Politicians must avoid knee-jerk decisions that rely on coal fired power and start delivering policies that will stimulate investment and exploit the renewable energy opportunities that are there for the taking.

••• BY KELVIN ROSS •••

The latest blackout that affected more than 600 million people in India at the end of July is a reminder of the intractable problems still plaguing the country.

Inadequate infrastructure, a crippling shortage of power and – most damning of all – an historic absence of governmental action and leadership, all conspire to ensure that at peak times the demand for electricity is at least a fifth higher than supply.

The blackout was caused by the collapse of three interconnected northern power grids, and extended close to 3219 km, from India’s eastern border with Myanmar to its western border with Pakistan.

In the weeks following the crisis, India’s Ministry of Power has said it would conduct independent audits of the country’s electricity transmission system within the next three months.

The decision was made at a meeting chaired by power secretary P. Uma Shankar, with attendees including members of the Central Electricity Authority, the Central Electricity Regulatory Commission, Power Grid of India, Power Operation System Company and officials from eight of the Northern states.

In addition to the audits decision, it was agreed to establish an effective plan to ensure the integrated operations of the national and regional grids in adherence with the Indian Electricity Grid Code.

It was also decided that all utilities must adopt best operation and maintenance practices, and would be subject to random checks by regional power committees.

Prime Minister Singh is also reported to have vowed to fast-track stalled power and infrastructure projects and introduce free market reforms aimed at reviving the country’s slowing economy.

But will all of this be enough to keep the lights on? Probably not, because the issue is not simply down to a lack of investment.

India’s chronic shortfall in generation capacity has slowly started to be addressed in recent years, primarily through private investment. New capacity additions this year, for example, are expected to reach around 26 000 MW – twice that which was installed last year.

According to the Financial Times, the main problem with India’s power sector is that its economics do not add up.

Major coal and gas suppliers such as Coal India and GAIL are, to put it simply, unable to produce enough to meet the demand of India’s power generation fleet. This means that power generators are forced to import fuel, which is extremely expensive. However, electricity tariffs in India are capped for consumers, so electricity suppliers are unable to recoup that cost and essentially are selling electricity at a loss.

As the Financial Times puts it, no wonder the state-owned utilities are said to have debts of 3 trillion rupees ($54bn). Of greater concern, however, is the expectation that their losses will treble over the next three years.

If there is a winner to emerge from the blackout crisis, it should be India’s solar sector.

The blackouts should act as springboard for the country’s solar players to be seen as offering a solution to the power problems.

Solar power should be a no-brainer for a country that needs to expand its generating capacity by at least 8 per cent a year or by some 400 per cent between 2011 and 2030 in order to meet both growing population and industrial demand.

India is already on a path to harness its considerable solar potential: the western state of Gujarat has already installed capacity of some 655 MW of grid connected solar power plants.

But there is a danger that India’s policymakers, facing thousands of businesses and homes being plunged into darkness, will ignore solar in favour of what is seen as tried and trusted conventional power plants.

“I am a little scared this is not going to be looked at as an opportunity,” says H. Harish Hande, managing director of Bangalore-based Selco Solar. He told Bloomberg that he fears the crisis “is going to be used as a pretext to push for coal and nuclear.”

But India’s coal sector is the last place anyone should look for a solution to the power crisis, being mired in its own supply and demand problems. And a government directive forcing the country’s largest state-run supplier, Coal India, to sign contracts to supply at least 80 per cent of required coal to power utilities or suffer penalties, has been branded a “desperate move which will not save the industry” by analysts at business intelligence company GlobalData.

The analysts added that “until the Indian government supports the coal industry or offers renewables as a suitably enticing alternative, the country seems set to keep on struggling”.

Vikram Mehta, former chairman of the Shell Group of Companies in India, agrees and says that India needs to face five hard truths about its energy sector: “Energy demand is surging, supplies are struggling to keep pace, technology is under-utilised, the institutional structure does not support an integrated energy policy, and the environment is suffering.”

Without far-reaching reforms that will deliver a fully-functioning power system, India’s aspiration of becoming one of the world’s leading economic powers is undoubtedly under threat.