[Economy] Electricity generation in India: Grid failure, privatization, problems, reasons, solutions and more

1. Electricity Scenario: India
2. Problem with hydro power
3. Coal Based Electricity Generation
4. What was the reason behind grid failure?
5. What is an electrical grid?
6. Components of a grid
7. When does a grid collapse?
8. Penalty for Grid violation
9. What is the network in India like?
10. Players in the game
    • Private players
    • Coal India
    • Local Electricity companies
    • Farmers
11. Suggest the reforms to fix Electricity problems in India

Because of the Grid failure, last month about half of India or roughly 10 per cent of the world’s population, suddenly found they had no electricity.
Electricity is the life line for Manufacturing and Service sector. If India wishes to grow at 8 or 9% a year, then smooth and uninterrupted supply of electricity =essential.

Electricity Scenario: India

• India’s present installed electricity capacity is 205 gigawatts (1GW is 1,000MW).
• Per capita electricity consumption in China is about 3.5 times that of India. [ If a country’s electricity, cement or steel consumption is higher than India, it means means they’re more advanced and Developed than we are].

• Hydro and coal account for nearly 77 per cent of electricity generation in India.

Problem with hydro power

• hydro power contributes to only about 20 per cent of electricity generation in India, while in China- the Three Gorges dam alone satisfies 10% of China’s electricity consumption.
• Only about one-fourth (25%) of the India hydro potential has been harnessed. Why?
• Lack of vision,
• social and environmental activism of Jholaachhap NGOs.
• slow decision-making
• Weak law-enforcement. (the whole naxal belt- Government cannot start any projects there)
• We’ve huge potential of hydro power generation in Arunanchal Pradesh but most of the projects are stalled due to Border disputes with China. (lack of political will.)

Coal Based Electricity Generation

• Coal accounts for more than half of India’s electricity generation.
• country has the world’s fifth largest reserve of coal but its quality is poor because of very high ash content.
• Coal India has not been increasing production fast enough.
• Compared to China’s exponentially increasing output, Indian production has remained almost stationary during the past two years.
• Existing mines have strict limits as to how much coal they can extract.
• New mines are difficult to open because of the trouble in obtaining environmental and land clearances.

What was the reason behind grid failure?

• The national electricity transmission network links up India’s five regional grids.
• some states used more than their quota of power from this network.
• Why? Because of the low monsoon, farmers were using more electricity to pump out more ground water.
• So this extra demand of electricity overburdened the system, causing a cascade of failures.
• To cut the burden, power plants were shut down, some automatically because of computer softwares.

Here goes some technical details

What is an electrical grid?

• grid is an interconnected network of transmission lines  : on one hand it has Generating station and on the other hand it has load centres.

• For an electricity grid to function smoothly, it is essential that load and generation must be balanced at all times to prevent a failure.
• The flow of electricity through the lines should ideally not exceed the rated capacity, otherwise the lines could trip due to an overload.

Components of a grid

• A grid consists of three main components:

When does a grid collapse?

• There can be two main reasons.
• First reason: equipment failure due to reasons such as fog and pollution
• Second reason: when one or more constituents violate the grid code and overdraw in a big way from the grid, causing it to fail due to the imbalance in the power injection
• Northern states are repeat violators of the grid frequency norms, especially Uttar Pradesh, Haryana, Punjab, Jammu and Kashmir.

Penalty for Grid violation

• If a state draws more electricity than its quota, then it has to pay penalty known as “Unscheduled Interchange or UI rate.”
• Uttar Pradesh is the repeat offender of grid violation, it has ‘UI’ penalty bills of several hundred crores and delays the payments. The state has also taken advantage of a High Court order under which it does not pay the full UI penal rate.

What is the network in India like?

• At present the northern, western, eastern and northeastern regions are integrally connected through AC (alternating current) transmission links to form what is called the ‘NEW’ grid.

Players in the game

Private players

• Few years back, (when there was no recession in US and call centres were booming), the private players thought that India’s middle class will grow exponentially, and everyone will buy TVs, fridge, washing machine and computers. Thus demand of electricity will increase and we could make heavy bucks. So many private players (like Anil Ambani), entered the game and opened their thermal power stations.

Problems faced by private players in power market

• electricity-generating companies in the private sector do not get enough coal from Coal India, or get the Indian Railways to transport it in time.
• And They cannot import lot of coal from abroad (Australia) because it is expensive and Government  controls the electricity prices, so they cannot pass on the cost of import to the final consumers.
• Thus industrialists have started reduced long-term investment in new plants. Some of them had taken loans from Banks and now showing inability to repay the loan on time, so banks are also feeling the heat. And adding insult to the injury, Less electricity = expensive electricity = low IIP, low GDP, high WPI and CPI.

Coal India

• it is the Government controlled mining company that has monopoly over digging up coal through out India.
• Environmental clearance : can’t dig enough coals from jungles.
• Coal India has $11 billion of unused cash, but reinvests only about 20 per cent of its gross cash flow into research and Development (R&D).
• So its coal processing capacity, machinery etc. are not up to the mark according to international standards.
• Technology and management practices in mining and transportation are outdated.
• Management is weak because of strong trade unions [just like Air India] and the system is rife with corruption. [just like MNREGA]

Local Electricity companies

• Most local distribution firms are state-owned and all but bankrupt, as local politicians insist that tariffs stay low and that juntaa especially farmers, get free power- especially during the election year. And given India’s polity, we’ve elections round the year- in this state or that state. So there is no “dry” year, in which Government can take tough non-populist measures.
• Lack of modernisation, poor operation and maintenance practices and pilferage (stealing of electricity) ensure that 30-40 per cent of electricity generated is lost and do not produce any revenue.

Farmers

• Farmers get free power to pump groundwater for irrigation, but some of this free power is illegally diverted to factories.
• Since electricity is free, farmers run their pumps whether or not crops require water. As a result, groundwater levels in many states are declining by over 1 metre every year.
• This means each year, farmers have to use more electricity to pump water from increasing depths,
• Secondly, when ground water table decreases, the soil becomes more saline. And saline soil produces less crop. Combine this with Deforestation and soil erosion= farmers are forced to use more and more fertilizers to produce same amount of crop.
• So, in the end this becomes a vicious cycle of excessive electricity and fertilizer use.

Suggest the reforms to fix Electricity problems in India

• Privatize Coal India.
• install new electricity regulator with teeth. (just like SEBI is for capital markets.)
• Install nuke power stations, disregarding the protests by jholaachhap NGOs and their foreign masters.
• Sort out border disputes with China, so that Arunanchal Pradesh’s hydro potential can be fully utilized.
• Your suggestions also welcome.

Ref

1. http://www.economist.com/node/21559977
2. http://www.indianexpress.com/news/power-failure-how-a-grid-works-and-when-it-doesnt/981586/0
3. http://www.indianexpress.com/news/watt-is-the-problem/984728/