Power sector faces a crisis, but technology can help overcome it
Acute power shortage in Tamil Nadu
Power problem is getting accentuated in all the States throughout India. Tamil Nadu Chief Minister Jayalalithaa has resorted to buying power from the open market to tide over the situation. Tamil Nadu is facing a shortage of 1026 MW. Telangana agitation has affected the coal supply to Ramagundam Power Plant from Singareni Collieries. Because of this, power generation has dropped from 2600 MW to 1500 MW. Tamil Nadu’s share of power has dropped from 659 MW to 300 MW. The acute floods in Orissa have affected the Talchar Power supply. Here Tamil Nadu’s share has dropped from 500 MW to 270 MW. Loss of wind energy has come at a time when power problem is acute in the State. But higher inflow to hydel reservoirs is a compensating factor to at least some extent. Tamil Nadu government has resorted to widespread load shedding throughout the State. Of course, the first two problems are only temporary. But throughout India, new coal fields are denied permission to operate because of environmental reasons and this has forced power companies operating thermal power plants to resort to import of foreign coal, which is time consuming and involve huge money and foreign exchange outgo for India.
Huge potential for wind energy in India
Asian Development Bank has sanctioned $750 million loan for the national power transmission improvement project of Power Grid Corporation of India. Wind Power is another area which can help India enormously. This year, according to the Union Energy Minister Farook Abdullah, India will add 2000 MW of wind energy power, to its grids. Wind energy comes cheaply and is clean. India has huge offshore and onshore areas to tap wind power. Many foreign companies like Gamesa of Spain have entered India, sensing business opportunity in the expanding wind power sector. Chinese wind power turbine manufacturers are going to enter the race and will pose stiff competition to both foreign companies like Gamesa and Indian companies like Suzlon, which is the market leader in wind power turbines.
Biggest wind power deal in India
Goldman Sachs has invested Rs.1000 crore to acquire majority stake in a renewable energy start up using wind power called ReNew Wind Power. It is said to be the biggest equity deal in India in renewable power sector. To start with, the company will install 85 MW in Gujarat and Maharashtra. It will then add 200-300 MW capacity each year. It is targeting 1000 MW capacity by 2015. That will require an investment of $1.3 billion. Wind power potential is estimated at 450 GW, mainly in the Deccan plateau and parts of Rajasthan and Gujarat.
Wind power units face problems in Tamil Nadu
But there are problems in Tamil Nadu in wind power generation. Evacuation issue is haunting wind power producers in Tamil Nadu. Many companies like Techno Electric, Orient Green, Hong Kong-based CLP Holdings and other companies want to shift to other States like Karnataka, Rajasthan, Andhra Pradesh and Gujarat where infrastructure facilities are excellent for wind power generation. So far, Tamil Nadu has topped wind power generation with a capacity of 6300 MW, which is 40% of India’s capacity. But now Tamil Nadu may lose out to other States because of the financial problems gripping its transmission utility TANTRANSCO.
Solar power is green power
Solar power is a green area which is rising in the power horizon. A renewable energy revolution is going on in India. Solar power plays a major contribution in this segment. Alan Rosling, who served as a Director in the Tata group and headed its globalisation efforts, has started a solar power start-up called Kiran Energy. Three US-based funds have made an initial equity commitment of $50 million to the venture. The company has targeted production of 300 MW solar power by 2014. It is setting up a 20 MW solar unit in Gujarat and 5 MW plant in Rajasthan. Thar Desert is a good source of solar power generation. About 3500 sq km of its area can produce solar power upto 1750 GW. Thar Desert has a total area of 35000 sq km.
Biomass power has huge potential
The size of domestic market in power generation equipments is poised to rise from $5.7 billion to $27.5 billion in 2022. The transmission and distribution equipment industry is estimated to grow from $18.5 billion to $75 billion in 2022. But for this to happen, the government will have to take steps to alleviate the sufferings of the power sector. At present, the problems faced by the power sector include environmental clearance, land acquisition and getting a streamlined coal supply and other resources. Biomass power plants contribute in a small way to the power supply but they are also facing problems. TNEB has not paid them for the last 8 months for the power generated by them in Tamil Nadu. The amount due is Rs.50 crore. There are 17 biogas power plants in Tamil Nadu with a total capacity of 130 MW. Biomass energy is based on biological materials like agricultural residues, wood, food waste, animal residues, industrial waste, municipal solid waste and sewage. Tamil Nadu has the potential to produce 450 MW of biomass power.
