Shankar Sharma: Power Sector Inefficiency – Economic & Legal Implications

1.                Preface – Electricity scenario in the country 

Whereas the central and state governments have been pouring thousands of crores of Rupees every year under the guise of meeting the ever escalating electricity demand in the country none of the consumer groups are satisfied with the quality of supply.  Whether it is the BPL category, who are getting heavily subsidized electricity, OR the agricultural consumers, who are getting either free or highly subsidized electricity, OR the industrial and commercial consumers, who are bearing the burden of the cross subsidy to other categories, OR the residential consumers who are facing continuously faltering supply are all severely complaining about the unreliable supply of electricity affecting all walks of our life.  

Installed electricity generating capacity has grown phenomenally from about 1,400 MW in 1948 to about 157,000 MW in Feb 2010; an increase of 110 times.  Annual electricity generation from all sources has increased from about 61,000 MU in 1970-71 to 724,000 MU in 2008-09 an increase of 12 times in 30 years.  The national per capita consumption has gone up from 238 kWH in 1989-90 to about 660 kWH in 2009, an increase of more than 2.5 times in 20 years.  Despite such phenomenal increases in capacity since independence, about 40% of rural households are still deprived of electricity connection, and various forms of electricity crises are continuing even after 6 decades of self rule.

An overview of the power demand and supply in the country during the last 10 years indicate that the deficits experienced is more in the form of peak hour demand / supply scenario than in annual energy supply scenario.  It is well known that the peak hour demand issues can be satisfactorily resolved but it requires sustained and determined efforts.

Except for few states and during few years the electricity consumers in all parts of the country were generally not satisfied for most part of the post independent era.  The problems in the electricity sector have only aggravated with the passing of each year with most of the states resorting to severe power cuts to all categories of consumers as a norm than exception in recent years.  The state of Maharastra, which was comfortable in power supply position few years ago, is facing severe crises.  Many electricity supply companies, which were operating profitably till 1990s, have joined all other supply companies to contribute to the national level loss running to thousand of crores of Rupees every year.

Whereas the state capitals and larger cities in each state are getting electricity supply for 23 – 24 hours every day on average the villages are getting less than 12 hours on an average, while about 40% of the house holds are still without access to electricity. This disparity in supply of electricity to rural areas is seriously hampering the adequate development of rural India. Because of this the urban migration is also increasing at an alarming rate with serious consequences such as unmanageable urban sprawls, accelerated depletion of natural resources, huge drain on the STATE in providing man made facilities in urban areas etc..  Whereas the cities seem to be exploding due to unchecked urban migration, unhindered industrial and commercial growth, and unabated electricity demand many villages are experiencing a slow death due to such neglect. Neither of these two phenomena is in the interest of the country.

While there seem to be no end to the steep growth in electricity demand, mostly from urban areas, the same is leading to massive problems in social and environmental spheres of the country. Continuous increase in the number of large conventional power plants, such as dam based hydro, fossil fuel based thermal and nuclear based power plants, is already a cause of major concern to the international community because of their impact on our environment, and Global Warming. As per Inter Governmental Panel on Climate Change (IPCC), the Global increase in CO2 concentration, which is the most important anthropogenic green house gas leading to Global Warming, are due primarily to fossil fuel use and land use change.  Large conventional power plants are all closely associated with fossil fuel use and land use change.

Fast depletion of natural resources such as forests and rivers; unmanageable pressure on agricultural land and fresh water; unacceptable level of pollution of air, water and soil; and never ending displacement of poor from their natural habitat, have all been resulting in massive socio-environmental problems, and in drastically reducing what should have been massive contribution of rural areas to the overall wealth of the country. Though the companies dealing with electricity in every state have faced many problems, for many of which they might not have been directly responsible, one cannot say that these companies have always operated with adequate responsibility and accountability.

The gross inefficiency in power sector also has economic and legal implications of serious nature, affecting the overall growth and welfare of the society. The inefficiency in the sector is considered to be one of the biggest stumbling blocks in societal development. 

As per “STERN REVIEW – The Economics of Climate Change”, the Climate Change could have very serious impacts of growth and development.  It says: the costs of stabilising the climate are significant but manageable; delay would be dangerous and much more costly. The benefits of strong, early action on climate change outweigh costs. Studies by International Energy Agency show that, by 2050, energy efficiency has the potential to be the biggest single source of emission savings in the energy sector.

In view of all these implications there is an urgent need to review the performance of the entire sector on an objective basis so that techno-economically suitable solutions are implemented.  The business as usual scenario of adding more of the conventional power projects will not be able to provide energy security for all sections of our society, but will lead to massive issues on social and environmental fronts. Nothing less than a paradigm shift in our energy policy is required.

2.      The issues – never ending crises

The National Electricity Policy states:

“It would have to be clearly recognized that Power Sector will remain unviable until T&D losses are brought down significantly and rapidly. A large number of States have been reporting losses of over 40% in the recent years. By any standards, these are unsustainable and imply a steady decline of power sector operations. Continuation of the present level of losses would not only pose a threat to the power sector operations but also jeopardize the growth prospects of the economy as a whole. No reforms can succeed in the midst of such large pilferages on a continuing basis.”

The main issues confronting the power sector can be broadly classified into the following categories: gross inefficiency in the sector; uncontrolled demand growth; political interference leading to large scale corruption; rural /urban discrimination; unsustainable exploitation of our natural resources; socio-environmental impacts.

The unreliable electricity supply has led to serious problems on the social front.  Very severe consequences are in the areas of drinking water, agricultural activities, education, health etc. not only in villages but also in many urban areas. Disparity against villages in supply of electricity is considered to be one of the prime reasons for the continued backwardness, poverty and accelerated decay of rural India. As shown by the recent Greenpeace study report “STILL WAITING” the disparity in supply of electricity against rural areas is prevalent in the country as a whole.  In this study report electricity supply pattern was studied in two urban areas and three villages from each of five states chosen in four geographic regions of the country. Whereas the state capitals got supply for 23 to 24 hours on an average, the next level urban area got 20 to 22 hours of supply and the villages got less than 12 hours of supply. The report also establishes that most of the additional generation capacity goes to serve the unabated demand of the cities, as demonstrated by the increasing per capita electricity consumption in cities. 

