:Fusion, ultimate green energy source

Scientists have moved a step closer to achieving sustainable nuclear fusion and almost limitless clean energy. U.S. researchers have achieved a world first in an ambitious experiment that aims to recreate the conditions at the heart of the sun and pave the way for nuclear fusion reactors.

The scientists generated more energy from fusion reactions than they put into the nuclear fuel, in a small but crucial step along the road to harnessing fusion power. The ultimate goal — to produce more energy than the whole experiment consumes — remains a long way off, but the feat has nonetheless raised hopes that after decades of setbacks, firm progress is finally being made.

Fusion energy has the potential to become a radical alternative power source, with zero carbon emissions during operation and minimal waste, but the technical difficulties in demonstrating fusion in the lab have so far proved overwhelming. While existing nuclear reactors generate energy by splitting atoms into lighter particles, fusion reactors combine light atomic nuclei into heavier particles.

In their experiments, researchers at the National Ignition Facility at the Lawrence Livermore National Laboratory in California use a bank of 192 powerful lasers to crush a minuscule amount of fuel so hard and fast that it becomes hotter than the sun.

Complex process

The process is not straightforward. The lasers are fired into a gold capsule that holds a 2mm-wide spherical pellet. The fuel is coated on the inside of this plastic pellet in a layer as thin as a human hair.

When the laser light enters the gold capsule, it makes the walls of the gold container emit x-rays, which heat the pellet and make it implode with extraordinary ferocity. The fuel, a mixture of hydrogen isotopes called tritium and deuterium, partially fuses under the intense conditions.

The scientists have not generated more energy than the experiment uses in total. The lasers unleash nearly two megajoules of energy on their target, the equivalent, roughly, of two standard sticks of dynamite. But only a tiny fraction of this reaches the fuel. Writing in Nature , the scientists say fusion reactions in the fuel released at best 17 kilojoules of energy.

Though slight, the advance is welcome news for the NIF scientists. In 2012, the project was restructured and given more modest goals after six years of failure to generate more energy than the experiment consumes, known as “ignition”.

Results from the NIF facility will help scientists work out how to build a fusion reactor, but the centre is funded primarily to help the U.S. understand how its stockpile of nuclear weapons is ageing. The experiments help to verify computer models that are used in place of nuclear tests, which are now banned.

Omar Hurricane, the lead author of the report, said the latest improvement came by controlling the implosion of the spherical pellet more carefully. In previous experiments, the pellet distorted as it was crushed, which seemed to reduce the efficiency of the process. By squashing the fuel more softly, helium nuclei that are produced in the fusion reactions dump their energy into the fuel, heating it up even further, and driving a cycle of ever more fusion.

“We are finally, by harnessing these reactions, getting more energy out of that reaction than we put into the DT fuel,” Mr. Hurricane said. The report appears in the journal Nature .

A long way to go…

The dream of controlled fusion remains a distant hope, and Mr. Hurricane said it was too early to say whether it was even possible with the NIF facility. The researchers need to get a hundred times more energy from the fusion reactions before the process can run itself, and more for it to deliver an overall surplus of energy.

Steven Cowley, director of the Culham Centre for Fusion Energy near Abingdon in the U.K., said the study was “truly excellent” and began to address the core challenges of what is known as inertial fusion in the lab. He said the team may need a bigger laser, or a redesigned capsule that can be squashed more violently without becoming unstable. “Livermore should be given plenty of time to develop a better capsule. We have only just begun to understand the fusion regime,” Mr. Cowley said.

The Culham lab has taken a different approach, called magnetic confinement. “The engineering milestone is when the whole plant produces more energy than it consumes,” Mr. Cowley said.

Plan to produce 40,000 tonnes of bio-aviation fuel

Based on pilot plant studies of a state-of-the-art process developed by the Indian Institute of Petroleum here, a unit in a refinery is being revamped to yield 40,000 tonnes a year of bio-aviation turbine fuel at competitive rates. It will be blended with fossil jet fuel for running commercial flights.

M.O. Garg, Director of the Institute, disclosed this at a National Science Day workshop on ‘Bio-Jet Fuel-A Key to Future Green and Sustainable Aviation’ held here on Saturday.

He said that under the recently developed process, renewable aviation fuel was produced fromJatropha curcas oil through a non-noble metal catalyst. “Pratt & Whitney, Canada, Indian Oil Corporation Ltd. and Hindustan Petroleum Corporation Ltd. are collaborating in the project. They have tested our fuel for its physio-chemical and performance characteristics.”

Mr. Garg said there was a worldwide interest in reducing the carbon footprint of civil aviation. The carbon tax imposed by Australia and the European Union on the aviation indus-try prompted airlines to run their flights on bio-fuel.

Biofuel

From Wikipedia, the free encyclopedia

A bus fueled by biodiesel

Information on pump regarding ethanol fuelblend up to 10%, California

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A biofuel is a fuel that contains energy from geologically recent carbon fixation. These fuels are produced from living organisms. Examples of thiscarbon fixation occur in plants and microalgae. These fuels are made by a biomass conversion (biomass refers to recently living organisms, most often referring to plants or plant-derived materials). This biomass can be converted to convenient energy containing substances in three different ways: thermal conversion, chemical conversion, and biochemical conversion. This biomass conversion can result in fuel in solid, liquid, or gas form. This new biomass can be used for biofuels. Biofuels have increased in popularity because of rising oil prices and the need for energy security.

Bioethanol is an alcohol made by fermentation, mostly from carbohydrates produced in sugar or starch crops such as corn, sugarcane or sweet sorghum. Cellulosic biomass, derived from non-food sources, such as trees and grasses, is also being developed as a feedstock for ethanol production. Ethanol can be used as a fuel for vehicles in its pure form, but it is usually used as a gasoline additive to increase octane and improve vehicle emissions. Bioethanol is widely used in the USA and in Brazil. Current plant design does not provide for converting the lignin portion of plant raw materials to fuel components by fermentation.

Biodiesel can be used as a fuel for vehicles in its pure form, but it is usually used as a diesel additive to reduce levels of particulates, carbon monoxide, and hydrocarbons from diesel-powered vehicles. Biodiesel is produced from oils or fats using transesterification and is the most common biofuel in Europe.

In 2010, worldwide biofuel production reached 105 billion liters (28 billion gallons US), up 17% from 2009,^[1] and biofuels provided 2.7% of the world's fuels for road transport, a contribution largely made up of ethanol and biodiesel.^{[citation needed]} Global ethanol fuel production reached 86 billion liters (23 billion gallons US) in 2010, with the United States and Brazil as the world's top producers, accounting together for 90% of global production. The world's largest biodiesel producer is the European Union, accounting for 53% of all biodiesel production in 2010.^[1] As of 2011, mandates for blending biofuels exist in 31 countries at the national level and in 29 states or provinces.^[2] The International Energy Agency has a goal for biofuels to meet more than a quarter of world demand for transportation fuels by 2050 to reduce dependence on petroleum and coal.^[3]

Liquid fuels for transportation[edit]

Most transportation fuels are liquids, because vehicles usually require high energy density, as occurs in liquids and solids. High power density can be provided most inexpensively by an internal combustion engine; these engines require clean-burning fuels, to keep the engine clean and minimize air pollution.

The fuels that are easiest to burn cleanly are typically liquids and gases. Thus, liquids (and gases that can be stored in liquid form) meet the requirements of being both portable and clean-burning. Also, liquids and gases can be pumped, which means handling is easily mechanized, and thus less laborious.

First-generation biofuels[edit]

'First-generation' or conventional biofuels are made from sugar, starch, or vegetable oil.

Ethanol[edit]

Main article: Ethanol fuel

Neat ethanol on the left (A), gasoline on the right (G) at a filling station in Brazil

Biologically produced alcohols, most commonly ethanol, and less commonly propanol and butanol, are produced by the action of microorganisms andenzymes through the fermentation of sugars or starches (easiest), or cellulose (which is more difficult). Biobutanol (also called biogasoline) is often claimed to provide a direct replacement for gasoline, because it can be used directly in a gasoline engine (in a similar way to biodiesel in diesel engines).

Ethanol fuel is the most common biofuel worldwide, particularly in Brazil. Alcohol fuels are produced by fermentation of sugars derived from wheat, corn,sugar beets, sugar cane, molasses and any sugar or starch from which alcoholic beverages can be made (such as potato and fruit waste, etc.). The ethanol production methods used are enzyme digestion (to release sugars from stored starches), fermentation of the sugars, distillation and drying. The distillation process requires significant energy input for heat (often unsustainable natural gas fossil fuel, but cellulosic biomass such as bagasse, the waste left after sugar cane is pressed to extract its juice, can also be used more sustainably).

Ethanol can be used in petrol engines as a replacement for gasoline; it can be mixed with gasoline to any percentage. Most existing car petrol engines can run on blends of up to 15% bioethanol with petroleum/gasoline. Ethanol has a smaller energy density than that of gasoline; this means it takes more fuel (volume and mass) to produce the same amount of work. An advantage of ethanol (CH
3CH
2OH) is that it has a higher octane rating than ethanol-free gasoline available at roadside gas stations, which allows an increase of an engine's compression ratio for increased thermal efficiency. In high-altitude (thin air) locations, some states mandate a mix of gasoline and ethanol as a winter oxidizer to reduce atmospheric pollution emissions.

Ethanol is also used to fuel bioethanol fireplaces. As they do not require a chimney and are "flueless", bioethanol fires^[4] are extremely useful for newly built homes and apartments without a flue. The downsides to these fireplaces is that their heat output is slightly less than electric heat or gas fires, and precautions must be taken to avoid carbon monoxide poisoning.

In the current corn-to-ethanol production model in the United States, considering the total energy consumed by farm equipment, cultivation, planting, fertilizers, pesticides, herbicides, andfungicides made from petroleum, irrigation systems, harvesting, transport of feedstock to processing plants, fermentation, distillation, drying, transport to fuel terminals and retail pumps, and lower ethanol fuel energy content, the net energy content value added and delivered to consumers is very small. And, the net benefit (all things considered) does little to reduce imported oil and fossil fuels required to produce the ethanol.^[5]

Although corn-to-ethanol and other food stocks have implications both in terms of world food prices and limited, yet positive, energy yield (in terms of energy delivered to customer/fossil fuels used), the technology has led to the development of cellulosic ethanol. According to a joint research agenda conducted through the US Department of Energy,^[6] the fossil energy ratios (FER) for cellulosic ethanol, corn ethanol, and gasoline are 10.3, 1.36, and 0.81, respectively.^[7]^[8]^[9]

Even dry ethanol has roughly one-third lower energy content per unit of volume compared to gasoline, so larger (therefore heavier) fuel tanks are required to travel the same distance, or more fuel stops are required. With large current unsustainable, unscalable subsidies, ethanol fuel still costs more per distance traveled than current high gasoline prices in the United States.^[10]

Biodiesel[edit]

Main articles: Biodiesel and Biodiesel around the world

In some countries, biodiesel is less expensive than conventional diesel.

Biodiesel is the most common biofuel in Europe. It is produced from oils or fats using transesterification and is a liquid similar in composition to fossil/mineral diesel. Chemically, it consists mostly of fatty acid methyl (or ethyl) esters (FAMEs). Feedstocks for biodiesel include animal fats, vegetable oils, soy, rapeseed, jatropha, mahua, mustard, flax, sunflower, palm oil, hemp, field pennycress, Pongamia pinnata and algae. Pure biodiesel (B100) is the lowest-emission diesel fuel. Although liquefied petroleum gas and hydrogen have cleaner combustion, they are used to fuel much less efficient petrol engines and are not as widely available.

Biodiesel can be used in any diesel engine when mixed with mineral diesel. In some countries, manufacturers cover their diesel engines under warranty for B100 use, although Volkswagen of Germany, for example, asks drivers to check by telephone with the VW environmental services department before switching to B100. B100 may become more viscous at lower temperatures, depending on the feedstock used. In most cases, biodiesel is compatible with diesel engines from 1994 onwards, which use 'Viton' (by DuPont) synthetic rubber in their mechanical fuel injection systems.

Electronically controlled 'common rail' and 'unit injector' type systems from the late 1990s onwards may only use biodiesel blended with conventional diesel fuel. These engines have finely metered and atomized multiple-stage injection systems that are very sensitive to the viscosity of the fuel. Many current-generation diesel engines are made so that they can run on B100 without altering the engine itself, although this depends on the fuel rail design. Since biodiesel is an effective solvent and cleans residues deposited by mineral diesel, engine filters may need to be replaced more often, as the biofuel dissolves old deposits in the fuel tank and pipes. It also effectively cleans the engine combustion chamber of carbon deposits, helping to maintain efficiency. In many European countries, a 5% biodiesel blend is widely used and is available at thousands of gas stations.^[11]^[12] Biodiesel is also anoxygenated fuel, meaning it contains a reduced amount of carbon and higher hydrogen and oxygen content than fossil diesel. This improves thecombustion of biodiesel and reduces the particulate emissions from unburnt carbon.

Biodiesel is also safe to handle and transport because it is as biodegradable as sugar, one-tenth as toxic as table salt, and has a high flash point of about 300°F (148°C) compared to petroleum diesel fuel, which has a flash point of 125°F (52°C).^[13]

In the USA, more than 80% of commercial trucks and city buses run on diesel. The emerging US biodiesel market is estimated to have grown 200% from 2004 to 2005. "By the end of 2006 biodiesel production was estimated to increase fourfold [from 2004] to more than" 1 billion US gallons (3,800,000 m³).^[14]

Other bioalcohols[edit]

Methanol is currently produced from natural gas, a nonrenewable fossil fuel. It can also be produced from biomass as biomethanol. The methanol economy is an alternative to the hydrogen economy, compared to today's hydrogen production from natural gas.

Butanol (C
4H
9OH) is formed by ABE fermentation (acetone, butanol, ethanol) and experimental modifications of the process show potentially high net energy gains with butanol as the only liquid product. Butanol will produce more energy and allegedly can be burned "straight" in existing gasoline engines (without modification to the engine or car),^[15] and is less corrosive and less water-soluble than ethanol, and could be distributed via existing infrastructures. DuPont and BP are working together to help develop butanol. E. coli strains have also been successfully engineered to produce butanol by modifying their amino acid metabolism.^[16]

Green diesel[edit]

Main article: Vegetable oil refining

Green diesel is produced through hydrocracking biological oil feedstocks, such as vegetable oils and animal fats.^[17]^[18] Hydrocracking is a refinery method that uses elevated temperatures and pressure in the presence of a catalyst to break down larger molecules, such as those found in vegetable oils, into shorter hydrocarbon chains used in diesel engines.^[19] It may also be called renewable diesel, hydrotreated vegetable oil^[19] or hydrogen-derived renewable diesel.^[18] Green diesel has the same chemical properties as petroleum-based diesel.^[19] It does not require new engines, pipelines or infrastructure to distribute and use, but has not been produced at a cost that is competitive with petroleum.^[18] Gasoline versions are also being developed.^[20] Green diesel is being developed in Louisiana and Singapore by ConocoPhillips, Neste Oil, Valero, Dynamic Fuels, and Honeywell UOP.^[18]^[21]

Biofuel gasoline[edit]

In 2013 UK researchers developed a genetically modified strain of Escherichia coli which could transform glucose into biofuel gasoline that does not need to be blended.^[22] Later in 2013 UCLAresearchers engineered a new metabolic pathway to bypass glycolysis and increase the rate of conversion of sugars into biofuel,^[23] while KAIST researchers developed a strain capable of producing short-chain alkanes, free fatty acids, fatty esters and fatty alcohols through the fatty acyl (acyl carrier protein (ACP)) to fatty acid to fatty acyl-CoA pathway in vivo.^[24] It is believed that in the future it will be possible to "tweak" the genes to make gasoline from straw or animal manure.

Vegetable oil[edit]

Filtered waste vegetable oil

Main article: Vegetable oil used as fuel

Straight unmodified edible vegetable oil is generally not used as fuel, but lower-quality oil can and has been used for this purpose. Used vegetable oil is increasingly being processed into biodiesel, or (more rarely) cleaned of water and particulates and used as a fuel.

Also here, as with 100% biodiesel (B100), to ensure the fuel injectors atomize the vegetable oil in the correct pattern for efficient combustion, vegetable oil fuelmust be heated to reduce its viscosity to that of diesel, either by electric coils or heat exchangers. This is easier in warm or temperate climates. Big corporations like MAN B&W Diesel, Wärtsilä, and Deutz AG, as well as a number of smaller companies, such as Elsbett, offer engines that are compatible with straight vegetable oil, without the need for after-market modifications.

Vegetable oil can also be used in many older diesel engines that do not use common rail or unit injection electronic diesel injection systems. Due to the design of the combustion chambers in indirect injection engines, these are the best engines for use with vegetable oil. This system allows the relatively larger oil molecules more time to burn. Some older engines, especially Mercedes, are driven experimentally by enthusiasts without any conversion, a handful of drivers have experienced limited success with earlier pre-"Pumpe Duse" VW TDI engines and other similar engines with direct injection. Several companies, such as Elsbettor Wolf, have developed professional conversion kits and successfully installed hundreds of them over the last decades.

Oils and fats can be hydrogenated to give a diesel substitute. The resulting product is a straight-chain hydrocarbon with a high cetane number, low in aromaticsand sulfur and does not contain oxygen. Hydrogenated oils can be blended with diesel in all proportions. They have several advantages over biodiesel, including good performance at low temperatures, no storage stability problems and no susceptibility to microbial attack.^[25]

Bioethers[edit]

Bioethers (also referred to as fuel ethers or oxygenated fuels) are cost-effective compounds that act as octane rating enhancers."Bioethers are produced by the reaction of reactive iso-olefins, such as iso-butylene, with bioethanol." ^[26] They also enhance engine performance, whilst significantly reducing engine wear andtoxic exhaust emissions. Greatly reducing the amount of ground-level ozone emissions, they contribute to air quality.^[27]^[28]

When it comes to transportation fuel there are six ether additives- 1. Dimethyl Ehters (DME) 2. Diethyl Ether (DEE) 3. Methyl Teritiary-Butyl Ether (MTBE) 4. Ethyl ter-butyl ether (ETBE) 5. Ter-amyl methyl ether (TAME) 6. Ter-amyl ethyl Ether (TAEE) ^[29]

Biogas[edit]

Pipes carrying biogas

Main article: Biogas

Biogas is methane produced by the process of anaerobic digestion of organic material by anaerobes.^[30] It can be produced either from biodegradable wastematerials or by the use of energy crops fed into anaerobic digesters to supplement gas yields. The solid byproduct, digestate, can be used as a biofuel or a fertilizer.

Biogas can be recovered from mechanical biological treatment waste processing systems.

Note: Landfill gas, a less clean form of biogas, is produced in landfills through naturally occurring anaerobic digestion. If it escapes into the atmosphere, it is a potential greenhouse gas.

Farmers can produce biogas from manure from their cattle by using anaerobic digesters.^[31]

Syngas[edit]

Main article: Gasification

Syngas, a mixture of carbon monoxide, hydrogen and other hydrocarbons, is produced by partial combustion of biomass, that is, combustion with an amount ofoxygen that is not sufficient to convert the biomass completely to carbon dioxide and water.^[25] Before partial combustion, the biomass is dried, and sometimespyrolysed. The resulting gas mixture, syngas, is more efficient than direct combustion of the original biofuel; more of the energy contained in the fuel is extracted.

Syngas may be burned directly in internal combustion engines, turbines or high-temperature fuel cells.^[32] The wood gas generator, a wood-fueled gasification reactor, can be connected to an internal combustion engine.
Syngas can be used to produce methanol, DME and hydrogen, or converted via the Fischer-Tropsch process to produce a diesel substitute, or a mixture of alcohols that can be blended into gasoline. Gasification normally relies on temperatures greater than 700°C.
Lower-temperature gasification is desirable when co-producing biochar, but results in syngas polluted with tar.

