Cross-subsidy of power tariffs lure businesses to solar energy

The fall in solar power generation cost has now made it attractive for businesses to go for captive solar power plan

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New Delhi: The practice of forcing industries to cross-subsidize household consumers’ power tariffs is leading to an unprecedented shift among businesses towards captive solar power with some committing to go fully reliant on clean energy.

Cost of producing solar power, which was over Rs12 per kilowatt hour (unit) in 2010, has dropped sharply over the years.

The latest auction, which was held in November, saw takers for solar power projects willing to sell power at Rs3 a unit.

The fall in solar power generation cost has now made it attractive for businesses to go for captive solar power plants, including rooftop plants that supply power cheaper than from the grid, which is expensive on account of the cross-subsidy that industrial consumers are saddled with.

Businesses, especially in the manufacturing sector, have long been complaining of high cost of power, exorbitant tax on diesel and escalating cost of capital as factors that render them less competitive in global markets where their peers enjoy low or negative cost of capital and in some cases, subsidies.

“Solar power is now available at Rs 4-4.5 a unit. In the future, it will cost much less because of technology improvement and possibly low cost of capital. In West Bengal, for instance, cost of power from the grid for industries ranges from Rs 6-8 per unit at present. In Maharashtra, it is Rs 6.5 a unit. Everywhere, except two or three states, tariffs are above Rs 5 a unit for industrial consumers. If you are able to get concessional finance from any multilateral agency and you can produce solar power at Rs 4 a unit consistently for 25 years, it can reduce cost of energy for the business and reduce carbon emissions,” said Mahendra Singhi, chief executive officer, Dalmia Cements (Bharat) Ltd.

Dalmia Cements’s short term goal is to raise the share of clean energy in its total electricity consumption fourfold from 7% at present and to go fully reliant on clean energy in the long term.

Multilateral agencies such as International Finance Corp. (IFC), the private investment arm of World Bank Group, US Exim Bank, the United States Agency for International Development (USAID), the Japan International Cooperation Agency and Germany’s KFW are bullish on India’s rapidly expanding renewable energy industry for investment opportunities.

“We already have $1 billion of investments in clean energy projects in India. We are open to scaling it up to $3-4 billion in coming years,” said Shalabh Tandon, India lead, climate business & clean energy, IFC.

IFC on Thursday announced an equity investment of $125 million in Hero Future Energies Private Ltd., a clean energy firm, for a minority stake. Tandon said that IFC does not invest in coal-based thermal power because of its commitment to climate change goals.

Companies like Apple Inc., IKEA Group, Nokia Oyj, Infosys Ltd and Tata Motors Ltd are among those committed to becoming fully reliant on clean energy.

The Economic Survey 2015-16 had suggested that the burden of subsidising poor consumers can shift from industrial consumers to rich individuals and that state electricity regulators should use income as a yardstick to fix the power tariff for individual consumers. The idea was to help businesses become more competitive.

India has a target of putting in place 175 gigawatt (GW) of renewable power capacity by 2022, out of which 100 GW is to come from solar. At the moment, the country has about 8.7 GW of solar power capacity.

One hurdle that companies face in going fully reliant on clean energy is that storage of energy is a costly proposition, which makes them rely on stable power from the grid for a significant part of their energy consumption when renewable energy is not available. Singhi of Dalmia Cements said that once power storage becomes a viable option, the company will be fully run on clean energy.

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Accountability of regulators a serious crisis in India: Goyal

Stating that accountability of regulators was a very serious crisis that the country was facing, Union Minister Piyush Goyal today said very often they are not even able to justify many of their decisions.
“The one very, very serious crisis that the nation is facing today is the accountability of regulators. There is almost no accountability of regulators. And in the garb of independence of regulation, it occasionally goes to another extreme,” the Union Minister of State for Power, Coal, New and Renewable Energy and Mines said.
He was speaking at a seminar on ‘Ease of Doing Business- Regulators as Facilitators’ at Vibrant Gujarat Global Summit 2017 here.Pointing at regulation of environment sector as a case in point, he said the sector suffered due to “over regulation as regulators are not able to justify many decisions”.

“The environment sector has suffered due to over regulation and very often regulators are not able to justify many decisions. So, you have a situation, where there is nothing like forest for an area called forest, no satellite image, no ground report says there is a single tree in that area,” he said adding that seeking building permission or regulatory permission for such areas causes a lot of trouble.

Attending the seminar were chairman of Food Safety and Standards Authority of India (FSSAI) Ashish Bahuguna, chairman of Competition Commission of India (CCI) Devendra Kumar Sikri, and chairman of Central Electricity Regulatory Commission (CERC) Gireesh Pradhan, among others.

