India needs more power generating capacity – could decentralized renewable generation be part of the answer? Sridhar Samudrala, WADE’s Director for Asia, reports.

India is home to over 17% of the world’s population (1.2 billion) and has an unquenchable thirst for energy. Meteoric growth is widening the gap between demand and supply. There is a concerted effort by the central and state governments, and the private sector, to meet this demand.

In 2011, foreign direct investment into India ranked third globally at around $45 billion, and continues to increase because of a policy roadmap by the Government of India that is increasing the liberalization of the nation’s economy, specifically in the energy and infrastructure sectors. Recently, the government is promoting widescale electrification in rural areas, where supply has been lagging in terms of service (measured by hours of supply), as well as penetration (only 25–30% of rural houses have access).

Currently there is a deficit in the availability of energy and 35% of India’s commercial energy needs are still imported. Figure 1 shows the anticipated growth in energy use in India by fuel source up to 2030.

In 2011, India’s GDP was at 6.5%. A mix of coal, oil, natural gas, electricity and biomass currently fuels industrial output. In order to bridge the energy gap, India needs to install an additional generation capacity of 150 GW by 2015. This would require an investment of approximately $300 billion or more – $150 billion in generation and $150 billion for transmission and distribution infrastructure).

Currently, the total installed electrical capacity in India is almost 154 GW – of which 83% is owned by central and state governments. In addition, there is another estimated 45 GW of capacity in self-generating plants; of which 22 GW is generated by small diesel and gas-fired generator sets under 1 MW of capacity. Most of the generation is from coal (55%).

The government estimates an addition of 78 GW of self-generation in the current 11th Five Year Plan period (2007–2012). This estimate appears to be either an underestimation or does not take into account the millions of stand-by diesel generators and inverters that commercial and residential establishments use during power outages. Due to its low cost and domestic availability, coal is the dominant fuel source for electricity generation in India, and its use is forecast to grow between now and 2030. India is investing in a number of coal-fired power plant efficiency measures, specifically cogeneration.

Figure 2 illustrates potential changes to India’s electricity generation mix.

Currently, there are severe peak and general electricity shortages in the country. The overall peak deficit stood at 16.6%, and the energy deficit at 9.9%, in 2007-08.

The 11th Plan (2007–2012) aims to address this problem by adding 79 GW of generation. Of that, 70% is expected to be coal-based, with 20% from hydroelectric sources and 10% from renewable and other sources. India’s dependence on coal generation will continue well into the future and may still be over 70% of electricity generation by 2030.

Nine ‘ultra mega power plants’ (UMPPs) of 4000 MW are under development, each involving investment of about $3.5 billion. The Ministry of Power defines a UMPP as a coal-fuelled, supercritical power plant of about 4000 MW. DECENTRALIZED AND RENEWABLE GENERATION

India has a large requirement for power, and distributed/renewable generation (DG) can play a vital role in solving the deficit. Conventional wisdom has indicated that large generation stations offer significantly better economies of scale. However, calculations must be recalibrated when faced with the state of the power grid viz, large distributed (rural) load, high T&D losses (including theft), limited capacity availability, and dramatically poor supply conditions. In such cases, a thorough analysis should be made for the policies, technical specifications, and economic analysis behind the use of DG.

Figure 1. Total primary energy by source (1980–2030)

There are several potential applications of DG including standby power, combined heat and power (CHP), peak shaving, grid support and stand-alone power. DG also offers the possibility of creating microgrids (within the utility’s overall framework) to cater for the requirements of a group of consumers in a well-defined geographical region.

While the government is exploring many policy options to incentivize greater energy efficiency throughout all sectors of the economy, industry and others are reviewing the vast potential of CHP and district heating and cooling (CCHP) and the role that these technologies can play in tackling the challenge of meeting the country’s growing energy needs in a cost-effective and environmentally sustainable manner.

The policy foundation for DG centres on bagasse-based cogeneration largely in the sugar industry and supported as a renewable energy source. Industrial CCHP has been of interest in India for over a decade, both to augment industrial energy supplies and to use fuels of all kinds more effectively, but applications have been limited. Estimates of CCHP in India have been scanty. The government estimate is restricted to bagasse-based cogeneration, where a current installed capacity of 720 MW is found predominantly in the states of Andhra Pradesh, Karnataka, Maharashtra, Tamil Nadu and Uttar Pradesh.

A study by The Energy and Resources Institute (TERI), estimates India’s CCHP potential at 7600 MW. More than two-thirds of that, 5100 MW, is in the sugar industry alone. CCHP estimates are based on the internal heat-to-power ratios which would meet the plant’s energy requirements. The estimates do not cover the power maximization options, which would significantly increase the CCHP potential.

The Ministry of New and Renewable Energy (MNRE) plans and promotes the development of all sources of renewable energy. Its contribution to the total electricity matrix is only about 8%, currently, but MNRE is making the case for renewable energy as a necessary component of India’s sustainable development. Over 15% of the incremental capacity addition in the current 11th Plan is expected to be from DG and renewable sources.