Solid biofuels[edit]

Examples include wood, sawdust, grass trimmings, domestic refuse, charcoal, agricultural waste, nonfood energy crops, and dried manure.

When raw biomass is already in a suitable form (such as firewood), it can burn directly in a stove or furnace to provide heat or raise steam. When raw biomass is in an inconvenient form (such as sawdust, wood chips, grass, urban waste wood, agricultural residues), the typical process is to densify the biomass. This process includes grinding the raw biomass to an appropriate particulate size (known as hogfuel), which, depending on the densification type, can be from 1 to 3 cm (0 to 1 in), which is then concentrated into a fuel product. The current processes produce wood pellets, cubes, or pucks. The pellet process is most common in Europe, and is typically a pure wood product. The other types of densification are larger in size compared to a pellet, and are compatible with a broad range of input feedstocks. The resulting densified fuel is easier to transport and feed into thermal generation systems, such as boilers.

Industry has used sawdust, bark and chips for fuel for decades, primary in the pulp and paper industry, and also bagasse (spent sugar cane) fueled boilers in the sugar cane industry. Boilers in the range of 500,000 lb/hr of steam, and larger, are in routine operation, using grate, spreader stoker, suspension burning and fluid bed combustion. Utilities generate power, typically in the range of 5 to 50 MW, using locally available fuel. Other industries have also installed wood waste fueled boilers and dryers in areas with low cost fuel.^[33]

One of the advantages of solid biomass fuel is that it is often a byproduct, residue or waste-product of other processes, such as farming, animal husbandry and forestry.^[34] In theory, this means fuel and food production do not compete for resources, although this is not always the case.^[34]

A problem with the combustion of raw biomass is that it emits considerable amounts of pollutants, such as particulates and polycyclic aromatic hydrocarbons. Even modern pellet boilers generate much more pollutants than oil or natural gas boilers. Pellets made from agricultural residues are usually worse than wood pellets, producing much larger emissions of dioxins andchlorophenols.^[35]

In spite of the above noted study, numerous studies have shown biomass fuels have significantly less impact on the environment than fossil based fuels. Of note is the US Department of Energy Laboratory, operated by Midwest Research Institute Biomass Power and Conventional Fossil Systems with and without CO2 Sequestration – Comparing the Energy Balance, Greenhouse GasEmissions and Economics Study. Power generation emits significant amounts of greenhouse gases (GHGs), mainly carbon dioxide (CO₂). Sequestering CO₂ from the power plant flue gas can significantly reduce the GHGs from the power plant itself, but this is not the total picture. CO₂ capture and sequestration consumes additional energy, thus lowering the plant's fuel-to-electricity efficiency. To compensate for this, more fossil fuel must be procured and consumed to make up for lost capacity.

Taking this into consideration, the global warming potential (GWP), which is a combination of CO₂, methane (CH₄), and nitrous oxide (N₂O) emissions, and energy balance of the system need to be examined using a life cycle assessment. This takes into account the upstream processes which remain constant after CO₂ sequestration, as well as the steps required for additional power generation. Firing biomass instead of coal led to a 148% reduction in GWP.

A derivative of solid biofuel is biochar, which is produced by biomass pyrolysis. Biochar made from agricultural waste can substitute for wood charcoal. As wood stock becomes scarce, this alternative is gaining ground. In eastern Democratic Republic of Congo, for example, biomass briquettes are being marketed as an alternative to charcoal to protect Virunga National Park fromdeforestation associated with charcoal production.^[36]

Second-generation (advanced) biofuels[edit]

Main article: Second-generation biofuels

Second generation biofuels, also known as advanced biofuels, are fuels that can be manufactured from various types of biomass. Biomass is a wide-ranging term meaning any source of organic carbon that is renewed rapidly as part of the carbon cycle. Biomass is derived from plant materials but can also include animal materials.

First generation biofuels are made from the sugars and vegetable oils found in arable crops, which can be easily extracted using conventional technology. In comparison, second generation biofuels are made from lignocellulosic biomass or woody crops, agricultural residues or waste, which makes it harder to extract the required fuel.

Sustainable biofuels[edit]

Biofuels, in the form of liquid fuels derived from plant materials, are entering the market, driven by factors such as oil price spikes and the need for increased energy security. However, many of the biofuels that are currently being supplied have been criticised for their adverse impacts on the natural environment, food security, and land use.^[37]^[38]

The challenge is to support biofuel development, including the development of new cellulosic technologies, with responsible policies and economic instruments to help ensure that biofuel commercialization is sustainable. Responsible commercialization of biofuels represents an opportunity to enhance sustainable economic prospects in Africa, Latin America and Asia.^[37]^[38]^[39]

Biofuels offer the prospect of increased market competition and oil price moderation. A healthy supply of alternative energy sources will help to combat gasoline price spikes and reduce dependency on fossil fuels, especially in the transport sector.^[38] Using transportation fuels more efficiently is also an integral part of a sustainable transport strategy.

Biofuels by region[edit]

Main article: Biofuels by region

Issues with biofuel production and use[edit]

Main article: Issues relating to biofuels

There are various social, economic, environmental and technical issues with biofuel production and use, which have been discussed in the popular media and scientific journals. These include: the effect of moderating oil prices, the "food vs fuel" debate, poverty reduction potential, carbon emissions levels, sustainable biofuel production, deforestation and soil erosion, loss of biodiversity,^[46]impact on water resources, the possible modifications necessary to run the engine on biofuel, as well as energy balance and efficiency. The International Resource Panel, which provides independent scientific assessments and expert advice on a variety of resource-related themes, assessed the issues relating to biofuel use in its first report Towards sustainable production and use of resources: Assessing Biofuels.^[47] In it, it outlined the wider and interrelated factors that need to be considered when deciding on the relative merits of pursuing one biofuel over another. It concluded that not all biofuels perform equally in terms of their impact on climate, energy security and ecosystems, and suggested that environmental and social impacts need to be assessed throughout the entire life-cycle.

Current research[edit]

Research is ongoing into finding more suitable biofuel crops and improving the oil yields of these crops. Using the current yields, vast amounts of land and fresh water would be needed to produce enough oil to completely replace fossil fuel usage. It would require twice the land area of the US to be devoted to soybean production, or two-thirds to be devoted to rapeseed production, to meet current US heating and transportation needs.^{[citation needed]}

Specially bred mustard varieties can produce reasonably high oil yields and are very useful in crop rotation with cereals, and have the added benefit that the meal left over after the oil has been pressed out can act as an effective and biodegradable pesticide.^[48]

The NFESC, with Santa Barbara-based Biodiesel Industries, is working to develop biofuels technologies for the US navy and military, one of the largest diesel fuel users in the world.^[49] A group of Spanish developers working for a company called Ecofasa announced a new biofuel made from trash. The fuel is created from general urban waste which is treated by bacteria to produce fatty acids, which can be used to make biofuels.^[50]

Ethanol biofuels[edit]

Main articles: Ethanol fuel and Cellulosic ethanol commercialization

As the primary source of biofuels in North America, many organizations are conducting research in the area of ethanol production. The National Corn-to-Ethanol Research Center (NCERC) is a research division of Southern Illinois University Edwardsville dedicated solely to ethanol-based biofuel research projects.^[51] On the federal level, the USDA conducts a large amount of research regarding ethanol production in the United States. Much of this research is targeted toward the effect of ethanol production on domestic food markets.^[52] A division of the U.S. Department of Energy, the National Renewable Energy Laboratory (NREL), has also conducted various ethanol research projects, mainly in the area of cellulosic ethanol.^[53]

Cellulosic ethanol commercialization is the process of building an industry out of methods of turning cellulose-containing organic matter into fuel. Companies, such as Iogen, POET, and Abengoa, are building refineries that can process biomass and turn it into bioethanol. Companies, such as Diversa, Novozymes, and Dyadic, are producing enzymes that could enable a cellulosic ethanolfuture. The shift from food crop feedstocks to waste residues and native grasses offers significant opportunities for a range of players, from farmers to biotechnology firms, and from project developers to investors.^[54]

As of 2013, the first commercial-scale plants to produce cellulosic biofuels have begun operating. Multiple pathways for the conversion of different biofuel feedstocks are being used. In the next few years, the cost data of these technologies operating at commercial scale, and their relative performance, will become available. Lessons learnt will lower the costs of the industrial processes involved.^[55]

In parts of Asia and Africa where drylands prevail, sweet sorghum is being investigated as a potential source of food, feed and fuel combined. The crop is particularly suitable for growing in arid conditions, as it only extracts one seventh of the water used by sugarcane. In India, and other places, sweet sorghum stalks are used to produce biofuel by squeezing the juice and then fermenting into ethanol.^[56]

A study by researchers at ICRISAT found that growing sweet sorghum instead of grain sorghum could increase farmers incomes by US$40 per hectare per crop because it can provide fuel in addition to food and animal feed. With grain sorghum currently grown on over 11 million hectares (ha) in Asia and on 23.4 million ha in Africa, a switch to sweet sorghum could have a considerable economic impact. ^[57]

Algae biofuels[edit]

Main articles: Algaculture and Algal fuel

From 1978 to 1996, the US NREL experimented with using algae as a biofuels source in the "Aquatic Species Program".^[58] A self-published article by Michael Briggs, at the UNH Biofuels Group, offers estimates for the realistic replacement of all vehicular fuel with biofuels by using algae that have a natural oil content greater than 50%, which Briggs suggests can be grown on algae ponds at wastewater treatment plants.^[59] This oil-rich algae can then be extracted from the system and processed into biofuels, with the dried remainder further reprocessed to create ethanol. The production of algae to harvest oil for biofuels has not yet been undertaken on a commercial scale, but feasibility studies have been conducted to arrive at the above yield estimate. In addition to its projected high yield, algaculture — unlike crop-based biofuels — does not entail a decrease in food production, since it requires neither farmland nor fresh water. Many companies are pursuing algae bioreactors for various purposes, including scaling up biofuels production to commercial levels.^[60]^[61] Prof. Rodrigo E. Teixeira from the University of Alabama in Huntsville demonstrated the extraction of biofuels lipids from wet algae using a simple and economical reaction in ionic liquids.^[62]

Jatropha[edit]

Main article: Jatropha curcas

Several groups in various sectors are conducting research on Jatropha curcas, a poisonous shrub-like tree that produces seeds considered by many to be a viable source of biofuels feedstock oil.^[63] Much of this research focuses on improving the overall per acre oil yield of Jatropha through advancements in genetics, soil science, and horticultural practices.

SG Biofuels, a San Diego-based jatropha developer, has used molecular breeding and biotechnology to produce elite hybrid seeds that show significant yield improvements over first-generation varieties.^[64] SG Biofuels also claims additional benefits have arisen from such strains, including improved flowering synchronicity, higher resistance to pests and diseases, and increased cold-weather tolerance.^[65]

Plant Research International, a department of the Wageningen University and Research Centre in the Netherlands, maintains an ongoing Jatropha Evaluation Project that examines the feasibility of large-scale jatropha cultivation through field and laboratory experiments.^[66] The Center for Sustainable Energy Farming (CfSEF) is a Los Angeles-based nonprofit research organization dedicated to jatropha research in the areas of plant science, agronomy, and horticulture. Successful exploration of these disciplines is projected to increase jatropha farm production yields by 200-300% in the next 10 years.^[67]

Fungi[edit]

A group at the Russian Academy of Sciences in Moscow, in a 2008 paper, stated they had isolated large amounts of lipids from single-celled fungi and turned it into biofuels in an economically efficient manner. More research on this fungal species, Cunninghamella japonica, and others, is likely to appear in the near future.^[68] The recent discovery of a variant of the fungus Gliocladium roseum points toward the production of so-called myco-diesel from cellulose. This organism was recently discovered in the rainforests of northern Patagonia, and has the unique capability of converting cellulose into medium-length hydrocarbons typically found in diesel fuel.^[69]

Animal Gut Bacteria[edit]

Microbial gastrointestinal flora in a variety of animals have shown potential for the production of biofuels. Recent research has shown that TU-103, a strain of Clostridium bacteria found in Zebra feces, can convert nearly any form of cellulose into butanol fuel.^[70] Microbes in panda waste are being investigated for their use in creating biofuels from bamboo and other plant materials.^[71]

Greenhouse gas emissions[edit]

Some scientists have expressed con

Filling the Gaps: Rooftop Solar Projects in India

With a high population density, large tracts of land required for large-scale solar projectswill be hard to come by in India in the near future. And this is where small-scale rooftop solar projects can fill in the gap and address the ever-increasing domestic energy requirements. A look at the challenges involved in promoting and implementing these projects in context of the ongoing Jawaharlal Nehru National Solar Mission.

Annie Phillip (annie.ac@gmail.com) is an independent journalist based in Mumbai.

With an average of 300 sunny days a year and high solar insolation, India has the capability of producing 5,000 trillion kilowatts of clean energy annually.[1] The potential to lead the way in the solar power space, in addressing domestic energy requirements and as a supplier of equipment to other countries is immense.

The Jawaharlal Nehru National Solar Mission (JNNSM), launched in 2010, set an ambitious target of deploying 20,000 MW of grid-connected (including rooftop installations) and 2,000 MW of off-grid solar power by 2022 in three phases.

The JNNSM Phase II policy document has declared Phase I (up to 2013) a success story, with encouraging response from project developers.[2] A new World Bank report[3] attests this and states that the JNNSM Phase I is “well-poised to make India a global leader in the development of solar power”, and that it has been “instrumental in bringing down the cost of solar power to a level that is competitive across the world”.

However, almost all of the solar power projects of Phase I were “ground-mounted utility scale grid-connected systems”.[4] Large-scale solar projects are space intensive. “A 1,000 MW plant may require nearly10,000 acres of contiguous land”.[5] With a high population density, land required for solar projects will be hard to come by in India. And this is where rooftop projects can fill the gap. Rooftop projects also improve productivity as transmission and distribution losses are reduced, and they require a low gestation time.[6]

JNNSM Phase II (2013- 2017) aims to deploy 1,000 MW of grid-connected and off-grid rooftop solar projects.[7]

To achieve a nationwide impact through solar power, particular attention will need to be given to small-scale solar applications, including rooftop projects. These projects will require continuous support and evaluation from the Ministry of New and Renewable Energy (MNRE) and the states. The bigger focus on large utility-scale projects is because these projects are easier to monitor and allow for achieving policy targets on time for policy makers.[8]Rooftop solar projects pose quite a few challenges which need to be addressed before solar panels on roofs across India become a common sight.

Solar Space Market

As of October 2013, India’s total installed capacity reached 2,100 MW[9] from a mere 17.8 MW[10] in early 2010. Of this, grid-connected solar capacity amounted to 1,969 MW and off-grid systems accounted for 131 MW.[11]

The Indian solar market is estimated to reach US$2.05 billion in 2015, up from US$1.05 billion in 2012, according to an analysis by Frost and Sullivan.[12]

The JNNSM has been effective in bringing down the cost of solar power in India. A tariff of Rs 17 per kW hour was fixed by the regulator when the solar mission was launched in January 2010.[13] Over the course of two years, the tariff reduced dramatically from Rs 17 per kWh to Rs 10.8 in November 2010 and further to Rs 7.49 per kWh in December 2011.[14]

Rooftop Solar Power

Grid-connected : The Rooftop Photovoltaic (PV) and small Solar Power Generation Programme (RPSSGP) scheme (under JNNSM) aims to encourage states to set up small solar grid-connected projects. This endeavor will help “create a database of performance of solar plants under different climatic and grid conditions”.[15] RPSSGP is a generation based incentive (GBI) scheme and the projects are connected to the grid at voltage levels below 33 kV.

Interestingly though, a Centre for Science and Environment report states that “almost all projects under the RPSSGP are actually ground-based”.[16]

MNRE launched a pilot scheme for promotion of large area grid-connected roof top solar PV projects in cities. It is primarily targeted at cutting the dependence on diesel generators for backup in commercial establishments. A 30% subsidy on the system cost is provided through Solar Energy Corporation of India (SECI), a government-run implementation agency.

Off-grid: Off-grid solar applications include solar lighting systems (lantern, home and street), solar power plants, charging stations and pumping systems. JNNSM has set a target of 20 million solar lighting systems for rural areas by 2022.[17]

A good example of an off-grid solar project would be the micro grid executed by Mera Gao Power (a USAID-backed enterprise) in Damdampurawa village, Sitapur district, Uttar Pradesh in early 2013. Each household in the village was provided two LED lights and one mobile-charging point at Rs 25 per week (works for seven hours every evening) and a one-time setup cost of Rs 40 was charged. The roof of a sturdy house was chosen to install the two solar panels and battery (two panels can serve up to 50 households).[18] The project brought a vast improvement to the life of the villagers.

States and the Domestic Consumer Space

In the domestic consumer space, a typical house solar installation of 1KW power costs about Rs1.7 lakh with the battery costing approximately Rs 60,000 to Rs 70,000. The battery needs to be changed every five years.

Many states now have their own solar policies with Kerala, Tamil Nadu, Gujarat and Karnataka investing significant allocation to rooftop projects directed at households.

Challenges and Looking Forward

Policy barriers: A report[19] by World Bank in 2010 pointed out certain policy and regulatory barriers as key impediments to solar power development in India. Based on interviews with developers in the solar power space, it cited a lack of clarity in guidelines as a hindrance. For the domestic consumer, a tedious approval process to obtain subsidy,[20] and the presence of multiple partners (MNRE, state implementation agency, project developer) makes installation a cumbersome task.[21]

There have also been administrative issues because of the “proliferation of different solar programmes”.[22] Currently there are, at least, “three programmes with similar mandates and overlapping areas of operation” among off-grid projects in rural areas .[23] These include programmes by the MNRE and Ministry of Power, which differ in their view of the type of decentralised energy sources to be used and the permanency of the off-grid system. The result is that “no single entity is fully aware of villages being electrified through various decentralized energy programmes across the country”.

For the domestic consumer, rural and urban, a single point of contact from financing to installing to operating to maintaining is required for the smooth implementation of the solar project.

Operational issues: The power grid in India has been known to have severe stability problems with major grid collapses. Solar power, being more erratic than conventional power, poses an important challenge to grid stability.[24]With multiple small solar projects connected to the grid, there is a possibility that the electricity network can become imbalanced.[25] As the number of these projects increase, it will be vital to monitor grid stability for its sustainability.

Effective storage becomes an important issue during India’s monsoon season[26]. In the current scenario, solar power for households can only be stored in expensive batteries made from environmentally toxic materials[27]. After-sales service was also identified as a challenge area for small-scale project developers[28].

Costs, financing and conventional energy sources: Even with subsidies, the installation cost of a domestic solar system at present remains high for most consumers in India. However, solar PV power is now cheaper than diesel generated power.[29] “The MNRE anticipates solar power achieving grid parity by 2017-18 and parity with coal-based thermal power by 2025, but this recognises that cost trajectory will depend upon on the scale of global deployment and technology development and transfer”.[30] Ultimately, the growth of solar power in India is closely tied to the cost of conventional energy power. As solar power costs turn more competitive, demand from consumers will naturally push supply in the domestic segment.

The second phase of the JNNSM is facing a major shortage of funds [31], and rooftop solar projects are bound be affected as they rely largely on MNRE funds. But, in a positive development, “the RBI allowed loans given to individuals to set up off-grid solar and other renewable energy solutions for households as priority sector loans”.[32] However, the banking community will require training to become familiar with dynamics involved in financing of the solar sector, especially the off-grid segment for rural areas.[33]

One model does not fit all and role of State: The feed-in-tariff model presents some challenges in implementation.[34] A key issue is monitoring of projects. It is possible that power generated from sources other than solar, including utility supply and power generated from subsidised fuels, is fed into the grid, and a model like feed-in-tariff could end up being misused.[35] In fact, the Delhi government scrapped its solar rooftop scheme fearing such abuse and exploitation.[36] It also poses a high burden on the discom because purchasing power from individual households might be uncompetitive, as the per unit cost of electricity may be higher due to the small size of the project.[37] The dynamic nature of the solar energy market also makes it difficult to fix the tariff.

