Why Renewable Energy Is Harder in India than in Other Countries

Challenges of Renewable Energy Sources: Global Plus India-specific

Renewables in India are different from renewables deployed in the U.S., Europe, etc. and understanding these differences is key to viable policies. The triad of “usual” challenges of renewables remains in India, such as (1) intermittency/variability; (2) location-specific potential (concentrated in areas sometimes away from consumers or the grid; and (3) higher costs. However, there are specific differences and needs that demand deeper analysis for the long-run viability of renewable energy. Making renewables viable for producers is easy pay them enough but can the rest of the system handle that? Because of pricing subsidies as well as high losses (both technical and commercial, i.e., theft), utilities already lose on average about a rupee, if not more, per kilowatt hour sold.

One of the typical calculations that power systems operators do is estimate how much renewable power the grid can handle. Typical figures from elsewhere are in the range of 20-30 percent , with more requiring significant investments in transmission or peaker plants. India is different because its grid is very weak and unstable, and instead of having a reasonable reserve margin (typically 15-20 percent in the west), there is a shortfall in the grid, officially in the range of 5 percent or so, but actually much higher. Even the Grid Code is modest, recommending (but not mandating) only a 5 percent margin.  The grid is kept afloat through massive “load-shedding” (feeder-level cutouts of supply). Such load shedding even impacts options like rooftop solar, since grid-tie inverters are designed to switch off during outages or faults, for safety reasons. But if the grid is down so much, then the economics of rooftop solar takes a massive hit due to non-supply of power.

There are other technical reasons why the Indian grid is weak, including lack of ancillary services (systems designed to keep the grid stable, instead of just pricing kilowatt-hours), and even a lack of time-of-day pricing for bulk procurement of power. There are few peaker plants (which would operate only some 5-10 percent of hours in a year), since there isn’t sufficient incentive for these. Without incentives for plants that can ramp up (or down) quickly but may not get used much, how will the grid handle 20 percent renewables? Even worse, the types of plants capable of fast ramping are limited in near-term growth in India hydropower (due to land and social/environmental challenges) and natural gas (due to supply constraints).

What Is the Problem You’re Trying to Solve with Renewables?

Germany is touted as a model for rooftop solar programs. India gets some 20+ percent more sunlight, and labor costs are lower. But that would only bring the cost of such systems down from about Rs. 20/kWh to perhaps Rs. 13/kWh, still some four times higher than the average household tariff. Much more importantly, Germany and other countries are solving an energy (kWh) problem India is still working to solve the capacity (kW) problem. Solar does not contribute in the evening, which is when India’s peak demand occurs (driven by lots of small residential and commercial users). Thus, even if India adds 20 GW of solar, it still needs 20 GW of additional capacity to meet its peak, and the picture is almost as bad for wind because of its strong seasonality.

This is also one reason why renewables aren’t a panacea for rural electrification. Beyond the issue of the evening peak, most optimal renewables (except solar) are village-scale, if not larger, not household. One still needs a last-mile connection. At that point, the grid becomes more attractive (given it reaches the vast majority of villages already), especially as demand grows rapidly once a household is electrified.

Renewables Are Vital and Worth Supporting, but Need Honest Accounting and Extensive Planning

Where are renewables headed? They will certainly grow, especially because of support mechanisms (for more background information, see my chapter on Renewables in India, commissioned for the Economist Intelligence Unit’s special report on Energy in India). The national government has immense support mechanisms, from a dedicated Ministry to various Missions and Programmes, but do consumers support renewables? Will they pay a higher price for them? Or, are they just too concerned with lack of access/supply?

There is another dimension, one that impacts policies – the role of the state-level distribution utilities (which are the real decision-makers when it comes to renewables). In almost all states, the steps utilities have taken toward renewables have been top-down imposed, whether through state policy, or regulatory requirements, or even a renewables portfolio obligation (RPO). Talking to many utilities, they ask a tough question: Why should I encourage an unpredictable and non-dispatchable source of power that costs much more than my average supply costs, but offers a Plant Load Factor (PLF, aka capacity utilization factor) close to 20 percent (coal plants easily operate at 75-80 percent PLF)? Of course, utility cost calculations are based on them having older and “cheaper” generation stations in the state, which offset the costs of more expensive “external” power (whether from Central Generation Stations like NTPC or private producers).

When we factor in the price of new generators, especially coal (which is often imported), renewables don’t look as expensive anymore. Plus, the cost of fossil fuels is only rising, not to mention subsidies or preferences given to fossil fuels, let alone costs of externalities such as pollution or even carbon. This is why, among other reasons including large scope for growth, employment, and perhaps exports, renewables should be pursued.

Recommendations

To help integrate renewables better into the grid, a few recommendations for India include:

(1)    Move toward time-of-day pricing for bulk supply, including peak pricing (this is easier than consumer time-of-day pricing, and can come first).

(2)    Enhance storage solutions and deployments.

(3)    Improve measurements, predictions, and analysis for wind and solar generation, including data sharing.

(4)    Begin ancillary services in the grid.

(5)    Deploy smart grids to make demand more dynamic and grids robust.

(6)    Improve planning and accounting for renewables (rather, all generation), factoring in their burden on the rest of the grid such as transmission congestion.

Renewables have been called the energy source of the future. With proper effort and planning, that future can start much sooner.