UB Reddy, Managing Director, Enerfra Projects (India) Pvt Ltd
‘We need a balanced mix of solar, wind, gas, and coal to create a solution with tariffs that are viable for DISCOMs, power producers, lenders, and suppliers’
Reduction in power cuts and rural household electrification will drive demand, albeit at a slower pace, says UB Reddy, Managing Director, Enerfra Projects (India) Pvt Ltd.
Power: Fulcrum of growth
Power is indeed a fulcrum of growth for any country that has improved the life of its people. To put it in perspective, India’s per capita consumption of about 1175 kWh/yr is half that of Mexico or Thailand, and one fourth that of China. For our nation to progress, demand needs to go up much more.
Rural electrification to drive demand
Rural household electrification and reduction in power cuts will continue to drive demand, but only near the current six per cent per year. Since the industrial sector accounts for 40 per cent of consumption, a material increase above six per cent per year will take greater adoption of Make in India campaign.
Game changing initiatives and reforms
UDAY has been a game changer for distribution companies or DISCOMs via sharp reduction in T&D losses from 24 per cent to 19 per cent in two years ending FY18, 70 per cent reduction in financial losses in the same two years, and tough action against power theft that was occurring in a highly organised manner. DISCOMs are the customers of every generation or transmission company. Further, almost all states have taken a pledge to cut power to customers only for technical reasons and tariff reform is next.
Offshore wind power generation
India’s offshore wind speeds are 7 to 8 m/s, while those at successful European wind farms are about 10 m/s. This difference translates to 50-65 per cent less energy. Hence, it is best to openly discuss what offshore wind will cost in India — perhaps ₹7-10/kWh, and what the discoms are willing to pay — perhaps ₹3-4/kWh. That is a huge gap. As of now, the target of 30 GW seems unrealistically high. India should do what makes sense for our country.
Meeting renewable energy targets
India’s renewable energy target is 100 GW solar and 60 GW wind by 2022. For wind, considering 34 GW today, 1.7 GW commissioned in 2017-18, and optimistically 3 GW in 2018-19, achieving 60 GW by 2022 will require not only SECI led auctions, but also policies to encourage captive/group-captive market, feed-in-tariff for
For solar, the issue is severe as solar is forcing coal plants to back down, saving the DISCOM ₹1.2-1.6/kWh variable cost of coal, but paying more than ₹2.50/kWh. Solar and gas turbines are natural partners, with coal as baseline. The only way to achieve 100 GW is to revive gas turbines and make the mix cost effective. India should also think about real time pricing for large consumers to enable significant demand-side management.
Wind energy tariffs
Current SECI and state tariffs are based on areas with highest wind speeds and shortest transmission lines. Tariffs of ₹3-3.1 per unit can be viable with no ISTS charges if the industry can consistently hit over 5 GW/year of volume. In the excitement of lower tariffs, we need to be careful as some of the low tariff projects could turn into NPAs in a few years, with lakhs of crores of public money at risk. We need a balanced mix of solar, wind, gas, and coal to create a solution with tariffs that are viable for DISCOMs, power producers, lenders, and suppliers.