Shankar Sharma – Inefficient Electricity Industry and Global Warming, Nov 07

Inefficient Electricity Industry and Global Warming

1. Preface:
Since the release of 4th Assessment Report (AR4 Synthesis Report) by Inter Governmental Panel on Climate Change (IPCC) released on 17th Nov. 2007, there are probably no serious deniers of the concept of Global Warming & Climate Change. While some skepticism is still being heard from some quarters, generally there is widespread acceptance of the causes and consequences of Global Warming & Climate Change. The unanimity of opinion at UNFCC conference in Bali to deliberate further to find a mechanism to replace Kyoto Protocol by 2012 is a clear vindication of this statement. Most importantly, most of the provincial and Union governments seem to have accepted the harsh realities of Global Warming & Climate Change. Union govt. has even mentioned that the reduction of GHG emissions will be a priority task.

However, there will always be a considerable gap between such an assurance from the govt. and its effective implementation. Since the issue of Global Warming & Climate Change concerns the entire world, at present and in the future, the civil society has to take the initiative of mitigating the impacts, without having to relying entirely on the govt. IPCC / ORF had sought feedback from the public on various measures to mitigate the impact of Global Warming as apart of IPCC Outreach Activity on WG III Fourth Assessment Report, Mumbai, on 9th October 2007. The efforts by IPCC / ORF to seek the feedback from the public are very laudable objectives.

In this feedback only the issues relevant largely to the electricity industry are considered. In view of the fact that about 21% of all GHG emissions and about 42% of all CO2 emissions are known to be coming from the activities associated with electric power generation alone, adequate emphasis on this industry goes a long way in mitigating the impact of Global Warming & Climate Change. IPCC, UNEP and many other Global organizations have no doubt that by reducing the need to add more electricity generating stations through measures like higher efficiency of the usage and energy conservation, the total GHG emission can be brought down considerably. In this regard an analysis of the efficiency of the electricity industry in Karnataka and India can reveal a disturbing picture.
Appropriate change in policies and practices relevant to electricity industry alone can go a long way in reducing the total GHG emission of the country. What is required is a paradigm shift in our energy policy.

Table 1: Annual Green House Gas emission by Sector

(Source: IPCC Report)

2. Inefficiency in Indian electricity industry:
2.1 The high level of inefficiency prevailing in various aspects of the electricity industry in India is a major contributor to the present level of GHG emissions, even though India’s per capita GHG emissions is considered to be one of the lowest in the world. But it should be noted that there is a huge potential for phenomenal increase in such GHG emissions because of the hugely projected increase in population growth and largely unmet demand for electricity even at the present level of population. In this regard the Union government’s stand that due to low per capita GHG emissions, the country should not be expected to spend considerable sum in reducing such emissions does not carry enough conviction. Since there is huge scope for improvement in the efficiency and decrease in the GHG emissions, our country should set itself a stiff target.

2.2 The civil society should do all that is possible to convince the government that the containment of GHG emissions to the lowest level possible, keeping in view the sustainable development activities of all sections of our society, is in the overall interest of our own people. Whereas the per capita emission of GHGs can be a useful indicator in international negotiations, it is the total GHG emission which is important from the Global Warming perspective. Even if India’s per capita emissions remains below the world average in next few decades, its total GHG emission can be still a major contributor to Global Warming. As a matter of fact International Energy Agency (IEA) has projected that India could be the third largest emitter of GHGs by 2015 after China and USA if the present trend continues. In addition, being a tropical country India also faces high risk from the impact of Global Warming, as compared to temperate and cold countries. Besides, the high level of GHG emissions in the country will also have local impact on its own environment first, before it affects other parts of the world. Hence it becomes critical that the country, as a responsible member of the international community, must do all that is possible to minimize the GHG emission to the minimum levels possible within its constraints, without giving too much credence to the argument of per capita emission alone. There will be no possibility to reduce the total GHG emission at the Global level, if each of the developing countries attempts to match even half of the per capita electricity consumption as reported from USA.

2.3 The major areas where the electricity industry in India is exhibiting much lower level of inefficiencies, because of which the GHG emissions are high, as compared to the international best practices are:
• Low Plant Load Factor (PLF) of the order of about 60% at the National level (as low as 25% in some cases) in the operation of the older and smaller size coal based power plants; this PLF is in stark contrast of more than 90% in some of the modern power stations of NTPC;
• Aggregate Technical & Commercial loss of about 40% against less than 10% elsewhere;
• Utilisation loss in applications of about 15%;
Additionally there is huge scope to reduce the very demand for electricity by means of Demand Side Management & Energy conservation, which is of the order of about 15% and which are also techno-economically feasible.

