (2007-08 to 2014-15), 103 GW of thermal capacity has been added – of which, 94 GW is coal/lignite based. Yet, several projects can’t operate at benchmark PLFs (Plant Load Factor) due to lack of domestic coal availability. While the Government has taken steps to augment coal availability via higher production through Coal India Ltd as well as coal mine bidding, these measures will be inadequate to meet the demands of stalled and under-construction thermal power plants.

This coupled with the unsound financial health of distribution companies as well as transmission & distribution losses, has resulted in the lack of development of new thermal power plants. Faced with these critical challenges, India is seeking to harness alternative energy sources in order to secure its development objectives and provide 24×7 power supply to all citizens and stakeholders. It is in this context that the Government’s target of adding 175 GW of renewable energy capacity could be the fulcrum for India’s energy security. This step means India will skip creating fossil-based assets and would directly leapfrog into the renewables era. Thereby, consumers in India would not have to pay the cost of stranded fossil fuels-based power plants. Considering the above, measures suggested below could help India achieve its target of 175 GW by 2022:

• Introduce FIT (Feed-in Tariff) programme since it is more successful than bidding as demonstrated by the success of FIT in international markets and Gujarat. The bidding process entails additional costs on developers that impact the tariff. The FIT system can help avoid such costs.

• India needs to focus on commissioning solar farms of 50 MWp (megawatt peak) and 200 MWp sizes. A solar farm of this size has economies of scale, while the energy generated from it would be consumed locally. Therefore, no additional distribution network is needed, which means the cost of transmission will be lower. Above all, the commissioning time for a mid-sized solar is anywhere between 6 and 12 months.

• In addition to accelerated depreciation, providing GBI (generation-based incentive) will reduce the tariff by Rs0.77/unit.

• These steps should be in addition to supporting the sector with Infrastructure Trusts and providing credit insurance/guarantee through NCEF (National Clean Energy Funds). A combination of the above measures will help reduce tariffs and increase the sustainability quotient of renewables projects in the country.

Source : moneycontrol.com

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