So should households install grid-connected or off-grid rooftop solar projects? What should be the model of operation? States/ local bodies will need to decide on the suitable model to adopt based on local conditions. States will have to step up mandatory regulation and provide an encouraging environment for the domestic consumer and for organisations setting up off-grid applications in rural areas. Punjab has made it mandatory for houses constructed over an area of above 5,400 sq feet to install solar power projects.[38]

Engaging the customer: Getting the domestic consumer interested in solar power is perhaps the most important step to popularise rooftop solar installations. An expansion of the service network, large scale visibility/ publicity and provision of information to customers, as mentioned in the JNNSM Phase II policy document, is required. The MNRE has to rope in state and local civic authorities and residential associations.

At present, the market has different types of solar devices of varying quality, including poor quality imported products. JNNSM Phase II has plans both for developing “star rating systems” and standards for components used in solar systems. Also, all roof types may not be suitable for installation and may require refurbishment.[39]

Another concern for the domestic consumer would be ownership (in case of shared roof) and renting the roof for rooftop solar projects. The owner may consider the roof as a source of income in the future. When the incentive (based on generation) is fixed (Gujarat’s rooftop scheme), the owner may be hesitant to enter into a long-term agreement “where there is a risk of disproportionate green incentive versus the rise in rent income.”[40]

Despite the difficulties involved in harnessing solar power on a smaller scale, rooftop solar projects present a real opportunity for energy security for India’s vast populace, especially the large majority (400 million people)[41] who lack access to modern forms of energy.

Reforms in coal sector remain a grey area for the government

In its efforts to bring reforms to the coal sector, the UPA government not only failed but also ended up sullying its own image in allocation of coal blocks, which has cost two of its key ministers their jobs.

Executing coal sector reforms has remained a grey area of the Manmohan Singh government, which faced a gruelling time in the last two Parliament sessions following a CAG report which criticised the Centre for distributing captive coal blocks, 57 of them to private companies, which the audit watchdog said cost the exchequer Rs 1.86 lakh crore.

A defensive government ordered a CBI probe and ever since the agency has filed 14 FIRs and two Preliminary Enquiries and recently a chargesheet as well.

The controversy generated from the CAG report and subsequent inquiry also engulfed the Prime Minister’s Office, whose former officials have been reportedly questioned by the CBI for their alleged complicity in allocation of coal blocks.

Industrialists like Naveen Jindal, Aditya Birla and Vijay Darda are learnt to be under the CBI scanner for allegedly manipulating their way into securing coal blocks for their respective companies. The government understandably failed to defend itself in the Supreme Court when the Attorney General conceded that “things could have been handled in a different way.”

Realising that the it has erred in distributing the mines through an empowered inter-ministerial committee between 2006-09 (the erstwhile Screening Committee), the government in 2010 amended a mining law to introduce auctioning process. While it was too late, the auction process is yet to take off.

While proscribing commercial coal mining, the government leaned heavily on Coal India (CIL) to bail the country out of fuel shortage, but given the inefficient mining policies, huge evacuation bottlenecks and tepid growth in output, the PSU could not deliver fully on the entrusted mission.
Adding to the woes, in 2011, the Union environment ministry imposed the system of go and no-go, added the woes of power generation companies. Almost none of the crucial hurdles could be resolved within the term of the current regime. Desperate to galvanise CIL into action, the government in July 2013 imposed a Presidential directive on the state-run company, mandating it to sign fuel supply agreements to provide fuel to 78,000 MW capacity amounting to 63 MT of coal.

Considering that the company has pending Letters of Assurance for about 30,000 MW and if these projects are also commissioned then CIL would have negative coal balance as per the available demand-supply estimates, according to a IMG meeting details held in December 2013.

Further, there are 479 pending applications demanding 197 MT of fuel from the non-core sector for their captive power plants totaling to 39,000 MW, which CIL is unable to consider due to paucity of fuel. So while state-run CIL could not deliver much, enlisting private participation through captive blocks also got mired in controversies.

While endorsing the popular contention that the coal sector needs a regulator, the ministry got the Union Cabinet’s approval to set up a watchdog, but refused to confer it pricing powers or any say in allocation or de-allocation process.

Unable to push through the coal regulatory bill in its last leg, the government intended to set up a regulator through an ordinance, but that plan seems have fallen through.

The inept handling of the performance-related pay of nearly 18,000 executives of CIL, due since 2007, has resulted in these officers going on a nation wide strike crippling coal despatch services.

The strike is a fallout of a long a silent tug-of-war between the coal ministry and the department of public enterprises. The much-touted restructuring of CIL also failed as the coal ministry seemed to be a divided house on it.

The UPA government bowed to the pressure from CIL’s trade unions and shelved plans to execute a follow-on-public offer. It had to plug its revenue gap by ensuring a hefty special dividend from CIL. After intense criticism on coal block allocations, the coal ministry set up an inter-ministerial group to initiate punitive measures against erring holders idling on their captive mines. The panel has recently canceled 31out of 60 mines an more de-allocations are expected in the near future.

ACTIVISTS SLAM DEMAND

Discoms can’t meet green power target, seek waiver

Richi Verma & Jayashree Nandi TNN

New Delhi: Power companies have told the regulator that they are not in a position to meet their renewable power obligations (RPO). In the tariff petitions for the financial year 2014-15, the discoms have requestedDelhiElectricity Regulatory Commission towaiveoff their RPOin theinterestofconsumers or consider carrying forward the commitment to subsequent years.
    The scheme, which became a part of the tariff from FY 2012-13, makes it obligatory for discoms to source a fixed percentage—4.8%—of the total power from renewablesources. “The companies can procure renewable energy, generate it themselves, or buy renewable energy certificates (REC) from the power exchange,” said an expert.
    In their tariff petitions, the discoms made it clear that they were finding it difficult to continue meeting the RPO. “We madeevery effortto procure renewable power through shortterm tenders, but no party has come forward. We had also floated a long-term tender, which attracted six to seven bids, but DERC has not approved our petition so far. The renewable power available in Delhi is limited. To meet the requirement we will be forced to buy RECs, which will be very expensive and will have a bearing on the tariff,” said a discom official. DERC officials said they were yet to examine the demand for a waiver. “They were unable to fulfil their obligationsin 2013-14 andwantitto waived or carried forward to the nextfiscal,’’ said a DERCofficial.
    Environmentalists, meanwhile, slammed discoms and urged DERC not to accept their demand.
    “It’s unfortunate that the discoms have petitioned DERC for a completewaiver.Despite a huge potential for solar-based energy, particularly rooftop generation, in Delhi, along with its economic viability with the current retail tariff, the discoms failed to tap a cleaner resource for addressing the energy crisis as well as combating climate change. By implementing rooftop solar power generation in government, industrial and commercial buildings of Delhi, the discoms will not only be able to produce more than 900MW but also meettheir current andlast fiscal’s RPO target,” said AbhishekPratap,senior campaigner from Greenpeace India. There is no additional financialburden asthecostof generating electricity is well within the retail tariff of commercial and industrial customers, he added.

GLOBAL SCIENCE Sun is Shining on Energy Sector

Hari Pulakkat

Solar energy leaves utility companies powerless

Last week, the financial services company Barclays made a surprising announcement: it downgraded the US electric sector from market weight to underweight. Operating in regulated markets with little competition, American utilities have had a wonderful run for the last few decades, making handsome profits every year. Now Barclays thinks the game is up, as it has competition from an outsider: solar energy . It is worth examining this issue on World Environment Day , as India too will reach this milestone in the near future.
Greatest Enemy of Coal The real problem is not that solar energy can match coal in large power plants. It is that distributed solar power is disrupting the business model of utility companies. This trend is most pronounced in Europe, where utilities have lost more value since the recession than the banks have. Renewables now account for more than two-thirds of new capacity added in Europe every year. Not all of the troubles of utilities are due to renewable energy , but solar power is taking away demand when it matters most: during peak hours in the afternoon. No wonder many European utilities were downgraded in the last two years.The US is now seeing the acceleration of this trend, as hundreds of thousands of people put up solar arrays on their rooftops. In the last quarter alone, 1.33 gigawatts of solar panels were put up in the US. It is creating what author Jeremy Rifkin calls the zero marginal cost society -or near-zero, to be precise. Once you pay for the capital costs of your solar panels, your operational costs are near zero for a long time. This is not what the utility companies want.
Consumers sell excess solar power to the utility companies, but they don't like it. They have made large capital investments, and so expect to charge the consumer continually . Net metering is not their idea of business.
Now look to the future and you see further disruptions, driven by large adoption, relentless decline of prices and improvements in technology . President Barack Obama is striving for a 30% cut in US greenhouse gas emissions by 2030, a goal that has not found favour in the coal belt. Coal use is declining in the US, the prime reason being the increased use of natural gas. Solar energy will play an increasing role too in the future. Yet, the greatest enemy of coal is not climate change policy but adoption of distributed solar.
Scientists keep advancing solar technology , and these advances will keep bringing the prices down. The advances are coming in every conceivable aspect of solar technology . They are giving us 3D solar cells, new high-efficiency cells, better thin-film cells, better manufacturing techniques and so on. Storage technologies are improving too. One day , probably in a decade, artificial photosynthesis could combine generation and storage in one neat trick.
Many of the new ideas seem like fantasies at the moment. For example, an engineering couple in Idaho has designed an intelligent “solar roadway“ that can generate power as well as communicate with the drivers, apart from doing many other wonderful things.
In Sweden, Volvo is testing an electric road that can charge cars as they move along. These concepts do not need technology breakthroughs but are still revolutionary . There are enough roads in the world that can generate all the power that automobiles need.
Imagine what will happen if we combine high-tech and energygenerating roads with driverless cars. The world is at the beginning of a revolution, not different from the development of the internal combustion engine in the late 19th century .
This column looks at global science from an Indian perspective

Delhi neglects solar power, ignores potential

Jayashree Nandi

New Delhi:

TNN

CITY HAS NEITHER ADOPTED NET-METERING TECH TO FACILITATE ROOFTOP POWER PRODUCERS NOR WORKED OUT INCENTIVES

Gujarat had land to develop solar farms and plan innovative projects like solar panels on the Narmada canal; land-starved Delhi cannot afford all that. The least it can do is to replicate Gandhinagar’s solar rooftop project that started as a pilot for government buildings but now provides to private properties as well. In contrast, Delhi has hardly moved on the solar front. It has small projects with a negligible output. The Delhi government had prepared a solar policy in 2013 but it’s still stuck between various departments.The installed capacity of solar photovoltaic (PV) cells in Delhi till 2013 was only 2.5 MW compared to over 1000 MW in Gujarat. “The overall cost besides an acute shortage of land is what kept Delhi waiting.
Which is why we too advised them to look at rooftop systems instead of ground-mounted ones,” says Abhishek Pratap, renewable energy campaigner for Greenpeace India. “Even if Delhi chooses to replicate the Gandhinagar model, determining the preferential tariff for those who rent their roof out to utilities is crucial. Without an attractive incentive for them, the scheme will just fall
flat.” That’s the feedback they have got from RWAs.Under the rent-a-roof scheme in Gandhinagar, residents give out their rooftops on hire to private solar energy
companies who in turn pay them Rs 3 for every unit of energy produced.Delhi has also been slow in executing the net-metering technology that is crucial for
producers of roof-top solar power to be able to supply to the grid and gain benefits from it.Net metering is a mechanism that credits customers who generate solar energy to add to
the grid. The utility pays the customer for the extra or unused units of solar energy, which automatically go back to the grid. Delhi Electricity Regulatory Commission (DERC) had recently invited comments from stakeholders on a proposal to introduce net metering for rooftop solar power generation according to the guidelines laid down by the ministry of new and renewable energy. But that hasn’t been finalized either. DERC hasn’t fixed a tariff yet because the projects in Delhi are too small. “We will do that only when there is a very big project. It doesn’t make sense otherwise,” says PD Sudhakar, chairman of DERC.Delhi met 0% of its renewable purchase obligation (RPO) in 2012 while Meghalaya, Tamil Nadu, Nagaland, Uttarakhand and Karnataka overshot their targets. RPO is a government regulation that makes it obligatory for state electricity regulatory commissions to buy a certain percentage of electricity generated from renewable sources. These targets were set by different states in 2010 to achieve the National Action Plan on Climate Change (NAPCC) requirement of 15% renewable energy supply in India by 2020.
Environment secretary Sanjiv Kumar and director, environment, Anil Kumar, had visited Gujarat last September to see their projects. The two are currently in Gandhinagar.“We are trying to understand the feasibility of the solar rooftop project but can’t say if anything will be replicated for sure,” said Anil Kumar.
Experts say the rooftop model is the only scheme that is replicableAnand Prabhu Pathanjali, energy campaigner with Greenpeace India, said the rooftop model is a microutility concept or one that can also work in a mini-grid and that it is well-established in parts of United States and Germany. “It’s an established concept for any land-starved city. I think Delhi can try the canal project too where panels are laid on a Narmada canal in Gujarat. It may be costly on the Yamuna though because of the size.” ‘Rooftop Revolution’, a report by Greenpeace, has estimated that of 700 sq km, which is Delhi’s total built-up space, about 31sq km is the “available roof space” that can be utilized for the solar project and that it has a potential to generate 2,557 MW, much higher than what Gujarat is generating currently.

Getting down to the energy business

Energy sits at the nub of every politician’s deepest dilemma. How to meet the demands of the electorate for affordable and reliable fuel without pushing government finances into a deep hole? In the specific context of India, this dilemma has been about providing cheap (if not free) power to farmers, subsidised LPG and kerosene to householders and affordable diesel to transporters and, at the same time, keeping a check on government finances. So far, politicians have done a poor job in striking the right balance. They have concentrated only on meeting populist demands. As a result, the energy sector is in crisis and the exchequer faces a high fiscal deficit.

The most experienced brains in the country have sought to resolve this dilemma over the past few years. Vijay Kelkar (former petroleum and finance secretary), C. Rangarajan (former governor of the RBI), B.K. Chaturvedi (former petroleum secretary, cabinet secretary and member, energy, Planning Commission) and Kirit Parikh (energy economist and also former member, energy, Planning Commission) have, at some point or the other, headed a committee of experts to look into this issue. The terms of reference for these committees have been different but their underlying purpose has been to lay down a route map for the government to meet the legitimate and understandable demands of the poor while also complying with the macro demands of financial prudence. Had previous governments implemented even part of the suggestions recommended by these committees, the current administration would not have inherited such a mess. Unfortunately, they did not or could not, because they had a fractured and unstable mandate.

Today, the political conditions are different. The government is not shackled by coalition politics, the next election is five years away and the prime minister has been elected to put the economy back on the rails of sustainable growth. There could not be a more propitious combination of circumstances to correct the imbalance. I list six initiatives below that I believe will help the government move in that direction.

One, energy prices should be market-oriented and energy subsidies should be scaled back. It would be socially and economically harsh to withdraw them totally. The poor cannot afford the current market prices, especially for LPG and kerosene. The structure of disbursement should, however, be altered. Currently, the PSUs make the initial payout. The government subsequently reimburses them, but the lag imposes an interest burden on their bottom line. Subsidies should henceforth be paid out of the Consolidated Fund of India. They should be disbursed through direct cash transfers, using the platform of Aadhaar, and the distributor intermediaries should be totally excised from the process.

Two, the government should continue the current system of graduated increase in diesel prices, by 50 paise per month, until such time as the domestic price is aligned to the market. In addition, it should contemplate raising the price of the higher grade BS1V to import parity levels as soon as practically possible. This is the grade consumed inter alia by owners of SUVs and sedans. There will, no doubt, be leakages and diversions. It is never easy to manage a dual-price regime, but the benefits should outweigh the costs. It is estimated that this initiative could save the exchequer upto Rs 10,000 crore. The supply of subsidised diesel for fuelling generator sets and telecom towers should also be choked off.

Three, the government should reinstate the decision to cap the supply of LPG cylinders to six a year. This measure was implemented but then rescinded as the elections drew near.

Four, the Rangarajan committee recommendation to hike the price of domestic gas to $8 per million metric British thermal units should be endorsed. This is, however, a controversial subject and it would be counterproductive to do something that provokes another AAP-type outburst. So the government should place the incremental revenues earned by the Reliance/ BP consortium into an escrow account. It should be kept there until the arbitration proceedings that this consortium has initiated against the government have been completed. If the arbitral tribunal accepts the consortium’s contention that the government has a contractual obligation to raise prices, the money can be released to them. If not, it can be handed over to the government. The positive effect of such an endorsement would be twofold. One, ONGC, which produces 85 per cent of India’s gas production, would see substantially enhanced earnings. Two, international industry would see this as a positive signal. The government should certainly not set up another committee to look into this matter.

Five, the government should permit private-sector participation in coal mining. Further, state governments should be encouraged to streamline and expedite land acquisition and approval procedures. Also, the many projects that are currently stranded because of delays should be quickly unclogged.

And finally, the government should take a leaf out of the experiences of

Gujarat and Madhya Pradesh with the management of state electricity boards (SEBs). Both state governments have successfully turned around their SEBs. They were able to do so because they gave the market fuller rein and persuaded the public to accept some short-term pain in return for assurances of robust and durable longer-term gains. Gujarat, for instance, segregated its main rural transmission line into two feeder lines. One feeder provided power for irrigation; the other, for lighting and cooking. The price of the former was subsidised, the price of the latter aligned to the market. The farmers accepted the quid of higher price for (controllable) household consumption in return for the quo of reliable, timely and cheap supplies for farming. Today, the Gujarat electricity board is a profitable entity.

In addition to these six specific initiatives, the government should communicate, in non-technical language, the interplay between energy prices, government finance, economic development and environmental protection. It should bring consumers into the energy debate and harness the “soft power” of public opinion to get politicians to do what is right and not just what is perceived to be popular. The prime minister is a masterful orator and his communication skills are difficult to best. He also has a deep understanding of the energy business, perhaps more so than anyone else in his cabinet. Were he to take on the task of explaining the issues and dilemmas surrounding an energy policy, the political dilemmas outlined above would be easier to resolve.