2.4 Due to these inefficiencies in the usage of electricity from the existing assets more power generating plants, especially fossil fuel based, are being planned & commissioned than those which may really be necessary. There are techno-economically viable measures, which can improve such efficiencies to international best practice levels. As per the prevailing wisdom / experience these measures are expected to cost only about 25% of the cost of establishing new generating capacity.

2.5 In addition, the widespread use of non-conventional energy sources like solar, wind, bio-mass, wave energy etc. can reduce the current and future demand for grid quality electricity through large fossil fuel based or dam based power plants by a considerable margin. These measures will be able to reduce the need for fossil fuel burning and submergence of forests and vegetation in the form of large size electric power generation projects. They will also assist in preserving certain natural resources like fertile land and water.

2.6 In summary, it can be said that about 40 to 50% more virtual capacity addition (than what is available now) is possible through various efficiency improvement measures, which is expected to obviate the need for new generating capacity of about 60,000 to 70,000 MW in the next few years. These measures will reduce the GHG emissions not only from the existing coal power plants, but will also reduce the total GHG emissions in the future.

2.7 These measures will also have huge positive impact on economic, social and general environmental aspects of the society. While providing clear economic benefits, these measures will also result in reduced need for land acquisition, displacement of Project Affected Families, and acute pressure on fresh water and other natural resources. At a conservatively estimated cost of new generation capacity of Rs. 5 Crores per MW the savings to the national economy could be more than Rs. 250,000 Crores in today’s prices. If we also take the economic benefits associated with the carbon credits, which can be earned through these measures under CDM regime, the overall benefit to the nation will be huge.

These measures while reducing the need for additional generation capacity will also assist in reducing the GHG emission from the electricity industry in excess of 500 millions of tons of GHGs per year.

2.8 Keeping these multiple societal benefits in mind there cannot be any reason why the governments should not like to invest adequately in these measures. Hence there is an urgent need for the civil society to persuade the state and central governments to put huge emphasis on efficiency improvement measures and the effective deployment of distributed renewable energy sources.

3. Action Plan to improve the efficiency in the electricity:
The governments should be urged to seriously consider implementing the following action plan:

3.1 The national average of electricity transmission loss should be brought down to less than 3 % by Year 2015, and that the board of directors of each transmission authority should be held directly responsible, as in the case of the financial disclosures. Also there should be a target to decrease AT&C losses to below 10 % by 2015, failing which a financial penalty of some sort should be considered. In this regard each of the central sector agencies like NTPC, NHPC and PGCIL should be mandated to adopt few state transmission & distribution systems by investing 20 – 30 % of their annual budgets to reduce the technical losses below 10%.

3.2 The thermal efficiency of the boilers in new coal fired stations should not be below the efficiency of super critical boilers, which is of the order of 39%. For the existing ones a cut off date should be set, failing which the operating license should be withdrawn.

3.3 ‘Polluter pays principle’ is a novel idea put in to practice with the desired effect in many parts of the world, and it is best applied at the stage of mining and electricity generation itself. A suitably designed pollution tax should be applied to each ton of coal /gas, litres of diesel, mega litres of water or kWh of energy produced /consumed /generated. Suitable incentive also should be admissible for exceeding the targets of reduction in pollution, and efficiency in generation.

3.4 After thorough study and consultations with the industry experts, firm target levels should be mandated for efficiency improvement measures, time frame and accountability for each sector of the energy industry.

3.5 All feasible options available for increasing the capacity or to improve the efficiency of each of the existing generating stations should be explored and implemented. In this regard Central Electricity Authority (CEA) should look at each of the stations state by state, consult the original equipment manufacturers or experts to determine the opportunities available in this regard. The experience gained so far in enhancing the capacity / efficiency of power generation capacity in projects like the Bhakra Nangal project in North, Sharavathy valley project in South should be extended to all other projects. In the case of coal fired power stations of older designs, a close examination is likely to reveal the potential to save 3 to 5% energy in the station auxiliary consumption alone.

3.6 All feasible options available to flatten the demand curve in each state should be deployed, and the difference between maximum demand and average demand should be reduced below 10% by 2012 in all the states. These options may include widespread use of CFL or LED lamps in place of incandescent lamps, the use of roof top solar water heaters, use of solar PV panels for street lights and village electrification, diversifying the peak load occurrence within and across states, two time zones for the country etc.