The potential for using microturbines and heat recovery boilers from small generators is significantly increasing. For example, NEERU, a biogas company in Andhra Pradesh, and Capstone Turbines of the US are working with Mukund Dairy Farms in Andhra Pradesh to set up a cogeneration mechanism generating electricity from the microturbine and using the residual heat in the pasteurization plant. This type of innovative idea can take a lead in electrifying the rural sector. Already, China, Philippines, Thailand and other Asian countries are moving forward in these innovative approaches.

With the announcement of the National Action Plan on Climate Change (NAPCC), there is a marked shift in policy to diversifying the energy mix to lower carbon intensity options. The NAPCC calls for boosting renewable energy’s share of the national generation from 2% to 5%, with specific emphasis on significantly increasing solar energy’s share of the total energy mix. It envisions increased use of distributed solar photovoltaic cells, but also, as technology permits, commercial-scale solar reflector generating stations.

The Electricity Act 2003 and the NAPCC together provide a roadmap for increasing the share of renewables in the total generation mix. The government has allowed wheeling of power and recommended a 2% charge. However, some states do not allow wheeling, while others have imposed excessive charges of over 15%. In India, the utilities’ policy for renewable and DG units seems to overlook the benefits of DG in remote areas.

However, renewable energy resources are not evenly spread across the country and the high cost of DG discourages local distribution companies from purchasing more than their obligatory amount of renewable generation. To address the imbalances and encourage renewable energy capacity addition in states with untapped renewables potential, the Central Electricity Regulatory Commission (CERC) promulgated a regulation creating renewable energy certificates in January 2010.

Figure 2. India’s electricity generation mix (2005–2030)

Renewable energy generators, which register with CERC, will have the option either to sell power at a preferential tariff set by their State Electricity Regulatory Commission (SERC), or to sell the power and its associated environmental benefits in the form of renewable energy certificates. The certificates can be sold in CERC-approved exchanges to entities needing them to meet their Renewable Power Purchase Obligations (RPPOs) thus creating a national market for such generators to recover their costs.

As of March 2010, 16,817 MW of grid-connected renewable power was in place, according to the MNRE. Of that, 11,800 MW was from wind energy. Small hydropower, up to 25 MW, supplied 2735 MW, and bagasse-fuelled cogeneration 1334 MW. Just 10 MW of solar energy generation capacity was installed. Off-grid and distributed renewable energy generation supplied an additional 405 MW electricity equivalent, boosting the total to 17,222 MW.

CCHP potential is expected to grow with the country’s expanding industrial base. The CCHP potential is estimated to reach 28 GW in 2015 and 85 GW in 2030


The power sector is taking important steps toward greater efficient-use energy and utilizing CCHP to meet energy needs. However, to realize the benefits of greater CCHP investment in India, there needs to be greater awareness in central, state, and local governments

India has made some changes in the energy policy act of 2003, and the government now needs to pursue new reforms which analyze the benefits related to CCHP cost effectiveness, energy efficiency, greenhouse gas emissions reduction and CDM potential. State governments should encourage and enable local entities capable of utilizing CCHP, eg at airports, shopping malls, industrial parks and others. This could be achieved by any of the following ways.

Inform state and local governments about the potential for CCHP at new industrial and commercial plants.

Developers of all special economic zones, industrial parks, commercial complexes and other networks of commercial, business and high-end residential complexes should examine the viability of CCHP at the plan approval stage.

Target inefficient industries and work with them to improve utilization of efficinet CCHP technologies.

Establish an Industry Initiative on CCHP – currently, there is no clear leader on CCHP policy or technology best practices in India.

Regulators should consider issuing regulations regarding CCHP in the context of the National Electricity Policy. The Government of India could also consider expanding feed-in tariffs for non-bagasse CCHP.

The National Solar Mission has set a goal of generating at least 10% of India’s power from solar energy. It envisages increasing the production of solar photovoltaic panels to 1000 MW per year from the current 235 MW per year, and generating 1000 MW of grid-connected solar power, up from the current 10 MW, by 2017.

The government has already made provision for subsidies of up to $650 million in the DG/renewable sector. A number of promotional measures have been proposed for DG, including non-fossil fuel obligation and the use of open access without cross-subsidy surcharge among other fiscal measures.

India has abundant renewable resources in solar, hydro, biomass/gas, and wind, and the legal, policy, and regulatory environment is becoming more hospitable to the increase of DG/renewables/ in the energy sector.

Along with SERC regulations on the RPPOs, renewable energy certificates and attractive rates for renewable power offered by CERC have moved renewables from the fringes of the energy basket to the mainstream. With all these measures, CCHP could be a saving for India’s energy sector and provide all necessary returns in an environmentally sound manner.

Sridhar Samudrala is Director for Asia with the World Alliance for Decentralized Energy (WADE).


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