ENERGY - The Next Policy Steps for Renewable Energy

Shivanand Nimbargi

The new government, with a majority in Parliament, has the opportunity to reshape the energy sector. We can focus on energy security being a core element in the strategy for longterm growth. The new government has the opportunity to have a holistic review of the energy sector and to formulate a coordinated and synchronised approach to revitalise it.As the economy liberalised, the thrust of energy policy was on developing conventional energy as the primary engine to drive growth. As we progress, the contours of policy discourse on energy are shifting from rapid expansion of conventional energy sources to assessing their longterm economic, strategic and environmental consequences.
The economic and strategic impact of reliance on imported fuel to the carbon footprint and environmental consequences of large thermal or nuclear plants have taken centre-stage in the energy debate.
The role of non-conventional energy , especially renewables, has to move centre-stage. In a country blessed with abundant sources of renewable energy , the industry, market and the policy framework have evolved rapidly in recent years. In the last decade, the renewables sector has moved from the fringes to being one of the major sources of energy . This has been achieved with a combination of a supportive policy framework and technological advances, which have made it commercially viable and attractive for investment. The move towards renewables has reduced the carbon footprint from generation, and the potential benefits of greater substitution of conventional energy by renewables are evident.
Renewables have the potential to reorient the way we think about energy.
The viability of small or micro renewable plants and the rise of off-grid solutions can open up new ways to look at providing energy at a local level. Let us take the example of the poor man’s fuel, kerosene. The government has heavily subsidised it to keep it affordable for weaker sections of society. The subsidy is around .
`20,000 crore. If this subsidy could gradually be transferred to build generating plants supported by adequate infrastructure for renewable energy, like solar, wind and other sources, one could reduce the dependence of a large section of the population on kerosene.
In the last decade, the renewables sector has grown to 32,000 MW. However, recently, it has faced policy challenges. Renewables, especially wind and solar, have recently achieved a meaningful scale, but need support from policy. A few big-ticket measu
res could help. These include dedicated evacuation infrastructure linked to the national grid to allow optimum utilisation of renewable power, and to reduce the impact of geographical factors in the renewable potential of each state.We also need to move towards market-determined pricing, adjusting for the inherent advantages of large conventional power stations. An area needing immediate focus is the Renewable Power Obligation (RPO) framework, which was designed to encourage state electricity boards (SEBs) and captive consumers to use renewable energy . We need to implement the RPO by a carrot-and-stick policy , by recharging the market for Renewable Energy Certificates (REC), the tool for implementing the RPO framework, and charging penalties for noncompliance by SEBs and consumers.
This will create a viable market for renewable energy . The sector needs pricing certainty on RECs beyond 2017, to invest in addition of capacity .
We also need implementation of open access in the true spirit of The Electricity Act, with competitive pricing to allow unrestricted national transmission of renewable power.
A logical follow-up would be the complete integration of large renewable plants in the national grid with scheduling and forecasting to foster effective utilisation of renewable power.
The renewables sector has matured and is moving towards becoming a major participant in the energy landscape. Now, policy has to step up to enable further growth. The sector needs the support of strong institutional, financial and legal mechanisms. A move in this direction will go a long way in achieving the goal of an energy self-reliant India by 2050.
The writer is managing director and CEO, Green Infra

Online Consolidated Data Base on the Renewable Energy, Energy Efficiency Policy and Regulatory Framework in India

BACKGROUNDER

The Ministry of New and Renewable Energy Sources (MNRE) has developed an online Database to disseminate information on the renewable energy and energy efficiency policy and regulatory framework in India. The Ministry has developed Indian Renewable Energy and Energy Efficiency Database (IREEED) with summaries of policies, regulations, and incentive programs for the Central Government and all States. The entire database has been made available online at the website http://www.ireeed.org/. The IREEED had been developed as part of an Indo-US Energy dialog wherein MNRE and the US Department of Energy (US DOE) have collaborated to develop a database on clean energy policies and incentives similar to the Database of State Incentives for Renewables and Efficiency (DSIRE) that exist in United States of America.

From October 1^st, 2013 onwards IREEED website will form part of MNRE web portal managed and updated by the Ministry. The Beta version of the website was launched in April, 2013 (Website http://www.ireeed.org/index.php) and initially it contained the clean energy policies of Gujarat, Maharashtra and Rajasthan. Later, policies and data for the remaining States have also been included.

With a view to involve all the stakeholders into smooth implementation of the online availability and updation of the data, MNRE held a workshop in the Capital recently in which representatives from State Nodal agency for renewable energy and energy efficiency, State Electricity Regulatory Commissions, Ministry of Power, Bureau of Energy Efficiency and Central Electricity Authority attended the workshop.

The major features of IREEED are as below:-

i) Information on Policies and incentives: IREEED summarizes the policies of renewable energy and energy efficiency published by Ministry of New and Renewable Energy(MNRE), Bureau of Energy Efficiency (BEE) and other State Nodal Agency (SNA) and State Designated Agency(SDA).

ii) Information on Regulations: Information on Feed in Tariff (FIT), Renewable Purchase Obligations (RPOs) and Open Access (OA) regulations pertaining to renewable energy are included in IREEED.

iii) Providing Information: News pertaining to above is distributed through Twitter,Facebook and Linkedin.

iv) Search Facility: A Database Search Button on the left navigation bar to search the complete database. For someone interested only in renewable energy or energy efficiency, the search can be narrowed by clicking on the relevant search box on the left navigation bar beneath the database search button.

Ministry has sought views on IREEED’s present format, suggestions for improvement and additional formats etc from all sections of the society including academia, research institutions, NGOs, individuals etc. These will help in revising, updating and finalizing the websites, so that it becomes more informative and user-friendly. Feedback/suggestions are invited at feedback-ireeed@nic.in.

IREEED, once fully developed, is envisioned as a publicly available database that is a repository of all central and state government policies, incentives, regulations and programmesrelated to renewable energy and energy efficiency.

Renewable Energy - The way forward.

The Government recently announced an ambitious plan to produce more electricity from renewable sources as a part of its target to add 10 Giga watts of solar energy by 2017 and 20 Giga watts by 2022. The steps being taken in this direction include setting up of an ultra-mega green Solar Power Project in Rajasthan near SambharLake. The project will be the first of this scale in the world and will thus turn to be a model for future projects.

With the completion of the first phase of Jawaharlal Nehru National Solar Mission by surpassing the target, the country is set to embark on its second phase. In the first phase 1685 MW of solar energy was generated against the target of 1100 MW. In the second phase, areas for focus have been identified in Rajasthan, Kargil andLadakh.

Generation of solar energy has come a long way since we embarked on the Jawaharlal Nehru National Solar mission in 2010. Today, we generate 1.8 GW of electricity from solar energy which is going to be multiplied in the years to come.

Despite this, solar energy forms but only a small fraction of power generation in the country. In fact the entire sector of renewable energy, which includes small hydro- electric projects, contributes only 12 % to the national power kitty; about 17% comes from hydro- power and about 2% from nuclear power. The bulk 70% comes from coal and gas based plants.

Sixty-five percent of power from renewable sources comes from wind energy. Biomass accounts for 14%, small hydro- power projects contribute 13% and solar energy 5%. Other sources contribute about 3%.

This imbalance needs to be corrected on many counts, on top being the environmental concerns. When the world is seriously concerned about global warming, non-conventional sources of energy need to be exploited to the maximum extent. And that is precisely what India is trying to do. Besides, the country imports 70 % of oil which is a big drain on its foreign exchange reserves.

The total installed capacity of power generation in the country now stands at just over 223 GW, far less than the requirement. The demand for power is estimated to increase by 16 GW a year at least until 2020.

In this situation, every source of energy needs to be tapped to meet the needs of a growing economy. The 12th plan provides for increasing the capacity generation by 72 GW in thermal sector, 11 GW in hydro sector and over 5 GW in nuclear sector.

In physical terms renewable sources of energy contribute 29 GW of electricity. The country is set to double this generation to 55 GW by 2017. Solar energy generation alone will increase to 20 GW during this period under the Jawaharlal Nehru National Solar mission.

Even though India has less than global average of wind speed, wind energy has been the most successful renewable source of energy in the country. Bulk of it comes from just five states, with Tamil Nadu as the leader. An encouraging factor is that off shore wind energy is becoming cost competitive with the energy generated from fossil fuels. It therefore becomes an attractive option for electricity generation.

Biomass is another area which holds a good promise. With over 60 % of India’s population dependent on agriculture, the area throws up opportunities for power generation. No wonder major projects in this field are coming up in different states particularly in Punjab. The estimated power generation capacity in this area is put at 18000 MW. In Britain and some other European countries too, coal-fired plants are converting to bio mass. Proper exploitation of this field needs huge investments for building storage capacity and plants, the way countries like Finland and Sweden have done. In Finland 20 % of power generation and in Sweden 16% of power supply come from biomass. With about 200 tons of agricultural waste going unused in India, the potential of harnessing this area is substantial.

Though per capita greenhouse gas emissions in India are very low, it has added about 2000 clean power projects in the last decade or so. The number of greenhouse buildings where solar and wind energy mechanisms and water harvesting etc. are in place has reached 2204. The number is planned to reach 1 lakh mark-an ambitious target indeed- by 2025.

The Asian Development Bank has just announced that it will provide $500 million to build a power transmission system to carry clean electricity from wind and solar power projects in Rajasthan to the state and the National grid. Since setting up of transmission lines to evacuate power from the generating stations is a massive challenge, it will go a long way in dealing with the problem.

Today, India is in a position to help other countries also. It has offered line of credit and expertise to Cuba to develop renewable energy projects to enable it to reduce its dependence on oil imports. NTPC is exporting 250 MW of electricity to Bangladesh at a fixed tariff. India has also invested in power projects in Bhutan.

In short, keeping in view the challenges of power shortage and increasing demand in developing countries and environmental challenges across the world, India as also the rest of the world, needs to pay adequate attention to power generation through non- conventional sources. According to one estimate India has the potential to generate 150 GW of power through renewable sources alone- thanks to plenty of sunshine for most part of the year and a good wind velocity in many parts of the country. But it needs huge investment to realise it. The rich countries must come forward to help developing nations to promote clean power generation. India on its part is well on the march.

Fragile Financial Health of Power Distribution Companies

India’s power distribution system is historically plagued by high transmission and distribution losses, inadequate maintenance, low plant load factor, inept planning, lack of investment in up gradation, power theft, non-billing, inefficiency of collection, political unwillingness to raise electricity tariff etc. The end result is that the discoms are finding it very difficult to service their debts; raising alarm in the banking sector and the lending community. Even the finance ministry asked banks to stop providing working capital to utilities sitting on huge losses.

The overall loss was about 39 percent in 2001-02 and 24 percent in 2012. The accumulated losses of state power distribution companies (discoms) is estimated at about Rs 2 lakh crores. Non-revision of tariffs, subsidy arrears, the high cost of buying short-term power and high distribution losses are some key reasons for their financial ill-health. Just 7 (out of 28 Indian states) – Andhra Pradesh, Haryana, Madhya Pradesh, Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh – account for over 70 percent of the losses. Unless action is taken immediately, the discom losses would amount to about 1.2 percent of the GDP in 2014 up from 0.9 percent in 2009.

They have generally availed short-term borrowings from banks and financial institutions to cover cash losses. It has raised serious concern not only for the discoms but also for the banks/ financial institutions that gave them money. State governments also extend support to the discoms through various direct and indirect channels. Budgetary support by the state governments is in the nature of subsidies and grants in lieu of subsidised power provided to certain categories such as agricultural and domestic consumers, and equity/bond investments and direct loans to discoms. Off-budget support is in the form of state government guarantees for the loans obtained by discoms from banks/financial institutions.

Annual Report 2011-12 on The State Power Utilities – Pl. Comm.

The growing concerns over the financial health of discoms in recent years have led to setting up of several committees at various levels to examine and suggest remedial actions. The Expert Group on ‘Financial Health of State Distribution Utilities’ was constituted by the Planning Commission to assess the cumulative losses of the distribution utilities in seven states and work out financial restructuring and turnaround plans for the power distribution companies in these states. Based on its recommendations and its own assessment, the Center has brought out a scheme for the financial restructuring of state discoms. Under the scheme, banks are expected to support the restructuring of debt by waiver of penal interest, moratorium on repayment of principal and restructuring of existing loans.

The restructuring of the short-term liabilities of state discoms to bring about a turnaround in their financial position can be successful only under the following conditions:

(a) Removal of systemic deficiencies of the state discoms;

(b) Elimination of the gap between average revenue realised and average cost of supply as early as possible through periodic tariff revisions; and

Therefore, in an attempt to enable the turnaround of state-owned power distribution companies and ensure their long term viability, the Ministry of Power announced a scheme for the financial restructuring of state discoms on October 2012. The scheme aims to eliminate the systemic deficiencies in the working of the discoms and contains various measures required to be taken by state discoms and state governments to improve the operational performance of the discoms.

The Union Government is also planning to bring a State Electricity Distribution Responsibility Bill to hold state discoms accountable for their performance. States would be expected to enact similar legislation with 12 months. This is expected to provide teeth to the financial restructuring scheme.

Rating of Discoms

Distribution function is a crucial link in the electricity chain as it provides the last mile connectivity in the Electricity Sector. Over 90% of the country’s power distribution business comes under the ailing state distribution companies. Hence, achieving improvements in the financial and operational performance of the State Power Distribution Utilities is of paramount importance for the robust overall development of the Indian power sector. The state power distribution sector today presents a grim scenario with mounting financial losses and is plagued by operational and cost inefficiencies besides regulatory infirmities.

With increasing losses, and inadequate support from the State Govt., most of the State Distribution Utilities have been forced to increase their level of borrowings, mostly bank borrowings, beyond their sustainable limits. Banks in the past have generally relied on sovereign guarantees for taking loan exposures to the State Power Distribution utilities and have continued to increase their lending exposure sizably. As on date a major portion of the losses of state distribution utilities are funded by bank borrowings, mostly short term borrowings. With signs of severe financial strain emerging in the distribution sector in certain states, lending institutions, especially banks had become cautious as a result of which the fund flow to the entire state power sector had been affected adversely .

The Ministry of Power developed an Integrated Rating methodology for the State Power Distribution Utilities as a measure of their financial health. The main objectives of developing the integrated rating methodology for the state distribution utilities are:

To devise a mechanism for incentivizing/dis-incentivizing the entities in order to improve their operational & financial performance.
To facilitate realistic assessment by Banks/FIs of the risks associated with lending exposures to various distribution utilities and enable funding with appropriate loan covenants for bringing improvement in operational, financial and managerial performance.
May serve as a basis for Govt. assistance to the state power sector through various schemes like RAPDRP, NEF, etc.

The MoP mandated Power Finance Corporation (PFC) to co-ordinate the rating exercise, which in turn has appointed ICRA & CARE to carry out the rating exercise. The exercise does not cover State Power/Energy Departments and private sector distribution utilities.

Of the 39 utilities from 20 states, all four electricity distribution utilities from Gujarat got A+ rating with Dakshin Gujarat Company Ltd receiving the highest 89%. They were followed by West Bengal and Maharashtra Distribution companies with A grade. The tail end was occupied by the four discoms from Uttar Pradesh with C grade.

Renewable Energy Development: REC vs Preferential feed-in-tariff

Renewable Energy Certificates (RECs)

Charanka Solar Park, Gujarat

In January 2010, the Central Electricity Regulatory Commission (CERC) announced Regulation on Terms and Conditions for recognition and issuance of Renewable Energy Certificate for Renewable Energy Generation. Accordingly, a generating company involved in electricity generation from renewable sources of energy will be eligible to get Renewable Energy Certificate (REC) for each 1 MWh (1000 unit) of generation subject to:

It has got accreditation from State Nodal Agency
It does not have any PPA for the capacity related to such generation with distribution licensee at preferential tariff (state regulated tariff),
It sells electricity generated either to the distribution licensee at price not exceeding average pooled cost of power purchase (APCPP) of the distribution licensee for last year, or
To any other licensee or to an open access consumer at mutually agreed price, or through Power Exchange.

Captive RE Generators are also eligible for REC if they are not availing promotional Wheeling or promotional banking and not getting any electricity tax/duty exemption from the state.

This provision ensures supply of REC in the market; the demand is ensured through the mandatory Renewable Portfolio Obligations (RPO) across all Indian states. The RPOs are imposed on “Obligatory Entities” – distribution licensees, captive consumers and open-access consumers – to consume certain % of their total energy consumption through renewable energy sources. They can buy RECs from the market equivalent to the short fall in their RE purchase.

The legislative support for RPO comes from section 86 (1) (e) of the Electricity Act,-2003 which says: “to promote co–generation and generation of electricity through renewable sources of energy by providing suitable measures for connectivity with the grid and sale of electricity to any persons, and also specify, for purchase of electricity from such sources, a percentage of the total consumption of electricity in the area of a distribution licensee.”

Procedure for RE generators to avail REC

The first step on the path of REC is to get accreditation from the State Nodal Agency and then register with the Central Agency (NLDC). Thereafter the RE generator is required to verify its RE generation through the State Load Dispatch Center (SLDC). Then an application is filed with the Central Agency to get RECs issued in the dematerialized form which can be traded at the designated Power Exchanges in Delhi or Mumbai.

Salient Features of the REC Framework

Renewable Energy Certificate (REC) mechanism is a market based instrument to promote renewable energy and facilitate renewable purchase obligations (RPO).
RE generations with existing Power Purchase Agreement on preferential tariff are not eligible for REC mechanism.
REC mechanism is aimed at addressing the mismatch between availability of RE resources in the state and the requirement of the obligated entities to meet the renewable purchase obligation (RPO).
The State Electricity Commissions define who the obligated entities are: distribution companies, open access consumers, captive consumers.
Cost of electricity generation from renewable energy sources is visualized as consisting of two components: (a) cost of electricity generation equivalent to conventional energy sources and (b) the cost for environmental attributes.
Price of the electricity component would be equivalent to the weighted average power purchase cost of the discom including short term power purchase but excluding renewable power purchase.
1 REC will be issued for each 1 MWh of electricity injected into the grid from renewable energy sources.
REC would be issued only to the accredited projects of RE generators.
Grid connected RE Technologies with minimum capacity of 250 KW and approved by MNRE would be eligible under this scheme.
CERC has designated National Load dispatch Centre (NLDC) as Central Agency for registration, repository, and other functions for implementation of REC framework at national level.
Central Agency would issue REC to RE generators for specified quantity of electricity injected into the grid.
REC would be exchanged only in the CERC approved power exchanges.
Price of electricity component of RE generation would be equivalent to the weighted average power purchase cost of the discom including short term power purchase but excluding renewable power purchase.

REC would be traded only within the limits of forbearance price and floor prices. These prices would be determined by CERC in consultation with Central agency and FOR (Forum of Regulators) from time to time.

In case of default SERC may direct obligated entity to deposit into a separate fund to purchase the shortfall of REC at forbearance price.
Central Agency will extinguish the RECs sold in Power Exchanges in its records as per information provided by the Power Exchanges. The certificates will be extinguished by the Central Agency in the “First-in-First-out” order.

Feed-in Tariff

A feed-in tariff (FiT) or preferential tariff is a policy mechanism designed to encourage the development of renewable energy (RE) sources and help them move toward grid parity. It typically includes three key provisions

Guaranteed grid access
Long-term contract for the electricity produced
Purchase prices that are methodologically based on the actual cost of renewable energy generation and tend towards grid parity. This is also known as Cost-plus approach.

Under the preferential tariff, the regional or national electric grid utilities are obliged to buy renewable electricity (electricity generated from renewable sources, such as solar, wind, biomass, hydropower, etc), at the price determined by regulators using cost-plus approach. This approach enables development different RE sources and investors to obtain a reasonable return on their investments.

Salient Features of PPA framework

A Power Purchase agreement (PPA) in the field of solar power plant development is a twenty five (25) year buy back agreement done by the government with the developer.
The tariff in case of a PPA is fixed for twenty five years or as defined in the PPA agreement.
Normally PPA based projects are allocated through a competitive bidding process where the developers interested to develop a solar power plant bid through a closed reverse bidding process to get the project.
The developer who bids at the lowest tariff is allotted the project and so on.
All expected capacities to be allocated through the PPA framework in the National Solar Mission as well as Rajasthan State Solar Policy will be through a competitive bidding process.

Snapshot of REC vs Preferential Tariff Mechanisms

REC projects	PPA projects
Open access	Entry through competitive bidding
High but variable returns	Average but fixed returns
Any capacity above 250 Kw	Minimum 5 MW
Allotment is assured	Allotment depends on competition
Get RECs trading	Not eligible for REC trading
Variable tariff	Fixed tariff
No cap	Limited allotments
Tariff variable but minimum revenue REC floor + APPC	Tariff fixed for 25 years
Accelerated benefit allowed	No Accelerated Depreciation benefit

Solar Power Earning Potential in India through the REC Mechanism

Posted on April 29, 2012by Goodpal

Background of Renewable Energy Certificates (RECs)

Released in June 2008 by the Government of India, the National Action Plan for Climate Change (NAPCC) laid out a roadmap for increasing the share of renewable energy in the total generation capacity of the country. The Plan set the minimum renewable energy target at 5% of the total energy procurement by 2010 across the country, with a 1% year-on-year increase for the next 10 years, that is, 10% by 2015 and 15% by 2020. The solar RPO requirement currently ranges from 0% to 0.5% of total electricity consumed. It is expected to go up to 3% by 2022.

The potential of renewable energies (RE) is spread throughout the country and power generation from them is fairly decentralized. Therefore, the Electricity Act, 2003 has assigned the responsibility of RE promotion to the respective state electricity commissions (SERCs). Accordingly, the SERCs are empowered to ensure a certain pre-fixed percentage of renewable energy – known as renewable purchase obligation (RPO) – in the electricity mix in their respective states. But there is an in-built problem with this preposition: some states have low renewable energy potential and hence, they are constraint to fix low RPOs because it is an intra-state affair. Likewise many states are quite high on renewable energy potential, but they lacked incentive to develop it beyond their RPO requirement due to high project costs.