Great relief for Andhra Pradesh
In the month of September, the Southern States suffered the worst power problem. Coal workers’ strike affected 4000 MW of power. About 100 million units of hydro power were lost due to receding monsoon. But the Southern States tided over the situation by buying power on the power exchanges. Secondly, some merchant stations like Jaypee’s Karcham Wangtoo, Sterlite’s Jharsuguda and Lanco’s Amarkanthak helped. IEX is India’s largest power exchange. Andhra Pradesh bought power in this exchange in a big way and solved its problem. Now the Prime Minister has offered help to Andhra Pradesh and has instructed diverting power from the Eastern grid to Andhra Pradesh.
Power sector luring many companies
Reliance Infrastructure offers consumers the choice to monitor remotely the power supply to their homes and offices. But this facility is at present available only to consumers in Mumbai and Delhi. The smart grid installed has the capability to re-route electricity if there is a power problem in one line. If there is a power shortage, the smart grid will automatically turn off appliances like AC that consume huge power. Power generation has become an attractive proposition in India that even companies in other sectors of operation are venturing into it directly or indirectly. For example, the Hyderabad-based NSL group that is in the business of cotton growing, ginning, spinning, weaving and manufacturing apparel has now entered into power generation and started its facility Regen Powertech to manufacture turbines. India plans to generate 15% of its total power by 2020 through renewable energy. India receives a high doze of solar energy amounting to 2000 kWh of sunlight radiation per square metre annually. Any breakthrough through research in producing cost effective solar photovoltaic cells and concentrated photovoltaic cells will further generate a quantum leap in the renewable energy sector in the near future.
Moser Baer has big presence in solar power
Moser Baer India has a big presence in solar energy with its photovoltaic cells and modules. It has a production capacity of 90 MW of crystalline modules and 100 MW of crystalline cells, besides 50 MW of thin film. Solar energy gives India a very good opportunity to combat poverty and fight climate change. Pune based Thermax is also in the solar power business. In August, Tata BP Solar commissioned its first plant in Orissa. It is also executing projects in other States. But the cost of installing and operating solar power plants is nearly five times that of operating a coal based thermal power plant. The government will have to chip in with a subsidy of $1 billion per year in order to achieve a takeoff in solar power generation in India.
Mumbai is bright, Navi Mumbai is dark
In Kerala, a non-conventional energy park in a 50 acre land near Wayalar in Palakkad is coming up. A solar park in six acres of land will generate 1 MW solar power at an investment of Rs.22 crore. Wind Energy Park is coming up at a cost of Rs.12 crore. Although power generation has improved in India over the years, meeting the raising demand is still a problematic one for the government and industries. The cumulative electricity generation in April-July 2011 was at 291139 million units, which was an increase of 9.3% over the corresponding period of the previous year. Better monsoon also aided power generation through hydro electric power stations. Improved plant load factor also played a role in this increase. But power generation alone is not sufficient to meet the demands in all parts of India. Its transmission and distribution also plays a crucial role. For example, Mumbai city faces no power shortage because it is the financial capital of India. Just travel 50 km away and enter Navi Mumbai. You can see hours together of power cuts faced by both houses and factories. A recent report says that India could face a 10% shortfall in electricity in 2011-12 as against 8.5% in 2010-11.
Nuclear energy plants face opposition from the public
As on 31st July 2011, India’s total installed capacity was placed at 180358 MW. Of this, State government utilities constituted 46% amounting to 82814 MW. Central government utilities accounted for 31% amounting to 56572 MW. Private power projects accounted for 23% amounting to 40972 MW. The 12th Plan has targeted an additional power output of 100000 MW by 2017. The private sector’s share is expected to rise to 52% during the Plan period. But how is the government going to tackle the inadequate availability of coal in the Plan period is not clear. Will it sacrifice environmental concerns for purely business reasons? Already there is a widespread opposition to nuclear power plants in India. Recently, even villagers joined in the protests against Kodunkulam Nuclear Power Plant after witnessing the problems of Fukushima Nuclear Power plant in Japan in the aftermath of earthquake and tsunami.
