India has faced a scarcity of electricity for decades, but could in the coming years be confronted with the problem of plenty in the future. With the addition of many projects in recent years, the country’s gross electricity capacity is now higher than the demand, and shortfalls have significantly dropped. Official data indicate that chronic power shortfall fell to as little as 0.7 per cent in 2016-17, and this year, there could well be a surplus. 

This is the result of simultaneous growth in renewable energy (RE), as well as continuing growth in power output from conventional sources. RE is growing dramatically; India had the second-highest solar capacity addition in the world in 2017. The central government has set a target of 175 gigawatt (GW) by 2022, which requires an annual growth of well over 25 per cent. Further, coal-based capacity for the period FY 2011-17 has also risen over 12 per cent annually, which is twice the rate of growth in demand for power.

A new RE-ality in power management

Isn't this a good thing? Yes, and no, as it turns out. While adequate power supply is surely a worthy goal, the rising contribution from RE also presents the grid with a challenge. The question, “How much RE can the grid handle” does not have a simple answer, as a recent reports by the Brookings Institute points out. The report, titled "Embarassment of riches: The rise of RE in India and steps to manage surplus electricity" points to the challenges that loom in the changing power situation in the country.

Compared to conventional power generation from coal and gas, and even hydro-electric ones, power generated from renewable sources are quite variable, depending on changes in cloud-free daylight and winds in source areas. At low RE levels, the grid can be managed despite this variability, but as the share of RE in the power sector rises, this becomes much harder. States need to invest in nimble, standby alternatives to be able to respond to drops in power from renewables. Also, when there is a surge in power from renewable sources, other plants cannot be quickly backed down to keep the overall supply constant. According to a study by the Central Electricity Authority (CEA), the system-level costs associated with managing RE on the grid are almost Rs 1.5/kWh, or more than half of recent RE bids.

The Brookings report points out, additionally, that the targeted 175 GW of RE is also concentrated in only a handful of states. For example, Karnataka has almost 5 GW of solar, and more of wind, well ahead of its targets, but the maximum load served is only about 10.2 GW. During the windy months of the monsoon, the demand is as low as 6.5 GW. In the coming years, the focus will increasingly have to be on the management of surplus, especially during certain months and times of the day.

Storage technologies could help save the day in the future, with excess RE being steered towards storage rather than be wasted. But for now, the costs of large-scale storage are still high. Until their viability improves or until prediction of RE availability becomes more accurate, we'll have to focus on balancing supply and demand, or continue to accept the losses - and system costs - of surplus renewable power.

As an aside to the reader, the report also points out that surplus capacity doesn't automatically guarantee an end to load-shedding. The state distribution companies are in poor financial health, and unable to purchase power even when it is available, and this is often the most important cause of shedding.

New policy directions needed

To properly plan for the management and growth of RE in India, the Brookings report suggests four steps.

  1. Data capture regarding wastage of RE must be mandated: Currently, when surplus RE is thrown away - known as 'curtailment' - there is no aggregated record kept of this information. Just as importantly, the reasons for curtailment should also be recorded. This would be of huge commercial significance, since in India most power contracts are set up in a way that producers don't get paid if their energy is not delivered. Whenever RE is curtailed for no fault of the producers, there should be a compensation mechanism for this. Draft regulations from the Ministry of New and Renewable Energy indicate that the government is moving in this direction.

  2. Frameworks for curtailment compensation must be created: The burden of curtailment must be shared, and India requires fair and efficient frameworks for this. Each coal-based plant has its distinct variable costs, so a hierarchy of pain-sharing can be developed based on who would lose the most if curtailed. Solar plants, on the other hand, all have identically marginal costs - zero. If only technical efficiency yardsticks were applied in terms of which power plants should be curtailed, it’s possible that some of them will be disproportionately affected. To minimise the impact on selected plants, socialising their costs is an option. China has done this; its model could offer a starting point for India's efforts too.

  3. RE generation data should be captured with granularity, and dissemminated: For economic as well as technical reasons, the addition of new RE should be guided by good information about how much is already produced and used. Aside from the need to make better predictions, consumers with rooftop solar and other RE producers will benefit from this information. The Central Electricity Authority recently began compiling aggregate RE production per month, a small step but a lot more is required.

  4. All units of power must not be treated the same: Time of Day pricing must be introduced : Almost all Indian power transactions are made on the basis of Power Purchase Agreements which treat all power the same. However, the value of power differs based on the time of day, predictability, ramping ability, and other factors. The rise of RE will require the system to be become more flexible. In the future, signalling will have to vary for different grid locations; peak power that operates a few hours a day will be more expensive than baseload coal or opportunistic RE, but such power must be enabled.

The shift from a bleak, power-scarce situation to a surplus offers hope that universal, affordable access to energy will be achieved. That's certainly something to look forward to, but as this Brookings report reminds us, it is a path that wil be paved better with foresight and planning for this new reality.