Where do we stand today ?
Energy security for India is
substantially electricity security. Except largely for domestic cooking, road
transportation, some part of industrial heating and railway traction,
electricity is urban and industrial India’s primary source of energy.
How are we ‘managing’ ?
Consumers belonging to the
commercial, industrial & urban domestic categories try to achieve on-demand
power by backing-up grid supply either with battery storage coupled with DC to AC inverters or with diesel generating sets. Rural consumers rarely have such
‘luxuries’. While diesel sets are a very expensive alternative, battery-backed DC to AC inverters are
viable only if grid non-availability is limited to just a few hours a day.
Improving the supply side
On-demand power from the grid calls
for reliability in the electricity supply and delivery industry. Supply-side
reliability could be achieved through contracted access to long-term and medium
term resources, balanced by short-term contracts to meet imbalances. Growth of long term supply sources within the
country has significantly slowed down despite substantial private sector
participation. Changing goalposts for environmental clearances, uncertain fuel
availability, weak financial position of distribution utilities (who are the
bulk buyers) and the huge uncertainties involved in competitively bid 25 year
power purchase agreements (PPAs) have made project financing very difficult.
What are we doing about energy
imports ?
Besides an increasing effort to
source electricity from neighboring countries (hydro power from Bhutan on a concrete basis and from Nepal on a rhetorical basis!), there is also effort
being made to source fuel from abroad for electricity generation (through
multiple agency uncoordinated coal imports from Indonesia, Australia &
Southern Africa and planned pipeline gas imports from Turkmenistan & Iran).
And distributed generation ?
Security of both availability &
pricing of energy is now being strengthened through development of distributed
sources of generation like solar photo-voltaic, wind, biomass and biogas. While
rooftop solar PV is picking up in India, there are new issues that have arisen
internationally due to the reduced usage of the grid-network when solar panels
generate enough power locally during the day. Arizona has already implemented an
additional user charge on consumers for grid-redundancy caused by rooftop solar
and Germany is legislating a similar charge.
Easing electricity flow across the market
Access to electricity from
non-proximate resources for bridging short-term demand-supply gaps calls for
efficient short-term access to transmission pathways, something that continues
to be very difficult. Despite legal provisions for ‘open access’ to
transmission & distribution pathways that would enable consumers to
purchase power from anywhere, regulators have tended to protect the incumbent
distribution utilities rather than the power-deprived consumer.
Balancing demand and supply
Reliability at the retail level
further entails well maintained distribution assets, including wires,
transformers, switching devices and meters. Effective balancing of demand &
supply at an optimal cost also requires an efficient commercial mechanism at
both bulk and retail levels. This will enable cost recovery and generation of
signals that can incentivise investment in fresh and/or more efficient supply
and delivery resources. Such signals can pinpoint higher demand based on
location, time of use, class of consumer, voltage level etc.
Commercializing electricity distribution
To make balancing of demand &
supply effective, it is also necessary for the retail electricity distribution
network to be modernized in its operation. While this is possible even in a
regulated cost-plus model, it has increasingly been seen in the western world
that competition amongst multiple distributors is essential. This calls for
separation of electricity distribution into two distinct businesses, one
operating the ‘wires’ or ‘carrier’ business comprising physical assets like
cables, overhead wires, transformers, switching devices & meters, and the
other operating the ‘content’ business of supplying electricity over these
wires. While ‘wires’ would be a regulated cost-plus monopoly business to avoid
asset duplication, supply of retail electricity would see multiple competing
operators based on differentiated purchase & sales strategies.
And some recent successes . . .
A partial step towards improving distribution
management, already rolled out in some cities of India, is the franchisee model
where a private party uses the government utility’s distribution assets on a
fee-based model and is further incentivised through better commercial
management and customer service. This has reduced technical & commercial
losses in many areas and reduced the disincentive to distribution entities that
are reluctant to purchase additional bulk power because more supply means more commercial
losses.
And therefore . . .
On-demand electricity and energy security therefore calls for :
- better forecasting of demand with increasing granularity, supported by commercial mechanisms that generate clear signals for investment in supply as well as delivery resources;
- putting the onus on electricity regulators to focus on not just ‘low’ tariffs but also on penalizing distribution entities for failure to supply;
- a problem-solving approach to issues that arise from the need for environment protection, rights of people affected by project development, ease of access for fuel supply and recurring challenges in long-term contracts;
- a more co-ordinated approach towards procurement of bulk electricity as well as fuel from foreign sources;
- changes in the approach to transmission planning to accommodate distributed generation;
- competition in retail supply with efficiently managed common delivery infrastructure, to incentivise better customer service on the one hand and catalyze procurement of additional long-term, medium-term and emergency supplies from bulk assets as well as from distributed generation;
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