2018-04-16
How India can end energy poverty by 2040

What would be the energy scenario in India in, say, 25 years from now? This is an important political inquiry as the path we choose would have a pivotal role in determining the country’s economic growth, social development, and environmental sustainability. But, before gazing into the crystal ball, let’s analyze emerging trends in the sector.

The tariff of utility-connected large solar photovoltaic (PV) power projects in India has hit a record low of Rs 2.44/kWh. At this tariff, solar plants are cheaper than several new and old coal-fired power plants. In the past six years, the tariff of large solar power in India has reduced annually by 20%. Going by the global trends, it is likely to fall further. In October 2017, in Saudi Arabia, the winning bid for a 300 MW solar plant had a tariff of Rs 1.2/kWh. The International Renewable Energy Agency (IRENA) says by 2025, the global average cost of energy (LCOE) of solar PV system could fall by 59% from 2015 levels. Even if the tariff of large solar projects drops by 5% annually in India between now and 2020 (lower than IRENA’s prediction), solar plants would soon be the cheapest source of electricity during the daytime.

Wind power tariff also shows a downward trend. In the latest auction of 1,000 MW wind power, the tariff hit a record low of Rs 2.64/kWh. By 2025, the global average cost of onshore wind power is projected to fall further by a quarter from 2015 levels, making it cheaper than coal-based power. Lithium-ion battery prices have also tanked by over 70% since 2010. If this trend continues, the global average cost of electricity storage could fall further by 70-80% and reach Rs 3.0/kWh by 2025. At this cost, utility-scale electricity storage would become economically viable, and batteries could act as a large baseload power plant (which generates power to satisfy the minimum demand like coal-power plants) as well as a peaking power plant (which generally runs when there is a high demand like gas-power plants).

Considering the potential of battery storage in stabilizing the grid and providing peaking load, grid-connected battery storage projects are already being installed across the world. India’s first utility-scale storage project of 1.25 MWh was commissioned last year in Puducherry. Elon Musk’s Tesla in December 2017 commissioned world’s largest battery storage facility to provide power backup to Western Australia. The automobile industry has hitched its future to the low cost of the battery and is preparing for e-vehicles (EVs) future. Every major automobile manufacturer has EV models in the pipeline. At a time when air pollution from vehicles has emerged as a major public health concern worldwide, it is a matter of time, maybe 10-15 years, before e-vehicles become the most dominant segment in passenger vehicles.

The energy efficiency of most domestic appliances, including refrigeration and air-conditioning systems, has improved six to 10 times in the last 30 years. With the best available tech in the global market, it is possible to double the efficiency of domestic appliances available in India in five years. The energy efficiency of new buildings can also be improved manifold by making stringent green-building codes mandatory.

Induction cooking, less polluting than LPG gas stoves, is emerging as the safest, cheapest, and most efficient way of cooking. A family can cook for a day on an induction cooktop with an expenditure of Rs 20 on electricity. Induction cooking will gain widespread acceptance once electricity for all becomes a reality.

We are staring at a future in which the transition to renewable energy sources, efficient tech, and low battery-cost will alter the way we produce and consume energy. Renewable energy will be the dominant source of energy in India in the 2040s. Over 80% of the country’s installed capacity would be based on non-fossil fuels. The role of coal- and gas-based power plants would be limited to providing the balancing power to offset the variability of renewable energy. I say this because it would be expensive to set up coal-power plants post-2030. India is not likely to install any new coal power plant after 2030. The consumption of coal in the power sector is also likely to peak by 2030. As renewable energy becomes cheaper, rich domestic consumers and commercial and industrial consumers will start moving out of distribution firms, or DISCOMS. They will have their own solar and wind plants with battery storage. This will make DISCOMS, which survive on high tariff from commercial and industrial consumers, even more unviable. By 2030, there would be no rationale to have large integrated DISCOMS. DISCOMS would be unbundled into the distribution network operator (DNO), whose job would be to plan, maintain and operate the distribution network, and the supplier of electricity, which will pay DNOs for the use of infra. Consumers will have the choice of whom to buy electricity from. The grid of the 2040s would be similar to the internet of today.

Smart grids would become common and the distribution network will become bi-directional. There will be millions of prosumers (producers-consumers) producing electricity using solar rooftops and feeding the excess to the distribution grids. Virtual power firms, with no assets of their own, would come into being. They would collect power generated from individual rooftops and renewable power plants and sell to consumers. This will be the ‘Uber model’ in the electricity sector. Firms would emerge to install big utility-scale electricity storage devices and provide electricity to the grid for balancing, peaking and even base-load requirements.

Since EVs would be the biggest segment of the automobile sector, petrol pumps would be transformed into electric-power-charging firms, where batteries would get charged or swapped in less than 10 minutes. The country would have millions of solar houses generating enough electricity to meet its energy requirements, including powering vehicles. The grid would act only as a backup for the millions of consumers, who would rely largely on their own rooftops. It would also be a world of watts, not kilowatts, as highly efficient appliances would be the norm.

But what would happen to the poor—the 300 million people who currently don’t have access to electricity and the 700 million who cook using polluting fuels? Will they be able to afford this new energy infra? First, in 2040, everyone in India will have access to electricity. Second, renewables will be the cheapest source of electricity then. Third, even for the poor, the cost of energy as a proportion of their income will be lower in 2040 than it is today. Fourth, the government can continue to cross-subsidize the poor by fixing higher charges for the rich for the use of the grid and the distribution network. Last, the government can continue to provide direct subsidies to the poor for a certain minimum amount of electricity. If we add all these together, energy poverty in India would be history in 2040.

This scenario is not fantasy, it is inevitable. We are already putting in place policies, though in a fragmented manner, which will make this future a reality. The government is promoting large solar projects. A net metering policy is practically in place for solar rooftop in all states. Open access, wherein one can install a large renewable energy project at a distant place and transport electricity via the grid by paying to the transmission and distribution firms, is allowed but is being resisted by DISCOMS. The government is pushing for EVs. We have a star rating for energy efficiency in appliances and an energy efficiency building code (though both needs strengthening). We are investing in smart grids and meters. The politics of day demand that access to electricity is provided to all ASAP. If all these policies are put together, further improved and implemented, we will have a new energy infrastructure in the next 25 years. The only question is how painless this transition will be.

Source- The Financial Express