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Meeting India’s Renewable Energy Aspirations

Rural India still needs sustainable and modern energy as commited by PM Modi

Pooja Vijay Ramamurthi
Publish Date: Oct 8 2016 1:48PM | Updated Date: Oct 11 2016 4:25PM

Meeting India’s Renewable Energy Aspirations

A year has passed since September 2015 when global leaders, including Prime Minister Modi, assembled at the United Nations (UN) Headquarters in New York to adopt the Agenda for Sustainable Development for 2030 and its 17 Sustainable Development Goals (SDGs). 


It is now recognised that modern energy access has a critical impact on quality of life. Hence, access to affordable, reliable, sustainable and modern energy is SDG 7 with targets to increase electricity, reliance on clean fuels and technologies, share of renewables in the energy mix and energy efficiency. 


Currently, India has the world’s largest population without modern energy access — 400 million without electricity access and twice that number cooking with traditional biomass. Further, India has set ambitious targets of more than tripling its Renewable Energy (RE) capacity with a target of 175 GW in 2022 from the existing 49 GW (Ref).With these staggering figures, the question arises –  can satisfy the SDG 7 aspirations by providing universal access to electricity and clean cooking fuels while meeting national renewable targets and reducing its energy intensity in the next 15 years?  



Electrifying India



Recently, national discourse on modern energy access in India has primarily focussed on electricity access. The Minister of Power, Coal, New and Renewable Energy and Mines, Piyush Goyal, has stated that universal electricity access will be a reality by 2019, 3 years before the government’s target of 2022. While, similar electrification targets were set by previous governments for 2007 and 2012, India has repeatedly fallen short. 


Officially, India’s villages are 98% electrified according to the national definition of rural electrification where a village is considered electrified if public buildings and 10% of the village population have electric connections. However, actual household level electrification rates are estimated to be only around 70%. 


Further, the brunt of electricity deficit is often felt by rural populations, where average daily supply is low, with many places restricted to 6 or 8 hours. Poor access and quality of electricity persists, though India is stated to have enough generation capacity to supply 24X7 electricity to all and wholesale prices have fallen dramatically.  


A major reason for the underutilization of current distribution structure is the financial losses faced by Distribution Companies (DISCOMs) from supplying subsidized electricity to rural populations, especially agricultural consumers. The low rural tariffs, are significantly below the cost at which DISCOMs buy electricity. 


While, this financial loss is supposed to be covered by state governments, they often delay or don’t completely pay DISCOMs. To incur the least financial losses, DISCOMs provide rural consumers with the regulator mandated minimum supply and are hesitant to release new agricultural connections.    


The government’s recently announced electricity distribution bailout scheme UDAY, the third of its kind in recent years, attempts to tackle the financial challenges of DISCOMs through a number of operational measures such as improved metering and reducing Aggregated Technical and Commercial Losses (AT&C). 


A key scheme under this is “Mhara Gaon Jagmag Gaon” initiative  in Haryana aimed at improving payment rates of consumers by providing more electricity to those feeders with high collection rates. A similar project run by the Energy Policy Institute at the University of Chicago, in Bihar utilities showed that linking electricity access to payment rates can reduce the AT&C losses by upto 12%. In order for the UDAY scheme to become a success it is key to create a sound monitoring and evaluation mechanism to study the actual progress of the utilities, which does not exist currently. 


While these policies are a step in the right direction, utilities will continue losing financially unless the subsidy burden is addressed. As the subsidies are vital lifeline to ensure access to water to farmers they cannot be removed, and the effective alternative would be a change in the way that subsidies are disbursed. 


Similar to the Direct Benefit Transfer for LPG gas (Pahal scheme), farmers can be directly transferred a lump-sum electricity subsidies to their bank accounts. This will benefit utilities as they get paid at an increased tariff, and could influence farmers to decrease their electricity consumption to retain some part of the subsidy for their own expenses. 


Another reason for poor access to electricity has been the increased emphasis on expanding central grid systems. Decentralised technologies have recently been promoted though the Decentralised Distribution and Generation (DDG) scheme under the Centre’s Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY). 


However this is a top down, one size fits all scheme where, the capital and operational charges for projects where grid extension is most unfeasible such as hilly terrains and scattered nature of the village settlements do not fall within benchmark costs. This shows that generic Central Government schemes cannot meet the local needs of many un-electrified populations.  Therefore, states will need to 


Memorandums of Understanding (MoUs) to provide 24X7 electrification have been signed between a few states and the Central government. However, they deal with broader aspects of infrastructure roll-out, rather than streamlining decentralised targets required for rural electrification. This problem is part of a large disconnect that exists between central policies and regional needs, and smaller projects tends to get shelved for larger grid-scale ones. 


Another alternatives to ensure rural electrification is to encourage private sector investments, rural entrepreneurship and public-private ventures to promote decentralised generation. This would require providing soft loans at 4-5% through Rural Regional Banks (RRBs), as accessing finance is currently difficult with typical loan rates as high as 12-14%. 


Further, lack of a state planning for rural electrification implies that one in unaware of when a village might be electrified. In these cases, villagers hope the grid will reach them and are unwilling to pay developers for expensive electricity. This makes micro grid entrepreneurs reluctant to set up plants in remote villages and thus states should create risk mitigation plans, where developers can be compensated or can be connected to the grid if it does reach the village. 



Meeting India’s Renewable Energy (RE) Aspirations 



RE has become a priority for India in recent years, with ambitious targets of meeting 10 % of India’s power from renewable sources by 2020, from the current 6%. Such tremendous growth in RE capacity installation requires a robust policy and regulatory framework. 