“Transparency is another area, when we look at the regulatory process. Regulators should be open about their working, hearings should as far as possible be more and more in public domain, and speaking orders, with a logical approach, should be available in public domain so that others should benchmark their business process to whatever is decided by regulators,” he told the audience.

“And regulators should also be user-friendly rather than being under the shroud of what really was the intent of regulators and intent of law. Lastly, it is important to target regulation on what the problem is, so that we don’t tend to go haywire and over-exceed our brief,” Goyal said.

“If we can keep the side effects of regulations minimum, it can help make regulators truly a facilitator person and help economic growth. We can then have a situation where people are not fearsome of regulators, we have to get fear out of regulation,” he said.

“In that sense, policy makers and regulators should work hand in hand. You can’t have a situation, where policy makers and regulators think differently,” he added.

View original post on Business standard: http://www.business-standard.com/article/pti-stories/accountability-of-regulators-a-serious-crisis-in-india-goyal-117011101448_1.html

Can India dump coal quite so easily?

(Getty Images)

Since the Paris Climate Conference in 2015, India vouched to increase its renewable energy production by 175 gigawatts. These broad claims made many wonder whether India would ever be able to achieve this feat, until now. The government’s energy advisory board in a statement said that India could meet its energy needs by 2022, without the need for more coal-powered plants.
The national electricity plan, the draft of which was released by the Central Electricity Authority on 12 December 2016, stated that the share of non-fossil fuel production capacity of the country was to increase to 46.8 per cent by 2022. It may further grow by close to 10 per cent in the subsequent five years. These figures also take into account another 50 GW of coal-based power plants that are in construction and would likely come online by 2022. “The study result for the period 2017–22 indicated that no coal-based capacity addition is required,” said the report.
It’s not just the Indians who are confident and invested in making India renewable energy-sufficient. The confidence comes from the fact that the demand for electricity in India is growing continuously. One quarter of India’s population, which equates to 300 million people, still has no access to electricity. KfW Development Bank, a unit of the German Federal Ministry for Economic Cooperation and Development, recently concluded a 0.5 billion-euro loan agreement with Powergrid, the Indian power transmission company. This is the first leg of a KfW 1 billion-euro loan for expanding Indian transmission lines.
This investment, along with other minor investments from other countries and banks, seems set to fuel India’s renewable energy production in the coming years. These investments, coupled with a billion dollars from the Indian government, are a part of the construction of “green-corridors”. These new transmission lines will feed on electricity obtained purely from renewable energy sources.
Similarly, there is another mega project to expand the transmission network in the States. The government has signed contracts for expanding the networks in Rajasthan and Tamil Nadu. 125 million euros were provided to each of these States’ power companies to finance the project. This will enable electricity to be transmitted in a much more efficient way. It would reduce power loss during transmission and reduce our carbon footprint. If India wants to see a noticeable reduction in its CO2 emissions, there needs to be at least a 15 per cent increase in its renewable energy production by 2022, to match the increase in demand through the years. The main issue with renewable energy is that the end customer will only be able to access power from these renewable energy sources if they are stable and efficient. Stability is not as much of a problem for hydro power plants as it is for solar power and wind.
Another issue is that solar and wind power plants are primarily located in only seven states in the country, that is, Gujarat, Andhra Pradesh, Himachal Pradesh, Maharashtra, Karnataka, Rajasthan and Tamil Nadu. Some of these are situated away from the financial centres that are the primary consumers of the power. Therefore, it is very important that the transmission lines be expanded and made efficient.
To increase renewable energy production by such a magnitude is a huge turnaround for one of the world’s largest greenhouse gas emitters that has thrived until now on cheap coal. The energy policy announced in 2006 said that coal would continue to dominate the energy production matrix of India till 2031-32 and maybe even beyond. It projected that India may need 2 billion tons of coal by 2032.
However, with this new turnaround, the new plan puts the total coal requirement for 2022 at 727 metric tons, and for 2027 at 901 metric tons, provided renewable energy targets of 175 gigawatts are achieved. This is after factoring in a 30 per cent reduction in hydropower generation due to monsoon failure being supplemented by coal-based generation.
This bold move has been inspired by, in part, the successful deployment of various renewable energy programmes, especially the Jawaharlal Nehru National Solar Mission that has added 10 GW of power in six years.
The Draft Electricity Plan is the only policy paper we have today that provides an insight into the government’s intentions on energy. Thus contradictory plans seem to flow with government intending to increase the supply of coal and at the same time reduce greenhouse gas emissions by turning to renewable energy.
First, coal output is not being curtailed. With Coal India ready to produce a billion tonnes and private coal mines another half a billion, India will have twice the coal it needs. This coal would have to be pushed for export, a wise thing to do as long as the coal markets are buoyant and profitable. This would help India earn foreign exchange and help the country’s negative balance of trade. Second, the government has no legal power to prevent private coal mine owners from setting up coal-based power plants. Power generation no longer requires a license after the Electricity Act of 2003 opened it up.
So we might see a shift from state-owned coal power to privately owned coal-power generating capacities. Coal power nevertheless will grow as coal mining continues to grow. About 83 GW of India’s thermal generation capacity of 214 GW and 130 GW of its total power generation capacity of 308 GW is already privately owned.
The government believes that renewables, especially hydro and even nuclear power would help overcome some of the key problems that have led to a persistent gap in energy access. Moreover, off-grid localized production is also under discussion. It may help ensure stability and efficiency that may be a problem with high transmission and distribution losses.
There is some scepticism about India’s renewable energy policy. India is almost as big as China in terms of population; however, it still is desperately poor and is determined to develop. The easiest way to get richer is to industrialise the nation. This would require more power, and the easiest way to get more power is to dig up coal and burn it, especially as India is endowed with very large coal deposits.
Increasing the renewable energy base is welcome for the fight against global warming. To prevent the adverse effects of climate change, India will have to industrialise differently from the way Europe and the US did. They industrialised by burning coal. India will have to skip most of the coal stage and go right to solar.
The falling cost of solar will help with that, obviously, but India’s unusually abundant, cheap coal resources mean it will not quickly convert from coal to solar power. Although the Narendra Modi administration has made big promises on cutting carbon emissions, many question the government’s ability and will to follow through, especially given the country’s traditional reluctance to address the issue.
This reluctance is understandable. India is very vulnerable to climate change, with long coastlines and a lot of poor people. Therefore, it needs to industrialise quickly and also fight global warming. It is manifestly unfair for India to hobble its growth when most other nations got rich by burning fossil fuels. That will create popular pressure for the government to do less than it should.
The simple solution then would seem to be for rich countries to pay India and other fast-developing nations to skip coal and go straight to solar. However, with European economies in the dumps and the US soon to be headed by the Trump administration, such a bargain seems unlikely.
A more realistic solution to our present situation is for India and other developing countries to receive trade investment, access and know-how from the developed countries. Ways need to be provided to India to ensure it receives the required inputs and the technology base at a competitive price so that it grows faster and does not have to rely on more coal. Additionally, India can impose a high tax on carbon, and adopt other incentives to substitute solar for coal more quickly.
To summarise, developed countries should also do two things. First, they should direct large amounts of investment India’s way, and drop trade barriers. Second, they should set up technology transfer programs that give away clean energy know-how.
This kind of grand bargain would satisfy Indians’ desire for fairness, while also helping them to industrialise quickly. It would also strike a big blow against climate change. This is something that Europe, Japan and other developed countries can do, even if the US opts out under Trump. Though solar has given humanity a possible window out of the climate change trap, bold policy is needed to take advantage of that window.