People’s displacement is the most serious social implications of large conventional power projects. Since independence about 5 million people are estimated to have been displaced, many of them few times in few decades, because of various large size projects, of which power projects are known to have contributed considerably. Dams, power project buildings/facilities, transmission lines, coal & ash handling facilities, nuclear buffer zones, staff quarters etc. have all consumed a lot of lands including a considerable amount of fertile agricultural and forest lands. As per the Integrated Energy Policy (IEP) the total installed power generating capacity in the country has to increase from the present level of about 160,000 MW to about 800,000 MW by 2031-32.  About 70% of this total generating capacity is projected to be from coal power and about 20 % from dam based hydel power. This massive addition to the capacity through conventional power sources will require about 1 million acres of land, most of which will be fertile agricultural and forest lands, and which will displace a large number of people who are already economically and socially at a disadvantage. Agricultural production loss due to loss of fertile lands and the pollution due to such power plants has already provided clear cases of serious impact on the economy as a whole and on the welfare of the masses.

As per a recent report of the Planning Commission the average cost of supplying electricity is expected to be Rs 4.16 per Unit in 2009-10, while the actual average tariff for the same is Rs. 3.37 per unit. Thus the average gap between the cost of supply and the tariff is about 89 paise per unit.  The average recovery of cost is even less because of the inefficiency prevailing in the system.  Such a huge gap year after year is having a big impact on the economy of the country.

There are major economic dimensions to this sorry state of affairs in the power sector.  As per the report of the 13th finance commission, which was tabled in the parliament on 25.2.2010, unless the public utilities engaged in transmission and distribution of electricity take urgent measures to improve the efficiency of operations the combined losses at the national level may increase from Rs. 68,643 crores in 2010-11 to Rs. 1,16,089 cores by 2014-15.  Such huge losses year after year have led to deprivation of adequate funding to other crucial sectors of our developmental process such a drinking water supply, poverty alleviation, health, education, rural infrastructure etc. These huge losses cannot be sustained, and have huge deleterious impact on the developmental front.  Except for few privately owned companies, there is probably not a single electricity supply company in the country which is financially healthy.  In most states the industries, which were established on the assurance of reliable electricity supply, are suffering greatly, and a considerable number of small scale units are reported to begetting closed every year due to unreliable electricity supply.  The inefficiency in the sector has meant that the actual cost of bringing electricity to the end users has become very high.

It is widely accepted that none of the conventional power plants can provide electrical power on a sustainable basis. Coal reserve in the country, though thought to be huge only few years ago, is now estimated to last not more than 45 year because of the increasing amounts of coal extraction.  About 75% of the petroleum products are already being imported, and the natural gas reserve also is not considered huge.  With the thermal power capacity already at about 65% of the total, it is pertinent to question the wisdom of continuing to rely on this source of electricity on a sustainable basis.  Energy security for all sections of our society cannot be assured on the basis of imported energy sources.

The environmental issues caused by the inefficiency in the power sector can be termed as most severe. The ever increasing number of conventional power projects such as dam based, coal based and nuclear power projects are demanding large amounts of natural resources such as land, water, coal etc. and add huge amounts of pollutants to our environment.  About 42 % of CO2 and about 24% of all Green House Gases (GHGs) at the global level are known to be associated with electric power generation.  In addition the pollution of land, water and air are reaching an unacceptable level, because of which a large number of industrial zones have been declared as severely polluted and moratorium on additional industrial activity has been applied on these by MoEF. A comprehensive environmental assessment report of industrial clusters released recently by the environment ministry says more than 85% of the industrial zones in India, 75 out of 88, are severely polluted. Many of these sites have large coal power plants.

The coal power plants demand large tracts of land (about 1 acre for 1 MW of capacity) and huge quantities of fresh water (about 80 Cubic meters per 1000 KWH of energy production). They burn enormous quantity of coal (about 0.7 kg per kWH) and generate mountains of ash (about 30 % of coal consumed).  In 2005-06 the state owned coal power stations were estimated to have generated about 113 million tons of fly ash, 1 million tons of particulate matter, 347 million tons of CO2, 19 million tons of Sulphur di-oxide and tons of mercury and NOx & other flue gases.  Such a high level of pollution of the environment invariably leads to serious health problems. Global Warming; pollution of land, water and air; emission of mercury and acid rains are some of the major environmental issues with the coal power plants. A coal based power policy will need opening up of a large number of additional coal mines (in addition to the increased coal import), which are all below thick forests. While coal power plants release large amounts of GHGs, they also reduce the forest & tree cover in order to open up additional coal mines.  While the reduced forest & tree cover will reduce the ability of the nature to absorb CO2, additional amount of CO2 release from the coal power plants will add to GHGs in the atmosphere.  Coal power plants, thus, will lead to accelerated Global Warming & Climate Change.

There is also another dimension of inefficiency in case of coal power plants. The technical efficiency of converting coal energy to electrical energy in Indian power stations is about 30% only. The world’s best technology claims that this can be increased to a maximum of about 40%. About 8 – 9% of such generated electrical energy gets consumed by various supporting processes within the coal power station itself. With Transmission and Distribution loss level of about 30%, and end use loss of about 15% prevailing in the country, the overall efficiency in coal energy to electrical energy put into productive / economic use can be only of the order of about 10%.

The issues associated with other thermal power sources, such as diesel or natural gas, are similar in nature.

Large dam based hydro power plants drown large tracts of agricultural and forest lands; produce Methane which is a much more potent GHG than CO2, reduce forest and tree cover, lead to loss of bio-diversity. They also deprive the benefits of flowing water and sediment to the organisms immediate downstream of dams. Displacement of people is another major issue.

