Sunday, September 30, 2012

Why does India face power cuts?

Every man on the streets of India - urban and rural - will say they face power cuts everyday. The number of hours may vary based on state and city. Gujarat probably is the only state which is surplus in power and and its residents hardly face power cuts both at urban and rural level. So, what is different? Why can't the entire country have the same picture? The article below explores our major problems, solutions and illustrates a shining example of Gujarat which needs to be replicated across each state.

Until early 2000 there was no interconnected grid (interconnection of power sub stations and transmission lines). Each state had its own network. The early 2000 saw the reality of a power grid that connected North, South, East, West and North East. The state owned POWER GRID runs this and is 95,000 km long. The reason the grid was established was that the grid would enable power to be given to states which are in deficit so that there is a balance. While the Southern Grid is itself not connected to the remaining 4, all the remaining 4 are interconnected. The North, West, East and North East grids supplied electricity to the respective states and the basic condition of such a grid was that no state would draw more than it proposed as excess withdrawal or excess addition would cause the entire grid to fail. Every day each state that uses this grid will submit a projected daily usage a day before its usage for every 15 min. This would enable the Power Grid to balance the supply accordingly. Despite this check Uttar Pradesh (as per news reports) drew more electricity than projected on July 30 and 31st 2012. Despite a heavy fine established on any state that overdraws the power  one of the states did it causing a mass outage in NORTH, EAST, NORTH EASTERN parts of the GRID. The Western Grid took quick action and so was spared. The Southern Grid was not affected anyways.

July 30th and 31st 2012 when there was massive power outage in Western, Northern and Eastern India for 2 consecutive days - is a shame on rising India. Mainly because one of the states overdrew more power in the grid causing imbalance and electricity grid tripping. This was so bad that airports, railways, metros, hospitals, clinics, industries everything was crippled, paralyzed and came to a COMPLETE HALT without electricity. 

  • 600 million people were without electricity - a population double the United States.
  • 18 states affected at the same time.

Let's get to some quick stats: The source of electricity and their % contribution to power grid are as follows:

Total Installed capacity: 205.34 Giga Watt (GW)

Between 2007-2012 we added only 78,000 MW while China added 4* 78,000 MW. What a difference!!!

1/3rd Indian population - has no electricity - (300 million)

Losses due to power thefts and distribution - 20-32% with world's average 15%

Net shortfall - 10%. This is huge since India's demands have far outgrown the actual generation/availability.

The contribution of coal to electricity generation in China is 77% while 56% in India. China may be polluting more but it has massive wind and solar power generating capacity, only next to USA. India has only 12% of total electricity coming from wind+ solar combined.

Clearly our problems (and solutions) are:

a) Coal power generation has not increased since coal is not being properly utilized and exploited despite   its abundant supply. Many coal projects have got struck in environmental clearances, several of them have been scrapped since the COAL SCAM erupted under our very own PM - Manmohan Singh. Coal India which owns almost 80% of coal has to sell in the market at 70% discount prices just to have the subsidy going (Source). It's a blunder and Coal India neither can invest in natural gas nor increase its production.  Government needs to break up Coal India, involve private sector in production and distribution. Let us have an independent regulator for this rather than depending upon Government's intervention.

b) There is no exponential increase in contribution from Renewable sources like wind and solar. Solar is the easiest since 360 days of the year we have solar energy. Yes, one good thing the current government has done is to launch National Solar Mission which has framed policies for solar investment. However, not everywhere one is ready to invest. The government needs to provide incentives  for local manufacturers to come with the hardware so that the investors can depend upon them with trust. It is shocking that within 3 years we added only 1000MW of electricity through solar power by using parts made in US because they get that at a cheaper interest rate(3%) unlike banks in India (14%). Clearly this is the sector that the government needs to strongly push for competition so that solar projects come up everywhere. This is the best way to increase electricity generation.

c) Our transmission and distribution losses are immense causing a lot of scarcity due to inefficiency and there is power theft at the consumer level. Many of them connect their power lines directly to distribution line and makes them unaccountable for the same. Take a look at the streets of Delhi. This is a national shame. An estimate puts (because of power theft like the one below) the loss amount to $3 billion!!(Source)

In this June 13 file photo, an electrical linesman repairs cables in the middle of a spider web of  illegal subsidiary wires around the main cables in Allahabad, India. Stealing of power is a frequent phenomenon in Indian towns.

d) Private players cannot sell electricity to customers directly (unlike Gujarat which does allow).

e) State electricity boards (SEB) are running under losses total adding to Rs.2.46 lakh crore in 2012 (Source). But why do states end up in losses? This is because many states offer free electricity to farmers or at a very low subsidized rate. The tariffs are not regularly revised and they depend on bank loans that is difficult to repay. All this in the name of vote banks of the poor. This is practiced by almost all political parties across various states. The government recently waived half of the debts SEB has and the other half SEB will issue bonds to the banks -on the condition they strive to make them profitable. Almost all SEB are bankrupt excepting Gujarat which is running surplus. But really what SEB's need is not government's money, but a way of increasing its capacity.

A classic example is seven years ago TamilNadu was a power surplus state but now is bankrupt because the DMK government gave free electricity to farmers.

How is Gujarat having surplus electricity and how is it having low distribution losses (Business Today Source) ?

  • Multiple sources of electricity add to the electricity grid of Gujarat. Wind, Solar, coal, natural gas, water - all exist in the state. Most of these are run by private companies which can sell the generated power to consumers and to the state electricity board. So, it has more than the state's demand every year (for the past 6 years or so).
  • The farmers get NON FREE 24*7 electricity to their homes and at fixed times to their fields separately. They are not mixed. This is called Jyotigram scheme launched by the CM Modi way back in 2003. Since the farmers are assured of electricity for both homes and fields, they have not hesitated to pay for the same as against free electricity which is erratic and unpredictable. This is done through separate feeders for fields and homes - a feat that only this state has it and is working marvelously.
  • It raises tariffs periodically to that industries don't mind paying since they get uninterrupted power supply
  • 2200 km gas grid connects the industries and provides them with electricity through natural gas.
  • Set up 5 police stations across the state only to catch electricity thieves and disconnected anybody who was getting un metered electricity. This brought down transmission losses from 35% to 15% (Times of India)

So, where do we see going in the future?

If our current power cuts has to be avoided, more electricity needs to be added to the grid. Uncertain monsoons and absence of several dams make hydro unreliable, inefficiently exploited coal makes coal unreliable. The only way out is to have more solar parks, solar energy and wind energy. The private companies which can invest in this must have a way to directly sell this to customers so that it creates a competition between state boards and private companies thereby benefiting customers. The customers at least in cities will pay more if they have to provided they get uninterrupted power supply. Every state must take the feeder separation mechanism so that its own board won't run into losses. People need to stop electricity theft and take accountability for the usage.

This complex picture of electricity in India is worrisome. One needs to keep in mind that we are generating electricity but it is still far short in proportion to the demands. If we continue at this rate even 20 years down the lane we will experience power cuts everyday.

Our PM fought for nuclear deal. This deal has headed nowhere except bringing Congress back to power. The nuclear power is far more complex, requires great regulation and safety mechanisms and can take years to set up one. We can't wait for that long. Solar and Wind are the answers which India abundantly gets. If a couple of states have shown this, the entire country can.