Therefore, in order to achieve the ambitious goal of RE development a nation-wide mechanism was needed that could allow RE deficit states to aim for bigger RPO targets and also encourages development of renewable resources in the RE rich states. Thus, the concept of renewable energy certificate (REC) was developed learning from the experiences of other countries. Besides allowing inter-state transactions, it also serves others goals, such as

Overcoming geographical hurdles in the development of renewable energy resources.
Creating competition among various RE technologies
Effective implementation of RPO targets across all states
Being a market based mechanism, it would ultimately allow the government to move away from subsidy based promotion of RE which is a drain on the exchequer

The REC essentially represents two different products: One is the commodity electricity and the other is the environmental benefit of renewable energy power. These two entities can be sold separately and independently. The electricity is sold to the local distributing company (discom) and the environmental benefit represented by the REC is paid for by the economic system of the country.

It must be noted that the REC mechanism is not an incentive scheme. It is merely a market mechanism to enable various obligated entities to meet their RPO norms specified by their respective SERCs. The mechanism co-exists with all the current incentive schemes which are generally designed for generation only.

RPOs – The Main Drivers of RE Development in India

State level Renewable Energy Purchase Obligation (RPO) regulations/norms are put in place by SERCs in most of the states. The RPO regulations are required to be met by obligated entities (distribution licensees, group captives and open access customers) by purchasing renewable energy either by entering into PPAs with renewable energy assets and/or by purchasing renewable energy certificates.

RE Producers Eligible for REC Mechanism

In order to be eligible the generating company has to meet one of the eligibility criteria, as defined by the CERC, so that the central agency (NLDC) can grant registration to the “Eligible Entity”. These are given below:

Will get accreditation from the state agency as notified by the SERC concerned;
Will not have any PPA with distribution utilities at a preferential tariff determined by the SERC; and
Will sell the electricity generated either to the distribution licensee of the area in which the eligible entity is located, at a price not exceeding the average pooled cost of power purchase (APPC) of such distribution licensee, or to any other licensee or to an open access consumer at a mutually agreed price, or through power exchange at the market-determined price.

Existing projects for which long-term PPAs are already in place will be allowed to participate in the REC scheme after the expiry of their existing PPAs. Since March 2011, RECs are traded on the power exchange for market-based price discovery, with the floor and cap being set by the CERC.

Pricing of the Electricity and the REC Component

The pricing of the electricity and the REC has to follow separate mechanisms. The electricity tariff is generally fixed as the average power purchase price (APPP) of the distributing licensee. The state electricity commissions regulate all sources of power purchase and the procurements of all distribution licensees. Thus, the power purchase expenses are calculated on the basis of the aggregate revenue requirements of the generators.

The average power purchase (APP) cost is calculated by pooling the price of all the sources of power, for which all relevant information is available well in advance. Thus there is increased certainty both for the project developers and the end consumers regarding the price of power. The most important benefit of this method is that it doesn’t unnecessarily overburden the consumer.

As per the August 23, 2011 order of CERC, the cap (forbearance) and floor prices have been fixed for five years starting from April 1, 2012. Thus, they will remain effective till March 31, 2017. It should reduce regulatory uncertainty and provide comfort to investors and lenders.

	Non Solar REC (Rs/MWh)	Solar REC (Rs/MWh)
Forbearance Price*	3300	13400
Floor Price**	1500	9300

*Forbearance Price: It is the highest difference between the CERC tariff and the APPC across states.

**Floor Price: This is the price to keep the project viable in terms of meeting the O&M expenses, Interests on loan and working capital, principal repayment etc. It is taken as the highest difference between the minimum requirement for project viability and respective state APPC of pervious year.

These new forbearance and floor prices indicate downward revision from the previous prices (ie, for solar RECs the previous cap and floor prices were Rs 17,000 and Rs 12,000).

The REC trading started in March 2011 and it is too early to draw any meaningful conclusions from the trading prices and volumes. The REC market is still evolving with the REC trading volume is significantly low compared with the overall RPO requirements in the country. Looking at the status of RE development in the country, the supply of RECs is expected to trail the RPO demand in the coming years across states.

India’s First Solar REC

M&B Switchgear has become India’s first solar developer to get itself registered by National Load Despatch Centre (NLDC) for solar renewable energy certificates (RECs) for its 1.5 MW solar plant. It is also planning to raise its capacity to 6MW and put the entire capacity under REC. Three other companies in line are Jain Irrigation (8 MW), Kanoria Chemicals (5 MW) and Numeric Power (1 MW).

Latest Solar Forbearance and Floor Prices

(Data from CERC Order of August 23, 2011: Annexure-5)

Rs/KWh	Solar PV	Solar Thermal
O&M Expenditure	0.87	1.16
Interest on Term Loan	3.92	3.75
Interest on Working capital	035	0.35
Repayment	6.08	5.79
Total	11.22	11.05

Calculation for Solar PV

State	APPC (2011-12)	CERC Tariff (PV)	Gap Between Tariff & APPC	Min Requirement	Gap Between Min Req. & APPC
Tamil Nadu	3.38	15.39	12.01	11.22	7.84
Gujarat	2.98	15.39	12.41	11.22	8.24
Haryana	2.77	15.39	12.62	11.22	8.45
Punjab	2.71	15.39	12.68	11.22	8.51
Karnataka	2.66	15.39	12.73	11.22	8.57
UP	2.62	15.39	12.77	11.22	8.60
Maharashtra	2.62	15.39	12.77	11.22	8.60
Rajasthan	2.60	15.39	12.79	11.22	8.62
Andhra Prad.	2.50	15.39	12.89	11.22	8.72
WB	2.43	15.39	12.96	11.22	8.79
Uttarakhand	2.34	15.39	13.05	11.22	8.88
HP	2.23	15.39	13.16	11.22	8.99
MP	2.09	15.39	13.30	11.22	9.13
Chhattisgarh	2.05	15.39	13.34	11.22	9.17
Kerala	1.99	15.39	13.40	11.22	9.23

Therefore, the current forbearance and floor prices are Rs 13,400 and Rs 9,300 (rounded to next hundred) and will remain valid till March 2017. A similar calculation for solar thermal projects using CERC tariff of Rs 15.05 and Minimum requirement of Rs 11.05 yields lower figures than these prices; so they are discarded in favor of these prices.

There is a wide variation in the APP costs in different states. Because of this, an obvious outcome is that the RE project implementer might sense better opportunities in states with higher APP cost rather than states which have better renewable energy generating opportunities.

Comment: The forbearance and floor prices are thus decided by the state with the lowest APPC – Kerala here. Therefore, if the calculations of CERC are realistic, any RE project should be viable anywhere in the country.

Example: Suppose you decide to set up a 1 MW solar power in Uttar Pradesh and go for REC mechanism. So you will sell the electricity at Rs 2.62 per unit and if the solar REC at the floor price of Rs 9.30, you earn Rs 11.92 per unit electricity produced. Add to that the benefit of GBI of Rs 0.50 per unit and you make Rs 12.42 per unit. If the demand-supply mechanism operates in the REC trading and the RPOs are strictly enforced in the future and you are able to sell the REC part at the mean of the cap and the floor price (ie, Rs 11.35), you end up earning Rs 14,47 / unit electricity.

A Critical Bottleneck

RPO levels are not in line with the NAPCC Roadmap

There are really two issues with the RPO targets across Indian states. First: the RPO targets (for example for 2012) vary considerably from 1 to 11 percent and are not in line with the recommended level of 7% suggested by the NAPCC. Some states such as Chhattisgarh, Haryana, Kerala, Tamil Nadu, Uttar Pradesh and West Bengal have revised their target RPO levels significantly downwards for 2012 compared with the earlier set targets. For instance, Tamil Nadu (which is rich in wind energy) has reduced the 2012 target to 9 percent compared with 14 percent of 2011. This most likely reflects poor financial health of state utilities.

Second: Only few states have set their RPO targets for longer periods into the future; most have targets only till FY 2012 or 2013. Coupled with the tendency of downward revision and lack of clear and strict enforcement mechanism, it creates uncertainty for the investors and developers, which is not good for the future of REC mechanism.

A Suggestion to Deepen the REC Market

Mr Vineeth Vijayaraghavan, Editor of Panchabuta, an online newsletter, has given this suggestion to stir enough demand for RECs. These are bought by “obligated entities” if they fail to buy the prescribed percentage of renewable energy – known as renewable purchase obligation (RPO). Normally these “obligated entities” include distribution companies, captive consumers, and open access users. They are expected to meet their shortfall in renewable energy portfolio by buying RECs.

The suggestion is to include the thermal power plants in the list of “obligated entities”; they are themselves big consumers of electricity. These plants consume power in their functioning; for example, for lighting and fans, to run coal and ash handling plants, etc. This “auxiliary consumption” is typically of the order of 7 percent of the generating capacity of the plant. Thus, a 1,000-MW thermal power plant consumes 70 MW power.

The thermal power capacity in the country is over 100,000 MW, the “auxiliary consumption” of these plants works out to 7,000 MW. Imposing a 10 percent RPO adds over 700 MW worth demand for RECs.

Let us see if and when the CERC concurs with this idea.

Summary of REC Price Trend and Outlook

We believe that the rising international prices of fossil fuel and the persistent domestic coal shortages make will continue to close the gap between the RE prices and low cost thermal power. We also expect the new RE projects/IPPs to prefer the REC route as opposed to the preferential tariff. As the REC trading takes roots, the demand and supply forces would begin to govern the REC prices which should allow a win-win situation both for the “obligated entities” and RE producers. Stricter and periodic (monthly or quarterly) enforcement of RPOs is certainly indicated for good health of REC mechanism. This, however, demands improving financial health of state electricity utilities. Current scenario can be summed up as follows:

The installed RE capacity is very low compared to the potential and the Renewable Purchase Obligation (RPO) requirements.
Many states (such as UP, Haryana, Delhi) have very low supply of RE against their RPO requirement. The generation from projected RE capacity addition will leave a shortfall for their RPO requirement in the coming years.

Sun is Shining on India’s Solar Power Program!

Posted on April 27, 2012by Goodpal

Solar Energy Prices Moving towards Grid Parity

Indian renewable energy policy makers appear to have learned a lesson from the EU: they are forcing solar power producers to compete in auctions rather than luring investors with subsidies which can hurt the economy. This is the message that came across loudly in the latest national auction (National Solar Mission’s Phase-1 Batch-2) of December 2011. The lowest bidder (Solairedirect SA, France) offered photovoltaic electricity at the rate of Rs 7,490 ($147) per megawatt-hour. According to the analysis of Bloomberg New Energy Finance, this is globally the third lowest bid after $120 for a megawatt-hour in Peru and $110 in China and also 30 percent below the global average price for solar power. This study also points out that, in terms of levelized cost, globally project developers ask for around $208 per megawatt-hour for a solar plant, $78 for a wind, and $76 for a coal plant.

The average bid price in the Batch-2 auction was Rs 8,780, which is 30 percent lower than the average of Batch-1 auction of December 2010. Therefore, even the solar prices (most expensive amongst the renewables) are fast inching towards the conventional coal based power; though still off by about 35 percent. Industry experts feel that solar power will achieve cost parity with fossil-fuel based power in next 3 – 5 years; the Indian government is a bit extra cautious and expects parity by 2019.

The reason for this happy scenario for solar energy is the falling prices of solar panels due to rapid capacity additions by the Chinese manufacturers. The price competition taking place worldwide is reflected in these latest bids. Recently, solar and Wind power developers in some Latin American countries like Brazil, Uraguay, and Peru have won contracts close to the rates of fossil fuel-based electricity.

As per current scenario, solar power is already on par with power produced from imported LNG at a production cost of Rs. 8-10 / unit.

Rising Interest in Solar Electricity

It cannot be denied that a large part of India’s solar success is due to State incentives under the National Solar Mission (NSM), which seeks to install 20GW of solar power by 2022 in the country. The Jawaharlal Nehru National Solar Mission (JNNSM) was announced in 2009. JNNSM aims to promote the development of solar energy for grid connected and off-grid power generation. The ultimate objective is to make solar power competitive with fossil based applications by 2020-2022.

Roadmap Proposed by the Jawaharlal Nehru National Solar Mission

Application Segment	Target for Phase 1 (2010-13)	Target for Phase 2 (2013-17)	Target for phase 3 (2017-22)
Solar Collectors	7 million sq. meters	15 million sq. meters	20 million sq. meters
Off-grid solar application	200 MW	1,000 MW	2,000 MW
Utility grid power including roof top	1,000-2000 MW	4,000-10,000 MW	20,000 MW

In addition to the federal program, states such as Gujarat, Karnataka, Tamil Nadu and Maharashtra have also emerged as front-runners in promoting RE by offering fiscal and tariff incentives to both domestic and overseas promoters.

Response to NSM’s Phase-1 auctions has been quite heartening: In the Batch-1 auction of December 2010, there were bids for 1,700 MW against the allocated 150 MW; in the Batch-2 bidding of December 2011, about 200 companies offered over 2,500 MW against invitation of 350 MW.

This is despite a 2010 World Bank study ‘Report On Barriers For Solar Power Development In India’ that interviewed solar developer: “Around 63% of the developers stated that barriers in policy and regulatory aspects were the most significant barriers. Around 53% of the developers stated that along with policy barriers, the infrastructure barriers are critical too.”

Nonetheless, overseas solar developers still have faith in the Indian solar market. Given the solar growth potential, global solar operators cannot afford to ignore India. International player do see good prospects in investing in India’s RE sector that largely comprises wind and solar. Recent reports by PwC and KPMG consultancies have highlighted that India is the third preferred nation after USA and China for global renewable energy investment. Major global solar suppliers have already entered or have plans to enter soon. Given the rate and quantum of tie-ups, experts feel that the solar capacity which was mere 50 MW in 2010 is set to rise to almost 10GW in next five years.

In the End…

Let us hope that all these developments will bring “light” in the homes of over 400 million Indians living in the rural and backward areas uncovered by the national power supply grid, as pointed out by a 2011 study of International Energy Agency. It will be unjust if the fruits of all these “developments” again remain limited to only about 300 million urban Indians, including the corporate sector, whose interests are primarily at the core of the so called “economic liberalization” of the country.

Hydroelectric Power Projects: Latest Threat to Himalayan Ecosystem

Posted on December 15, 2011by Goodpal

Energy Hungry Indian Economy

Today development means industrial development and that requires electricity and energy. The two most populous nations of the planet –China and India– are converting from a rather agrarian economy to industrial economy, so they need a lot of energy. Hence, both are trying to tap every possible source of energy. The large domestic populations also put significant pressure on power generation.

The demand for power has been increasing in India due to the rapid industrial growth in India. For last several years, Indian GDP has been growing annually in the range, 7 – 9 percent. Over the last 10 years, energy and peak demand shortage averaged around 8% and 12% respectively. For the Indian economy to grow at 9% annually, additional capacity of 60 GW must be added every five years. Government’s promise of 100% electricity to domestic users will also push up consumption.

Why India wants to Tap Hydro Power?

Hydro is the most well-established form of renewable electricity production. In 2010, hydro comprised about 80% of all of the renewable electricity capacity in the world, and accounted for about 20% of global electricity production capacity. Hydropower is also the most efficient means we know of to convert energy into electricity. Typically 85%-95% of the energy in water is converted to electricity, compared to 15%-20% for PV solar, 35%-45% for wind, and 30%-45% for coal. Various studies have established the ideal Hydro:Thermal power mix for India at to be at 60:40. The present mix of 75:25 is creating much problem in the Indian power system, particularly with peaking shortage. Hence, hydro power must be developed at much faster pace than rest of the other power sources.

Typical Advantages of Hydroelectric Power

Due to the following well known benefits, hydroelectric power has been historically the preferred option for power generation.

It is totally renewable and non-polluting (?) and can also provide a more stable price regime over a long period of time.
Long life – The first hydro project completed in 1897 is still in operation atDarjeeling.
It has remarkably higher efficiency (over 90%) compared to thermal (35%) and gas (around 50%).
It has inherent capability for quick starting, stopping, load variations, etc. and is thus ideally suited for meeting the peaking demand; thus, is useful for enhancing reliability and stability of the power supply system.
Generation cost is not only inflation free but it also reduces with time.
Development of hydro power projects is also in many cases associated with irrigation, drinking water, flood control, pisciculture, navigation, recreation and tourism benefits.
Being located in remote regions, hydro power installations lead to development of remote and backward areas.

India’s Hydro Power Potential

Indian government wants to tap the full identified potential of hydro power (about 150 GW) in the country by about 2025. In order to achieve that, a National Policy on Hydropower Development was launched in 1998. The initiative involved identifying potential locations for future hydro power projects throughout the country. In total, 399 potential projects (worth 148 GW) were identified which it aims to exploit by 2025. Most hydropower projects fall in the Himalayan region of North and North-East India in just a few Indian states – notably Arunachal Pradesh, Himachal Pradesh, Uttarakhand, and Jammu and Kashmir.

Ground Reality of Hydro Power Projects

The impact of hydroelectric power plant on the environment is varied and depends upon the size and type of the project. Although hydropower generation does not burn any fuel to produce power and hence does not emit greenhouse gases, there are definite negative effects that arise from the creation of reservoir and alteration of natural water flow. It is a well known fact that dams, inter-basin transfers and diversion of water for irrigation purposes have resulted in the fragmentation of 60% of the world’s rivers.

The physical environment is affected rather significantly by the construction of a hydroelectric power station. Both the river and ecosystem of the surrounding land area will be altered as soon as dam construction begins.

Displacement and people and damage to local ecology are two typical problems associated with hydropower projects. Lack of proper compensation and rehabilitation are the typical problems for people affected by such projects. Displaced people are invariably poor and have limited capacity to withstand the trauma of eviction. Corrupt official often deny them whatever compensation the government offers. As a result, they are forced to live in poverty with little survival skills in areas unfamiliar to them.

In India, 75% of people displaced by dams have not been rehabilitated. In China, almost half (46%) of those displaced are living in extreme poverty. Although indigenous people are just 8% of India’s population, they comprise 60% of those displaced by dams in their regions. Almost all of the large dams in the Philippines that have been built or proposed are on the land of indigenous people. In India and China alone, 26-58 million people have been displaced during 1950 – 1990 due to dam projects.

Other Long Term Consequences

There is protest against all major hydro projects by the local groups. Apart from the cruel reality of being displaced from their lands they are also resentful due to other reasons.

The hydro power projects in Himalayan foothills can severely damage the fragile local ecosystem by causing felling of trees and change in landscape. It forces affected people to adopt a new lifestyle in other areas – in fact; it is a drastic blow to their peaceful lifestyle in harmony with nature.
The power generated on their land is transported to far off areas to promote industrial or other urban activities. They see it as highly unfair – someone else benefiting at the cost of their ancestral land and lifestyle.
They see long term adverse impact on their life nurturing rivers. Man made construction activities near the river origins, damage to fragile local ecosystem and diversion of water flow are all affecting Himalayan glaciers. They fear that their rivers would dry out within next 2-3 decades. This was a major concern of environmental activists against the Tehri dam project at the Bhagirathi river, which is a major tributary of Ganga river. Since the dam is still being filled by the water of the Bhagirathi river since 2005, as a result Ganga is receiving less water. This is another cause of resentment.

Another Mega Hydro Project; and Concerns

Now huge hydro project at the Indo-Nepal border, the 6480 MW Pancheshwar Dam is planned to be a huge 315 m high rock fill dam, which will be the world‟s second-tallest dam after the Rogun Dam in Russia at 335 m. In comparison,China’s Three Gorges Dam is only 101 m high which is the largest dam (2,335 m) in the world. Tehri Dam is 261 m high.