Nuclear power plants have their own share of concerns.  Even after 6 decades of massive investment in the nuclear power industry the technology has not won the confidence of the public as far as its safety is concerned. The nuclear power capacity contribution to the total installed capacity is only about 4%, and the capital cost, excluding the hidden costs to the society, itself is much higher than the other conventional sources.  The inadequate reserve of Uranium as a fuel within the country, the massive damage to our environment from nuclear mining, the radiation safety issues, and the huge cost to the society of safeguarding the spent nuclear fuel for generations have all become major concern to the society.

Keeping all these issues in correct perspective, it is impossible to accept these large centralised conventional energy sources as sustainable energy options.  But the state and union governments are continuing to build more and more of these power projects at huge and unbearable cost to the society.  Although the official reasons being given for the massive addition to these conventional energy capacity is that there is a severe shortage of power, and the fact that about 40% of the households in the country is deprived of electricity connection, the serious issues of huge inefficiency in the sector and the lack of clarity on the demand side management are conveniently being ignored.

As per Inter Governmental Panel on Climate Change – IV Assessment Report “Emissions from deforestation are very significant – they are estimated to represent more than 18% of global emissions”; “Curbing deforestation is a highly cost-effective way of reducing greenhouse gas emissions.”  Large conventional power projects are all major contributors for deforestation either through dams, buildings, transmission lines and pollutants like coal dust, coal ash and acid rains. 

What our society is doing at present is to supply inefficiently derived electrical energy from limited conventional sources at subsidized rates for highly inefficient and /wasteful end uses, for which the real subsidy cost will be debited to the account of future generations.

3.      Extent of Inefficiency –  a huge drain on the society

“India’s power sector is a leaking bucket; the holes deliberately crafted and the leaks carefully collected as economic rents by various stake holders that control the system. The logical thin to do would be to fix the bucket rather than to persistently emphasise shortages of power and forever make exaggerated estimates of future demand for power. Most initiatives in the power sector (IPPs and mega power projects) are nothing but ways of pouring more water into the bucket so that consistency and quantity of leaks are assured ….”

Deepak S Parekh, Chairman, Infrastructure Development Finance Corporation, September 2004.

The country has been known to be exhibiting one of the lowest levels of efficiency in the overall management of a vital resource like electricity.  The average Plant Load Factor (PLF) of the coal power stations in the country is reported to be about 78 % as compared to about 90% in case of some of the best run power plants such as NTPC plants. With a total coal power capacity of about 80,000 MW, improved PLF of 90% national average would have provided additionally about 9,600 MW for usage with the same installed generating capacity. This is in stark comparison of about 18,000 MW peak deficit recorded between 1996 and 2009. There have not been serious efforts to improve the efficiency levels to the international best practice levels, which alone would have eliminated the deficits completely.  Our inability to effectively harness this potential of about 9,600 MW basically means that we have missed the opportunity to save investment in additional coal power stations worth about Rs. 60,000 Crores. The economic implication of such low PLF at the national level is that the massive investments already made in coal power sector, at huge costs to our society, are not yielding the desired results. Instead the society is pouring more money in setting up additional coal power plants.

PLF is a measure of utilisation of the installed capacity.  The inability to optimize the installed capacity is not much different in nuclear power plants where the average PLF is not much above 50% in most of the years, whereas the figure has been as high as 80% in few plants in some years. 

The capacity utilisation in the case of dam based hydro power stations, though referred to as annual load factor, also is unsatisfactory. As per a study by Himamshu Thakkar of SANDRP, out of 228 operational hydel projects in India as on 31.3.2007, which were surveyed by him, 82% were underperforming.  Additionally, the survey has indicated that this 82% of the projects have achieved actual generation of electricity which was less than 50% of the design capacity. This situation is mostly due to overestimation of the hydro electricity potential of the individual projects or sedimentation or both.  Sharavathy valley hydel project, which is a major project in Karnataka, is known to have recorded full reservoir level of stored water only in 4 years out of 30 years of commissioning.  Such overestimation of the hydro potential has resulted in many projects acquiring more forest /agricultural lands than required, and consequently has displaced more people than was really necessary.

The main reason for low PLF of thermal power plants and nuclear power plants is known to be inadequate supply of fuel, whether coal, diesel or gas. The annual load factor of hydel power stations is known to be much lower than the designed capacity because of reduced rainfall in the catchment area and high level of siltation.

Having invested massively on such conventional power projects since independence the society has not reaped commensurate benefits. According to a number of reports, including all the official reports, the aggregate technical and commercial losses in transmission and distribution (commonly referred to as AT&C losses) in the country is estimated to be between 35 – 40% of the total energy available for usage at the generating stations.  Internationally, this figure is known to be less than 10% and as low as 5% in some parts of the world.  Within the country there are few pockets of much lower AT& C losses such as Bangalore city (less than 10%), Mangalore Electricity Supply Company, Karnataka (less than 14%) etc.  It is known to be techno-economically viable to reduce theses losses below 10%, as demonstrated by the MoP’s target of reducing it below 15% in 11th plan period.

The National Electricity Policy states:  “It would have to be clearly recognized that Power Sector will remain unviable until T&D losses are brought down significantly and rapidly. A large number of States have been reporting losses of over 40% in the recent years. By any standards, these are unsustainable and imply a steady decline of power sector operations. Continuation of the present level of losses would not only pose a threat to the power sector operations but also jeopardize the growth prospects of the economy as a whole. No reforms can succeed in the midst of such large pilferages on a continuing basis.”

