Economic Survey: Climate Change, Sustainable Development and Energy

Electricity is one the key sectors of the Indian economy and with the emergence of non-fossil power plants unsettling the traditional businesses it was high time to have a comprehensive take on the subject, the recent economic survey tries to do just that. A chapter aptly titled ‘Climate Change, Sustainable Development and Energy’  is a clear indication that the electricity sector today has wider impact on the people than portrayed by the phrase ‘Bijli, Sadak, Pani‘ (Electricity, Road, Water).

Climate Change

The chapter on economic survey clearly brings out the Govt.’s objective to stick to its commitment to the Paris Agreement (Read more on India’s climate commitment). The chief economist goes on to say India will stick to its stand irrespective of what happens with the US’s stance on climate change.

Sustainable Development

Its been over two years since UN released its objectives for Sustainable Development and the 17 Sustainable Development Goals (Know more about SDGs) and India has produced the first review of the goals. As expected the emphasis is on SDG 7, “Ensure access to affordable, reliable, sustainable and modern energy for all”. Incidentally, SDGs also have 2030 as the target year like the Paris Agreement.

Energy

The narrative of the chapter is quite clear right from the start, justify the need to transition to Renewable Energy (RE) alternatives by stressing the benefits of climate change and sustainable development. A detailed analysis on the costs of energy and net benefits have been studied and presented in the study. A few of the analysis have been spot on like the one on anticipated RE penetration by 2027, a 43% of the grid total and getting better of coal.

RECoal

Solar Power

The past year has been a clear indication that rapid deployment of solar power is possible with declining costs (highlighted below). (Solar bids: No more outliers)

Solar

The survey interestingly points out to the key factor that determines if a solar power development is really sustainable. I’m glad to be proved right, that the development costs of solar power is high considering land use is impacted especially if the plants are performing below their efficiencies (Read more: Is Solar Power Development Sustainable?) Survey points out the land requirement for solar is 10 times the requirement for coal plants, clearly a loss of opportunity cost.

Need explanation: Social costs

As a surprise, in what looks to be a clear approach to show the net benefits of RE switch is not significant as thought, the economic survey throws up an analysis that points social costs of Renewables is three times that of coal but reduces as we progress to 2030.

SocialCosts

Similarly an explanation is needed to justify the lack of accounting of actual costs of stranded assets in thermal power plants while the same has been well accounted for renewables. If there is a valid justification, calculations have to be made public for debate.

SocialCosts1

Subsidies

It is understandable that subsidies for RE have been high in the past and wind accounted for a major chunk considering the Generation Based Incentives (GBI) were in place until March 2017. How are the budget estimates for 2017-18 FY expected to be close to last year when the major financial incentive of GBI has been waived off? There have been no known policy announcement that can justify this estimate.

Subsidies

National Clean Energy and Environment Fund (NCEEF)

A topic that needs further debate considering that the new proposal of  Govt. is to use this fund for compensating states for the loss of revenues from GST implementation. I had earlier pointed out NCEEF allocation had to be re-looked considering its objectives (NCEEF: A review). The survey points out the NCEEF has been under utilized, no projects have been recommended by Inter Ministerial Group (IMG) to be funded from this corpus for the past two years.

NCEF

Overall, summaries from a few analysis are highly debatable especially related to social costs of renewable energy. But, the Economic Survey brings out the major topics for discussion in the public domain, a clear indication that the government is actively pursuing these policy objectives. The chief economist has promised to release all the data pertaining to the economic survey in public domain in due course and I’m looking forward to it.

On a personal note, I’m glad that a chapter in Economic Survey talks about Climate Change, Sustainable Development and Energy in the same breadth, the very topics I have been writing about in my website.

 

 

 

 

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The electric grid, prosumers’ and climate change risks

The blog post was the runner-up at Masdar Blogging contest, 2017

Electricity generation accounts for nearly 50% of CO2 emissions in the world. Renewable Energy (RE) sources have begun to account for a significant share in the grid mix thereby reducing the emissions Year on Year (YoY). An increasing RE in the electric grid is not a straight solution to reduce carbon emissions and combat climate change.  RE is intermittent and in order to completely leverage it there is a need for a technological solution that also captures the economic benefits of this low carbon transition.

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The electric grid of today

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Image © Author

In most parts of the world the electric grid is predominantly unidirectional with a small percentage of bidirectional flow originating from grid connected rooftop systems. Even with increase in RE in the grid the impact on climate change mitigation will remain insignificant if the end consumer doesn’t interact with the system.

The electric grid of the future

The transition to a low carbon world implies switching to a fuel source that is not only environment friendly but is free thereby reducing the overall operational costs in the long run.  The grid infrastructure wouldn’t transfer the net benefit unless there is a seamless bidirectional communication between the source and the consumer in other words it has to turn into a ‘smart grid’.

