I’m sitting on the rooftop deck at Dream Heaven, a funky lakefront hotel in Udaipur, India. Across the lake, the opulent City Palace is lit up against the night sky, casting a medieval reflection on the waters of Lake Pichola.
Air conditioners are working hard against the humid night air here in Rajasthan. The monsoon is late, and temperatures have been rising to over 100 degrees in the day. The people, the land, and the cows and dogs in the streets are all praying for rain.
Suddenly, the lights go out. The buzz of the air conditioners goes quiet. It is yet another power outage, though only on our side of the lake. City Palace continues to glow serenely.
After a few minutes, diesel generators begin to fire up, including a huge one at the luxury hotel next door that sounds like a tractor-trailer.
It’s a typical event here in India, where utilities use outages to manage the system.
The shadow utility
While the country has plenty of generation overall — something like 270 gigawatts of capacity in a system that typically peaks around 180 gigawatts — local distribution utilities can’t always afford to pay for power from state-owned or private generators.
The unreliability of the power system has led to customers building their own shadow utility system, almost as big as the official one.
Ujjwal Bhattacharjee of TERI, a leading energy think tank in Delhi, estimates that customers have installed about 100 gigawatts' worth of backup generators, with another 70 gigawatts for cell phone transmitters.
Many homes opt for battery systems, with lead-acid systems that provide juice during outages. The India Energy Storage Association estimates lead-acid battery sales for stationary and motive applications (like electric tuk-tuks) at about $1.9 billion in 2015. This could double by 2020.
This DIY attitude extends to illegal hookups and stolen electricity as well. The back streets of Delhi are lined with a chaotic tangle of power lines. As much as 20 percent of power is stolen in some areas.
Photo credit: Bentham Paulos
As part of national renewable energy goals through 2022, the Indian government has called for 100 gigawatts of solar, including 40 gigawatts on rooftops.
The shadow utility already built implies that Indians can do the same with solar — acting on their own where government-owned power systems have failed.
But there are many impediments to rooftop solar in the country. And it's still unclear whether the country can get anywhere close to the ambitious targets established by the government.
Getting to 100 gigawatts of solar
A week later, I’m sitting on another deck, at The Park Hotel in Hyderabad, talking to Dr. P. Jayakumar. The Park is the nicest hotel in town, with a swept aluminum façade and a deck overlooking Hussain Sagar, a lake built in 1562. Next door is a vacant lot full of trash, some of which is on fire, sending toxic fumes of burning plastic across the deck, spoiling my gin and tonic.
Dr. Jayakumar runs Arbutus Consulting in Pune, and has helped develop 1 gigawatt of the 7 gigawatts of solar in India. He also helped Jigar Shah, his colleague from BP Solar days, get SunEdison started in India in 2007.
But I was focused on one question: How can India meet its huge solar goal?
In addition to the 7 gigawatts already built, India has 20 gigawatts in the development pipeline, according to the government.
“When we started in 2007, grid-connected systems were very new,” Jayakumar recalls. “Utilities weren’t familiar with the technology, and land ownership was often unclear, making project development difficult.”
Things are progressing, but Jayakumar still sees two major things that need to be solved: finance and coordinated development. “If we don’t solve these problems, I have the feeling we may be doing 50 percent of the goal.”
The utility system in India is largely owned by state and federal governments, through a series of public corporations. The one exception is renewables, which have largely been built by private developers in recent years.
India spent decades as a planned socialist economy, with an army of bureaucrats controlling business though the “permit raj.” Reforms in 1991 spurred a move away from central planning; this June the pro-business administration of Narendra Modi announced further measures to encourage development, such as easing limits on foreign investment.
But the energy sector is a stalwart of the old economy, and efforts to modernize run up against a host of barriers. Energy policy has a strong “social mission,” and electricity is often sold at less than cost to low-income customers or given away for free to promote economic development.
“About 75 percent of customers pay full price for electricity,” estimates Ravi Vora, a former managing director of an Indian utility.
The rest of the power is simply not paid for, and goes onto the books of the state-owned distribution utilities. Debt has gotten so catastrophically large — estimated losses of $9 billion per year and an accumulated debt of $64 billion — that utilities have been unable to pay their bills or borrow money to invest in their systems.
The federal government is now pursuing what it calls “the most comprehensive power-sector reform ever,” a plan called UDAY, to roll that debt onto bonds to allow the utilities to stay solvent. A total of $15 billion in bonds has been sold in the past year.
Rural areas are central to the problem. While almost all villages have been connected to the grid in recent years, only half of village homes have power and none enjoy reliable power. An estimated 300 million people are poorly served, or are not served at all. (This dashboard tracks weekly progress in the quest for village electrification.)