 

View original post on: http://www.thestatesman.com/opinion/can-india-dump-coal-quite-so-easily-1484422630.html

Electricity may get costlier as states demand higher royalty on coal: India Ratings

If the hike in royalty is accepted, it will lead to coal attracting the highest ad-valorem duty compared to all other minerals

Electricity may get costlier as states demand higher royalty on coal: India RatingsElectricity may get costlier as states demand higher royalty on coal: India Ratings - Image
New Delhi: Chhattisgarh’s request for a revision in royalty rates on coal to 30 per cent from the existing 14 per cent ad-valorem, will push up the cost of electricity by 7 per cent or 10-12paisa/kWh, India Ratings today said in a report.

The state government has constituted a study group to consider the revision in the royalty rates based on the request.

“Ind-Ra believes the royalty hike looks quite steep at 30 per cent, and if accepted, it will lead to coal attracting the highest ad-valorem duty compared to all other minerals,” the report said.

Assuming a pithead price of Rs 720 per tonne for coal, the royalty increase will also lead to a higher contribution towards district mineral foundation (DMF) at 30 per cent of royalty and National Mineral and Exploration Trust (NMET) at 2 per cent of royalty, which translates into a higher cost of electricity generation by 10-12paisa/kWh.

Since January 2015, coal consumers have been hit by rising prices due to the imposition of DMF and NMET (effective January 2015), taking the effective royalty rate up to 18.48 per cent from 14 per cent.

Additionally, if the royalty rates were to increase to 30 per cent, the effective royalty rate would be 39.6 per cent including DMF and NMET contribution.

Furthermore, the clean energy cess increased to Rs 400 per tonne from Rs 200 per tonne in the Union Budget 2016.

During May 2016, Coal India Limited (CIL) increased the run-of-the-mine prices for the most widely supplied grades of coal to the power sector by an average of 16 per cent. Similarly from 1 April 2015, freight charges for coal were hiked by 6.3 per cent.