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Image © Author

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Image © DOE

According to EPRI “Smart grid represents, the migration from the current grid with its one-way power flows from central generation to dispersed loads, towards a new grid with two-way power flows., two way and peer to peer customer interactions, distributed generation, distributed intelligence, command and control”

Prosumers’

Installing distributed energy systems like solar photovoltaic panels empowers people to shift from being a passive consumer of electricity to a Prosumer who sells power to the utility. The financial incentives like Feed in Tariff (FiT) are quite popular around the world. But the real potential of such systems will be leveraged when technological advancements like smart grids are in place and smart meters are the norm.

Smart Meters

In the evolving connected world every device around us meteris turning smart and its quite natural that the source powering them all is smart too (if not smarter). Germany and Italy have been pioneers in smart meter implementation, the former driven by a buoyant adoption of rooftop solar PV.

Why do we need a smart grid?

RE is intermittent as widely known. In an ideal case we would prefer power production at times when we consume. In real world to meet power demand when RE generation is low there is a need to look for alternatives which in general happens to be turning on the fossil fuel power plants just to ‘keep the lights on’ as the utility would claim.

In order to mitigate the potential damage caused by these scenarios it is critical to ensure the fossil fuel powered plants are not turned on, let alone operate them at a lower efficiency thereby compounding the damage. Battery storage will be a key breakthrough but unless the devices and the grid is in place, the net effect of energy storage will be minimal.

Can prosumers make an impact?

Technology at the RE generator level enables forecasting at a better accuracy on a day ahead level.  The information if shared to the consumers by utilities along with the price incentive will enable them to shift loads to low price periods thereby reducing the net overall demand. Demand Side Management (DSM) is another possibility considering the penetration of smart meters at residential consumer level. Utilities and DSM service providers anticipate that with technological advancements, prosumers will not only be able to sell their excess PV but also be able to automate their battery backup systems to respond to utility signals by discharging energy back to the grid during peak load.

Overall, technological adoption will be key to ensure a successful RE transition. The idea of smart grid and smart meters controlling the devices has been mooted for long but with an increasing RE capacity addition, the technology will be indispensable. The penetration of intelligent appliances in households will leverage the smart grid technology in delivering value thereby providing the prosumers’ (who will be a significant majority) with a tool to know more about their electricity use, reduce demand, cost and carbon emissions.

The blog post was the runner-up at Masdar Blogging contest, 2017

 

India ratifies Paris Agreement, what next?

The Indian Government surprised everyone when in 2015 it released its Intended Nationally Determined Contributions (INDC) on Gandhi Jayanthi invoking his thoughts on the moral responsibility of human beings in preserving natural resources. An even bigger surprise followed in 2016, when intense speculation on India’s stance on the accord preceded its sudden decision to ratify the agreement, again on Gandhi Jayanthi (Read more).

The Paris agreement was subsequently ratified by a few more countries (75 as on date) and will come into force on Nov 4th, 2016. (How the entire process unfolded?)

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Upon ratification countries are expected to submit their Nationally Determined Contributions (NDC) which will serve as a yardstick for monitoring by all the parties at the meetings of Parties to the Paris Agreement (CMA). India however has submitted its INDC as its first NDC which brings the focus back on the INDC (India’s INDC:Towards Climate Justice; An earlier blog post).

The premise of the INDC brings in the equation of ‘Climate Justice’ , clearly highlighting a need to consider the past of the global emitters.

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co2-emissions-metric-tons-per-capita (Cty:WB)

A need to clearly map the present and future scenarios was illustrated in the INDC.

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A key point of contention that will remain is the electricity demand per capita.

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electric-power-consumption-kwh-per-capita (Cty: WB)

INDC key highlights

  • India plans to cut emissions by 33-35% by 2030 from 2005 level.
  • India projects to achieve a renewable energy capacity addition of 175GW by 2022 and increase the renewable energy in the mix to 40% by 2030. It seeks funds explicitly from the Green Climate Fund. (The fund the developed countries agreed to create for projects in under developed/developing countries).
  • To create a carbon sink of 2.5-3 billion tonnes of CO2 equivalent through forests and trees by 2030.
  • India estimates its Climate Change mitigation plan will cost $2.5Trillion between now and 2030.

The way forward will see some challenges

  • Enforcing policy regulations.
  • Creating a finance mechanism that utilizes the coal cess, Renewable Purchase Obligation(RPO), Perform Achieve & Trade (PAT) etc.
  • Creating a Green Energy Corridor (est. $6Bil) to facilitate power evacuation from renewable energy plants.
  • Not to compromise on Human Developmental Index of the nation. 300Million people in India still have no access to electricity. Hopefully we achieve the national target of ‘Electricity for All’ by 2019.
  • A need to cut subsidies and increase tax in fossil fuels.
  • Securing fuel for proposed 63GW of nuclear power projects.

At the moment, Indian government through its various ministries is trying to establish a framework to gather emissions data from concerned sectors. Recently aviation sector which dint find traction @ COP21 managed to agree for a global cap by 2020(Read more). India however decided to remain out of the pact until it establishes relevant frameworks in the sectors (read more). The next phase in this deal will be more clear once it is enforced and the first meeting kicks off in COP 22 until then its fair to rejoice the moment of clinching this deal.