The proposed Pancheswar Dam would straddle the Kali River which forms a 230 km (193 mile) boundary between India and Nepal. The project is the largest hydropower project in South Asia. The dam will submerge an area of 134 sq km; in comparison, Tehri submerged 52 sq km. Of the 134 sq.km, 120sq.km is in Uttarakhand; only 14sq.km in Nepalese territory. Officially, 82 Indian villages and 33 Nepalese villages would be completely submerged and 11,361 families would be fully displaced. Tehri Dam submerged 33 villages.

Like the Tehri Dam, the Pancheshwar Dam lies in Zone 4 of Seismic Activity. Between 1992 and 2006, over 10 earthquakes with a magnitude exceeding 5 (on the Richter scale) have had their epicenter within a radius of 10 km around the site of the proposed Pancheshwar Dam, making the Pancheshwar Dam much more vulnerable to damage in an earthquake than the Tehri Dam.

Although identified since 1962, the project has been evolving slowly over time. Just recently, India and Nepal formed the Panchmeshwar Development Authority to complete the Detailed Project Report (DPR). However, Maoist influence in Nepalis threatening to delay or derail the project.

Summary

As long as the current model of economic development will continue, poor people living near water or other natural resources will continue to be the victims. One really fails to understand why there is no sense of natural justice in Indian economic policies. Why development should only mean promoting mega-town and setting up energy guzzling industries – all at the cost of poor people living in harmony with nature.

I wonder why they still talk of things like global warming or climate change at all, when all they intend to do is to live in concrete jungles of urban areas where trees only mean a few flower pots. What is sad it is happening in China too. After completing the world’s largest hydropower plant, the Three Gorges Dam, they are coming up mega hydropower schemes in Tibet which is rightly called the “water table of Asia”. Hydro Projects in Tibet: Thirsty Dragon, Restless Neighbors

Measures to increase Coal production

The Coal India Ltd has taken a series of steps to increase coal production. These include, follow up on Environment & Forestry clearances and with the Ministry of Railways for making available rail rakes, approaching State Government for necessary assistance in land acquisition and dealing with law and order problems, regular monitoring of production in existing mines and implementation of ongoing and new projects. This information was given by the Minister of State for Coal, Shri Pratik Prakash Bapu Patil in a written reply in Rajya Sabha today.

Minister said that Coal production from Coal India Limited increased from 379.46 million tonnes in 2007-08, (terminal year of XI th Five Year Plan) to 452.19 million tonnes in 2012-13 (terminal year of the XII th Plan). The targets for coal production and achievement during the 11^th Plan period are given below:

(in million tonnes)

Year	Target	Actual
2007-08	384.51	379.46
2008-09	405.00	403.73
2009-10	435.00	431.26
2010-11	460.50	431.32
2011-12	447.00	435.84

The Minister said that the main reasons for not achieving the targets include;

· Delay in forestry clearances, environment clearance etc;

· Delay in land acquisition and R & R related issues;

· Adverse law & order conditions in some of the mining areas;

· Transportation constraints in moving coal from pithead to sidings and delay

in construction of rail Infrastructures in some of the major coalfields;

Measures to check theft and pilferage of coal

The Government has taken a number of steps to prevent theft and pilferage which include:

· Establishment of Check Posts at the vulnerable points.

· Fencing, lighting arrangements and deployment of armed guards round the clock around the coal dumping yard and railway sidings.

· Regular patrolling is conducted in and around the mine including OB dumps and at Railway sidings.

· Interaction and liaison with State/ District officials at regular intervals and holding meeting with Administration at frequent intervals.

· Issue of Challans for coal transportation by trucks outside the district after fixing hologram and putting signatures of authorized officials of Central Industrial Security Force (CISF) to check pilferage.

· Lodging of FIRs by the Management of the collieries and CISF with local Police Station against the pilferage/theft of coal.

· Filling/dozing/sealing/blasting of the old/abandoned exposed coalfaces in phased manner.

· GPS based truck transportation of coal.

Theft and pilferage of coal is carried out stealthily and clandestinely. As such, it is not possible to quantify the losses incurred on account of theft and pilferage of coal. However, regular FIRs are lodged by the Management of the Collieries and CISF with local Thana whenever any such instance of theft and pilferage of coal comes to the notice. This information was given by the Minister of State for Coal, Shri Pratik Prakash Bapu Patil in a written reply in Rajya Sabha today.

National Clean Energy Fund

Government proposes to tap the National Clean Energy Fund (NCEF) proceeds to subsidise the capacity addition envisaged in the 2nd phase of the National Solar Mission (NSM).

The Government has approved implementation of a ‘’Scheme for Setting up of Grid-connected Solar PV Power Projects of 750 MW aggregate capacity on Build-Own-Operate basis under batch-1 of 2nd phase of the National Solar Mission (NSM) with Viability Gap Funding (VGF) support to the tune of Rs.1875crore (maximum) from the National Clean Energy Fund (NCEF)’’ on 3rd October 2013.

The scheme envisages setting up of the projects on Build-Own-Operate basis, purchase of the generated power by Solar Energy Corporation of India (SECI) at a fixed levelised tariff of Rs.5.45 per kWh for 25 years and its onward sale to willing State Utilities/ Discoms at a fixed tariff of Rs.5.50 per unit for 25 years. The projects will be selected based on a process of reverse bidding on VGF required by the developers. Detailed guidelines for implementation of the scheme have been issued by the Ministry on 25.10.2013 and Request for Selection (RfS) document has been issued by SECI on 28.10.2013. The closing date for receipt of proposals in response to the RfS is 28.12.2013.

Solar Cities

The Ministry of New and Renewable Energy has been implementing a programme on “Development of Solar Cities” under which a total of 60 cities/towns are proposed to be supported for development as “Solar/ Green Cities”. So far, in principle approval has been accorded to 55 cities of which 45 cities have been sanctioned. Out of these 45 Cities the Master Plans have been finalized for 36 cities. The criteria set by the Ministry for the identification of cities include a city having population between 50,000 to 50 lakh (with relaxation given to special category States including North-East States), initiatives and regulatory measures already taken alongwith a high level of commitment in promoting energy efficiency and renewable energy.

As per the proposal received from various states, so far, an amount of Rs.21.23 crore has been sanctioned for preparation of Master Plans, Solar City Cells and Promotional Activities for 45 cities, out of which Rs. 4.64 crore has been released. Further, an amount of Rs.25.55 crore has been sanctioned for execution of renewable energy projects in 9 cities, out of which Rs.9.49 crore has been released for utilization by the concerned State Nodal Agencies/ Municipal Corporations.

A total of 60 cities/towns are proposed to be supported for development as “Solar/ Green Cities”. So far in principle approval has been accorded to 55 cities of which 45 cities have been sanctioned.

Climate Responsive Technology Design

The Ministry of New and Renewable Energy is implementing a programme on ‘Energy Efficient Solar/Green Buildings’ which promotes the energy efficient solar/ green building designs with renewable energy applications including Green Rating for Integrated Habitat Assessment(GRIHA) system.

Under the programme, the Ministry promotes the energy efficient solar/green buildings by providing incentives to promotional activities, awards to urban local bodies & green buildings having maximum RE installations, incentives to Architects/Design consultants and other related activities.

lternative Energy Sources

The installation of Grid Connected Solar Power and Wind Power Projects is a continuing process. So far 2101 MW capacity Grid Connected Solar Power Plants and 19,881 MW of Wind Power Plants have been installed in the country. The steps taken by the Government, to employ alternative energy source on a large scale are as under:

Government of India has launched Jawaharlal Nehru National Solar Mission (JNNSM) on 11th January, 2010. The Mission targets deployment of 20,000 MW of grid connected solar power by 2022 in three phases.

Provision for renewable purchase obligation for solar has been made in the National Tariff Policy.

Concessional Import duty/Excise duty exemption for setting up of solar power plants, accelerated depreciation and tax holiday.

Generation based incentive and facility for bundled power for Grid connected Solar & Wind Power Projects through various interventions announced from time to time.

Awareness programmes such as exhibitions, training workshops etc. are being conducted.

Several R&D efforts have been initiated for new technologies and improvement in efficiency.

Generation of New and Renewable Energy

Renewable energy based power projects aggregating to 4942 MW during 2011-12 and 3163 MW during 2012-13 were commissioned in the country. Source-wise details are given below:

Source-wise details of Grid-Interactive Power Capacity installed during 2011-12 and 2012-13.

(in MW)

Sector	2011-12	2012-13
Wind Power	3197.00	1698.80
Small Hydro Power	353.00	236.93
Bio-mass Power and Bagasse Co-generation	470.70	466.90
Waste to Power	17.20	6.40
Solar Power	905.00	754.14
Total	4942.90	3163.17

During the year 2013-14, against a target of 4325 MW, 1468 MW grid connected renewable power projects have been commissioned as on 31.10.2013

National Project on Biogas

The Ministry of New and Renewable Energy (MNRE) has formulated the following Schemes for exploring the potential of bio-energy-

i. Biomass Power and Biomass Cogeneration in Sugar Mills

ii. Biogas Power Generation Programme (BPGP)

iii. Biomass Gasifier Programme

iv. Waste to Energy Programme

v. National Biogas and Manure Management Programme (NBMMP)

vi. Biomass Cogeneration Non-bagasse

MNRE provides Central Financial Assistance for setting up bioenergy plants, training and awareness raising. Besides, fiscal incentives such as custom and excise duties concession, accelerated depreciation, income tax holiday and preferential tariff are also provided for grid connected bioenergy power generation projects.

Ministry of New and Renewable Energy gets evaluation studies done on installation and functioning of biogas plants through independent agencies. As per the recent study report, received in May, 2013, about 95.5% of the surveyed biogas plants have been found functional.

A target for setting up of about 1.06 lakh family type biogas plants has been fixed in the country for the year 2013-14 under the NBMMP of the Ministry.

Initiatives in the Field of New & Renewable Energy

The details of a few new initiatives taken in the field of new and renewable energy sector during the last three years and the current year are as given below:

a. Launch of Jawaharlal Nehru National Solar Mission (JNNSM). The mission envisages installation of 20,000 MW of grid solar power, 2,000 MW of off-grid solar applications and 20 million sq. m. of solar thermal collector area by 31^st March 2022.

b. Generation Based Incentives (GBI) for Wind Power projects. The scheme provides fifty paisa per unit of electricity fed to the grid with a cap of Rupees one crore per mega watt of wind power during 4 to 10 years period.

c. Viability Gap Funding for Solar Photovoltaic power projects. Grid-connected Solar Photovoltaic Power Projects of 750 MW aggregate capacity to the tune of Rs 1,875 crores (maximum) from the National Clean Energy Fund.

d. Build-own-operate model in the field of Solar and Biomass Power.

e. Intensive resource assessment of solar and wind energy.

In a major achievement for the power sector, Southern Grid synchronously connected with the National Power Grid
Indian power system becomes one of the largest operating synchronous grids in the world

The Southern Grid has been synchronously connected to the rest of the Grid in the country. With this, the mission of ‘One Nation – One Grid – One Frequency’ has been successfully accomplished. The southern grid connectivity was achieved on the evening of December 31, 2013 through commissioning of Raichur-Solapur 765 kV single circuit transmission line by Power Grid Corporation of India Limited, the Central Transmission Utility of the country, interconnecting the Southern grid synchronously with the rest of the national power grid facilitating bulk transfer of power across regional boundaries. This line of 208 circuit kilometers (ckm) and 765/400 kV substations at Raichur and Sholapur has been commissioned five months ahead of its contractual schedule i.e. 31st May, 2014 at a cost of approximately Rs.815 crores. With this interconnection, Indian power system has entered into a new era and become one of the largest operating synchronous grids in the world with about 232GW of installed power generation capacity.

Synchronous integration of Southern Grid with rest of the national power Grid shall not only augment the inter-regional power transfer capacity of Southern region but also relieve the congestion being experienced in few transmission corridors. This will be a great boost for further economic growth of the country. It is likely to take a few months before power flow over this line is stabilized.

Indian Power System is operating through five Regional Grids and a Pan India synchronous grid was envisaged for optimal utilization of the generation resources in the country. Till now, four regional grids namely Northern, Eastern, Western and North-eastern regions (NEW grid) were connected synchronously and Southern Region (SR) was connected to this NEW grid through HVDC links. Synchronous interconnection of SR with NEW grid was envisaged through high capacity 765 kV Raichur – Sholapur lines, as an ultimate step towards establishment of an “All India Synchronous National Grid” facilitating bulk transfer of power across regional boundaries.

Scheme for operationalization of Power System Development Fund.

The Union Cabinet today approved the proposal of the Ministry of Power for operationalization of the Power System Development Fund (PSDF) and the scheme formulated for utilization of funds deposited therein based on the procedure laid down in the Central Electricity Regulatory Commission (CERC) Power System Development Fund Regulations.

The Power System Development Fund will be utilized for the following purposes :

i) Creating necessary transmission systems of strategic importance based on operational feedback by Load Dispatch Centers for relieving congestion in Inter-State Transmission Systems (ISTS) and intra-state system which are incidental to the ISTS.

ii) Installation of shunt capacitors, series compensators and other reactive energy generators for improvement of voltage profile in the grid.

iii) Installation of standard and special protection schemes, pilot and demonstrative projects, and for setting right discrepancies identified in protection audits on regional basis.

iv) Renovation and Modernization (R&M) of transmission and distribution systems for relieving congestion.

v) Any other scheme / project in furtherance of the above objectives, such as, conducting technical studies and capacity building, etc.

The PSDF will be operationalized within three months.

Power System Development Fund (PSDF)

The Government has approved the scheme for operationisation of Power System Development Fund (PSDF) in January, 2014. As on 31.12.2013, about Rs.6300 crore was available with this Fund.

The criteria and purpose for which the PSDF will be utilized are as follows:

1. Creating necessary transmission systems of strategic importance based on operational feedback by Load Dispatch Centers for relieving congestion in Inter-State Transmission Systems (ISTS) and Intra-State System which are incidental to the ISTS.

2. Installation of shunt capacitors, series compensators and other reactive energy generators for improvement of voltage profile in the grid.

3. Installation of standard and special protection schemes, pilot and demonstrative projects, and for setting right the discrepancies identified in protection audits on regional basis.

4. Renovation and Modernization (R&M) of transmission and distribution systems for relieving congestion.

5. Any other scheme / project in furtherance of the above objectives, such as, conducting technical studies and capacity building etc.

Projects proposed by distribution utilities in the above areas that have a bearing on grid safety and security, provided these are not covered under any other scheme of the Government of India will be eligible under this scheme. Private Sector projects will not be eligible for assistance from the Fund.

Tense over energy

South Asia is looking at an energy abyss. Millions of its people have no access to electricity or any other energy. This has put the brakes on the high growth rates in what should have been a dynamic region. High dependence on petroleum import coupled with mismanagement of their energy sector has made the SAARC countries extremely vulnerable. Cooperation could be a way out. Latha Jishnu travels across Pakistan to find out if India and its largest neighbour can set aside their mutual distrust and find solutions for the energy security of the region. From Bangladesh, Sayantan Bera brings a more hopeful report as he visits the site of the region’s latest inter-country power exchange between India and Bangladesh. Ankur Paliwal analyses the mood in Nepal and Sri Lanka along with the prospects of a South Asian grid

Photos: Reuters

On a blazing morning in May 2012, top government representatives of two Central Asian states (CAS), Afghanistan and Pakistan, stream into a plush conference room at the Grand Hyatt in Dubai to discuss an ambitious energy project. There is a heavy contingent of World Bank officials on hand to steer the ministerial talks on the $1 billion project that will bring electricity from the energy-rich countries of Kyrgyzstan and Turkmenistan to South Asia. The CASA 1000 project, as it is called, is expected to be the harbinger of improved energy security in South Asia, which is essentially an area of darkness.

CASA 1000, which the World Bank is part-funding with a loan of $510 million, is projected to bring in 1,300 mega Watt (MW) of electricity into Afghanistan from its neighbours who are floating in petroleum and have enough power to spare. War-torn Afghanistan requires just 300 MW currently and the rest is to be transmitted to Pakistan. The project is part of a grand idea of integrating the energy infrastructure of the region which was thrown up by a summit of South Asian Association for Regional Cooperation, or SAARC, leaders in 2004 in Islamabad. The idea is to have energy rings in places where trading of power is possible (see ‘Power exchange’ [4]).

Source: The report, ‘Prospects for Regional Cooperation on Cross-Border Electricity Trade in South Asia’ by South Asia Regional Integration (SARI) Project by USAID and Integrated Research and Action for Development

At the Dubai meeting there is general agreement on this path-breaking venture among the assembled officials. But the more interesting development for the rest of South Asia, particularly India and Pakistan, is the interest in another initiative: a power link between the two neighbours who are also the largest countries in the eight-member SAARC. On the sidelines of the CASA meeting, the World Bank holds an unscheduled session to discuss power trade between Pakistan and India.

It is here that the project for exchange of 500 MW of power from India to Pakistan is initiated, with then Pakistan minister for water and power Naveed Qamar readily agreeing to a pre-feasibility study. Later, the minister pulls out all stops to get the report finalised in double quick time. But, despite being fast tracked and the World Bank putting its full powers of persuasion behind it, the electricity link between Amritsar in Indian Punjab and Lahore in Pakistan’s Punjab has still a long way to go. High-level delegations of the two countries have met to discuss the power trade but there is no tangible outcome as yet. The deliberations have been kept confidential; there is nothing on paper.

What has been achieved so far is a pre-feasibility report by consultants appointed by the World Bank for the project which will cost no more than $120 million. In Islamabad there are complaints about the “not very cooperative attitude of the Indian bureaucracy” which refused to share details of power availability and the way the electricity markets work in India. For its part, Indian officialdom justifies its position by saying it could not have done otherwise because there is no formal agreement on inter-connectivity. Experts say that barring the political nod everything is in place for the grids to be connected. The broad regulatory frameworks and associated laws in both India and Pakistan are similar and pose no legal hurdle to power trade, they say. Neither do the technical aspects.

According to them, all that is needed is a 30-40 km high voltage direct current (HVDC) transmission line. Although India works on a 400-kilovolt (kv) line while Pakistan uses 500 kv, a back-to-back alternate system should work, they say. For India, the cost is minimal, at around $10-15 million, according to persons privy to the report. The rest of the cost will be borne by Pakistan which has reportedly called for a final feasibility report.

Qamar, who was stripped of his portfolio in June 2012 ostensibly because of the acute power crisis in Pakistan that had resulted in heavy load-shedding in its Punjab province and shifted to the defence ministry in the Yousuf Raza Gilani government, told Down To Earth (DTE), “There are too many political issues to be resolved between the two countries but Pakistan is moving forward on these. India has to understand this change.” This is a common refrain in Pakistan where officials, political analysts and journalists accuse New Delhi of failing to respond to the new political winds blowing across the country. They believe that India’s intransigence and insistence on resolving issues bilaterally is the main impediment to a cohesive South Asia.

Qamar and others of his ilk could be a mite too sanguine about Pakistan’s desire to move forward on cooperation. There is invariably some political opposition to any rapprochement.

In September this year, the Senate Standing Committee on Water and Power opposed the move to import electricity from India and said the government should not be wasting huge amounts of money undertaking feasibility studies and raising loans from multilateral agencies. In a report from Islamabad, Dawn quoted Senator Zahid Khan of Awami National Party, chairperson of the standing committee, as saying, “How is it possible to import electricity from India amid exchange of heavy firing on the borders for 20 days in a month?” The money, he said, would be better utilised in expediting hydropower projects.

This is but a small example of how complex such issues, even a mutually beneficial power exchange, can become in South Asia. It is a region like no other. Historical rivalries have left a bitter legacy of deeply entrenched antagonisms and a huge trust deficit. India is viewed with suspicion by its neighbours. Or, as an arrogant and sometimes meddlesome Big brother of South Asia. The exceptions have been Bhutan and till recently Maldives with which it has enjoyed a sound relationship.