The inefficiency in electricity industry is not small in end use applications. As per the official reports (Central Electricity Authority) available for years 1970-71, 1980-81, 1990-91, 2000-01 and 2006-07 more than 80% of the total electricity consumed in the country has been accounted for by the three major categories of industry, agriculture and domestic consumers. Whereas the figure for industrial consumption has come down from 68% in 1970-71 to 38% in 2006-07, the agricultural consumption increased from 10% in 1970-71 to 27% in 2000-01, and recorded a figure of 22% in 2006-07. The domestic consumption had reached 24% in 2006-07. It is recording a steady increase over the years and is expected to increase further with the burgeoning middle class and the penchant for Air Conditioners, computers and other electronic gadgets. It is of critical importance to note that each of these sectors have a lot of inefficiency.

The inefficiency prevailing in the end use of energy in the country is so much that the Integrated Energy Policy has estimated that the energy intensity of our economy can be reduced by 25% by 2031-32; cost effective saving potential is at least 15% of total generation through Demand Side Management. Agricultural sector alone, which consumes about 22% of the total electricity, is known to be wasting about 50% of that energy due to technical losses, which of course can be drastically reduced by simple measures. Andhra Pradesh govt. was reported to have taken a decision few years back to replace all the inefficient and old irrigation pump sets by new efficient pump sets at a total expenditure of Rs. 15,000 Crores. So much is the potential for savings in agricultural sector alone.

The domestic consumption, which has reached 24% of total consumption, has huge potential for savings. Lighting application in domestic consumption is estimated to account for about 19% of the total, where the replacement of inefficient incandescent lamps by compact fluorescent lamps alone is estimated to yield benefits equivalent to 10,000 MW of new power generation capacity, as per Bureau of Energy Efficiency.  Inefficiency in other applications such as domestic water pumps, fans, refrigerators, ACs, water heaters, electric stoves etc. can bring considerable amount of savings without huge investment by the STATE. As per a recent study report by Prayas Energy Group, Pune (“Energy Savings Potential In Indian Households From Improved Appliance Efficiency”) usage of  energy efficient  models of common house hold appliances such as lamps, refrigerators, fans, TVs, radios etc. can result in about 30% energy savings annually by 2013. This corresponds to an avoided additional generating capacity of 25,000 MW. 

Industrial and commercial consumption categories also have huge potential for savings through energy efficiency and Demand Side Management (DSM). IEP has recommended that all consumer category installations with load more than 1 MVA should be compulsorily subjected to energy audit, which indicates the huge potential for savings.

Most of the additional demand for electricity is coming from the urban areas. The usage of electricity for night time sports, air conditioned shopping malls/housing complexes even in cooler places, heavy usage of illumination for advertisements, unscientific use of illumination for street lights, avoidable & inefficient use of a large number of electrical and entertainment appliances, whether in houses, shops, offices, public places or factories are all escalating. Due to the unabated electricity demand for many unproductive and non-essential applications, the economic, social and environmental issues associated with the electricity sector cannot be addressed unless a paradigm shift in the way our society looks at  ‘DEMAND & SUPPLY’ is brought about. 

As per Bureau of Energy Efficiency, a unit of energy saved is considered equal to four units generated as it saves losses on production, transport, transmission and utilisation.  Because of huge losses in these areas a unit saved in end use is likely to be greater than many times generated, as per some experts, if we also take into objective account the externalities like environment, health and social costs.  Hence any amount of money in the area of efficiency improvement is worth the investment because it provides perpetual benefits as opposed to perpetual costs in the case of large conventional power stations.

It is pertinent to note that the expenditure for such energy efficiency and DSM measures is estimated to be about 25 to 40% of the cost of new power stations.  These measures also require no additional land OR natural resources; they also do not contribute to environmental pollution.  Instead, by directly/indirectly reducing the electricity demand on the integrated electricity grid network they eliminate the need for additional conventional power projects, which in turn will reduce the total GHG emissions.

As the Bureau of Energy Efficiency has estimated, at the prevailing cost of additional energy generation, it costs a unit of energy about one fourth the cost to save than to produce it with new capacity.

Keeping these technical, social, economic, and environmental issues in proper perspective we have to ask the question: how desirable it is to invest in the construction of more of conventional power projects to meet our legitimate electricity demand without optimizing the usage of the existing electricity assets.

As per Planning Commission (integrated energy policy document): “India’s conventional energy reserves are limited and we must develop all available and economic alternatives. … Clearly over the next 25 years energy efficiency and conservation are the most important virtual energy supply sources that India possesses.”

4.      Issues of constitutional and other legal importance – matters of serious concern

When we look at the huge inefficiency and public unaccountability prevailing within the electric power sector in the country with a correct perspective, the violation in letter and spirit of many provisions of various Acts of parliament and our Constitution itself becomes obvious.

As per the sections 48 (a) and 51 (a) (g) of our Constitution it is the duty of the STATE and every citizen to make honest efforts to protect and improve our environment by protecting and improving rivers, lakes, forests and living beings. The large number of conventional power plants, which are continuing to be planned and implemented, are destroying thick forest cover, severely interfering in the natural flow of rivers, and destroying /hastening the extinction of many species of bio-diversity.  This is being done despite clear knowledge of huge inefficiency prevailing in the system, which if addressed correctly will drastically reduce the need for such conventional power projects.

It is almost impossible to notice the compliance of the letter and spirit of Indian Electricity Act 2003, and National Electricity Policy as far as salient features such as efficiency, economy, responsible use of natural resources, consumer interest protection, reliable supply of electricity, protection of environment are concerned.

Whereas the National Forest Policy recommends that  33% of the land mass should be covered by forests and trees for a healthy environment, our practice of continuing to divert forest lands for large power projects will bring this percentage much below even the present low level of 24% in the country.

A recent statement by MoEF has indicated that about 35% of the coal reserve belts in the country are in ‘No Go’ areas because of the environmental reasons.  But there are reports of massive lobbying to permit coal mining in such areas also, in order to cater to a large number of additional coal power plants.  Bending the relevant rules to permit coal mining in such areas will be in complete violation of Environmental Protection Act, the Forest Conservation Act and the Wild Life Protection Act.