Foreign coal has become costly
Two thirds of India’s power generation depends on thermal power. Coal is a vital raw material in these plants. India produces around 560 million tonnes of coal every year. But the demand is for 700 million tonnes of coal. The demand is likely to surge to 1000 million tonnes by 2017. There will be a huge gap in the demand and supply. Necessarily, the gap has to be bridged through import of more coal from abroad. Tata Power had agreed to sell power at Rs.2.26 a unit to five States namely Gujarat, Maharashtra, Punjab, Haryana and Rajasthan. The 4000 MW Tata Power plant depended on imported coal from Indonesia. Now Indonesia has raised its price for the coal it exports. Therefore Tata Power is renegotiating the tariff with these State utilities. Reliance Power also owns Indonesian coal mines and may have to revise its tariffs. It has temporarily stopped work on its 4000 MW Krishnapatnam ultra mega power project. Many of the untapped coal sites are located inside forests and therefore the government will not give permission to open them as forests will have to be destroyed and it will also affect the tribal people, which is a big political issue in India.
Breakthrough in technology awaited for solar power tapping
All these things reveal that the power scenario in future is gloomy. But there is still a silver light visible on the horizon. If new technology breaks through, then solar power will solve most of India’s power problems in the long run. For example, the US laws required the solar energy user to shell out huge equipment installation costs up front. But Jigar Shah, an Indian and founder of SunEdison, revolutionised the solar energy industry by introducing the principle of solar energy purchasing agreement in US. According to this concept, the company will install solar energy equipments and the users will have to simply pay the company a fixed monthly charges for their usage. In India also, such a kind of concept will be introduced by companies in due course, at least locally, if not nationally. Indian Institute of Technology, Gandhinagar and US-based Underwriter Laboratory are planning to jointly conduct study on solar power plants.
State Electricity Boards are unprofitable
Over the next five years, distribution franchisees may be allowed to directly buy and sell power. This concept may take roots locally in the beginning and then gradually spread to national levels. Bankrupt SEBs are in no position to manage power distribution and its procurement. State Electricity Boards have piled up huge losses amounting to Rs.70000 crore. These losses are set to widen to Rs.116089 crore by 2015. The bulk of these losses are accounted by the Electricity Boards of Uttar Pradesh, Tamil Nadu and West Bengal. But transmission and distribution losses have come down from 30.62% in 2006-07 to 29.58% in 2007-08 and further to 28.44% in 2008-09. Subsidy plays an important role in the losses incurred by the State Electricity Boards, but even without subsidy, their losses will be sizeable. Efficient management is conspicuous by its absence in the State Electricity Boards. Selection at the highest level is based on political considerations. Power policies are taken, considering their political fallout and not based on wise economic criteria. Power reforms are shirked due to populist backlash.
BHEL’s future becomes questionable
India is one of the biggest markets for power equipment. Traditionally, companies like BHEL and Larsen & Toubro were dominating this sector. But the situation is changing. Young expat engineers from China, Korea, Russia and USA are entering power projects in India, earning big money for them and for their companies. One of the engineers is building a power project for South Korea’s Doosan in a remote place in Chhattisgarh State. BHEL’s equipments help light three out of four bulbs in India. But now its position is challenged by companies like Doosan. Doosan won the NTPC tender, bidding below BHEL. India’s major power companies like Tata Power, Adani Power, Reliance Power, Lanco Infratech, GMR Energy and GVK Energy are increasingly placing orders with foreign companies rather than with BHEL and L&T. Indian companies are also collaborating with foreign companies like General Electric, Mitsubishi Heavy Industries, Hitachi, Alstom, Ansaldo and Babcock & Wilcox. Indian companies are purchasing their requirement for auxiliary equipments like switchyards and cooling towers from abroad. If this trend continues in future, BHEL’s future will become questionable. Already the Department of Heavy Industries, in order to protect indigenous companies like BHEL, has proposed for 14% import duty on imported power equipments.
Ultra mega projects deferred
Power Ministry has deferred the planned initial bids for the upcoming ultra-mega power project (UMPP) in Tamil Nadu on the grounds that it does not meet all requirements under the new norms for prevention of coastal degradation. The Orissa and Chhattisgarh UMPPs have also been deferred. 11th Five Year Plan targeted to achieve an additional power capacity of 78700 MW. Subsequently, it was scaled down to 62000 MW. India may fall short of the target by around 10000 MW. For the current year, the target was set at 17716 MW but till August 31, only 6369 MW has been added.
