Transition to Renewables: Key milestones and challenges in the evolving power scenario

Key milestones and challenges in the evolving power scenario

The power sector in India is undergoing a phase of transition from being fossil fuel-dominant to an increasing share of renewables. The government has taken a number of measures to enable this transition. At the recent POWER-GEN India and Central Asia 2017 conference, sector experts shared their views on India’s transforming power system. The speakers included K.M. Singh, chairman and managing director (CMD), NHPC Limited; Atul Sobti, CMD, Bharat Heavy Electricals Limited (BHEL); K.S. Popli, CMD, Indian Renewable Energy Development Agency; Rajkumar Roy, director, Lanco Infratech Limited and president (head)-Lanco Solar; and Gerd Deusser, vice-president (India), power and gas, Siemens Limited. Excerpts from the discussion…

K.M. Singh

The government is targeting an economic growth rate of over 8 per cent, which requires a growth rate of 10 per cent or more in electricity generation. The power sector must make all possible efforts to achieve its projected rate of growth. In 2030, India’s power demand will be more than twice as much as it is today. This needs immediate attention to ensure energy security of the country.

Further, India is committed to playing a key role in climate change mitigation. Accordingly, in its intended nationally determined contribution at the Conference of the Parties (COP21) in Paris, India stated that 40 per cent of the cumulative installed power capacity would be generated from non-fossil fuel-based energy resources by 2030, with the help of transfer of technology and low-cost international finance. India further expressed its intent to lower the emission intensity of its GDP by 33-35 per cent by 2030 over the 2005 levels. As per the action plan, 175 GW of energy is projected to be produced through renewable sources by 2022.

Hydropower is one of the most environmentally benign and economically viable options. It has negligible greenhouse gas emissions compared to other conventional modes of power generation. However, hydropower has not been given its proper share in the projections, as only hydro projects of less than 25 MW are considered renewable. The largest producers of hydro worldwide like Norway, Sweden, China and Russia consider hydropower as a renewable source of energy. However, in India, hydro projects of more than 25 MW are not considered renewable energy sources.

Even with solar and wind, adequate spinning reserves will be required to ensure grid stability. The possible options for spinning reserves are hydropower projects, including pumped storage ones, and gas-based power projects. However, as gas reserves are limited and have a competing demand from other sectors, development of hydropower projects needs to be vigorously pursued.

India has a vast hydro potential of 148 GW, of which only 30 per cent has been harnessed so far. Realising the importance of hydropower in the overall energy mix, the government has formulated a scheme to revive this sector in order to provide a clean and sustainable source of power. Some of the main features of this scheme are the implementation of all hydro projects as renewable energy, introduction of a hydropower purchase obligation, provision of subsidy on interests and assistance through long-term viability gap funding (VGF) as well as rationalisation of tariffs.

We also need to consider a hybrid model, mainly consisting of micro and mini hydro projects with wind and solar projects, as may be suitable for the location, given that there are still many areas that are yet to be connected to the grid.

It is desirable to identify the policy steps needed at the planning stage itself so as to accelerate development in the power sector. Development activities cannot be viewed in isolation, as they call for a greater empathy towards issues related to the conservation of natural resources and public concern. Public participation in development activities is important not only because it gives people a sense of ownership and accountability. There is a need for a policy focus on more sustainable harnessing of resources. It is now essential that the public, industries and policymakers understand, prioritise and act.

Atul Sobti

The power sector is experiencing an evolution across four major areas – generation, transmission, distribution and consumption. On the generation side, a lot of capacity has been added in the recent past, including renewables. On the transmission side, the establishment of green energy corridors and the enhancement of transmission capacity through high-voltage direct current projects has been seen. In the distribution segment, with the introduction of the Ujwal Discom Assurance Yojana (UDAY), the discoms should have greater disposable income in their hands, which will definitely revive this segment. On the consumption side, a lot of effort has been made to reduce energy consumption through the introduction of low-cost, energy-efficient LED lights. Thus, there are disruptions that are taking place in the power sector and these are likely to increase in the future.

There have been changes on the supply side as well. A few years back, there were peak shortages of around 13-14 per cent. These have now come down to 1-2 per cent. Further, in the conventional power generation segment alone, we have added nearly 100 GW of capacity in the past five years, which is equivalent to the capacity added in the previous 15 years put together.

Another key issue in the past few years was the shortage of coal supply, which impacted plant load factors as a number of power plants had just one to two days of coal stocks. However, now coal is available in abundance. In fact, the dependence on imported coal is going down. We are now trying to find solutions to see whether the imported coal-dependent power projects can be converted to suit domestic coal. BHEL is working with many developers in this area. Earlier, to address the issue of coal shortages, BHEL had developed fuel-flexible boilers to meet customer requirements that were suitable for 100 per cent imported coal.

On the demand side, it is expected that programmes like Make in India will positively impact power demand. A number of under-implementation schemes such as Power for All and UDAY are also expected to positively benefit the demand side.

Another key initiative of the government is the replacement of old power plants of more than 25 years with new supercritical ones. Since these plants already have land availability and fuel, they would come up a lot easier. Almost 35 GW of opportunities are expected to be available in this particular area.

In India, we are also fulfilling our energy needs taking into consideration the climate change aspects too. We are concentrating on the entire energy mix including renewables, hydro and nuclear. However, as coal is expected to continue being the backbone of catering to energy requirements, a lot of effort will have to be made to make the generation from this fuel efficient, and at the same time, lower emissions. In this regard, the significant supercritical capacity addition that the sector is expected to see in the next few years is a positive move. Efforts are also being made by BHEL in the area of development of advanced ultra supercritical technology. Further, stricter emission norms issued by the government are another critical step in this regard.

