Electrifying India in a decentralized way

Overview

India is one of the fastest growing economies in the world, which is expected to grow at the rate of over 5% annually for the next twenty fives years. As growth demands energy, demand for power has risen rapidly with economic expansion, which has resulted into supply and demand mismatch. Energy Information Authority (EIA), the statistical agency of the U.S. Department of Energy, estimated that India was the world’s fifth largest consumer of energy (3.3 % of the world’s total annual energy consumption) in 2006, even though India’s per capita energy consumption (600 Khw) is low as compared to developed countries.

Power is one of the critical components of any economy’s infrastructure and without its development, economic growth could be hindered. During 2005-07 the demand for power grew at CAGR of 16 percent per annum according to Ministry of Power. In the year 2007-08, India’s total installed capacity stood at 130,000 MW with total generation of 80,000 MW (approx.)

Electricity generation mix is heavily dependent on coal /thermal at around 70% with hydel power contributing to 26%. Due to burgeoning demand and transmission and distribution (T&D) losses, India has been witnessing 11% peak hour shortage and overall 7% average shortage. Also, T&D losses are extremely high in India as compared to developed countries and world’s average. In developed countries such as USA and Japan, T&D losses vary between 7% -8% of total electricity generation, whereas in India it varies between 35% to 50%.

With technology developments in oil and gas sector, India has options to produce sustainable and efficient way of producing electricity through decentralized system from natural gas without incurring substantial T&D loss.

Going forward, Indian consumers will not only have natural gas for domestic cooking through pipeline but also they will have an option to produce electricity at a lower cost. Consumer will not have to depend on grid for uninterrupted supply electricity. This also means more independence and control over energy consumption.

Distributed Power – Empowering Consumers

Natural gas recognized as the fuel for the 21st century with long track record of developing and expanding the market potential for independent natural gas power generation in developed nation especially in USA, Japan and Australia. It has a history of being a swing factor for new generation capacity addition if coal and nuclear are found to be less desirable or expensive.

Considering huge demand of electricity and availability of gas to households, unique opportunities exist for generating electricity and satisfying on-site customer energy needs using smaller distributed generation power systems. In India natural gas is already powering gas-fired turbines for large power generation. With advent of technology, electricity can also be produced by using micro gas turbine at home from natural gas with ownership and operation resting with the private owners. Currently, the main attraction of microturbines is the promise of very low emissions coupled with high efficiency in combined heat and power (cogeneration) service.

For instance, industrial consumers in developed countries have began some time ago to exploit the benefits of on-site turbines for cogeneration and select electricity needs, applications for consumers is beginning to be observed in notably in Japan and South Korea. A Korean Apartment complex for instance is powered by micro turbines manufactured by a firm called Capstone.

Efficiency and Productivity – Major benefits of Distributed Power

If electricity generation cost is compared from the systems, the cost under centralized (grid) and decentralized system is similar but T&D cost and losses are high in centralized system leading to high retail tariff as compared to decentralized system. Thus the fundamental appeal of decentralized generation will be to improve the affordability of fuel prices as it avoids excessive T&D tariff and loss currently applicable by bypassing the grid.


Dynamic transformation in energy markets and developments in technology can converge to place natural gas generator sets on the forefront of energy consumption


Source: Company Reports / *Price per Unit in Rs

Besides saving the T&D losses, distributed generation will see active interest because of the benefits it delivers to utility companies whose transmission and distribution capital expenditure (T&D) are constrained. Thus by using distributed power system placed close to the point of use substantial T&D investments can be saved while protecting customers' reliability and power quality. Moreover it will also save a substantial cost the government incurs as transmission and distribution loss.

The discovery by Reliance Industries of a huge gas field with initial production of 40mmscmd and reaching 80mmscmd by June 2009 in the Krishna-Godavari basin opens up tremendous possibilities for use of natural gas for multiple purpose such as domestic cooking, instant hot water and for generating electricity. Reliance Industries is already working on setting up distributed power supply where some Reliance Retail outlets would come in Delhi. Reliance's find, when it is tapped, is bound to change the way energy is consumed.

Natural gas is the fastest-growing fuel of choice in several western countries with rigorous environmental regulations. However, the potential of natural gas has never been fully exploited. By 2011-12, total availability is expected to increase at a CAGR of 22% to 337 mmscmd, out of which 255.22 will be produced in India and rest 81.38 mmscmd will be supplied from LNG terminals, which are coming up in different parts of the country. State-owned Gujarat State Petroleum Corporation (GSPC) holds an estimated 20 Tcf of natural gas reserves in place at the KG-OSN-2001/3 block in the Krishna Godavari area while ONGC announced in December 2006 that it had found an estimated 21 to 22 tcf of natural gas in place at the KG-DOWN-98/2.

If this radical concept of distributed power is implemented, it will lessen reliance on external energy sources of energy. The Government can also hope for additional revenues in the form of taxes and cess from the gas exploited while at same time trimming the loses from transmission and distribution currently incurred.

Moreover restructuring in the electric generation industry can open the prospect for even greater opportunities for non utility generators. However, it requires appropriate regulatory and fiscal framework to encourage the much needed investment and a progressive and stable financial regime - a few simple initiatives from Government would be most valued at this stage of evolution of the industry i.e. creating sustainable electricity through decentralized system.

_____________________________________________________________________________________