Similarly, the large number of dam based hydel power projects, which are being planned in many parts of the country including almost all the Himalayan and sub-Himalayan states, will also lead to massive destruction of forests, unacceptable levels of interference in the natural flow of rivers, and will also threaten critical bio-diversity.  Permitting large number of dam based power plants will also be largely in violation of Environmental Protection Act, the Forest Conservation Act and the Wild Life Protection Act.

Nuclear power projects, although being branded as environmentally clean projects have many concerns of serious nature. Mining for nuclear fuels, processing and transporting them to the nuclear reactors, operating the nuclear reactors safely, and safeguarding the nuclear fuel wastes for thousand of years will all require huge resources of our nature.  Hence they will also lead to accelerated depletion of the natural resources.

In this context, when we objectively look at the direct and indirect impacts of large size conventional power projects, which have been set up in the coutry, it becomes evident that the letter and spirit of Environmental Protection Act, the Forest Conservation Act and the Wild Life Protection Act have not been complied at all, and in most cases there seem to serious & willful violation of these Acts. 

5. Issues of Global Warming and Climate Change – huge risk to the country’s vulnerable sections

As per IPCC some of the catastrophic consequences of Global Warning beyond 20 Centigrade increase are: famines and droughts threatening millions of lives; worldwide drop in agricultural and horticultural crops; up to 3 billion people at risk of flooding and without access to fresh water supplies; destruction of half the world’s nature reserves and a fifth of coastal wetlands; global sea levels increase by more than 20 feet; significant effects on biodiversity and ecological productivity; potential for international conflicts, border disputes, war due to water and food shortages, forced migration, extreme weather events,  huge impact on general health etc. 

In this background all out efforts to mitigate and adapt to the Global Warming by reducing the Global GHG emissions to the lowest possible levels are considered an urgent necessity by the global community.  Being a country with the second largest population India’s potential to be one of the three biggest GHG emitters is credible. Also tipped to become one of the most affected countries by Global Warming India has an important role to play in the comity of nations. In view of the huge contribution of conventional power plants to Global Warming through emission of Green House Gases such as CO2, Nitrous Oxide and Methane, our society has a duty of care to reduce the number of such power plants with honest implementation of energy efficiency improvement measures.

In this regard the govt. of India has published a National Action Plan on Climate Change (NAPCC), and the same is being projected at the international forums as India’s unique contribution in addressing Global Warming.  The Plan has identified eight broad areas for focused action, encompassing both mitigation and adaptation.  It is relevant to note that one of these 8 missions is: National Mission for Enhanced Energy Efficiency. So much is the realization about the importance of high level of energy efficiency, but the commensurate action plan is lacking as a national priority.

Looking at the large number of power projects being planned all over the country it is hard to believe that the stated objectives behind the missions such as National Mission on Sustainable Habitat; National Water Mission; National Mission for Sustaining the Himalayan Ecosystem; National Mission for a “Green India”; National Mission for Sustainable Agriculture can be met.

6.      Non-fulfillment of International obligationsserious implications to the national welfare

In the Cocoyoc declaration of 1974, at Mexico, as part of UN Conference it is said on the purpose of development: ” Our first concern is to define the whole purpose of development. This should not be to develop things but to develop man. Human beings have basic needs: food shelter, clothing, health, education.  Any process of growth that does not lead to their fulfillment – or even worse, disrupts them – is travesty of the idea of development. The problem today is not one primarily of absolute physical shortage but of economic and social maldistribution and usage.”  Large conventional power plants lead to the displacement of thousands of people, who because of highly insensitive rehabilitation process are most likely to become destitute. Additionally, because of high rates of pollution people living close to these power plants experience severe health problems for no mistake of theirs.

World Charter for Nature, which was adopted by consensus by UN General Assembly in 1982, has provided some guiding principles for protecting biodiversity: activities which are likely to cause irreversible damage to nature should be avoided; activities which are likely to pose significant risk to nature shall be preceded by an exhaustive examination; their proponents shall demonstrate that the expected benefits outweigh potential damage to nature, and where potential adverse effects are not fully understood, the activities should not proceed.

Convention on Biological Diversity was signed by 156 states in 1992, the objectives of which are the conservation of biological diversity, the sustainable use of its components, and the fair and equitable sharing of the benefits arising out of the utilisataion of genetic resources.  India, which is a signatory to this convention and which is also one of the most important bio-diversity hotspots as per UN, cannot stake claim as a diligent protector of its own bio-diversity. The large size dams are not only reducing the land based bio-diversity by drowning thick forests, but also are reducing aquatic bio-diversity by denying water and precious silt to the downstream of the dam. While a recent statement by Sri. Jairam Ramesh, Minister of Environment & Forests has indicated that almost one-third of the country’s top grade coal reserve would not be available for mining as these areas are now considered to be ecologically too fragile to allow mining, it should be noted that almost all coal mines which were opened in the past and those which are going to be opened were /are below thick forests. If we continue to opt for more of coal power stations the rich bio-diversity in these forests will be destroyed.

Recently, the minister of State for Coal said. “There are no two opinions about the need to switch over to other modes of power generation ……. Coal-based power production has to be restricted”. 

A recent report by MoEF “Achieving 2010 Biodiversity Target: India’s contributions” has copiously described the rich biodiversity in the country, the threats to it and the remedial measures.  It can be safely said that without holistically reviewing the present practice of issuing environmental clearance to almost all projects presented before MoEF, we, as a society, cannot take any credit for contributing to the conservation of global biodiversity.

At the global scale the value of ecological functions as well as resources of the environment has been estimated to be about $33 trillion per year, which is almost twice the global domestic product (refer: Bio-diversity Impact of Large Dams, prepared for IUCN / UNEP / WCD).  In this context if we care to assign a financial value to the ecological services associated with forests and fresh water resources in the country the enormity of loss to the nation’s economy in the form of destruction to forests, rivers and bio –diversity, which is happening every year, becomes evident.  As per the Convention on Biological Diversity it will be a wise policy to apply Precautionary Principle and take necessary action to conserve Bio-diversity before components of it are permanently lost.  In view of the fact that about 42% of CO2 and about 24% of all GHGs are known to be associated with the electric power plants, the need to operate the electrical power sector with the highest possible efficiency and responsibility requires no special emphasis.