Therefore, the variable cost of generation for a plant situated 500km from the mine which used to receive grade G13 coal, has increased by 24 per cent to Rs 1.69/kWh.

“If the revised royalty rates were to be accepted as proposed by the Chhattisgarh government, the variable cost of generation can increase by another 7 per cent,” India Ratings said.

It added that on the positive side, coal linkage rationalisation for companies has led to a decline in the transportation costs, thus easing some impact. Industrial power rates are a critical pre-investment consideration for manufacturers and given that bulk of the coal-based capacity in India is on a cost pass-through basis, the ultimate impact of such hikes is passed on to consumers. Such regular hikes in one form or the other are not a healthy sign for thermal power generators.

“Ind-Ra believes that as alternate sources of power namely solar see further reduction in tariffs, the competition between thermal and solar will intensify, with a high probability of solar winning. These price hikes have played out at a time when the all-India power situation continues to improve and CIL is looking at a coal surplus situation, with the possibility of coal also being exported,” it said.

Even after the hike, the coal supplied domestically by CIL continues to be cheaper than the imported coal. Coal has seen a change in royalty rate in 2012, with the royalty being changed to the ad valorem basis at 14 per cent from the earlier system of tonnage based and ad-valorem with royalty on Grade D/E coal being Rs 70 per tonne plus 5 per cent of CIL run of the mine price.

It furthr said the states will benefit at the expense of consumers paying more for electricity.

“Ind-Ra estimates that the increase in royalty up to 30 per cent for the top three states could result in an additional income between Rs 5 billion to Rs 39 billion, depending on the final royalty rate,” it said.

 

Has India’s Energy Sector Really Transformed?

SL Rao

Most importantly, Piyush Goyal, the Union Minister for Power and Renewable Energy, Coal, and Mines has cleared the coal sector’s Augean Stables, which were riddled with corruption, theft, and inefficiency. Coal is easily available today, imports have fallen, and global prices have fallen along with those of oil and gas.

Falling domestic demand has sent coal prices lower as well. Power is surplus despite power plants working at a low average plant load factor of 60 percent. But at the same time, around 30 crore people remain without electricity.

Does This Indicate A Transformation?

Not so much. On the positive side is the coal availability and price situation, increasing but still inadequate interstate transmission capacity, some reduction in transmission and collection losses.

But state-owned power distribution companies do not generate enough of their own funds to buy power from within the state or from outside. This is because tariffs remain uneconomical for the distribution companies.

States have violated the law that permits open access for distribution companies to purchase cheaper power from other states. Instead, they buy expensive power from within the state.

Ruling parties treat power as a public good which must be available to all, irrespective of their ability to pay. This has meant that power is given free or below cost to many households, for agriculture in many states, and to some other favoured consumers. Agricultural use of free or cheap power has led to a surge in water-intensive crops like rice and sugarcane, often on soil that is unsuitable. Outcomes range from saline soil to depleting groundwater and river water levels.

The government just ends up accumulating large stockpiles of rice. Compounding that, the Government of India has a minimum support price policy that encourages cereals even when the demand is falling. It has no relation to water availability and use for the crops.

There has been no improvement in gas supplies to operate stranded power generation capacity. Even when gas is available, demand may not be sufficient. Gas generation is flexible and can usefully back-up variable generation from renewables.

Renewable Energy And Efficient Appliances

Wind and solar renewable energy capacities have gone up significantly, as have some small hydro-electric projects. Governments incur subsidy expenditure in promoting renewable energy, but regulators have failed to enforce renewable energy obligations, resulting in a loss of revenue for the generators of clean power. State power distribution companies have not been compelled to meet renewable energy obligations in their total power supply mix.

Progress has been made on energy efficiency. The distribution of LED light bulbs has helped conserve a significant amount of power, as have other measures initiated by the Bureau of Energy Efficiency. This may well have resulted in some decline in demand for generated electricity.

UDAY Scheme: A Stop-Gap Fix

The power sector benefited from the Ujwal DISCOM Assurance Yojana (UDAY) scheme, which reduced debt on the books of state distribution companies by getting the corresponding state government to take over the debt. This, however, has not made any of the distribution companies profitable, but the saving in interest costs has freed some cash.

The UDAY scheme is the best that the Centre can do since electricity is a concurrent subject in the Constitution.

The scheme needs to be seen, not as a solution, but as short-term relief. Power distribution is a state subject, and ruling parties are populist about electricity pricing as they are able to woo large electoral voting blocs.

This is made possible via the appointment of state regulators who are mostly compliant, often from the community of retired bureaucrats who have served in the same state. Until regulators are appointed for their independence, courage, and lack of subservience to ruling governments, there can be little change in the dire financial position of power distribution companies.

