By Charitha Ratwatte –
With alternative energy sources improving their economic performance virtually by the day, combined with the USA accessing more and more domestic sources of crude oil and gas through hydraulic fracturing technology, the state of play in the power sector has undergone a revolutionary change.
South Asia’s power producers are faced with mammoth problems with galloping consumption of electricity. Conventional energy generation is in a mess in most South Asian countries, except Bhutan and Nepal, which have vast untapped hydro resources and low demand/consumption.
Importing coal, gas or oil is expensive; even in countries like India, which has coal resources, the State coal monopoly is unable to dig out enough coal to meet the demand. Coal has also to be imported. The domestic coal extracting industry is one horrendous mess of corruption.
Tycoons such as Kumar Mangalam Birla of the Adithiya Birla Group and Naveen Jindal of Jindal Steel and Power have got embroiled in corruption litigation, causing panic among Indian tycoons. As a result, brown outs and black outs are the norm; consumers rely on highly polluting diesel. India has found some oil and gas in the Cauvery Basin, but not as much as expected.
On the Sri Lanka side of the border in the Palk Strait, the Mannar Basin, two gas discoveries have been made by Cairn India. There is an issue as to whether these are commercially viable quantities. The price at which it can be extracted and sold has not been worked out. It is said that it would be a floating price negotiated depending on the cost of production and the benefit of import substitution to the CEB.
Solar success story
Solar power is one of the recent success stories in the renewable energy sector. Photovoltaic solar panels which generate electricity from sunlight to charge batteries that power lamps, fans and mobile phone chargers are spreading fast in South Asia. This is one clear manifestation of the global energy revolution.Bangladesh is a case in point. Munawar Misbah Noin, Managing Director of Rahimafrooz Solar, which assembles modules for solar panels at his factory in a rural area of Bangladesh, claims that Bangladesh is now the global champion of off-grid solar systems in homes, with two million units installed and another new 80,000 units being added each month.
In neighbouring India, in the middle of the Rajasthan desert, row upon row of angled solar panels are generating power from the sun, at a much larger scale than what can be used at the household level, and is connected to the Indian national grid.
The recent drop in the value of the India Rupee caused a crisis due to imported fuel prices shooting up and the Government had to take emergency measures. Many established old corporate entities have cashed in by switching to alternative energy generation.
An example is Welspun Energy, a renewable power company spun off from a family textiles group. The Managing Director Vineet Mittal says: “I’m seeing across the political spectrum that there are no second thoughts in any of the political parties that energy security is vital and that Indian must take steps to exploit whatever alternative, renewable energy resources which are available.”
The Welspun solar power producing facility at Phalodi, in Rajasthan, has a maximum output of 50 megawatt, and is the largest photovoltaic solar power plant in India. Indian solar energy capacity is today just over 1.8 gigawatts. These solar energy plants are located mostly in Gujarat and Rajasthan, two states which are blessed by unimpeded sunlight for 300 days in the year.
Narendra Modi, Chief Minister of Gujarat State, and recently anointed as the Prime Ministerial candidate of the opposition BJP, was recently at a place called Charanka, on a desolate salt plain in North Eastern India, near the Indo/Pakistan border. He stood before a crowd of around 5,000 people and a brass band and said: “I pray, sun god, that today Gujarat will show the way to the rest of the world for solar energy.” The occasion was the opening of a solar energy generating facility consisting of half a billion dollars worth of solar energy generating panels stretching as far as the eye can see.
Bio-mass generation of power
India is also going ahead with bio-mass generation of power. The Punjab Biomass Power plant near Ghanaur, a former coal power plant, processes 120,000 tons of rice straw a year to produce12 megawatts of power. The plant purchases from farmers rice straw, a waste product of agriculture. The plant is also eligible for carbon credits.
Finland, Sweden and countries which have well-managed forests and well-developed transport infrastructure also are major users of biomass. In India collecting, storing and transporting the biomass creates many challenges. A Dendro fuel wood power plant set up near Mahiyangana is Sri Lanka also ran into similar logistical problems. Biomass can also be used in mini gassifiers in rural areas; it is estimated that India has 800 to 900 small biomass plants operating.
Globally, solar power has long depended on government subsidies. However, the price and the cost of production and procurement of photovoltaic technology has fallen so fast and the efficiency of the cells to produce power has improved so much that the cost per unit of solar electricity is fast declining towards what is known by energy economists as ‘grid parity’.