[5]

In fact, the tragedy of SAARC has been that the Bhutan example has not proliferated. Since 1974, the Himalayan Kingdom has been supplying hydropower to India, the total now coming to around 1,000 MW. The consequences of mutual distrust are immense for the 1.62 billion people who live here, people who account for the largest number of the poorest outside of sub-Saharan Africa. In terms of energy security, too, they are among the most vulnerable. Hundreds of millions have no access to electricity, whereas their giant neighbour China provides power to practically its entire population (99.7 per cent).

India’s Big Brother attitude

Viewed as the regional superpower, India is usually blamed for having stalled cooperative energy ventures. Charles Ebinger, author of Energy and Security in South Asia: Cooperation or Conflict? sums up the mess and political impediments with the example of Nepal. He says hydropower is “one of the great tragedies of the region” because its tremendous resources lie unexploited.

Nepal’s total installed capacity is just 757 MW, the size of one coal plant in India, it is sitting on a potential of at least 43,000 MW of commercially viable hydropower. It is this fact that upsets Ebinger. At the launch of his authoritative book on South Asia, Ebinger, director of the Energy Security Initiative and a senior fellow at Brookings Institution, had this to say: “I literally spent 10 years representing the government of Nepal on funding by various donor agencies.

For 10 years our team argued that because building these dams would dislodge farmers and poor people from where they live in Nepal, and because India would gain major irrigation and downstream flood control benefits, that these ought to be considerations in the electricity tariff that would be negotiated on a particular project. And for 10 years I heard respective Indian power ministers and secretaries say no. Not ‘no, we will negotiate,’ but just ‘no’. To be fair, to the Indian side, in the 10 years I worked there, I had no less than 14 secretaries of energy on the Nepali side, so that every time we would get the minister up to speed on what we were trying to do with trading with India, the government would fall and we’d have a new person.”

It is easy to see India as the villain of the piece in all such failures. But other countries, too, have been equally mistrustful. In the case of the Iran-Pakistan-India gas pipeline [6], which has been in the works for close to a quarter century, international analysts say Islamabad did play politics with the first pipeline project in South Asia (see ‘Still in the pipeline’ [7]). India’s misgivings on the security of the project and finally the sanctions pressure exerted by the US have made it opt out of the multi-billion dollar project. The big game that is played over the world’s energy resources makes no concession for pusillanimity and that is why there are thousands of kilometres of pipelines stretching from Russia, Central Asia going all the way to China but none coming to this part of the world.

There was a time, during Mani Shankar Aiyar’s tenure as minister for petroleum and natural gas (2004-06), when India was in the forefront of seeking energy cooperation not just with its SAARC partners but China, Russia and West Asia, too. In January 2006, he famously said, “The Asian Resurgence depends on energy cooperation in Asia. The 21st century will indeed be the Asian century only if Asian countries join hands in a continent-wide bid at bringing Asia together and keeping Asia together.” He was sacked by Manmohan Singh within days of that speech.

In a detailed conversation with DTE, Aiyar explains how and why cooperation between India, Bangladesh and Myanmar on a gas pipeline, a deal that he had in the bag, was torpedoed by the Ministry of External Affairs for geopolitical and security reasons (see www.downtoearth.org.in [8] for detailed interview). His belief is that the future of South Asia lies in the region coming together, in enmeshing the economies together, primarily through energy linkages. “In our quest for energy security, we seem to be paralysed in our search for friends and partners, or to have abandoned the effort in despair,” says Aiyar.

Mismanagement

Pakistan is possibly in the worst fix amongst all SAARC countries on energy. Shortfall in electricity supply currently averages at 25 per cent of demand or 4,000 MW, increasing to 6,000 MW in peak season. Peak power load shedding extends to 20 hours in rural areas and to eight in urban areas. In winters, the outlook is chilly because the shortfall in natural gas supply is as much as 50 per cent of the demand. One of the reasons for the five-day week in Pakistan is to conserve dwindling fuel supplies.

Efficient combined cycle power generation capacity remains idle due to shortfall in gas supply and less efficient fuel oil-fired steam units are being operated to meet the demand which increases the cost of electricity generated. This is a sad state for a country that was among the first to embark on a major utilisation of gas after the discovery of the giant Sui field in the 1950s with even its vehicles running on compressed natural gas (CNG). Its automobile fleet is probably the largest user of CNG anywhere in the world.

But heavy subsidies have messed up the gas market thoroughly, a problem compounded by the fact that no fresh exploration has taken place because of lack of incentives to do so. Points out Abid Suleri, executive director of the Islamabad-based Sustainable Development Policy Institute, “All gas supplies came with a pilot light or a small flame that was always kept alight. Nobody wastes matches in lighting the gas. Ditto for geysers which run on gas and are never turned off.”

Consumer electricity prices, however, have doubled in the last three years, and are currently among the highest in South Asia, with tariffs ranging between 7 cents and 12 cents per unit. Yet, Pakistan’s circular debt problems are a besetting worry. This is the result of its Central Power Purchasing Agency having no money to pay the power supply companies because of non-payment by the provincial and federal governments.

On December 9, the Asian Development Bank (ADB) stepped in with a loan of $900 million for a new supercritical coal power generation that is being planned as an emergency measure. Announcing the loan for the 600 MW plant, Klaus Gerhaeusser, director-general of ADB’s central and west Asia department, spoke of “acute power shortages of up to 20 hours a day that have crippled economic growth and are contributing to unemployment and social unrest across the country”.

Perhaps that is one reason Pakistan is willing to talk to India on buying imported liquified natural gas (LNG) from the state-owned Gas Authority of India Ltd (GAIL). Sources in the petroleum ministry in New Delhi say India is ready to export 400 million cubic feet of gas daily to Pakistan if the price is right. This would involve the laying of a 110-km pipeline between Jalandhar and Attari. Although negotiations lost momentum after fresh outbreak of hostilities on the Line of Control, in September talks resumed during the visit to Delhi of Sartaj Aziz, adviser on foreign policy to Prime Minister Mian Nawaz Sharif.

The Indian side is reportedly seeking payment guarantees before it inks a gas supply contract. While such guarantees form part of any commercial deal, the sticking point is the $21 per million British thermal units (mBtu) that GAIL wants. Imported LNG, costing around $14 mBtu will be regassified before it is piped to Pakistan. If the project does see the light of day it would provide a much stronger thrust to regional energy cooperation than the power exchange that is taking place between India and Bangladesh.

For Pakistan, which expects to have its first LNG terminal ready by the end of 2014, there is every reason to push the project if a deal can be struck on prices. Official source in Islamabad told DTE, “No government will survive if it buys from India at this price.” The energy crisis has led to a sharp drop in investment and left industry and small businesses in bad shape. In 2012, the shortfall lopped an estimated two percentage points off the country’s GDP, while the rising tab for imported fuel oil continues to strain its finances.

Increasing high speed diesel import sucks up a significant portion of GDP

India’s power situation is not all that comfortable either, with an energy deficit of 8 per cent and peak demand shortfall of over 9 per cent. In July 2012 it suffered a massive grid collapse, leaving most of north India in utter darkness for several hours, twice in the course of a week. That is one reason some Indian officials scoff at the idea of energy cooperation because they say there simply isn’t enough power to go around. Mismanagement of the resources, and the high levels of energy subsidy in each of these countries coupled with spiralling demand have meant that governments are forced to take decisions that do not bode well for their economies or their environment. Take the case of Bangladesh.

In October this year, Bangladesh celebrated a milestone: the power generation capacity crossed 10,000 MW. There was reason to celebrate because for years on end there were 10-hour power cuts countrywide. Now per capita consumption is up 75 per cent to 321 kWh. But these increases have come at a cost. Much of the capacity addition has been through expensive oil-fuelled plants where per unit cost of generation is 15 times that of gas stations or four times that of coal-fired plants. Although the bulk (65 per cent) of the electricity is now generated from natural gas, coal will be the fuel of the future. Such plants are expected to produce half the electricity by 2030 while gas will account for just 23 per cent due to depleting reserves. Interestingly, it is banking on the regional grid to provide nine per cent while nuclear is envisaged to contribute 10 per cent. The share of oil-fuelled power plants will be cut to five per cent.

significant portion of the GDP. In 2012 alone Bangladesh spent 4.1 per cent of its GDP to pay for oil imports. For a country which still runs its energy-intensive sectors on supply of cheap domestic gas, the advent of oil-fired power plants has been a costly choice. “The government aggressively promoted oil-based power generation as an emergency measure which is costly and inefficient. It also brought in private players to start these plants guaranteeing them huge profits,” says Anu Muhammad, professor of economics at the Jahangirnagar University, Dhaka, and secretary of the National Committee to Protect Oil Gas Mineral Resources Power and Ports, a civil society group working on energy issues.

All of South Asia is vulnerable on the count as there is increasing dependence on imported energy, specially petroleum. India imports 80 per cent of the crude oil it requires, while Pakistan imports over 84 per cent and Bangladesh over 95 per cent; the other South Asian economies rely totally on imported oil. An equally important statistic is that nearly a fourth of the energy input that goes into economies of these countries comes from traditional biomass. The per capita energy use in the SAARC region is only 514 kg of oil equivalent per capita per year, a pathetic figure compared to other regions.

What is the outlook? Energy experts say SAARC’s primary energy demand could increase by 50 per cent by 2030 while its power demand could triple by 2030. Despite the apparent deficit, Ebinger believes the way forward is cooperation. He says South Asia is sitting on huge domestic resources, such as coal and natural gas even if it is “not as great in the existing fields as we had thought.” Cooperation, he insist, is the only way.

India, according to the International Energy Agency, has 63 trillion cubic feet of shale gas, apart from the possibility of large reserves of conventional gas that is yet to be explored. Pakistan, too, has substantial deposits, but in the tribal areas of Balochistan where violent insurgency is under way.

But ultimately, energy cannot be divorced from overall trade. SAARC is economically the least integrated of trade blocs. Bilateral trade between India and Pakistan is insignificant at $ 3 billion, which is just a fraction of their overall trade with the rest of the world. Before the romance of energy cooperation, the region needs the bedrock of larger commercial exchanges.

For detailed interviews see http://www.downtoearth.org.in [8]

Still in the pipeline—gas and peace

The geopolitics of pipelines and how India lost out on cheap gas supplies

Iran has completed its stretch of the pipeline, while Pakistan has till December 2014 to finish its part

Nothing exemplifies the geopolitics of energy and its impact on developing countries better than the Iran-Pakistan-India (IPI) pipeline [6]. The project, often referred to as the ‘peace pipeline’, has over the course of its long and winding history become a two-letter acronym, IP, after India pulled out of the project in 2009 under US pressure. Delhi was forced to distance itself from Teheran in the wake of its nuclear deal with Washington, a policy that has had serious costs: estranged relations with an old ally and the possibility of ensuring, at least partly, its energy security.

Pakistan, desperate for gas which is its energy lifeline, has gone ahead with the pipeline in defiance of US warnings. The pipeline was originally envisaged to be 2,670-km long, with the longest stretch of 1,115 km lying inside Iran and another 700 km in Pakistan. It would have brought both India and Pakistan around 1 billion cubic feet daily of gas from the enormous South Pars field. The IP pipeline was first proposed by Iranian and Indian officials in Teheran and Delhi in 1989.

There is a chequered history to the pipeline with both Pakistan and India blowing hot and hot over the project in response to regional politics and superpower pressures. While traditional rivalry and mistrust between the Asian neighbours was initially responsible for holding up the project, the Iraqi invasion of Kuwait in 1990 upset India’s traditional oil supply lines and prompted it to sign a memorandum of understanding with Iran on energy cooperation despite unresolved concerns on the security of the pipeline which passes through insurgence-racked Balochistan. Two years later, in 1995, Pakistan, too, signed an agreement with Iran on the pipeline. Since then, a large section of the IP pipeline has been completed. Iran has completed its section of the pipeline and is helping Pakistan with its stretch (see picture). There was jubilation in Islamabad when Iran and western powers [9]reached a pact in Geneva late in November on the question of Iran’s nuclear programme. However, Washington has made it clear that sanctions remain in place on the pipeline.

The clarification was made after Iran and Pakistan decided to set a time frame for implementing the pipeline project during a visit to Teheran by Sartaj Aziz, Pakistan Prime Minister's Advisor on National Security. Under the terms of the bilateral agreement, Pakistan has to complete the pipeline by December 2014, but this is in doubt since funding has dried up. Iran has expressed its inability to provide the promised $500 million of the total cost of $1.8 billion for constructing the pipeline while the threat of US sanctions has kept lenders away.

The major snag, however, is the price of gas. Initially, the three parties had agreed upon a price of $4.93 per million British thermal units (mBtu), a price benchmarked to crude oil prices. This will prove hugely uneconomic, a just-released report by the reputed think tank Sustainable Development Policy Institute (SDPI) warns. It points out that the increase in gas supplies in the US has led to a decoupling of gas prices from crude oil rates and suggests that the Pakistan government rethink its energy policy options. Arshad H Abbasi, author of the study, told Down To Earth (DTE): “Our study questions the price of gas agreed upon in the agreement with Iran.” The gas is intended for generating electricity and Abbasi’s calculations show that far from being the panacea for Pakistan’s energy problem as it is promoted, IP gas pipeline project would, under current pricing formula, push up generation costs by as much as $4.2 billion instead of helping to save $2.4 billion by replacing costly furnace oil.

The SDPI report also suggests that India should look at the IP project “to create greater energy security”. Clearly, having India as a buyer would help in negotiating more reasonable rates with the Iranians. Pakistan is clearly missing Mani Shankar Aiyar, former petroleum minister of India who pursued a vigorous policy of regional cooperation. Talking to DTE Aiyar recalled that in January 2005 he visited Pakistan to discuss gas prices. “I had proposed that gas and oil are two important commodities and we should unite for it and form an Asian Union. I went from Islamabad to Karachi, from there to Tehran, where the Iranian minister said, ‘so, you have been conspiring with Pakistan against us’. So I looked at him and said there is a problem between India and Pakistan and if we don’t hang together you would conspire against us and we would eventually end up paying very much higher prices.”

At the moment India is not interested in the IP project. A senior official of the Ministry of Petroleum says its focus is on another project, the Turkmenistan-Afghan-Pakistan-India pipeline. The price of that gas, says the SDPI report, will be as costly since they are linked to crude prices.

Push for energy trade comes from WB

Vaqar Zakaria is an energy expert who has assisted Pakistan’s Planning Commission, energy ministries, state-owned utilities, the World Bank, the Asian Development Bank, and the private sector in the development of energy infrastructure, including transboundary gas pipelines. He is chairperson of the National Transmission and Dispatch Company (NTDC), and a member of the board of directors of EngroPowergen Limited, a company that owns and operates a combined cycle power plant in the Sindh province and holds interest in Sindh Engro Coal Mining Company for mining of coal in the Thar and for setting up coal-fired power generation projects in Pakistan. In an interview to Latha Jishnu, he explains why he is not too hopeful about cross-border energy cooperation with India. Excerpts:

Vaqar ZakariaWill energy cooperation between India and Pakistan take off or will politics always cloud any possibility?

The near term outlook is not conducive or encouraging with the prevailing conflicts between India and Pakistan and in Afghanistan, associated with withdrawal of US troops. The push for energy trade between India and Pakistan is mainly supported by the international finance institutions, primarily World Bank, with limited active interest and support from the governments. The possible game changer on the horizon is regional strategic adjustment post US withdrawal from Afghanistan. The other possibility is containment of terrorism by Pakistan followed by economic growth and security which will support the development of regional markets and trade.

How do you see the South Asia grid shaping up? Will it benefit Pakistan?

The foundations for grid are already there, with trade taking place between other South Asian countries. Much of the technical and commercial groundwork for Pakistan-India trade has already been done, and connections can be built at a fairly low cost given the proximity of the transmission systems, generation capacities, and demand centres across the border. Pakistan can benefit tremendously by trade both in terms of reduction in peak shortfalls and cost of electricity.

How hopeful are you of the Iran-Pakistan pipeline taking off especially after Iran expressed its inability to provide funds for its construction?

Starting in mid-nineties when BHP was developing the project, the price of gas offered by Iran has risen from just about 1.0 $/mBtu to over $15/mBtu. The global gas and LNG market has also changed dramatically since, with entry of shale gas and improvements in LNG technology. The US sanctions are in effect, and Pakistan is grappling with a deteriorating security situation in Balochistan. Iran will also have to invest in development of gas fields for a secure long-term supply, and both Iran and Pakistan are struggling to arrange financing for the energy sector. Pakistan may divert the scarce capital to LNG and power generation, as opposed to blocking it in a pipeline. All these considerations do not support an early realisation of the IP gas pipeline project.

If the project sees the light of day do you see any prospects of India joining it?

For reasons stated earlier, combined with a longer distance of pipeline to India, transit fees through Pakistan, and already established LNG terminals in India, the prospects of India joining in do not look bright. Pakistan may offer a better price to Iran if at all the project matures. A capacity increase and extension of pipeline to India would be a possibility if Pakistan starts purchasing and the operation is demonstrated as secure through Pakistan.

Pakistan appears to be banking on cooperation with Central Asia to meet its future energy requirements.

Currently, the projects under active consideration are the CASA 1000 project for import of about 1,300 MW of electricity (corresponding to about 6 per cent of the demand in Pakistan) from Kyrgyzstan and Turkmenistan, and the TAPI project for import of 3 bscfd gas from Turkmenistan. Of this, Pakistan has expressed intentions to lift 1 bscfd (corresponding to about 20 per cent of country demand), while 2 bscfd will flow to India. These projects are also more complicated with multiple countries and multiple governments involved and associated risk and liability management.

In such a scenario how important is South Asian energy cooperation for Pakistan?

This would be the simplest and most economic alternative taking into account the investment, technology, security, and market fundamentals. The bilateral and regional security and stability gains would be enormous.

Is the TAPI project viable?

The security risks and commercial complexity make the project difficult to realise, but the potential benefits are so great that it would be worthwhile for India and Pakistan to do whatever they can to make this project happen.

Power exchange

Cooperation between South Asian countries may solve energy crisis. But is it possible?

South Asia’s latest inter-nation power grid at Bheramara, Bangladesh (Photo: Sayantan Bera)

It’s like the buzz of a million bees. The reverberation is caused by the sheer volume of power flowing into the 400 kilovolt (kv) high-voltage power transmission line at Bheramara, a small town in Kushtia district of Bangladesh. The transmission line and substation, which became operational on October 5 this year, are South Asia’s latest inter-nation power grid through which India supplies 500 mega Watt (MW) of electricity to Bangladesh every day. This is substantial for a country whose largest power plant has a capacity of just 450 MW.

The substation is a highpoint in the career of Kazi Istiaq Hasan, project director of Power Grid Company of Bangladesh. Spread over 45.7 hectares, it has 98 km of transmission lines running between the two countries through 197 towers. “From planning, designing to execution, it took a record time of three years. It happened due to the involvement of both countries’ prime minister’s offices,” he says.

This is the first bilateral thermal power exchange in the South Asian energy ring mooted during the 12th SAARC summit in Islamabad in 2004 (see ‘South Asia power network’). The super grid is still a concept but the Bheramera substation is a move towards its creation. India already has two such interconnections, with Bhutan and Nepal. These are hydropower-based.

[10]

Solution to power crisis?

The eight SAARC nations believe energy cooperation can solve the region’s power crisis. At a recent conference organised by the Independent Power Producers Association of India (IPPAI) in New Delhi, envoys of six SAARC countries, including Afghanistan, hailed the energy ring. Bangladesh’s high commissioner Tariq A Karim said his country could use surplus power from the proposed 69,000-MW generation in Arunachal Pradesh. His Pakistani counterpart Salman Bashir wanted power cooperation to move beyond politics and have the grid extended to his country. Sri Lanka’s Prasad Kariawasam stressed on exploring the possibility of exporting wind energy to India.

