By Dr Gaurav Bhatiani, Director, Energy and Environment, RTI International India
South Asia is home to a quarter of the world’s population, with a demographic exceeding 2 billion. Over the past decade, most countries in the region have made steady progress in improving energy access. As a result, electricity is now available to over 90 per cent of the population. However, the quality of electricity supply remains an ongoing concern. According to an Electric Insights report, most countries have frequent and recurring interruptions, with poor and dilapidated networks often being the cause.
Policymakers, regulators and utilities are aware of these network challenges. Therefore, policy and programmatic support is available. However, most utilities across the region are constrained due to poor finances, the lack of technical capability and administrative bottlenecks. As a result, many customers rely on captive or self-generation, typically based on diesel.
Ongoing network challenges present an interesting opportunity for the region to accelerate clean energy transition by expediting the deployment of decentralised renewable energy, based on local resource availability. Solar energy is abundant across the region. India alone has deployments of utility-scale projects; however, the deployment of decentralised solar has lagged across the region, including in India. This raises the question, what are the key challenges and how can they be overcome?
There are five common barriers, though their precise nature and intensity vary across the region. First, utilities are reluctant to allow or enable embedded generation, given the poor state of networks. Second, enabling regulations are often not in place or are very restrictive. Third, financing decentralised projects is challenging. Fourth, the market is dominated by small, unorganised suppliers. Last but not the least, the limited availability and quality of data constrain the realisation of market potential. We will look at potential solutions for each of these.
There is a lack of technical and commercial understanding about the potential and benefits of decentralised energy sources. The majority of utility managers and engineers are ingrained into the economies of scale of large projects. Utilities often have dedicated departments with managers trained in commercial aspects such as bidding, negotiation, and transactions with IPPs. Decentralised projects, on the other hand, require interaction, support, and cooperation among last-mile engineers, who are neither trained nor have the time to understand a very different function compared to the one they were initially recruited for.
Therefore, scaling decentralised energy generation will require a new mindset, which can be achieved by establishing a dedicated decentralised renewable energy (DRE) unit at the subdivision or division level. Such a unit will typically include technical, commercial and customer service staff. They will have a focused mandate to expand DRE within their respective jurisdictions and work in collaboration with various stakeholders.
We do not advocate for large units with their associated bureaucracy. It requires a small, motivated team dedicated to creating an enabling ecosystem at the local level by involving stakeholders, such as renewable energy services companies and local entrepreneurs who can be trained to undertake construction, operations and maintenance of such projects.
Simultaneously, initiating educational and awareness programmes for other departments, particularly for those involved in network planning and operation, will create a better, enabling environment. It is also important to provide network engineers with the tools to scientifically estimate the impact of incremental capacity at the tail end of the network. Further, it is crucial to evaluate the relative cost-benefits of adding capacity through decentralised generation compared to large utility-scale plants.
Decentralised generation sources offer several advantages. Given the relatively high level of transmission and distribution losses in most of the South Asian countries, decentralised generation enables significant savings. Further, strengthening the network generally costs half or less compared to expanding it with new capacity.
Decentralised sources with storage can also enable and accelerate the adoption of electric vehicles, which many countries in the region are keen to adopt. Therefore, scaling DRE will require rethinking of power distribution. The technological convergence of power, transport, and smart technologies makes it technically attractive and economically feasible, yet many utilities remain unaware or uninterested.
A key enabler of DRE is supportive regulation. There is a need to develop and implement enabling frameworks and regulations to encourage its uptake. Such regulations are required not only in the electricity sector but also in urban planning. This is because cities need to take the lead in achieving national net-zero targets.
The promotion and incentivisation of decentralised clean energy options should be a key element of the net-zero goal. Built-up areas need to be designed to maximise “face-time” with the trajectory of the sun, enabling cities to generate solar energy more efficiently. Alternatively, locations with high wind velocity could be utilised for wind power generation, rather than for building office blocks. Assessing the social, economic and environmental costs of city expansion should be a critical task before deciding to build or extend urban habitats. Currently, the mandate for rooftop solar in most cities is limited to new buildings with large plots. These thresholds need to be expanded by establishing by-laws.
International evidence suggests that financial constraints are a major obstruction for private players in adopting rooftop solar. Given the scale of the clean energy transition as well as the associated investment in climate adaptation and resilience, we believe that countries in the South Asian region should establish a green bank that is focused on mobilising and directing climate finance. This strategic initiative will not be exclusively for DRE but enable large investments in climate-friendly projects. It will also assist policymakers and regulators by providing real-life evidence and policy advisory.
There are multiple global precedents, including several regional green banks in the US. Likewise, Australia, Malaysia and the UK have created specialised corporations and banks to direct investments in green infrastructure. A dedicated institution will bring the required focus.
Further, a green bank can stimulate the DRE market through innovative financial products and by encouraging the market to evolve through various aggregation methods. For example, fiscal and policy incentives can promote the establishment of renewable energy service companies or project aggregation through real estate developers.
The size of the market is a barrier that may dissuade larger organised players from entering the rooftop solar space. This can be overcome through various measures. First, supportive policies and regulations should be prioritised within the sector, in order to ease market entry. Second, progressive utilities can perform due diligence and develop partnerships or certified suppliers lists. Finally, financial institutions and banks can partner with suppliers, in a manner similar to collaborations in real estate projects. The availability of high quality suppliers with healthy competition can drive the market through product and service innovation.
Most utilities and urban local bodies lack the relevant data to make informed techno-commercial decisions. This includes information such as asset maps, radiation or wind intensity, and customer locations. Since data is crucial for business and investments, many projects fail to take off. Therefore, it is important to consider the development of dedicated data repositories based on physical, satellite and drone-based surveys for accelerating DRE.
Most countries have extensive experience in conducting periodic surveys. More importantly, since data is increasingly valuable for multiple applications, the private sector is willing to invest in collecting, managing and analysing data. Data monetisation can be a win-win strategy for utilities and urban local bodies through public-private partnership models. Data can also enable the digitalisation of the network and customer assets, thereby improving the use case for DREs. The deployment of DREs along with smart meters also introduces new uses such as network monitoring.
DRE is an underutilised resource, particularly in South Asian cities. It offers immense possibilities, given its benefits of low costs, distributed ownership, enhanced reliability, and improved resilience. A journey down the road less travelled will enhance livelihoods, prosperity and quality of life in the region. The gain is worth the pain. We hope that policymakers, utilities and citizens will actively collaborate towards this goal, taking a cue from Henry Ford’s quote, “If everyone is moving forward together, then success takes care of itself.”
(The views presented above are the author’s personal views.)