Vandana Gombar: More than arm candy

An outspoken industry practitioner described the position of renewable energy as arm candy

Arm Candy. That is how one outspoken industry practitioner described the position that renewable energy actually enjoys in the country. We make a lot of right noises about it and boast about the fact that we are probably the only country in the world to have a separate ministry for such energy — the Ministry of New and Renewable Energy — which was set up over 15 years ago. What better way can there be to flash our green credentials to ourselves, and to the world, especially at a time when the first murmurs of disciplining emissions from India (and China) are starting to be heard from the Obama administration?

Here are two key facts about renewables in India — which includes wind, small hydro, solar and biomass — that put their significance (or insignificance) in perspective:

 

 

 

The installed capacity of renewables far exceeds nuclear energy (13,000 Mw vs 4,000 Mw); 
 

Renewables account for about 9 per cent of the total installed capacity in the country (against 3 per cent for nuclear). However, their contribution to the overall power generated in the country is a fraction of that.

The contribution of renewables to the overall power-generated basket is limited due to the fact that renewables work on very low plant load factors (PLFs) which, in layman terms, can be described as capacity utilization. While 20-25 per cent is par for the course in wind power, NTPC has managed PLFs of over 100 per cent in some of its thermal power plants. Then there are the challenges of grid connectivity for such plants given the unpredictability of the quantum and the time of generation.

Some years ago, however, the Electricity Act of 2003 directed power regulators to promote renewable energy. Many state power regulators did so by imposing renewable purchase obligations (RPOs) on the distribution companies, at a preferential tariff, and also enabling the connectivity of such power with the grid. These obligations range from 1 per cent in states like Delhi and Punjab to 10 per cent in Tamil Nadu.

Tamil Nadu, with its huge potential in wind, is already buying close to 15 per cent from renewable sources. Since this is at a preferential tariff, one would assume that it inflates the bill for the end-user. It does not, since buying power in the traders market in a shortage scenario is a far more expensive proposition. States like Punjab or Delhi, on the other hand, are barely able to meet their renewable procurement needs within their own borders.

There is an interesting idea of Renewable Energy Certificates (RECs) that is doing the rounds. Let a state with rich-wind-corridors, like Tamil Nadu, buy as much renewables as it can get and trade its “excess” in the open market with a state like Delhi through these certificates. It is easier than trading the actual power. It seems like a win-win. These certificates can also be sold to companies keen on flashing their triple bottomlines — economic, social and ecological (think Infosys). Green conscious retail consumers can also opt to consume a higher level of green power than that mandated by their regulator through these certificates.

This domestic version of the carbon emissions trading model can be implemented in a month, says a confident Pramod Deo, the central power regulator. If it is done within that time frame, it would be quite a record for any initiative in the country. Of course, there are pitfalls that need to be resolved like the basic price of these certificates as well as the possibility of them trading at a discount (rather than at a premium), when power is surplus for instance — but that is many years away. The policy can always be reviewed and changes effected.

The key question that needs to be answered is whether these measures will actually encourage investment in renewables. Prima facie, it seems that the answer should be in the affirmative. There will certainly be more wind power investments in Tamil Nadu, but it is unlikely to be of a magnitude which can plug the gap between the potential in renewables (84,000 Mw) and the realised capacity (about 15 per cent). Wind energy is not doing too badly, small hydro has covered some distance but solar — which should be the country’s natural choice for energy given that the sun god shines on us 320-325 days in a year — has a long way to go.

According to a presentation by Reliance Industries at a renewable conference last week, the internal rate of return (IRR) on solar projects is actually negative in states like Gujarat, and is a lowly 4.4 per cent in West Bengal. On top of that, there is the red tape that one has to wade through, with clearances required from multiple agencies, including the pollution control board. “Pollution control….for solar…,” smirked Reliance’s president for solar energy, Rabindra K Satpathy, to peals of laughter from the audience.

Let us go ballistic on solar. Let us increase the incentives for renewables. Let us go for the renewable energy certificates. Let us take a leaf from the Obama book of good energy governance and end our addiction to foreign oil while creating millions of jobs. Let us do everything required to mainstream renewables and make them more than mere arm candy!