RE discourse presently falls under the Prime Minister’s National Action Plan on Climate Change (NAPCC). This leads states to view RE deployment as a climate mitigation technique, thereby setting RE targets solely to comply with RPO targets mandated under NAPCC. Rather, RE can be used by states to reduce electricity deficits, decrease electricity imports and provide quality energy services. This is primarily because financially weak utilities do not want to purchase relatively high priced renewables, combined with grid integration challenges and lack of suitable inter-state power off-take mechanisms. 


Secondly, although a large number of projects have been allotted by state renewable agencies, actual commissioning doesn’t materialise due to the tediousness of getting permits and clearances for land use and transmission infrastructure. 


A short term solution, which is implemented by the Central government is to create large-scale solar parks for investors, however it might not be feasible to continually get such large tracts of land. Hence, targets should not merely be based on technical potentials, but efforts should be made to assess corresponding land-use.   


RE resources are available in primarily seven states in India, however, increased addition of capacity would be a burden on existing Transmission and Distribution (T&D) networks in these states. This has already been seen in the case of Tamil Nadu, where currently up to 30% of installed wind capacity cannot be evacuated. 


Decisions on RE are often created independently of convention power planning which leads to situations where states which have severe electricity deficits are unable to use their surplus RE generation to meet these needs. Hence, integrated planning such as Green Corridor projects should be planned for a large number of RE rich states. Further, the investments to handle load variability must be primarily borne by the state, with lack of central government. To encourage state RE deployment clean energy financial support should be made available to states for RE integration.    



Making Clean Cooking a Reality 



Although India has fared relatively well in regard to electricity use, it has performed comparatively much worse in regard to clean cooking. In 2012, only 30% used modern cooking fuel as their primary source of cooking and in the last decade, over 2001 and 2011, traditional cook stoves use decreased only by only 11 per cent. 


Indoor Air Pollution (IAP) caused by the combustion of traditional cooking fuels results in annually over 500,000 deaths. Studies show that even in 2030, between 20-40% of households will continue using traditional biomass for cooking. However, there is relative silence on the issue of clean cooking fuels.


The promotion of LPG through subsidy schemes and increased distribution led to 70 % of urban houses adopting LPG as their primary cooking fuel, but only 15 per cent of rural houses have done the same. 


The recently announced Ujjwala Pradhan Mantri Ujjwala Yojana aims to rapidly increase the penetration of LPG connections in India. However, access to LPG connections is already quite high at 75%, with actual usage not being correspondingly high due to issues of access, affordability and awareness. 


Thus it is not enough to only supply LPG connections, but important to ensure sustained use of modern cooking fuels.  The ‘Give It Up’ campaign is a step in the right direction. Over a crore a households have already surrendered their subsidies, which is 1-2 per cent (Rs. 1,400 million) of the government’s total LPG subsidy burden. 


There is however, a need for further efforts, such as differentiated LPG subsidies depending on income levels. Distribution networks in rural areas must also be strengthened. 


Current policy puts LPG expansion at the centre of clean cooking access. However other technologies such as Improved Cook Stoves (ICS) and biogas must play a more significant role in rural India. To promote a clean cooking mix which shares, an integrated approach is required where all concerned Ministries, including MNRE, the Ministry of Petroleum and Natural Gas (MoPNG) and the Ministry of Health, which has its own targets to reduce IAP should form an action plan. 


This action plan should stress on awareness programme through existing networks of local institutions and self-help groups. The scope of ICS and biogas missions should be more ambitious and include local communities to operate and sell these technologies for robust product supply chains. While capital subsidies are necessary to make clean cooking technologies affordable, mechanisms like Direct Benefit Transfer can be used to disseminate clean cooking technologies.



Increasing Energy Efficiency 



Energy Efficiency has been a priority for India over the past two decades with the Energy Conservation Act of 2001 being enacted to reduce the energy intensity of the economy. Energy Efficiency has been implemented quite aggressively in both domestic and industrial sectors. Recently, the UJALA scheme has distributed over 16 crore LED light bulbs which could lead to an estimated 1% reduction in India’s overall annual carbon emissions. 


In the industrial sector, Perform, Achieve and Trade (PAT), a market based mechanism to make energy efficiency cost effective has been rolled out to moderate success.  However, an integral sector where energy efficiency has not been able to make a significant impact is agriculture. 


Agricultural electricity consumption accounts for 20% of the total, with this share going as high as 40% in some states. Improved energy efficiency in agriculture, would result in reduced electricity demand by farmers, thereby reducing agricultural subsidies for DISCOMs and increasing power available to higher paying consumers. 


In India, pilot projects estimate that agricultural efficiency pumps could lead to up to 40% savings in sector’s electricity demands. However, penetration of agricultural energy efficiency is challenging. Financial experience to implement such projects on the large scale is poor, with weak monitoring and verification protocol to accurately estimate financial savings. 


Inefficient pumps are able to absorb the effects of sporadic electricity supply and frequent voltage fluctuations, unlike newer efficient pumps which get easily damaged. Further, there is lack of institutional capability to implement agricultural pumps projects, with implementing agencies struggling to gain farmer acceptance, standardise installation procedures and raise awareness about the schemes. 


Prior to the roll out of the scheme, it is important for concerned stakeholders to standardise mechanisms through which the financial viability and robust implementation strategies of projects can be demonstrated. 


Further, co-ordination with DISCOMs is required to ensure a minimum quality of electricity supply in feeders where pumps are going to be installed. Robust awareness campaigns which engage farmers and take into consideration their concerns are essential for the success of this scheme. 


India seems to be taking the right pathway towards meeting satisfying SDG 7’s lofty aspirations. However, the extent to which India can actually meet this goal depends largely on the extent to which different institutional actors prioritise and align themselves within India’s policy framework. 


The author is Senior Policy Associate, Energy Policy Institute at the University of Chicago (EPIC)-India