It is apparent that fundamental change still eludes the power sector.

UDAY is merely transferring some distribution debt to state governments. It does not tackle the problem of below-cost tariffs and significant inefficiency caused by government ownership.

The only way state governments can indefinitely continue taking on power distribution debt as it accumulates, is via the annual budgetary exercise. But doing so will divert funds from vital state spending – on human capital, law and order, and the building of infrastructure.

There is no option but to charge users a tariff that is remunerative to the company.

Regulate Well, Build Capacity, Store Better

Regulators must have the authority to punish those responsible for below-cost tariffs, and delays in Aggregate Revenue Requirement filings. Transmission and distribution losses, poor collection, and theft of electricity must be targeted, monitored and failures severely penalised.

Interstate and intrastate transmission capacities are grossly inadequate. Governments are the primary investors in this space, more so because private investors are put off by long and frequent government delays, and the consequent costs.

Delays in giving government clearances on land, environment, forest and others have held up many a project, keeping out subsequent private investment.

While India is taking rapid strides in renewable energy, and there are heavy government subsidies involved, there is little investment in backup storage capacity to make up for a shortfall when there is no sun or little wind.

This storage can be of water, batteries or as flexible generation capacities in gas or coal.

In sum, the energy and especially the power sector in India has experienced an uncoordinated set of policies that have left this vital sector largely in government hands and running at a loss. Foreign investment is most unlikely in such a sector. The domestic investment that has taken place is not very profitable. Their supply is either confined to large users or use other means to cover costs.

Huge investment has been made in the power sector, but it needs more. The present surplus is artificial and not due to demand satisfaction, as much as to poor revenues. The energy sector must be approached in its entirety, policies must be integrated for the private as well as public sector to run it in a way that is remunerative.

SL Rao is a Distinguished Fellow Emeritus at The Energy and Resources Institute (TERI), and was the first chairman of the Central Electricity Regulatory Commission.

(This article was originally published in BloombergQuint.)

 

View original Post on: https://www.thequint.com/environment/2017/04/03/energy-sector-transformation-renewable

Infrastructure: As far as private power producers are concerned, no light at the end of the tunnel

With around 45,000 MW of power capacity running at sub-60% Plant Load Factor (PLF), servicing their staggering debt of `1.9 trn has become a challenge for India’s thermal power producers.

With around 45,000 MW of power capacity running at sub-60% Plant Load Factor (PLF), servicing their staggering debt of `1.9 trn has become a challenge for India’s thermal power producers. To make matters worse, state discoms have been unwilling to sign power purchase agreements (PPAs) with private producers, opting for central and state power utilities instead. The PLF of the private sector’s coal-based plants fell to 56.45% in the ten months to January 2017 from 83.9% in FY10, as per data available with the Central Electricity Authority. The figure stood at 62.60% in January 2016.

The authority estimates that another 50,000 MW capacity would get commissioned over the FY18-22 period. The central and state utilities would account for 50% of this capacity and the private sector for 40%. Unfortunately, things are unlikely to get any better in the near future. “As the short-term power prices are likely to remain benign and discoms are unwilling to sign PPAs, capacities are unlikely to see an increase in PLF going forward,” Salil Garg, Director Corporate at India Ratings, says.

An analysis of the financials of power producers like GMR Infrastructure, GVK Power & Infrastructure, Lanco Infratech, KSK Energy, and Jindal India Power Ltd reveals the state of affairs as far as private power producers are concerned. GMR Infrastructure suffered a loss of `381 crore in the third quarter of FY17 compared with a profit of `40 crore a year ago. Two of its coal-based power plants—GMR Warora Energy Venture Ltd and GMR Kamalanga Energy Ltd—registered an accumulated loss of `3,022 crore as of December 31, 2016. GMR Chhattisgarh Energy, another subsidiary, saw lenders taking control of the project in February by converting `2,992 crore of the `8,800 crore debt into equity.

Lanco Infratech, an infrastructure-cum-power company, incurred a loss of `813 crore for the third quarter ended Dec 31 compared with a profit of `35.19 crore a year ago. The earnings before interest and tax (EBIT) for its power segment dropped 47.24% to `232.10 crore and the revenues fell around 20% to `1,190 crore. The company is looking at options to sell its operational assets. As for GVK Power & Infrastructure, it incurred a net loss of `71 lakh in Q3, compared to a loss of `6.80 crore a year ago. For its single coal-based power plant in the Taran Taran district of Punjab, the company is facing fuel supply issues.

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Another Hyderabad-based power producer, KSK Energy Ltd, saw its losses growing to `17 crore in the third quarter from `14 crore a year ago. The company is believed to be in talks with lenders to refinance its Mahanadi project debt—`11,691 crore of the total `19,000 crore—under the 5/25 scheme of the Reserve Bank of India.

