Wednesday, July 11, 2012

India's power sector woes

Conventional wisdom would have it that expansion of generation capacity and lowering of transmission and distribution losses would effectively address India's power sector woes. But closer scrutiny reveals a need to go beyond these measures. In fact, India's power sector is a entrapped in a gridlock of self-reinforcing spirals, breaking out of which would require concerted action at multiple levels.

Gurgaon is representative of the mess that is India's power sector. Its peak power deficit is 25%, amounting to 1200 MW. Supply to industries has been reduced from 18 hours a day to merely eight hours to meet the domestic and non-domestic demands. With demand rising at a staggering 25% every year, widespread powercuts have become a feature of life in Gurgaon in recent years.

Diesel generators or inverters are everywhere, even in middleclass households. Though the official electricity tariffs are far lower than global standards, the effective expenditure on electricity is well above that elsewhere. In other words, residents of Gurgaon end up paying much higher rates (than the formal tariffs) to access assured supply. But ironically, as with all other public utility services, any attempt to raise tariffs is inevitably accompanied by political protests. This collective unwillingness to pay higher tariffs obscures the individual's willingness to pay whatever its takes to access these services.

The system is therefore entrapped in a self-fulfilling downward spiral. The populist opposition to raising tariffs keeps utilities bleeding. Resource strapped and debt-laden utilities are unable to purchase enough power to provide adequate and reliable supply. Nor are they in a position to invest in network upgradation (to reduce losses) and expansion (to cover new areas). Consumers are forced to rely on alternate means, thereby increasing their effective cost of accessing power.  

However, even if adequate power is generated, there are formidable barriers to be surmounted before this power can be used. The deficient transmission capacity will hinder the evacuation of the generated power to load centers. This is all the more so with renewable sources, which are mostly located far outside the existing transmission corridors. In other words, if adequate power is available, then evacuation (from the generator) or transmission (to the buyers) corridors are not available.

Further, even if the transmission channels are available, the weak financial position of distribution utilities will surely restrict their freedom to purchase all the available power. In fact, it is an open secret that load sheddings are increasingly a reflection of the utilities' financial woes than caused by lack of power. The decreasing summer spot market prices in recent years, despite the increasing deficit, is a reflection of the unwillingness (borne out of their financial inability) to procure power even at relatively cheaper rates. 

1 comment:

Marketing Research Report said...

Considering the huge potential to convert waste to energy in India, the Ministry of Environment and Forests had formulated the Municipal Solid Wastes (Management and Handling) Rules in 2000. Waste to Energy is understood as a renewable technology, and comes under the overall guidance and facilitation of the Ministry of Non Renewable Energy of India.