As per STERN REVIEW – ‘The Economics of Climate Change’, the Climate Change could have very serious impacts on growth and development. The costs of stabilising the climate are significant but manageable, while delay would be dangerous and much more costly. The benefits of strong, early action on climate change outweigh costs.  This Review has estimated that certain scenario of Global Warming may result in poor countries like India suffering economic costs of about 20 % of its GDP, whereas the mitigation of the same now can be achieved at a cost of about 1% of present GDP.  The Review also indicates that more we delay in addressing the Global Warming the higher we will have to spend in mitigation of the same in future.  STERN REVIEW also indicates that “Emissions from deforestation are very significant – they are estimated to represent more than 18 % of global emissions”.  Hence “curbing deforestation is a highly cost-effective way of reducing greenhouse gas emissions.”  Large conventional power plants lead to large scale violation of many such international conventions.

The international community has attached so much importance to the forests that the main outcome of the UNFCC meet at Poznan was the decision to set in motion an international mechanism on ‘Reducing Emissions from Deforestation and Forest Degradation’ (REDD). Large conventional projects and coal mines can only reduce the all important forest cover and bring negative changes to the forest area that limit its production capacity.

A report “Bio-diversity Impacts of large dams” prepared for UNEP & IUCN, has listed a large number of such impacts. Among other things it says that about 60% of the world’s river flow is regulated. There are about 40,000 large dams and more than 100 dams with heights more than 150 meters.

Keeping the letter and spirit of these and large number of other international reports, seminars, and conventions it will be no exaggeration to state that we, as a responsible member of the international community, have largely failed to implement the necessary policies to safeguard the interest of our bio-diversity, environment and weaker sections of the society by continuing to ignore the huge implications of inefficiency in the electric power sector.

7.      Techno-economically viable alternatives to meet electricity demand – towards a sustainable the future

As per IREDA, under the Ministry of Non-Conventional Energy (NCE) Sources:

“Promotion of energy conservation and increased use of renewable energy sources should be the twin planks of sustainable energy policy.”

Whereas it will be impossible to satiate the ever escalating demand for electricity in our urban areas in the business as usual scenario, it is well recognized that with an efficient and responsible approach, the legitimate demand for electricity of all sections of our society can be met satisfactorily without having to add too many conventional power plants such as large size dam based, coal based or nuclear fuel based power plants. Efficiency improvement of the existing electricity infrastructure to the international best practice levels can provide us with a virtual additional capacity roughly equivalent 30-40% of the present available capacity. These measures include: improving the national average PLF of thermal power stations to a figure above 85%; annual load factor of hydel power stations to a figure above 65%; bringing down the AT& C losses below 10%; and improving the efficiency of end use applications to the level of world best practices. The efficiency improvement measures in different applications can provide us with savings of 5 to 20 % of the total electricity consumption; lighting applications (5 to 8%); agricultural pumping (15 to 19%); factories and commercial enterprises (5 to 8%); transmission & distribution (15 to 20%).

Effective steps in energy conservation and Demand Side Management will provide considerable relief in meeting the legitimate demand.  As per IEP: “India’s conventional energy reserves are limited and we must develop all available and economic alternatives. … Clearly over the next 25 years energy efficiency and conservation are the most important virtual energy supply sources that India possesses.” Planning Commission also estimates that CO2 generated from energy use can be reduced by 35% through effective deployment of efficiency, DSM measures and renewables. Planning Commission’s main action recommendation for energy security is: “… relentlessly pursue energy efficiency and energy conservation as the most important virtual source of domestic energy”.

Being a tropical country India is endowed with a huge potential in renewable energy sources such as solar, wind, bio-mass, wave energy etc.  These energy sources when deployed effectively in distributed mode at the level of individual premises or communities can not only eliminate all the negative effects of the large conventional additional power plants, but will also bring self sufficiency to villages and can stop urban migration. These renewable energy sources, when deployed effectively in distributed mode, will be able to drastically reduce the demand pressure on grid, and hence will limit the need for additional conventional power plants.

Explains Subhash C Mullick, professor, Centre for Energy Studies, IIT Delhi:  

“Fossil fuel reserves are limited and nuclear energy has waste disposal and other safety concerns. Renewable energy sources are our only hope.”

A pilot study conducted for Karnataka in 2006 has indicated that by undertaking measures such as efficiency improvement, DSM and energy conservation, and effective use of small size distributed renewable energy sources it is possible to satisfactorily meet even the projected demand in 2018 without adding any conventional power projects.  By diligent application of these measures a considerable portion of the future demand for electricity also can be met.  Compared to the option of additional generation capacity based on conventional power projects, these measures provide a large number of additional benefits to the society such as: 

  • greatly reduced AT&C losses,
  • avoided cost of network expansion,
  • improved voltage profile,
  • much lower gestation periods for additional power projects,
  • much reduced growth in demand (CAGR) for grid electricity,
  • reduced need for land acquisition for power stations, transmission lines and substations,
  • avoided costs of recurring fuel expenditure,
  • reduced complexity in system operation,
  • avoided costs of peak load power stations,
  • absence of the need for people’s displacement,
  • advancement of local employment opportunities,
  • reduced urban migration,
  • much higher success in rural electrification because of smaller gestation periods. 

There are many international reports, such as the one from Greenpeace India, wherein experts are of the view that a people friendly and environmentally friendly electricity supply system can be ensured on a sustainable basis by honest implementation of the above mentioned measures.  Renewable energy, combined with efficiencies from the ‘smart use’ of energy, can deliver half of India’s primary energy needs by 2050, according to the report: ‘Energy [R]evolution: A sustainable Energy Outlook for India’.

