India’s transmission and distribution utilities – It's time to transform

The need for power has seen tremendous growth in the last decade riding on the prosperity that various export oriented sectors, have heralded, in India. This economic growth has increased living standards for the common man who now demands more than just roti (food), kapda (clothing) and makkan (shelter). The burgeoning infrastructure sector’s tremendous growth in the previous decade due to the population requirements has made the Indian market amongst the most sought after.

Energy Demand Regional Breakdowns for 2008 and 2030 in Million tons of oil equivalent (Mtoe)

Amongst these influences, the need for power is recognized as a key factor enabling the sustained development of the Nation. However the gap between demand and supply has been ever increasing with no signs of abating. India’s growth story increasingly asks more of all, with the private sector energy generators consistently working on improving efficiencies along with methods of delivery. Inept state owned generation and distribution utilities continue to bleed under the guise of inefficiency, lack of accountability, subsidies and political promises. In addition, some distribution utilities actively block open access to prevent industries from moving over to more efficient and cost effective forms of energy and frequently, are at loggerheads with the energy regulator.

For every 3 KWh units of power generated most if not all state owned distribution utilities lose more than 1 KWh on Transmission and Distribution losses while the world average is much below 10%. Our nation faces the ignominious reality of having one of the planet’s most inefficient power infrastructure, with the largest number of energy deprived households and an economy deprived of consistent, clean power to sustain economic growth.

Indian Power Generation

India has a current installed power generation capacity of 180 GW+ which translates into a loss of more than 60 GW worth of power generation. The power generation for the last fiscal was 811 Billion KWh Units as against a target of 830 BU an on paper shortfall of 2%, whereas realistically it’s much more, as Distribution Utilities (discoms) don’t purchase power off power exchanges especially during peak periods and resort to alternate control techniques i.e. Load shedding. Recently generation companies are facing difficulties on imported coal and are alternatively pressurizing discoms into paying more for already signed power.

Some simple maths: A third of India’s currently operational 181 GW of power plants (coal, hydro, wind, biomass….) would generate approximately 300,000,000,000 KWh units of energy annually. We are thus looking at an annual systemic loss, at an average pooled purchase cost of Rs. 2.5, of approx. Rs. 75,000 Crores ($15 Billion USD), equivalent to 3% of India’s Annual GDP - enough to feed more than 62 million poor for a year or setup 7,500 MW of Solar PV power generation plants annually (an addition of 4% of the total Indian power generation or almost 35% of the total renewable energy power generation).

Global Electricity Generation by Region (2008 and 2030)

These numbers are mind boggling and an absurd waste of precious natural resources which keep energy prices high, wastefully consume scare resources, contribute to human poverty and make grid power unviable for the lower strata of society. Compounding this, losses are increasingly being recovered from consumer’s who already pays disproportionately, infusing further inflation into the economy.

The growing need for power by 2030 is a humongous fivefold target of 0.95 TW of Power Projects from the existing 0.18 TW in less than two decades. The Indian Power Ministry had recognized this as a priority with a target of power for all by 2012 but the chances of that being met are quite slim. There has also been a thrust in the hinterland via the Rural Electrification Policy and the Rajiv Gandhi Grameen Vidhyutikaran Yojana (RGGVY) with a focus on local generation and distribution. There have been recent efforts to upgrade old low voltage transmission lines to high voltage lines with a twelfth plan budget of $85+ Billion.

Energy Consumption per Capita

Required investment in the distribution sector is estimated at a staggering Rs. 4,30,000 Crores ($86.4 billion) for the XII Plan. The amount of infrastructure that must be installed to meet the five-year plan is sizable: 2.5 million poles for 33-kV overhead lines, another 9.4 million poles for other lines rated above 11 kV, and 20 million poles for low-tension lines. More than 50 million service connections would need to be added. 33-kV lines a planned total of 180,000 circuit kilometers (ckm), 11-kV lines 750,000 ckm, and low-tension lines 800,000 ckm. Investment into power in various stages of the supply chain will account for 45% of the Indian budget allocation for the five year plan from 2012-2017.

With a view to achieve sustained Aggregate Technical & Commercial (AT&C) loss reduction, the Centre initiated the Accelerated Power Development & Reforms Programme (APDRP) in the 10th Plan and launched Restructured Accelerated Power Development & Reforms Programme (R-APDRP) in July, 2008 in the 11th Plan. Under the first part (Part-A) of R-APDRP, almost 1400 projects and 42 projects for Supervisory Control and Data Acquisition System (SCADA), and under the second part (Part-B), almost 907 projects were sanctioned. The reported national average of Aggregate Technical & Commercial (AT&C) losses reduced from 36.64% in 2002-03 to almost 27.15% in 2009-10 though these numbers are contradicted by a number of agencies. In comparison South Korea has a T&D loss of only 3.5%.....