The fall in tariffs in solar and wind segments has compounded problems for thermal power producers. “The drop in tariff for solar projects to `2.97 per unit in the latest bidding in Madhya Pradesh and the levellised tariff of `3.34 per unit would be an additional burden for conventional power generators, as their cost of production has gone up due to cost overruns on fuel supply and environmental clearances,” an analyst with a Mumbai-based foreign brokerage says. The renewable segment is likely to see consolidation going ahead as the government’s target of attaining 175,000 MW of renewable energy capacity by 2022 approaches closer, he adds. As much as 15,000 MW of solar and 9,000 MW of wind capacity creation is likely to be targetted in the new financial year (FY18).

 

View original post on Financial Express: http://www.financialexpress.com/industry/infrastructure-as-far-as-private-power-producers-are-concerned-no-light-at-the-end-of-the-tunnel/612437/

The truth behind India’s electricity exporter status

India’s per capita electricity consumption is one-fifth of the global average

 

India’s efforts to sell electricity to its eastern neighbours might bring strategic and diplomatic benefits and also open new frontiers for exploring electricity generation opportunities in the region. Photo: Mint

 

The ministry of power last week claimed that India had become an electricity exporter for the first time.

“As per Central Electricity Authority (CEA), the designated authority of government of India for cross border trade of electricity, first time India has turned around from a net importer of electricity to net exporter of electricity,” the ministry said in a statement, adding that upcoming cross-border transmission lines with Nepal, Bangladesh and Myanmar will continue to increase sales.

India exported around 5798 million units of electricity to Nepal, Bangladesh and Myanmar, which is 213 million units more than the import of 5,585 million units from Bhutan during the April-February period in fiscal year 2016-17. Exports to Nepal and Bangladesh increased 2.5 and 2.8 times, respectively, in the last three years.

Does India’s status as an electricity exporter mean that it has started producing surplus electricity?

The reality is a large number of India’s households are still living without electricity. Available government data shows there is a discrepancy in the percentage of villages electrified as against the share of rural households electrified. The former set of figures is often cited to portray India’s electrification challenge as an already accomplished one.

What explains the wide gap between the share of electrified households and villages? According to the Deen Dayal Upadhyaya Gram Jyoti Yojana website, a village is deemed electrified if basic infrastructure such as distribution transformer and distribution lines are provided in the inhabited locality as well as the Dalit Basti hamlet (where it exists), and electricity is provided in public places like schools, panchayat office and health centres. Here’s another interesting thing. For a village to be considered electrified, at least 10% of total households have to be electrified. But the actual supply of electricity is not mentioned in the definition of electrification.

Such a definition means that village electrification numbers have little bearing on the supply of electricity in reality. Data from 2011 census shows that almost one-third of the households in the country were dependent on kerosene as a source of lighting, with the situation being worse for rural households. This is even as over 84% of villages had been electrified in 2011-12, as per data with the Centre for Monitoring Indian Economy (CMIE).

International comparison also underlines the fact that Indians consume much less electricity in comparison to their peers. The ratio of domestic and world electricity consumption (per capita) was broadly similar in India and China in 1990. Latest data shows that China has surpassed the global average in terms of power consumption, whereas India is still stuck at its pre-reform relative electricity consumption levels. In 1990, India reported 273 kilowatt hour (kWh) of electric power consumption, as against 511 kWh in China and 2,120 kWh in the world. In 2013, these figures were 765 kWh, 3762 kWh and 3104 kWh, respectively, as per World Bank data.

India’s efforts to sell electricity to its eastern neighbours might bring strategic and diplomatic benefits and also open new frontiers for exploring electricity generation opportunities in the region. Such developments, however, should not make us oblivious to the fact that a large majority of Indians are still living in darkness in villages which have been declared electrified on paper.

 

View original post on: http://www.livemint.com/Industry/K0WPSj0piCnJZNVkw3JWrL/The-truth-behind-Indias-electricity-exporter-status.html

Wind power bids seem unrealistic

To operate at a tariff of, say, ₹3.50 a unit, projects need to achieve a plant load factor of 35 per cent, which is a tall order

The recent bid by the Solar Energy Corporation of India (SECI) to set up 1000 MW wind power plants saw tariffs drop to ₹3.46 per unit. This has set a new benchmark for wind power in India, bringing the overall cost of power down in a rapidly growing economy.

Despite being India’s first wind power project tender, SECI was oversubscribed 2.6 times. Bids were concentrated in three States; with Tamil Nadu receiving the highest share of 1794 MW, followed by Gujarat with 700 MW and Karnataka with 100 MW.