What is needed is an honest and objective effort in implementing ‘Integrated Energy Resource Management Approach’ taking all aspects /potential of energy resources in the country on a holistic basis. At the same time we cannot afford to forget that there are more pressing needs of the society such as clean air, water, right not to be displaced by large projects, poverty alleviation, health, education etc.  The legitimate demand for electricity must be determined in the background of the overall needs of the society instead of looking at the electricity demand in isolation.

In the background of all these glaring issues, it would tantamount to letting down the public if the STATE continues to spend thousands of crores of rupees of the state’s revenue and precious natural resources in establishing large number of additional conventional power plants without harnessing all the techno-economically benign alternatives first. 

The society can ill afford to allow the current chaotic situation to continue if we are hoping to become a welfare state. In this regard there is an urgent need to thoroughly review the past and present practices in electrical power sector, which has the potential to become the biggest polluter of our environment, and the fastest exploiter of our natural resources if not managed responsibly.  There should be onus on the project proponent of establishing the real societal need for additional conventional projects beyond reasonable doubts. The project proponent should satisfactorily convince the public that all the other alternatives to dam based OR coal based OR nuclear based power projects have been fully explored, and that the proposed project is in the best interest of the society. It must also be mandated that all the details of project report (except those which are commercially sensitive), Costs and Benefits Analysis (CBA), and the Environmental Impact Assessment (EIA) reports should be put on public domain for adequate periods so that concerned people can study the same.

While it is recognized that GDP growth rate emphasis by successive governments cannot be wished away in the near future, an effective tool to discourage ill conceived conventional power projects is needed in the present scenario of political economics. Such a tool could be the effective implementation of Costs and Benefits Analysis (CBA), wherein all the direct and indirect costs & benefits to the society of such high impact projects are analysed, assigned economic value and objectively compared.  Externalities such as costs associated with social, environmental and health aspects of our society should be accorded due importance in such a CBA model. This is a common practice in all business enterprises, and is being widely practiced in the industrialsied countries.  Satisfactorily establishing beyond reasonable doubt the efficacy of a given project through CBA should be made a prerequisite for the project proponent before the application for environmental clearance is lodged with MoEF.

Another crucial step in ensuring that environmental and social aspects of our society are adequately protected is to make it mandatory that effective public consultations are held at all important stage of approval process.

In view of the multi-dimensional crises facing the electrical power sector the public expects the following urgent steps from the union govt.:

       I.          An appropriately empowered committee should effectively review the past and present practices in electrical power sector, and to form policies for the future which are people friendly, environmentally friendly and sustainable. This process must take various stake holders into confidence by suitable steps such as effective public consultations.

      II.          The legitimate demand for electricity and the true rate of growth of electricity demand should be identified keeping in view the real developmental needs of all sections of the society, and the limit of the nature in supporting such escalating demand. All steps needed to keep such a demand within the limits of our natural resources should be implemented such that all round development is not hindered.

    III.          Highest priority should be provided to optimally utilise each of the existing electricity infrastructure facilities in the country. An objective comparison with international best practices in each segment of the electricity sector can be used as guiding tool.

   IV.          Before conceptualizing new large scale projects such as coal based, OR dam based OR nuclear based power projects, all the benign alternatives should be fully harnessed, and the final decision should be arrived at only after thorough review of the situation and after effective public consultation.

     V.          The onus of establishing the real need for additional conventional projects beyond reasonable doubts should be on the project proponent. Effective public consultation in all such projects and an objective Costs and Benefits Analysis should become a mandatory part of approval process.

   VI.          All possible measures should be taken to encourage the wide spread use of small size, distributed type renewable energy sources.

  VII.          Electricity companies should be entrusted with necessary levels of freedom and appropriate level of public accountability to function efficiently and with high degree of social responsibility.

  1. In the event of any referendum to be held to collect public opinion on the environmental impact, such hearing shall be held by an independent judge with due regard to principles of natural justice.

8.      Conclusions – of critical importance

The social, economic and environmental implications of the inefficiency prevailing in the electric power sector of the country are too huge to be ignored indefinitely.  Unless urgent measures are taken to optimize the same the overall welfare of our society will deteriorate at a faster pace.

There are techno-economically viable means such as efficiency increase, energy conservation and Demand Side Management which can provide virtual addition power capacity equivalent to 30 to 40% of the total installed generating capacity. The cost of such measures is generally 20 to 30% of the cost of green site power projects.

The results of gross inefficiency of electricity industry in social, economic and environmental aspects of our society are also clearly in violation of the spirit of many Acts of parliament, and even in violation of sections 48 (a) and 51 (a) (g) of our Constitution.  There are clear examples of non-fulfillment of International obligations because of such inefficiency.

In the background of all these glaring issues, it would tantamount to letting down the public if the STATE continues to spend thousands of crores of rupees of the state’s revenue and precious natural resources in establishing large number of additional conventional power plants without harnessing all the techno-economically benign alternatives first. 

The STATE should endeavor to put in place urgent measures to ensure harnessing of all the techno-economically benign alternatives first before approval for additional conventional projects are given.  This can be achieved by putting the onus of establishing the real need for additional conventional projects beyond reasonable doubts by the project proponent. Only by ensuring objective public consultation in all such projects through Costs and Benefits Analysis, the STATE can assure the public that environmental and social aspects of our society will be adequately protected.

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Some References 

  1. Greenpeace reports

{True Cost of Coal” provides a number of illustrations from around the world on the deleterious impacts of coal power projects

“BLUE ALERT “focuses on impact of Global Warming on India, in which about 120 Million people from coastal regions in South Asia are estimated to migrate to larger cities towards the second half of this century because of the direct/ indirect effects of Global Warming in the business-as-usual scenario.