Reduced losses are easily achievable by a revamp in infrastructure, movement of transmission lines to higher voltages and increased accountability of the utilities. However the industry, political and entrenched government establishments aren’t in sync on the intricacies. Energy is also wasted on the power exchanges daily, as distribution companies refuse to buy power at market price while they prefer to subject consumers to load shedding claiming increased cost.

There are dialogues of improving this but very little has translated to reality, with further hikes proposed by discom utilities to “at least recover average cost of power” from consumers in effect penalizing consumers for its shortcomings. This results in further burden on the common man already under the tremendous pressure of runaway inflation.

The current five year plan 2007 – 2012 envisaged an addition target of 1,00,000 MW but less than 70,000 MW has been achieved to date. The new plan 2012 – 2017 has increased focus on localized renewables and off grid energy as an increasingly important component on energy distribution but will it deliver, only time will tell.

The question that emerges - is the power grid an only source? or should off grid solutions be given more emphasis. Currently all renewable energy power producers are impacted by these numbers as they would be better compensated by an efficient network and consumer’s would benefit from reduced price as well as environmentally friendly power.

Generation numbers are also (mis)quoted by various power producers wanting to fuel their need for growth with a focus on the insufficiencies of power for industrial and national growth, rather than the efficient use and saving technologies, which is the need of the hour. The government has recognized the need for more immediate focus on reduction in losses than generation and is in the process of replacing old energy consumption technologies with newer efficient ones albeit at its own pace.

The immediate focus on more power should be tempered with an increased focus on the efficient use, implementation of energy saving equipment and proper transmission of power. Coal is now a scare commodity and multiple GW’s of proposed power plants are being abandoned, similarly Natural Gas and other fossil based fuel sources. A sub 10% loss in transmission and distribution with a further increase in use of efficient technology at the consumer levels should make available for use almost 20000 Crore units of unutilized power which would tide over the current power deficit and sustain economic growth for at least next 3 years.

Some immediate solutions to resolve this impending implosion though a bitter pill but necessary are:

1. Privatize, Privatize, Privatize……
2. Decentralize power generation and consumption
3. Promote power saving and efficient technologies to the hilt
4. Ensure recover of dues aren’t tied to political agendas
5. Large consumers of power should be audited regularly and wasteful use penalized
6. Mandate LEED certifications for all commercial premises including already built ones
7. Allocate coal and gas to only those plants which are in the mid-high efficiency bracket
8. Promote off grid solutions aggressively for lighting, agriculture, heating, cooling based - on solar, wind, biomass combined with energy storage
9. Include the availability of capital subsidies of more than 50% in special cases which is currently varied and tops off at 30%
10. Introduce an interactive grid at the earliest, which can source intelligently both locally as well off the national grid
11. Immediately introduce a Feed In Tariff for renewable energy installations in residential use below 50 KW size with increased pay out rates for scheduled peak hour grid infusion
12. Immediately upgrade old transmission lines and equipment at key locations, reduce burnouts
13. Plan for growth with actionable items if certain thresholds are met in power generation and consumption
14. Use penalties created using REC as well as those funds recovered based on generation and distribution utilities inefficiencies to subsidize local generation
15. Increase the capital subsidy KW scale for solar, biomass while keeping the power purchase rates down by levying a carbon cess on all power generated using non-renewables
16. Introduce a green charge per unit of power consumed by Industries and Commercial establishment
17. Mandate the immediate use of 10-20% green energy sources for Industrial and Commercial with lucrative incentives for achieving higher use
18. Strictly regulate carbon emitters and introduce an exponential carbon tax for regular defaulters
19. Privatize power distribution, especially those with more than 15% annual losses
20. Act on distribution utilities with AT&C losses above 10% especially those turning a blind eye to theft by incentivizing improvements and dis-incentivizing waste
21. Have state government subsidize organizations that provide power based on off grid models in their areas based on savings rendered
22. Mandate the use of Solar Water Heating in all residential and commercial units in all urban areas, new and existing.

We are the cusp of a large number of discoms being declared bankrupt due to short term strategy and thinking and unless drastic measures are undertaken, dependable power will become a luxury instead of a necessity.

The way ahead is also more dependent on unscheduled renewables but their current generation capability is a fifth of a similar sized power plant coupled with higher capital costs. Focus on grid connected and off grid 24 hour alternate power technologies like fuel cells, geothermal, biomass, etc has to ramp up significantly in this decade if we are to meet our growth targets.

For now, our energy future is bleak but it’s renewables………

Editor's Note: Ritesh Pothan leads an advisory organization focused on renewable energy projects and also runs two of the largest renewable energy forums on linkedin.com dedicated to the Indian subcontinent.

You can reach him at ritesh@natgrp.net and the forums at Renewable Energy and Cleantech Forum - India as well as Solar Energy Professionals - India.