The tender was floated by the SECI to help non-windy States access wind power by linking them to the inter-state transmission system. Project developers will sign a 25-year PPA with the Power Trading Corporation of India, which, in turn, shall sign back-to-back arrangements with discoms /bulk customers of non-windy States. Waiver of inter-State transmission charges and compensation for system losses till the interconnection point by allowing for construction of 5 per cent additional capacity were also provided as part of the tender.

Until now, wind energy in India followed the feed-in-tariff (FIT) route with tariffs for long-term PPAs with State discoms ranging from ₹4- 6 per unit. With the SECI tender mitigating key risks of off-take, evacuation and payment and going by the recent solar bidding process which witnessed tariffs fall below the ₹3 mark, the level of interest observed shouldn’t come as a surprise.

But, having lived through a situation where aggressive bidding in infrastructure projects has not worked in the industry’s favour, it does make us wonder about the strength of the underlying assumptions made in these bids.

A basic number crunching carried out with a tariff of ₹3.46 per unit at prevalent industry conditions – Central Electricity Regulatory Commission (CERC) estimated project cost of about ₹6.2 crore per MW, debt to equity of 70:30, financing at 9.5-10 per cent – indicates that Plant Load Factors (PLFs) of about 33-35 per cent may be required to fetch investors reasonable returns of 15-16 per cent.

Standing on shaky ground

Going by the historically available PLF data of wind power plants in India and limited availability of high wind density sites, achieving such PLFs consistently for the 25-year life of the plant seems far-fetched. Unlike solar energy, wind farms in India are concentrated in a few high wind States such as Tamil Nadu, Maharashtra, Karnataka, Andhra Pradesh, Gujarat and Rajasthan. Even within these States, only selective sites offer high wind energy potential.

The Indian market is moving towards adopting higher capacity wind energy generators (WTGs) with hub height of more than 100 metres. Global players such as GE have come out with advanced technology turbines designed to offer increased swept area, facilitating higher generation in low wind density sites. While this will improve the project economics for developers, implementation remains largely untested.

Alternatively, lower PLFs need to be compensated by either cutting down the project cost substantially, or by obtaining best deals for operation and maintenance (O&M) of the wind turbines, or by locking-in low cost funds, most often a combination of all of these. Clearly, higher capacity wind turbines are going to come at a cost and there are limitations to the concessions that can be obtained from O&M players.

Despite the interest rate cuts and falling MCLRs of banks, securing low cost funding in today’s market will largely depend on promoter strength and credit rating. Without a substantial database of PLFs of 35 per cent available in India today and given the first time deployment of next generation wind turbines, lenders, having burnt their fingers more than once, might choose to play it safe this time around.

Solar was a different story

Unlike Ultra Mega Solar Parks (UMSP), for the SECI wind projects, project land and evacuation infrastructure up to the point of interconnection at the ISTS need to be put up by the developers. In India, these things come at a cost. Right or wrong, these unstated costs need to be factored in the project cost estimates.

Further, the drop in prices of WTGs has been very different from what has been seen in solar power. Since 2009, solar PV module prices have fallen by 80 per cent as compared to a 30-40 per cent fall in wind turbine prices. Solar module costs fell by about 26 per cent in 2016 alone and are likely to fall further this year, due to oversupply in the Chinese and European markets. Considering the low lead time in procuring solar panels and low time required for commissioning, the bidders for Rewa UMSP would have had sufficient buffer to factor in another round of drop in solar module prices.

No such cushion is available for wind. Bidders would have had to rely upon pre-bid tie ups with WTG manufacturers to work out their project cost estimates. In a way, the aggressive bidding would have trickled backwards and caused a fair share of competition among turbine manufacturers.

More uncertainties loom

From April 1, 2017, the tax relaxation for infrastructure projects under 80IA shall cease. Further, wind power plants commissioned after this financial year will not be eligible for generation based incentives. Accelerated depreciation will reduce from 80 per cent to 40 per cent.

Also, the cloud of uncertainties that the implementation of GST poses needs to be factored for any reasonable viability assessment. Most wind turbines are domestically made. Currently, there is no excise duty to be paid for WTGs and renewable energy components attract a VAT of 0-5 per cent in most States. According to a report published by the Ministry of New and Renewable Energy, GST is likely to cause an increase of 11-15 per cent in project cost of wind power projects.

One can only hope that all these risks were adequately factored by the bidders. This kind of aggressive bidding is not new to us. Starting from BoT road projects awarded a decade back, to coal mining, telecom spectrum and more recently, solar power and hybrid annuity model (HAM) projects in the road sector, this issue has been ingrained in the system.

While it is good to see such investor interest in India’s infrastructure space, it is absolutely essential to tread carefully. Let us not forget all the BoT projects which became distressed assets in the books of lenders due to optimistic traffic projections or higher revenue shares promised during a competitive bidding war.