Banks may be in the red due to lending to power companies
Banking and financial sector is also in deep trouble due to mega loans advanced to power companies. Power firms could default on 135000 crore loans due to cost overruns. Half of the loans sanctioned to existing power plants remain unutilised whereas loan to new power projects has almost come to a grinding halt. The companies are battling against low power tariffs, land acquisition problems and fuel scarcity. State-run financial institutions like Power Finance Corporation and Rural Electrification Corporation have told their clients that they will not disburse the loan unless the companies tied up for fuel supply contract. The possible default will be around 50% of banking sector’s loan to power companies. This will add to the NPA level of the banks and financial institutions and make their balance sheets red. Many of the power projects like Lanco Infratech’s Anpara, Adani’s Mundra, Tiroda and Kawai are running at either low or idle capacities due to shortage of fuel.
Focus should be on renewable energy
There are enough of thermal power plants in India. But they are not running at full capacities due to fuel shortage. Many projects in the pipeline may have a severe environmental and social impact. Coal-based plants also require massive amount of water for cooling and for ash disposal. This will add to the water scarcity in the area where the company is in operation. Several areas will be critically polluted. Instead of spending massive amounts in thermal power plants in future, investment should be productively made in renewable energy generation. New government guidelines for solar power plants will encourage independent power producers to set up solar power plants of capacity upto 50 MW.
South Asian grid proposed
A new proposal floated by the Central Electricity Regulatory Commission could offer a fresh impetus to electricity flows from South Asian countries into the Indian grid and vice versa. The proposal is for setting up a South Asian power grid. Frequency norm changes are also on the cards under this system. The government is also considering funding in the Chinese currency renminbi (RMB) for power projects. The power sector will be requiring Rs.14 lakh crore during the 12th Plan period of 2012-17. 50% of this amount will be used for core activities of generation, transmission and distribution. As European nations and USA are struggling with their debt crisis and economic slowdown, Indian government is considering permitting the companies to avail loans in Chinese currency.
Grid connected solar power plants coming
A new phenomenon of grid-connected solar power plants has come to India. Gujarat, Rajasthan and Tamil Nadu are the front runners among the States that have grid connected solar power plants. So far, 20 plants with grid connected facility have been commissioned upto July. Rajasthan’s solar energy policy of 2011 has targeted a minimum of 550 MW of grid connected solar power by 2013. It is a sun kissed State. It will be the major area of photovoltaic investments in future. Anil Ambani called on the Rajasthan Chief Minister and offered to invest Rs.8000 crore to set up solar power with capacity 500 MW. Already work has begun for the production of 100 MW solar plant under the Central government sponsored Jawaharlal Nehru National Solar Mission (NSM). But the high cost of electricity is preventing investors from entering into energy-intensive projects like silicon fabrication, which is a vital input for the success of NSM. National Solar Energy Company has been formed by the government recently to oversee implementation of all the solar energy projects in India. Dr. Anil Kakodkar, former Chairman of Atomic Energy Commission is tipped to head the organisation. The increasing price of silver is also a worry for solar power operators as silver is an essential ingredient in photovoltaic cells that conducts electricity. Silver is the best conductor of electricity among metals. Silver has, along with its fellow noble metal gold, appreciated 74% to $35.30 a troy ounce on average this year from $20.34 last year. As the cost of silver soars still further, there is also an increasing danger of pilferage of photovoltaic cells installed in open spaces by thieves for grabbing the silver. Photovoltaic cells cannot be installed indoors and have to be installed only in open spaces to receive sunlight.
Delhi tops power consumption
Delhi tops the per capita power consumption in India at 11863 kWh. Bihar is at the bottom rung with figures of 122 kWh. India ranks 14th in the world in per capita power consumption with figures of 778 kWh. It is three times lower than that of China. The power loss on account of idle transformers in the 11-kV segment during distribution is over 2000 MW. There are over five million transformers in the circuit, which in idle state (no load) consume over 40 watts each. 70% of the transformers used are not in the star ratings specified by the government. The aggregate technical and commercial losses in the power distribution sector amount to a huge Rs.80000 crore annually.