All these initiatives, taken together, are expected to lead to cleaner, more reliable and affordable power.

K.S. Popli

India is following the global trend of increasing renewable-based generation. In 2010, we started with a very small target of installing 20,000 MW of solar capacity in the country. At that time, this seemed to be a huge target and we could not envision if it would be achieved or not. We have now set a new target of 175 GW of renewable-based capacity, including 100 GW of solar.

The cost of solar power has declined by almost 80 per cent, from Rs 12 per unit in 2010 to Rs 2.44 per unit, as quoted in one of the recent bids. Now, this gives us a huge opportunity to meet our targets, to scale up capacity and ramp up our plans. It was earlier contemplated that solar tariffs would achieve grid parity by 2017-18. Today, we have not just achieved grid parity but also gone beyond that. Recent bids for solar tariffs were below the average power purchase cost. Going forward, the Central Electricity Authority (CEA) has estimated that no new thermal power plants are required till 2022. Planned renewable-based capacity additions are expected to take care of the country’s additional power needs. In agriculture, which accounts for about 20 per cent share in the total electricity consumption, there is enormous potential to use solar power to energise pumpsets. This will have a huge positive impact on the health of utilities since agricultural consumers are provided power at highly subsidised tariffs, and even for free in some states. The transportation sector is also likely to converge with the power sector, with a major influx of electric vehicles expected in the country. This is bound to happen with the lowering of solar prices. Initially, the integration of renewables should not be very challenging. Other countries have done it, and India will be able to do it too. In times of surplus generation, Germany offers free supply to neighbouring countries, but does not ramp down production and sometimes, it pays the neighbouring countries along with electricity supply because the cost of ramping down is much higher than the cost of supplying power.

Across countries, including the US, the UK, China, Japan and India, the investments in renewables have gone up. Hence, capacity addition in renewables has grown more than that in conventional power sources. Moreover, many subsidies for renewables have been phased out. We do not have any generation-based incentives now, nor do we have VGF for solar. Initially, they were economically and socially viable, but now they are financially viable too.

All these things point towards the transformation of the system. Going forward, the transformation will be more rapid. Renewables will change the way power is produced and sold in India.

Rajkumar Roy

The government is making all efforts to improve the quality of the environment in terms of emissions, while fully recognising that India, with its large size and population, will not be able to manage an environmental disaster. This means that we need to essentially keep our environment as clean as possible. Some of the targets set by the government may seem highly ambitious, perhaps even unattainable over the next few years by our own yardsticks, but looking at the progress, we can believe that these will be achieved.

If we look at the solar bids that have taken place in the recent past,, people may feel this is not feasible. But when the next bid gives a lower number, the previous one seems more feasible now than before. We need to believe in the numbers being given by the market and work towards achieving them.

The era of gold-plating of projects from the point of view of both project cost and financing cost is gone. As business players in the sector, we have to look for ways to achieve the targets. We need to be innovative in our means and technologies to reduce all the project, financing, management and operating costs involved. Lanco, as an engineering, procurement and construction (EPC) provider in the sector, is also trying to reach a cost that allows a solar plant developer a reasonable financial return at a tariff of Rs 2.44 per unit. There is no point in not believing in these numbers, for if we have to survive in this sector, we have to reach these numbers. However, with the decline in solar prices has emerged the challenge of discoms refusing to sign PPAs even at considerably low bids. They may be waiting for prices to reach the bottom, but the bottom is not known to anybody. The discoms need to honour the bids and the government needs to find a mechanism to tackle this situation.

The central government, along with the state governments, is working towards the renewables’ targets. Going ahead, the governments will have to work in a more transparent manner, especially with respect to PPAs for projects in both –the public and private sectors in order to address the areas of concern. The government is also likely to come up with several innovative schemes to manage the agreements.

A lot of energy resources that we use today are going to be replaced by renewable energy sources. This is the transition that is going to happen in the energy sector. And, when the government talks about moving to 100 per cent electric transportation, we will see this transformation happening in the next 10 to 15 years.

Gerd Deusser

I was here in India from 2006 to 2010 and now I am back and I see a huge transformation – a transition to renewable energy. Now India is focusing a lot more on renewable energy than thermal power plants. This is a step in the right direction. India has an installed capacity of 300 GW of power, of which 65 per cent is coal, but solar power is coming up in a big way here. Also, demand is going down a little bit. But when I see initiatives like 24×7 Power for All, I believe the demand will be at the level of the projected figures. So the need of the hour is to invest and go forward. But I would suggest that this is not done too fast. This comes from the experience that I have from other countries. For example, in Germany, on certain days, power is generated completely through renewables whereas on other days, renewable generation falls to 10 per cent or less. We also have the issue that renewable power in Germany is generated at a certain place, but it is loaded somewhere else. So, the movement of renewable energy through the grid is a tremendous challenge.

I believe that we need a certain energy mix. We may completely meet our needs from renewables 20-50 years from now, but till then, a diversified power mix should be used to serve people. We could look at ways to generate coal-based power in an environment-friendly manner. For fast ramp-up and ramp-down, gas-fired power plants may be deployed. There are gas issues here and we have to cope with that. Moreover, a lot can be done on the transmission and distribution front.

Also, we need to look at alternative sources of energy that take care of environmental issues as well. For instance, waste to energy is a great concept, but it is too expensive. However, the policy-makers should take into account the advantages of this technology in terms of waste disposal without land degradation.

Going forward, there are a lot of enablers on the technology, and research and development fronts. One of these is digitalisation, which is coming up in a big way. Digitalisation is expected to help in the implementation of solar power as well as smart grids through forecasting and better management.