Grid parity or socket parity occurs when an alternative energy source can generate electricity at a levelised cost that is less than or equal to, the price of purchasing power from the national electricity monopoly’s grid. The term is most commonly used when discussing renewable energy sources such as solar and wind.
Reaching grid parity is considered, by energy economists, the point at which that renewable energy source becomes a viable contender for widespread development without subsidies. A wholesale shift in generation to these forms of energy production will take place when they reach grid parity. Grid parity has already been reached in solar power in India and Spain in 2013, and in some locations with on shore wind power in the year 2000.
The only drawback faced by solar technology is the inability to generate power when the sun is down and the difficulty of storing the electricity produced. This means that solar power has to be one of a mix of energy sources for any national network for it to be practical.
In South Asian nations , which have the land space, like India and Pakistan, vast extents of barren deserts like Rajasthan, and Baluchistan, etc., in the future mix of energy procurement , large-scale solar is going to be relatively more important than in countries like Sri Lanka, Nepal and Bangladesh. Solar power in India costs half the price of power produced by diesel generators.
Bureaucratic and fiscal hurdles
In the short term, however, investors in solar power generation in India are obstructed with bureaucratic and fiscal hurdles such as international trade disputes over ‘cheap’ Chinese solar panels, which India are claims are dumped at below cost of production prices in India, Indian Government demand that producers buy locally assembled panels, to local indebted State electricity monopolies being unable to pay suppliers on time for power purchases.
In Spain, Ghe government provided lavish subsidies for the procurement of solar panels and related generating equipment and attractive purchase prices for solar power, but later, stunned by the speed at which technology costs had fallen, tried to back out of contracts to purchase solar power at the older, higher rates.
The problem has arisen in India too. In Gujarat for example, the State has contracted to pay Rs. 12.54 per kilowatt hour for power from its early private solar plants, while the Welspun’s Rajasthan plant launched this year is selling at Rs. 8. The latest bids in India have been close to Rs. 5.
Other problems being faced in India are the difficulty in acquiring land to set up vast extents of solar panels and inadequate connections to link new solar power produces to the national and state grid.
Mercom Capital, an energy consulting firm, reckons that India will install only about one gigawatt of solar capacity this year, about the same as last year. This is despite headlong expansion elsewhere in the world and the great potential in India for the sector to expand rapidly and create much-needed employment opportunities. Mercom says that “the decision to pursue anti dumping investigations against Chinese solar panels and insist of local procurement, have all but paralysed the sector”.
Producers such as Welspun, which is building a 150 megawatt solar plant in Madhya Pradesh with equipment from China and has further plans for a total of 1.75 gigawatt of wind and solar capacity, say they are willing to buy local Indian products, as long as Indian manufacturers can guarantee the necessary scale quality and price of their output.
India, like so many other emerging and developing economies, is losing out on another industrial opportunity by trying to protect local Indian manufacturers, instead of forcing them to compete with world class producers. The policy has been described as inconsistent and “very patchwork” by Raj Prabhu, Mercom Chief Executive. Prabhu goes on to state: “In India coal is just not working. Solar and wind are the answers. They are the future.”
Covert moves to sell Norochcholai plant?
Look at Sri Lanka. Norochcholai – underperforming; Kerawalapitiya – underperforming, Sampur at Trincomalee – coal power agreement signed with NTPC of India but not much progress, although the news papers report a ‘bouquet of tax exemptions’.
The Norochcholai (Lakvijaya Coal Power Plant) is set to resume operations after being closed for more than a month for annual maintenance. It was scheduled to be started up on 28 September but it was reported this had to be postponed due to pipes brining in sea water for cooling the plant being blocked by ‘mud and oysters’.
Matters are further complicated by the employees’ trade union of the State-owned monopoly, generator, transmitter and distributor of power, the Ceylon Electricity Board, alleging that there were “covert moves to sell the LCPP plant at Norochcholai to a Chinese Government company, citing low productivity and continuous breakdown, as justification”.
The first phase of the Chinese Exim Bank loan funded LCPP was constructed at a cost of Rs. 56.1 billion. It was scheduled to be commissioned on 22 March 2011, but a fire broke out on 24 October 2010, which delayed the commissioning of the plant. Another fire broke out in August 2011 and a third fire broke out in January 2012. In between the Union alleges that there were several other technical failures and the tripping of the main power supply lines, disrupting generation.