View original post on Hindu Business Line: http://www.thehindubusinessline.com/opinion/wind-power-bids-in-india-are-unrealistic/article9618027.ece

New material may double solar cell efficiency

Washington, Apr 9 (PTI) In a breakthrough, scientists have identified a new crystalline material that could replace silicon and double the efficiency of solar cells without a significant cost increase.

Conventional solar cells are at most one-third efficient, a limit known to scientists as the Shockley-Queisser Limit.

The new material, a crystalline structure that contains both inorganic materials (iodine and lead) and an organic material (methyl-ammonium), boosts the efficiency so that it can carry two-thirds of the energy from light without losing as much energy to heat.

This material identified by researchers at Purdue University and the National Renewable Energy Laboratory in the US could double the amount of electricity produced without a significant cost increase.

Enough solar energy reaches the Earth to supply all of the planets energy needs multiple times over, but capturing that energy has been difficult ? as of 2013, only about one per cent of the worlds grid electricity was produced from solar panels.

Libai Huang, assistant professor of chemistry at Purdue, said the new material, called a hybrid perovskites, would create solar cells thinner than conventional silicon solar cells, and is also flexible, cheap and easy to make.

The most common solar cells use silicon as a semiconductor, which can transmit only one-third of the energy because of the band gap, which is the amount of energy needed to boost an electron from a bound state to a conducting state, in which the electrons are able to move, creating electricity.

Incoming photons can have more energy than the band gap, and for a very short time ? so short it is difficult to imagine ? the electrons exist with extra energy.

These electrons are called “hot carriers,” and in silicon they exist for only one picosecond (which is 10-12 seconds) and only travel a maximum distance of 10 nanometres.

At this point the hot carrier electrons give up their energy as heat. This is one of the main reasons for the inefficiency of solar cells.

Huang and her colleagues have developed a new technique that can track the range of the motion and the speed of the hot carriers by using fast lasers and microscopes.

“The distance hot carriers need to migrate is at least the thickness of a solar cell, or about 200 nanometres, which this new perovskite material can achieve,” Huang said.

“Also these carriers can live for about 100 picoseconds, two orders of magnitude longer than silicon,” he said.

Kai Zhu, senior scientist at the National Renewable Energy Laboratory in Colorado, said that these are critical factors for creating a commercial hot-carrier solar cell.

“This study demonstrated that hot carriers in a standard polycrystalline perovskite thin film can travel for a distance that is similar to or longer than the film thickness required to build an efficient perovskite solar cell,” he said.

“This indicates that the potential for developing hot carrier perovskite solar cell is good,” Zhu added.

The research was published in the journal Science.

 

View original post on India Today: http://indiatoday.intoday.in/

The UK’s electrical grid is so overrun with renewable power, it may pay wind farms to stop producing it

Generating electricity from the sun and wind is great for the planet, but the infrastructure necessary to deal with these intermittent power sources is tricky. Too much or too little power can upset the balance of the grid, which has to be finely tuned to keep the voltage of the electricity it delivers to customers stable.

Without a means of storing renewable energy or handling huge variations in production, too much electricity surging into the grid can damage appliances or even cause outages. This is the problem that the UK may face this summer, the country’s grid operator says. When electricity demand naturally falls during the summer months, it is thinking about paying wind farms to stop generating so much power.

For the past few years, the UK has been ramping up renewable-energy production—especially wind power—in order to reduce its carbon emissions. Government subsidies have also encouraged homes and businesses to install rooftop solar panels, which can bypass the grid altogether.

Meanwhile, National Grid, which manages the UK’s electricity network, has been trying to update its aging infrastructure. Ofgem, the UK’s energy regulator, estimates that payments to balance electricity generation when it gets out of whack—either too much or too little to meet demand, from both renewable and (mostly) fossil-fuel generators—ran to about £354 million ($540 million) in 2015, or less than 1% of energy bills.

This summer, National Grid estimates that maximum and minimum energy demand from utilities is likely to fall to an all-time low (paywall). Peak demand is predicted to be 35.7 gigawatts, compared with 37.5 gigawatts in 2015, and minimum demand to be 18.1 gigawatts, compared with 18.4 gigawatts in 2015.

The UK’s electricity consumption has been falling in recent years. Some of the decline was down to the financial crisis, in addition to increased energy efficiency at homes and businesses, according to a National Grid spokesman.

Reduced energy demand and more prevalent renewable power is a good combination for the climate, but a headache for grid operators. These staid businesses are scrambling to balance their grids in response to a rapid energy transition. In the meantime, they may have to keep paying some power plants for, in effect, not doing their job.

 

View original post on: https://qz.com/952827/the-uks-electrical-grid-is-so-overrun-with-renewable-power-it-may-pay-wind-farms-to-stop-producing-it/