3.7 A detailed study should be undertaken to look at every alternative available to conventional energy sources in each state, action plans drawn up, stiff targets set, adequate resources made available for implementation, all the technical help provided and diligent monitoring of the same should be employed. The target should be that 25% of each state’s installed capacity should be in the form of renewable energy by Year 2020 along with yearly targets.

3.8 An adequate national fund should be set up to reduce the agricultural pump set losses from the present level of about 50 % to below 10 % by 2015.

3.9 The PLF of each of the coal fired generating units should be brought above 90% by 2020, failing which they should be stopped functioning after that year. Generating units with low PLFs are major burdens to our society than of any real benefits. Erring units should be taken over by NTPC for modernisation.

3.10 Electricity Supply Companies (ESCOMS) should set a target to persuade and encourage at least 50% of domestic consumers, and about 75% of AEH consumers to install solar panels for lighting and water heating by 2015.

3.11 Energy auditing should be implemented in all premises with connected load more than 25 kW.

3.12 Before planning new thermal power stations at green sites, the more sensible option of considering the existing sites of older and low PLF power stations should be fully explored seriously. Such sites should be used to install new super critical boiler technology units of 600/800/1,000 MW capacity, and to improve the average PLF to more than 90%. Such an approach is essential in view of the popular opposition to acquire additional lands and fresh water sources for the sake of power plants, which have serious social, economic and environmental consequences anyway.

3.13 The usage of CFL should be fully implemented by 2015 by: (a) following the example of Maharastra, where the electricity companies are providing millions of such lamps to house holds on easy payment terms; (b) provide tax benefits/subsidy for the manufacture of CFLs for few years; (c) directly & indirectly discouraging the usage of incandescent lamps by levying Cess on their sales or completely banning the incandescent lamps.

3.14 In view of the fact that electricity industry has the potential to become the biggest polluter, if not managed responsibly, there is an urgent need to declare Electricity as a national asset and bring legislation, if necessary, to optimize its use and minimise its wastage. Central Electricity Regulatory Commission should be asked to formulate suitable tariff policies to discourage wastage of electricity in non-economic or non-essential uses.

3.15 There should be a clear policy directive to states that any new proposal to set up conventional power stations, whether fossil fuel based or dam based, should be supported by in-depth analysis of cost V/S benefits to the society of such projects by taking into account all the direct and indirect costs, and the benefits like carbon credits of suitable alternatives. Such proposals should clearly demonstrate that the proposed project is the best alternative available to produce additional electricity or meet the electricity demand in the state. Effective peer review of such project proposals by a committee of independent experts would a go a long way in addressing the multifarious ills facing the industry.

3.16. It is also well known in the academic / industry circles that the price of delivered energy, whether electricity, LPG, petrol, diesel etc, is generally much below the actual cost of supply. Making this price realistic with respect to the social, economic and environmental cost of delivering to the end users will go a long way in making the Indian energy industry a lot more efficient, which will in turn reduce the GHG emissions. The government should seriously consider the importance of pragmatism in this regard and adopt suitable policies and do away with populist measures.

4. Conclusions:
There cannot be any doubt that the electricity industry has the potential to become the biggest polluter, if not managed responsibly. It also is a major contributor of GHG emissions.

The Indian electricity industry has been highly inefficient since decades. In view of the ever increasing demand for electricity for a growing population, if course corrections are not applied immediately this industry will result in massive increase in the contribution to global GHG emission. Although the per capita GHG emission in India is known to be below that of the world average, there is huge scope for containing the total emission at an acceptable level, without having to compromise on the developmental activities in the country.

There are techno-economically viable means and huge scope to make the Indian electricity industry efficient to international standards. India also has a vast potential as far as renewable energy sources, especially as distributed energy sources, are concerned. A good combination of these measures will not only lead to highly reduced GHG emissions, but will also provide huge benefits to the society from social, economic and environmental perspectives. All the legitimate demand for electricity, not only of the present generation but also of the future generations, can be adequately met by a combination of high overall efficiency in the electricity industry, effective Demand Side Management, optimum level of energy conservation, and widespread use of distributed energy sources of renewable nature.

These measures while reducing the need for additional generation capacity will also assist in reducing the GHG emission from the electricity industry to the tune of millions of tons of GHGs per year.

Without fully harnessing these attractive and much benign alternatives, to continue to pour Billions of Rupees of our meager national resources in conventional power generating sources, is not only a huge let down for its own people, but also a failure in discharging its responsibility to the international community.

Shankar Sharma
Consultant to Electricity Industry
shankar.sharma2005@gmail.com