The Union alleges: “There is no doubt that the Chinese want to buy this plant and the Government wants to sell it. Some breakdowns may be deliberate; some may be due to substandard machinery. Therefore it seems that the owner wants to sell it on the grounds of low productivity, substandard machinery and continuous losses. There seems to be a buyer who wants to buy the plant cheap and sell power back to the CEB.”
The Union charged that “the ground had been prepared for such a sale by amending the Sri Lanka Electricity Act in February 2012, giving the power to the Government to sell or hand over the ownership of any power or energy source in the country to an outsider”.
Solar energy would seem an obvious winner for India specifically and South Asia in general. The ADB has advised Sri Lanka to reduce its dependence on thermal sources and go more for renewable sources of power generation. Solar parks are easier to build and will prove less controversial than nuclear plants, after Japan’s Fukushima disaster. Germany has decided to go off nuclear power and is promoting solar power and other renewables with attractive incentives.
The cost of solar power generating equipment has fallen by a third, says Alan Rosling of Kiran Energy, a solar firm operating in India backed by American private equity funds. Cheaper solar and pricier conventional power has persuaded many that solar energy will soon become very competitive, without lavish subsidies.
V. Saibaba, head of Lanco Solar, which operates solar parks in India, says by 2016 Indian solar will match the price of conventional electricity, i.e. Grid parity. Sunil Gupta of the Standard Chartered Bank estimates that India’s share of the new global solar installations will rise from 1% in 2012 to 5% by 2015. Other South Asian nations should take note.
India’s Central Government has set a target of 20,000 mw of installed solar capacity by 2022, as against less than 1,000 mw today. The 2022 target is still less than 5% of the estimated total power generation by that time. But the cost of installation is estimated to be between $30 and $40 billion, a fraction of the cost of coal power. The general opinion is that the official target will be surpassed. The IAS officer in charge of solar power in Gujarat believes Gujarat alone will reach 10,000 mw by 2022.
In Sri Lanka a solar power plant was inaugurated at Hambantota, built with Korean aid. Householders are increasingly installing domestic solar panels for hot water and also for back-up lighting, to cope with the regular power outages. This is in addition to the areas which are off the national grid which are increasingly installing solar panels for lighting.
The Energy Services Delivery (ESD) and the Rural Energy for Rural Economic Development (RERED) projects through its imaginative publicity promotion program ‘Gamata Light,’ implemented by the Sri Lanka Business Development Centre and designed by Phoenix Ogilvy, supported by a Word Bank soft loan, brought about an increased awareness of solar panels for household lighting and a number of businesses marketing solar panels and related products came into being.
The CEB is now buying power generated by households through solar panels fed into the national grid at the same per unit price at which it sells power to consumers. However, solar panel power is not without its flaws; there are limitations of high installation capital costs and although there is hardly any recurrent cost, skies overcast by cloud, night time and dirty panels are limitations.
Another solar technology is solar thermal, which uses mirrors to concentrate heat, produce steam and drive turbines. There would be potential in our arid zones of Mannar and Hambantota. Such solar thermal plants can be built on the scale of gas fired power stations, generating a few hundred megawatts at a time.
Another possible approach would be to encourage householders already connected to the national grid in Sri Lanka, through tax incentives, to install solar panels and have a set of alternative lights powered by solar panels. This would take the pressure off the national grid. Solar panels are available at very low cost from China and if there are fiscal incentives given, householders can be encouraged to use solar power for at least a part of their household lighting requirements. A step further may be to allow householders and industrial plants who can generate a surplus of alternative renewable energy to sell some power to their immediate neighbours, say in the same Grama Niladhari division. This will require the transmission and distribution monopoly of the CEB to be changed.
Generation of power is no longer a monopoly of the State. Localised transmission and distribution to households should be allowed, subject to special safeguards and precautions. In the tea and rubber plantations, in the old days, power generated from the mid-steam Pelton turbines installed in rivers and streams near the factory were connected to generators and electricity was distributed by the estate to the superintendent’s and staff quarters. This is nothing new. We need some out-of-the-box new thinking in this sector, if we are to break out of the ‘energy paralysis’ and ‘coal power fixation’ we have got ourselves into.
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