According to the World Bank, poverty rates in India have fallen from 20 percent in 2011 to 12.4 percent today. Still, that means that 172 million people in the country are living on less than $1.90 per day. Electricity is a luxury.
The government sees rural electrification as a key part of the war on poverty. “Rural electrification in India has caused changes in consumption and earnings, with increases in the labor supply of both men and women, and promoted girls’ schooling by reallocating their time to tasks more conducive to school attendance,” said the World Bank in a recent report.
Agricultural customers get power at very low or no cost, often unmetered, in the name of food security and rural economic development, resulting in a massive operating deficit for the local utility. In Maharashtra, for example, agricultural load — especially for water pumping — makes up about one-quarter of total sales (12 to 13 gigawatts) and is charged at 0.8 rupees per kilowatt-hour, whereas the cost of procuring that electricity to the utility is 2.4 rupees. Other states have an even higher share of agricultural customers.
While many reformers get excited about the potential for distributed solar to power rural India, heavy subsidies for rural energy actually make farmers less likely to buy it.
“A 1-kilowatt solar water pump may be only 30,000 rupees, but they say, ‘I’m getting my power for free today, why should I pay for it?’” asks Dr. Jayakumar.
“Many states use free power for agriculture as a political tool,” he argues.
In theory, solar can be an opportunity for utilities to move these money-losing customers off their books. But in practice, it is cheaper simply to cut off power. “Utilities serve rural areas only certain hours of the day,” Jayakumar says, “which already limits their losses.”
The financial problems of the Indian power sector limit new investment by the state utilities and scare off potential private-sector developers. As a result, “power-sector investments are seen often to have junk status,” according to the Renewable Energy Roadmap 2030, a report written for the National Institution for Transforming India Aayog, a government think tank.
High risk means high finance costs. Jayakumar says government-owned banks are a major source of finance for solar projects, but because they don’t offer “concessional” rates, project finance costs are around 13 percent.
“The most important thing is to bring down financing costs to 5 percent to 7 percent,” he says.
Private banks have shied away from such risk, he says, though this could be changing. A report from the Institute for Energy Economics and Financial Analysis chronicles over $100 billion of firm commitments for renewables announced by a variety of multinational banks and companies. The World Bank and others recently committed $2.5 billion in low-cost financing for solar.
Dr. Jayakumar’s second recommendation is greater coordination of development. He sees utility-scale projects as the main pathway for solar, since they are “the easiest question to answer.” Because the low-voltage grid is so unreliable, distributed projects in the range of 1 megawatt to 5 megawatts can lose access to their markets on a daily basis. Big solar plants, such as those 100 megawatts or more, that are connected to the high-voltage transmission grid are more secure.
“I think the way forward is not individual projects but through solar parks,” he says.
Solar parks, essentially industrial parks for solar projects, are being developed by state business agencies to streamline development. The parks clear up the issue of land ownership, since in many rural areas of India title to the land is uncertain, leading to expensive delays.
They are also sited near high-voltage grid connections, enabling big projects to be developed quickly. These solar parks can be integrated into broader transmission planning, such as the Green Corridor project.
While some observers look on India as a land of opportunity for clean energy, the truth is that it’s hard to get things done there. Financial problems, massive poverty, legal issues and a stubborn bureaucracy are all big red flags on the green pathway.
Over the past half century, most development in India has come from the government, as the only institution that can function in the chaos. As the Modi government continues to turn away from the centrally planned economy of Nehru and his descendents, they are seeking to unleash the power of the people to change the energy system.
A small example of this attitude was rolled out this spring in a quintessentially modern way — through two new smartphone apps.
Vidyut Pravah gives real-time information on power availability and price, while Urban Jyoti Abhiyaan has a “consumer dashboard” with data on outages, complaints, and energy theft for each local utility.
The apps aim to generate political pressure as much as energy.
“The mobile application will empower the Common People to demand 24×7 power from the States,” said Power Minister Piyush Goyal, speaking at an event in Delhi on March 31. “[T]his app will work as a manifestation of the Prime Minister’s vision of good governance via inculcating transparency in the system and will put pressure on power producers across the country.”
The app “will empower the consumer, thereby leading all the stakeholders to be more responsive and efficient, bringing more economy to the country.”
When it comes to energy, nothing is more grassroots than solar power. Modular and nimble, with many ways to be deployed, solar may succeed where other “hard-path” energy solutions fail. Most importantly for India, solar works with both the official utility and the shadow utility of diesel generators and batteries. This alone may make the 100-gigawatt goal possible — but certainly not easy.
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