“Hiding Behind the Poor”, wherein it was shown that in India the richest consumer classes produce 4.5 times more CO2 than the poorest class, and almost 3 times more than the average Indian (501 kg). 

energy {R}evolution, A SUSTAINABLE INDIA ENERGY OUTLOOK” indicates the feasibility in reduction of about 38% in demand by 2050 as compared to the reference scenario of IEA. 

Still Waitng” A recent Greenpeace study sought to show that the large number of additional conventional power plants have not been beneficial to the rural poor and the vulnerable sections of the society, but only feeding the insatiable demand for electricity of a small section of the urban rich, and at the same time escalating the addition of GHG emissions.} 

  1. “Bio-diversity Impacts of large dams” – UNEP & IUCN
  2. “IPCC synthesis report IV”
  3. “STERN REVIEW – Economics of Climate Change” – UK House of Lords
  4. “Achieving 2010 Biodiversity Target: India’s contributions” – MoEF report
  5. “Integrated Energy Policy”, Planning Commission of India
  6. Report of 13th Finance Commission
  7. ”Time for Plan B: Cutting Carbon Emissions 80% by 2020” Earth Policy Institute, USA; convincingly demonstrated that a good combination of efficiency improvement measures and renewable energy sources can eliminate the need for coal based power stations across the Globe.
  8. “National Electricity Policy” – MoP, Year 2005

 

Table 1 : Power Supply Position (Energy) in India
(1996-1997 to 2008-2009) [In Million Units, (MU)]

[Source: Ministry of Power, Govt. of India. (Parliament Question 10591)]

Year Requirement Availability Shortage Shortage
1996-97 413490 365900 47590 11.5%
1997-98 424505 390330 34175 8.1%
1998-99 446584 420235 26349 5.9%
1999-00 480430 450594 29836 6.2%
2000-01 507216 467400 39816 7.8%
2001-02 522537 483350 39187 7.5%
2002-03 545983 497890 48093 8.8%
2003-04 559264 519398 39866 7.1%
2004-05 591373 548115 43258 7.3%
2005-06 631554 578819 52735 8.4%
2006-07 690587 624495 66092 9.6%
2007-08 737052 664660 72392 9.8%
2008-09 777039 691038 86001 11.1%

                                        

Table 2 : Power Supply Position (Peak Demand) in India
(1996-1997 to 2008-2009) [In Mega Watts (MW)]

[Source: Ministry of Power, Govt. of India. (Parliament Question 10591)]

Year Peak Demand Peak Met Shortage Shortage
1996-97 63853 52376 11477 18.0%
1997-98 65435 58042 7393 11.3%
1998-99 67905 58445 9460 13.9%
1999-00 72669 63691 8978 12.4%
2000-01 78872 65628 9244 12.3%
2001-02 78441 69189 9252 11.8%
2002-03 81492 71547 9945 12.2%
2003-04 84574 75066 9508 11.2%
2004-05 87906 77652 10254 11.7%
2005-06 93255 81792 11463 12.3%
2006-07 100715 86818 13897 13.8%
2007-08 108866 90793 18073 16.6%
2008-09 109809 96785 13024 11.9%
         
Table 3 : Over view of Electricity Scenario in the country

(Source: Central Electricity Authority)

Year Installed Capacity

[Mega Watts (MW)]

Increase   Gross Generation

[Million Units, MU]

Increase   Per Capita Consumption

[kWH]

% Increase   T&D loss

(Excluding commercial losses)

% Change
1970-71 16,271   61,212         17.6  
1975-76 22,249 37 %   85,926 40 %         19.4  
1980-81 33,315 50%   119,260 39%         20.6  
1985-86 52,273 57%   183,390 54%         21.7  
1990- 91 74,699 43%   289,440 58%         22.9  
1995 -96 95,081 27%   418,043 44%         22.3  
2000- 01 117,783 24%   560,842 34%         32.9  
2005 -06 145,755 24%   697,459 24%         30.4  
2008 -09 147,965 1.5%   723,555 3.8%            
08-09/70-71   900%     1182%            
Feb 2010 157,229                    

 

Table 4 : Power Sector Efficiency in India

       Power Sector Area

 

Prevailing level of efficiency / loss in India International best practice
Generating capacity utilisation   50 – 60% More than 85%
Aggregate Technical & Commercial losses (AT&C)   35 – 40 % Less than 5%
End use efficiency in agriculture   45 – 50 % More than 80%
End use efficiency in industries and commerce   50 – 60 % More than 80%
End use efficiency in other areas (domestic, street lights and others)   20 – 30 %  More than 80%
Demand Side Management Potential to reduce the effective demand by more than 20%

                                                     (Source: Integrated Energy Policy, Planning Commission and other sources)

Table 5: Major issues for the society with conventional technology power sources

  Fossil Fuels (coal, gas, diesel)  Dam Based Hydro         Nuclear Power
Economic Issues Unsustainable pressure on natural   resources such as land, water and    minerals; reduced agricultural      production Demands large tracts of forests

and fertile land;  water logging;             affects the economy of the down             stream population; deposition  of silt

Demands large tracts of forests and

fertile land; huge Capital costs; long

term waste management costs; serious shortages of nuclear fuels

Social  Issues Peoples’ displacement and  health Peoples’ displacement and

Health

Peoples’ displacement and health
Environmental

 Issues

Global Warming; pollution of

Land and water and air; acid rains

Methane emission,  submersion

 and fragmentation of forests;  loss               of bio-diversity; downstream areas             get  deprived of fertile silt

Mining related pollution; radiation

emission during operations and from       nuclear wastes for centuries

 

                                                                                    Table 6: N&RE potential in India

                       Potential

          (Grid interactive power only)

  1. Wind energy      45,000 MW
  2. Small hydro       15,000 MW
  3. Solar   Over 5,000 trillion kWH/year Potential

   (estimated to be many times more than the total energy  needs of the country in 2050)

  4. Bio-mass         17,000 MW
  5. Ocean Wave     With about 7,000 Km of coastal line it

 should be huge, but no estimates available

                                                                              (Source: MNRE, Govt. of India)

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