The SAARC Power Exchange Report, published last year by the Islamabad-based SAARC Energy Centre, states that South Asia characteristically has surplus power resources and electricity deficit areas. The Himalaya-fed water resources of Bhutan and Nepal, for instance, have immense untapped hydropower potential. Bhutan generates only five per cent of its estimated 40,000 MW hydropower potential.

For Nepal, the generation is merely 1.7 per cent of its capacity of 43,000 MW. Sri Lanka has tapped very little of its 10,000 MW wind power. Bangladesh and Maldives are almost entirely dependent on fossil fuel. In Afghanistan, one in every three persons has access to electricity. India and Pakistan, the two larger economies, depend on a mix of hydro and thermal capacities. Their dependence on imported fossil fuel is rising steadily.

“An interconnected power system will help overcome the mismatch between energy demand and energy resource endowments in the region and enhance energy security,” says Hilal Raza, director of SAARC Energy Centre. This will reduce reliance on expensive import of oil, gas and coal. “Domestic energy developments and bilateral energy exchange agreements alone cannot solve power crisis in South Asia. The engagement has to be multilateral,” says Raza. An improved power situation will boost economic activity in the region.

Big ventures, slow progress

The idea of multilateral energy cooperation in South Asia is about a decade old, but bilateral energy exchange agreements date back to 1950s when India and Nepal decided to build hydropower projects on the Kosi and Gandak rivers. India built a 20 MW powerhouse for Nepal at Kataiya on the Kosi. It was mainly for irrigation and flood control. Power generation was the byproduct. Later, the two countries established exclusive projects for electricity transmission. India now exports 150 MW to Nepal in winters and 70 MW in summers. Nepal pays an average of Rs 4.8 per unit of power to India.

Bhutan, too, has a history of energy cooperation with India dating back to 1974 (see ‘Bhutan’s experiments with happiness, Down To Earth, October 31). Bhutan’s present installed hydropower capacity is 1,488 MW, 80 per cent which is supplied to India. In winters, when river flows dwindle, Bhutan imports 40 MW from India. Although small, the pact has helped Bhutan’s economy. It earned the country US $233 million in 2010-11 from sale of power to India. “Power export has helped Bhutan increase its GDP by 8.6 per cent from 2008 to 2012,” says Chhewang Rinzin, managing director of government-owned Druk Green Power Corporation.

“However, interconnected power systems of India, Bhutan and Nepal have elicited only a small part of potential benefits,” states a study by South Asia Regional Integration, a joint project of United States Agency for International Development and Integrated Research and Action for Development (IRADe) last year. India, Bhutan and Nepal have decided to enhance this cooperation. In 2006, Bhutan and India signed an agreement to develop hydropower projects totalling a capacity of 10,000 MW by 2020. Construction work has already begun on three projects with a total capacity of 2,900 MW, which are likely to be commissioned by 2016. Since Bhutan’s peak load is expected to remain below 500 MW by then, most of the power would be exported to India.

In comparison to Bhutan, Indo-Nepal energy trade relations have seen slow progress. “Despite a long history, our bilateral energy cooperation has not grown on expected lines,” says Rajan Dhakal, deputy general manager with Nepal Electricity Authority. “Governments, private companies and banks are reluctant to invest in Nepal due to lack of a stable government,” he adds.

As a result, the demand-supply gap in Nepal is 44 per cent, the highest in South Asia. Parts of Kathmandu currently experience 15-hour power cuts. With no new hydropower projects expected soon, Nepal will look for power from India. A 126-km transmission line between Muzaffarpur in Bihar and Dhalkebar in Nepal is expected to be complete by December 2014. This can carry 1,000 MW of power and cost $186 million. More such projects are being planned.

Moving southwards, an ambitious 360-km link between India and Sri Lanka is being proposed. Of this, 120 km will lie on the sea bed. The link will connect Madurai in Tamil Nadu with New Anuradhapura in Sri Lanka and transmit 1,000 MW. The two-way exchange will see India give peaking support to Sri Lanka. The country, in turn, will sell its surplus off-peak power of around 800 MW to India.

But laying high tension cables on the seabed is expensive. At $935 million project cost, both the countries are unsure of profit. “The project will make sense if the gains from the exchange are more than the investment,” says P N Fernando, Colombo-based adviser to Asian Development Bank (ADB).

“Initially, the undersea cable was to be about 15 km, from Dhanushkodi in Tamil Nadu to Talaimannar in Sri Lanka,” says Durga Raina, adviser to ADB, which is studying South Asia energy cooperation. “But a longer route was chosen because the region is ecologically fragile, and there was a fear of opposition from religious groups because the line would cross Ram Setu,” says Raina.

Tilak Siyambalapitiya, energy expert in Sri Lanka, says even if the project is undertaken there will be little business. Southern India is already reeling from power crisis, he told mediapersons. Maldives does not have a power exchange plan with any South Asian country as its geographical location would make transmission expensive.

There is a US $1 billion plan to wheel electricity from Tajikistan and Kyrgyzstan in Central Asia to Afghanistan and Pakistan. It will traverse a treacherous route through the Hindukush. In summers, Tajikistan and Kyrgyzstan have 6,000 gigawatt hours surplus hydropower, while Pakistan and Afghanistan reel from power crisis. If the project, called CASA 1000, becomes operational, 1,300 MW of electricity could flow through it. Pakistan will get 1,000 MW and Afghanistan will take the rest.

What’s hindering trade

On the face of it, implementation of a super grid looks easy, but it has many challenges. The biggest roadblock is the volatile relations between South Asian nations. “An underlying trust deficit has hindered energy cooperation in the region,” says Raina. “Another big obstacle is India’s attitude. It rarely maintains cordial relations with its neighbours.”

Devendra Chaudhry, additional secretary, Ministry of Power in India, said at a recent conference in Delhi, “Electricity is like goods. One can trade them when they are in surplus. But India will never have surplus power. Also, one has to see if the other side has the money to pay.” An ADB consultant, who does not wish to be named, says, power-strapped countries such as Bangladesh would be ready to import power because they spend a lot on power generation through imported oil.

Investors are reluctant to invest in cross-border interconnections. “What if two governments turn hostile or refuse to buy power due to domestic crises such as drought?” asks Anoop Singh, Department of Industrial and Management Engineering, IIT-Kanpur, who has worked with USAID on South Asia energy cooperation.

“India’s energy connection with Nepal has been slow. Two years ago, we sent a draft of power trade agreement to India. It has not been signed yet,” says Bishwa Prasad Pandit, secretary, Ministry of Energy, Nepal.

A key component needed for easy trade of power is an exchange, which will facilitate transfers between the energy haves and the have-nots. SAARC Energy Centre has proposed South Asian Power Exchange modelled on two existing exchanges in India. India Energy Exchange (IEX) and Power Exchange India Limited are about five years old. The quantum of electricity traded through these is only 3 per cent of India’s total power trade. But in a short time, they have gained the reputation of being efficient and transparent.

To trade through IEX, generators and buyers should be its members. For transaction, the seller and the buyer quote prices and volume of power to be traded a day ahead. Once the prices are quoted, the exchange calculates a market clearing price and volume. It is a mutually agreed price between the buyer and the seller.

But these exchanges cannot yet become the fulcrum for South Asia, says Shilpy Dewan of IEX. “South Asian power exchange could be an expanded form of IEX,” she adds. But the Indian guidelines currently permit domestic companies to participate in the exchange. For other countries to participate, these guidelines will have to be amended.

Besides, other than Bhutan and Nepal, no South Asian country legally recognises power as a tradable commodity. Individual bilateral agreements dictate the rules governing these transactions. “While issues of taxation and import duties will have to be addressed, a mechanism for bilateral dispute resolution will also be needed,” says Jyoti Parikh, founder director of IRADe.

Nayyara Houssain, executive vice-president IPPAI, New Delhi, says, “There must be synchronisation of all the grids. Grid failure of one member must not have an effect on the other.”

SAARC Energy Centre has prepared a draft called SAARC Inter-Governmental Framework Agreement for Energy Cooperation (Electricity). It intends to create SAARC Market for Electricity, which will provide for unrestricted cross-border trade, commercial negotiation of power purchase agreements, private sector trading and participation in power exchanges. “It is being considered by SAARC members,” says Raza. This will be an expensive proposition. A study by SAARC Energy Centre puts the cost of proposed links at US $2.3 billion over the next four to five years. But the region will save US $4 billion annually once the links are established.

The South Asian super grid has been planned to usher energy security. But challenges are far too many given the volatile bilateral relations. “Countries can overcome the challenges if political relations are stable,” says Raina. “But no one can guarantee that.”

With inputs from Arnab Pratim Dutta

India needs an energy security doctrine

Our foreign policy must aggressively secure long-term energy supply

Illustration: Jayachandran/Mint

Recently China and Russia signed a natural gas deal under which the Russian oil giant Gazprom will supply China’s largest oil company—China National Petroleum Corp.—38 billion cubic metres of gas every year for the next 30 years, beginning 2018. The deal is worth $400 billion and is the largest contract of its kind in Russia’s history.

The importance of the deal transcends its monetary terms and the volume of the commodity sought to be exchanged under it. It not only points towards the tectonic shifts taking place in the global energy landscape but also brings into sharp focus India’s continuing ineptitude at securing its energy future.

It is instructive to note how the deal came about to understand where India falls short. The deal was stuck in the past decade, largely on the issue of pricing. Russia was used to getting paid better, by its steady European customers, than what China was willing to shell out. Further complicating the matters was Russia’s involvement in Vietnam through defence deals as well as its stake in Vietnam’s oil and gas blocks, which fall under disputed territory.

The emergence of shale gas supply from the US, however, provides a cheaper source of supply for European countries. Over time, it is expected that Russia will lose out on the steady demand from the West. The move of the US and west European countries to corner Russia on the Ukraine issue made Russia further vulnerable. And this is exactly when China clinched the issue. To get the desired price, China also threw in a $50 billion loan to develop the Russian gas fields and build the pipeline up to the Chinese border.

There are two salient points here. One, China’s foreign policy is in sync with its energy security targets. For China, neither Russian involvement in its territorial disputes with Vietnam nor Russia’s actions in Ukraine came in the way of securing the deal. Two, China follows up its deals with financial might. When it comes to securing such international deals, it is never as simple as paying for the gas. Indeed, it is about the whole bouquet of services that a customer can provide. As a result, China has been able to develop a well-diversified energy sourcing portfolio.

Compare that to India’s embarrassing past at sewing up deals and our growing dependence on imports. Myanmar is perhaps the most outstanding example. For years, India helped Myanmar to explore its gas reserves. This was the costly bit. Obviously the idea was to get the gas, through a pipeline, to India. From the very beginning, it was matter of energy security, not financial gain. As things turned out, India’s foreign policy was not in sync with its energy interests. India dropped the ball and as a result China, the late entrant, now has cornered the gas through a pipeline, which became operational last in 2013. To add insult to injury, Indian Navratna company—Oil and Natural Gas Corp. (ONGC)—is actually involved in building the pipeline to China. Another, more recent example of such slippages is Kazakistan, where India lost out energy contracts despite bidding higher than China.

The story is the same when one looks at the India-China race for resources in Africa as well.

So what should India do? There are two ways to look at the Russia-China deal. One way would be to say that in any case this gas could not have come to India through a pipeline. Our western border is too troubled and unstable and the Himalayan range makes it impossible in the north and east. While this is true, it would be missing the larger lesson.

The right way to look at it is to realize that India urgently needs an energy security doctrine. India is the fourth largest energy consumer in the world and its import dependence is expected to grow to 50% of its total demand by 2030. India’s foreign policy must aggressively push to secure long-term and stable supply of energy.

Thankfully, the global rearrangement also gives India some hope. With US growing more capable of supplying its own fuel as well as that of Europe, India can aggressively court the Middle Eastern and African countries, as they look for newer customers.

Reforming India’s energy policy

India needs investment, technology, and competition among companies—things that only reform can bring

Illustration: Jayachandran/Mint

India’s policymakers are fond of defining the country’s energy security in terms of three As: availability, access and affordability. However, the three As appear at increasing risk in the face of four formidable barriers: energy subsidies, systemic management inefficiencies, competition from a resource-hungry China and climate change.

What makes these barriers even more daunting is the recent emergence in public discourse of a misplaced debate regarding the ownership of natural resources, which has hamstrung the country’s ability to frame long-term policies to help harness its energy potential.

Securing energy supplies for Indian citizens therefore is set to be a tall order for the new government.

Energy subsidies

India’s energy subsidies represent a significant portion of its budget. The government spends roughly $25 billion on fuel subsidies, $7 billion on electricity, and $10 billion on fertilizer. One of the justifications given for subsidies is to increase fuel availability to the least empowered. However, regardless of the billions spent on subsidies, modern fuels remain a privilege limited to a few. National Sample Survey data for 2011-12 reveal that despite claims of increased penetration of modern cooking fuels, such as liquefied petroleum gas, 70% of rural households still use biomass.

Guaranteeing access and affordability are also arguments advanced for energy subsidies. However, price controls have failed to expand supplies and services, and rather ended up diminishing both access and affordability. Diesel-fuelled sport-utility vehicles of the super-rich romp on city roads while farmers struggle to run their pumps. Access to electricity remains directly proportional to per capita spending—the poorest decile, constituting 40% of all households, still use kerosene to light their homes. Rather than enhancing energy security, subsidies, by interfering with markets, are putting the three As at risk.

Systemic inefficiencies

Contrary to popular perceptions, India is not a resource-poor country. It contains the world’s fourth-largest coal reserves, its thorium supplies are practically limitless, potential solar power is particularly abundant, and its 3.14 million sq. km of sedimentary basins have not been even moderately explored, though most of these are deep offshore. India’s problem is one of management rather than scarcity.

The management challenge is best understood by the deficiencies in the coal sector. Coal is India’s single biggest fuel source, accounting for half of the country’s total energy use and producing two-thirds of its electricity. Estimates are that the country has enough coal to last for the next 100 years. However, environmental clearances, land availability and evacuation constraints restrict access to huge swaths of coalfields, halving its extractable reserves. Meanwhile, the state-owned Coal India Ltd, which supplies over 80% of India’s coal needs, has struggled to raise output and meet supply commitments. In 2012-13, coal shortages of 165 million tonnes affected the availability of power. Power plants dependent on imported coal suffered because of highly volatile international prices.

India’s 12th Five-Year Plan focuses on means to curb the country’s coal dependence, but alternatives also have issues. Gas price controls, dismantled in 2002, were reintroduced and extended in 2007 to encompass private producers of domestic gas. A complex system of quotas and allocations has returned to haunt the sector. Simultaneously, gas imports are limited by lack of infrastructure. India has yet to build its first transnational gas pipeline, and with the Indian gas market at the mercy of policymakers, investors are wary of investing in liquefied natural gas facilities or pipeline infrastructure. Hydroelectric, nuclear and other renewable energy sources comprise one-third of the current installed power capacity, but numerous issues limit their contributions. Hydropower plants have low load factors, for example. Wind capacity grew by only about half the targeted amount after the government withdrew accelerated depreciation and generation-based incentives. Although the US-India civil nuclear agreement boosted the capacity of nuclear plants, the sector’s growth has been held to ransom by what’s commonly known as the nuclear liability law. Foreign equipment suppliers are worried that this law places a disproportionate legal burden on them in the case of an accident.

Great Wall of China

At about the middle of the past century, India and China were at identical points along their development and demographic trajectories. In 1965, China’s primary energy consumption was about two and a half times that of India’s. But an explosion in China’s heavy manufacturing capacity fired by its export-led growth made it the world’s largest energy consumer by 2011.

India’s growth over the same period skewed towards services, so its demand for energy rose at a far more moderate pace. Still, it needed to scour the world for resources—and increasingly hit the Chinese wall.

China acquired assets from under India’s nose in locations as diverse as Angola and Kazakhstan. China also diversified its supplies to encompass Central Asia, Russia, and Latin America. To insure against the risk of supply disruptions through the Strait of Malacca, China committed to developing the Gwadar Port in Pakistan and a gas pipeline in Myanmar. And China put a substantial offer on the table for the development of Iran’s Chabahar Port, for which India has also committed $100 million. By moving far more effectively to rationalize its price policies, China today is far better integrated into global energy markets while India meanders through repeated policy flip-flops.

Climate change

From 1996 through 2006, India was one of the 20 countries in which emissions intensity (carbon dioxide emissions per unit of gross domestic product) had declined during the first half of the period as well as the second half. Obviously, the reason for this drop during India’s boom years was growth led by services rather than manufacturing.

Can the pattern be sustained? The business process outsourcing industry, the poster boy of India’s growth, accounts for a mere 2 million jobs in a country where 12-15 million enter the workforce annually. Over the next few years, the only way to employ millions of youths is to create more jobs in the labour- and energy-intensive manufacturing sector. If India succeeds in achieving this necessary goal, however, it would be hard to maintain the intensity of its emissions. Yet it has pledged to reduce emissions by 20-25% under the Copenhagen Accord of 2009.

Ownership of resources

Under the planned economy model adopted post-independence, India gradually arrogated the responsibility for guardianship, extraction and conversion of fossil resources to the state. Thus the energy sector came to be dominated by gargantuan state companies and a host of smaller public-sector undertakings. Policy, legislation, rules and regulations were devised exclusively for state-led operations, leading to an incestuous relationship with parent ministries or departments of the government.

In the 1990s, lending institutions forced structural adjustments, which initiated a process of piecemeal reform in certain segments of this superstructure. However, a lack of fairness and transparency eventually led the Supreme Court to uphold the public trust doctrine. In short, this doctrine states that natural resources belong to the nation, and the government holds them in trust, in a fiduciary capacity, for the public good. Unfortunately, despite its intention to bring transparency into the allocation and use of natural resources, this principle has now become an excuse to stall much needed reforms.

India cannot discover, extract, convert and distribute resources without investment, technology and competition among companies in the private and public sectors—three things that only reform can bring.

Way forward

If there is any lesson to be learned from the piecemeal reforms that culminated in the Supreme Court’s rulings, it is that governments are poor and inefficient allocators of resources. Resources are best allocated by markets, rather than doled out through policy guidelines, which, straddling half a dozen ministries and a Planning Commission, can at best be suboptimal compromises.

To that end, policymakers must direct their support to consumers and not waste time on administering subsidies by interfering with markets. Some experiments with direct transfer schemes have begun, however, a quicker pace and far more efficient processes are needed.

Over the next 20 years, India’s dependence on coal will continue. Therefore, it is necessary to expand production capacities by allowing private participation. Given the right mix of incentives, market forces will usher in new capital and technologies for fuel extraction, carbon sequestration, and gasification.

Natural gas has been and is expected to continue to be available at a significant discount to oil. Therefore, government policy should allow market-led substitution of oil by gas. As for renewables, given low plant load factors, policy emphasis and incentives must shift to generation rather than the addition of capacity.

Although renewables will play an increasing role, they will have limited utility for base-load generation. Therefore, nuclear energy must be a viable option. The ambiguities with regard to equipment supplier liability that have crept into the Nuclear Liability Act must be resolved. Although the executive may issue ingenious guidelines to clarify the law, Parliament is the only constitutional body that can amend the legislation. India’s energy landscape may continue to be dominated by strong national energy firms, but an efficient and technologically robust public sector is best created through competition with a strong private sector. That can happen only if the government ensures a level playing field when it comes to policy and regulation.

A public sector that is expected to pick up the tab for the government’s redistributive largesse can never be competitive or have the financial ability to develop solutions to India’s unique challenges. The treatment of state-owned companies as patronage distribution networks that work to stall reforms must cease. With the expansion of energy markets imminent, India must become the nerve centre for innovation rather than a mere market for others.

Finally, a key failure of India’s half-hearted reform process has been the lack of strong and independent regulatory institutions. Organizations such as the Petroleum and Natural Gas Regulatory Board, the Central Electricity Authority, and the Tariff Commission have been unable to cut themselves loose from the apron strings of parent ministries. Regulatory authorities must be given the autonomy that ensures it is they who become the standard bearers of reform.

Monday, 14 July 2014

ENERGY