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The power plant in your backyard

By G M Pillai

In the not-too-distant future, power plants will shift from large, remote centralised stations to rooftops, basements, backyards, or nearby hill ranges. Experts predict that half the world's energy supply by 2050 will be from renewables. But there are several obstacles to the integration and effective market penetration of renewables

The future of the power system is in decentralised generation (DG). In the not-too-distant future, power plants will shift from large, remote centralised stations to rooftops, basements, backyards, driveways or your nearby hill ranges...Internationally acclaimed energy expert Amory Lovins makes the following prediction: "The central power plant, like much bulk electric transmission, will soon become a white elephant, uneconomic to run, and difficult to sell. Such plants are unlikely to survive in significant numbers by 2030 in any market economy."

Distributed generation has the following features: 1) located near the consumers or on-site, 2) connected at the distribution end of the grid or no grid and 3) the size of individual units would be small, ranging from a few kilowatts to a few megawatts. It provides easy access to power for tailend users like rural people, avoids high transmission and distribution costs, provides reliable and quality power, is energy-efficient and climate-friendly. Distributed or decentralised power generation is the perfect complement to decentralised development, decentralised governance and local economy. It is predicted that by 2010, 25-30% of new generation will be distributed. The petroleum major Royal Dutch/Shell group which has made a big foray into renewables, has come up with a report predicting that half the world's energy supply by 2050 will be from renewables. Amory Lovins feels that this is not only highly likely, but could be surpassed.

Energy security is of paramount importance for our national security. Energy security is conventionally understood in terms of the risks of fuel supply disruption and fuel price volatility....Some experts predict that by 2010 the price of crude would go up to $100 per barrel. Unlike the oil crises of the 1970s and 1980s which were politically created, the current price increases are fuelled by supply not matching demand. Despite new finds the fact remains that 70% of the world's daily supply comes from oil fields that have been drilled for 30 years or more. For the fast-growing Indian economy, this news is especially bad. In 2003-04, India had an import bill of Rs 83,528 crore, more than double the 1999-2000 figure.

A very significant study regarding oil supplies has been done by Colin J Campbell and Jean H Laherrere. Their findings clearly indicate that by 2010 the supply of oil will be unable to keep up with demand. The 'Hubbert's Peak' would be reached and the permanent decline in oil production will begin by 2010. By that time the 'BRIC countries' (Brazil, Russia, India and China) will need large chunks of oil, especially because of the fast growth of the Indian and Chinese economies. It is predicted that if only India and China continue to grow at current rates, the demand for oil will rise by 6% per year. To meet this demand, world output will have to rise by 43% by 2010. Prices might then shoot up to the $100 per barrel level. The impact on our import bill and balance of payment will be very serious.

The National Security Council of the Government of India has recently circulated a paper to union ministers outlining measures for our future energy security. Development of renewables and energy conservation are the two main focal areas in this paper. More significant is the fact that, probably for the first time, an official document admits that conventional fuels in India are threatened with extinction: oil, gas, uranium and coal would be exhausted in 25, 40, 80 and 200 years respectively. The probable extinction dates for oil and gas seem fairly accurate.

Renewables offer a direct means of dealing with these concerns. First of all, they are foreign exchange neutral. They are dependent on our own natural resources. They will never become extinct. The issues relating to their integration, high initial costs and investments required can easily be tackled through innovative legislative, policy and financial mechanisms. A recent report of the G8 Renewable Energy Task Force estimates that accelerating deployment of renewables might require 'learning investments' in the order of $100 billion. This is not a big figure, if you compare it to the economic losses that the increase in oil prices can create. The loss so created by a 10% price increase of oil in IEA countries would amount to billions of US dollars. This is more than enough to finance the 'learning investments' for deploying renewables.

Integration issues: Conventional power systems are not designed for parallel operation of a DG system. Today, in India, the penetration of decentralised generation systems in the grid is hardly 3%. As the contribution of decentralised generation to the grid increases, the operation and control of the grid will generate new technical challenges. Hence, conventional power utilities should try to study this issue in a scientific way and evolve solutions, rather than blindly opposing these new technologies. The integration of these power technologies in the existing power system is a challenge we should address. In order to allow optimised integration of the new technologies into the mainstream, radical changes and renewal in existing energy infrastructure will have to be made.

The issue of integration is at once technical and non-technical. Technical issues are not insurmountable. In a diverse country like India, the strategy to integrate renewables into the energy system will vary from state to state and within states, from one region to the other. Most of the renewable resources are geo-specific. So, location-specific strategies will have to be worked out. If integration is to be a reality, we will have to also address the following issues: 1) The intermittent character of some sources of renewable power. 2) The need for energy storage, in case of surplus generations. 3) Energy and load management.

Production of electricity from wind, solar photovoltaic and wave energy will be intermittent in nature, depending on the availability of the resource. Biomass-based power plants based on various sources like agricultural residues, bagasse from sugar factories, urban wastes etc can operate continuously. Admittedly, intermittent sources cannot cover peak loads. But in a situation of energy shortages, as is the case in India, any power produced any time is consumed. In a power system with diversified sources, balancing one against the other is also possible through proper load dispatch management. For example, hydropower stations can be backed down during peak wind power production. The stored water can be used later for peak load management. Storage of renewable power is another major issue being studied worldwide, to surmount the intermittency factor. Right now, with less than 3% penetration of intermittent renewables into the grid, storage is not an area of critical concern. In power-deficit countries like India, power is consumed as soon as it is produced and peak load management can be achieved through other sources...(The point is) that the problems created by the intermittent nature of some renewables are surmountable.

Conventional mindsets are the biggest barriers to integration. These new technologies are also faced with market acceptability and credibility problems. The economic, policy and technological environment is still not very conducive for the spread of these innovations. There are serious technical, economic and market distortions. Strict quality control and laying down of standards would help increase credibility. The malfunctions of some systems like solar street lights have caused widespread distrust about the new technologies. The non-availability of specialised engineers, technicians and after-sales service mechanisms have seriously hampered the growth of many renewable energy technologies. Development of appropriate, academic, technical and training infrastructure will have a beneficial influence in increasing the credibility and market acceptance of these technologies.

Cost-competitiveness of renewables: The competitiveness of renewable technologies vis-a-vis conventional systems is another important factor determining their market penetration. There are two costs involved -- the capital cost and the cost of producing power. The two are interrelated. As renewable technologies achieve economies of scale, the capital cost should come down. To some extent, this has been happening in the case of wind turbines. For some others like solar photovoltaics, the high capital cost is the biggest market barrier. Nevertheless, it should be noted that the price of solar photovoltaics has also dropped between one-third and one-fifth the cost in 1980. This cost is expected to further fall sharply in the next five years.

It is not widely known that conventional power production is the biggest polluter. Most people think automobiles and factory chimneys are the only culprits. The environmental and health costs of pollution are hidden. Now environmental economists have begun to unearth these hidden costs and quantify damages on a case-to-case basis. The World Bank estimates that the environmental and health costs of air pollution in China, primarily due to burning of coal, may be as high as 13% of China's gross domestic product by 2020.

In fact, a recent study done by the British government showed that by 2020, wind power will be the cheapest option for electricity generation, of all the technologies. Even today, it is a cheap source if life-cycle costing is considered and the environmental advantages are factored in.

There are numerous barriers preventing effective market penetration of renewables. The unfair pricing of power is only one of them. Any commodity is priced based on the cost of producing it, its utility for society, brand value, and of course, a certain profit for the producer. Conventional power is priced without taking into consideration all these factors. Most large hydropower projects in India function at less than half the rated capacity. While computing the cost of production of power from these projects, only the operational cost is considered, whereas ideally, the cost of capital investment should also be considered. The externalities of conventional power production, viz environmental cost, health costs, cost of displacement, adverse social impact etc, are not factored in. They also enjoy many hidden subsidies beginning with mining and transportation of coal, free supporting infrastructure provided by government, etc. Distorted prices worked out by ignoring such factors give wrong signals to the market. Renewable power is non-polluting, decentralised, causes no displacement and facilitates large-scale employment. Hence, grid-connected green power is eligible for a level playing field in tariff determination. The new Indian Electricity Act 2003 recognises this to some extent and has empowered the State Regulatory Commissions to fix suitable tariffs for renewable power.

The challenges faced by governments in formulating future energy policies over the coming years are too many. They have to ensure energy security for a growing population, ensure economic growth to contain poverty, see that such growth is sustainable, address environmental and climatic change, create more employment, and facilitate development of new technologies. Renewable energy is the only energy source which can address these issues and impact all of them in a positive way. It is abundant and not source-limited, it is sustainable, it is environment-friendly, it creates new employment opportunities, production is decentralised and would emerge as a cheaper option in the near future.

(G M Pillai is the founder Director General of the World Institute of Sustainable Energy (WISE), Pune. He is a senior IAS officer and former Director General of the Maharashtra Energy Development Agency. This is an excerpt from his paper, 'Towards a Sustainable Energy Economy', in The New Energy Economy, conceived and edited by GM Pillai, published by WISE, 2005)

InfoChange News & Features, June 2006