India’s 227GW Renewables Plan: What Could Derail It, and a Solution to Keep the Lights On

By: Nitin Tanwar, Mridul Chadha, Saurabh Shrivastava, and Niladri Roy for Climate Connect Technologies 

India has set itself an ambitious goal of building 227 GW of additional renewable generation capacity by 2022. Whilst progress towards this goal has been good so far, production is only one part of the equation that makes up a country's power infrastructure. A national power system functions well only when the right amount of electricity is consistently supplied to end-users at the right time, and at the right price.

As the integration of renewable sources of power into the grid ramps up, supply-side volatility will only increase. Renewable generation is fundamentally weather dependent, and this attribute has led to some pundits warning of an impending grid collapse. However, evidence from countries around the world, which have a much higher penetration of solar and wind than India, refutes this premise. Grid imbalances have been very well managed using the right combinations of reserves, storage, and forecasting tools.

The problem

India’s challenges on the demand-side are well documented, particularly in regards of distribution companies (Discoms). Although significant progress has been made in this domain by distribution policy reforms, the current state of infrastructure is not quite suitable for a grid dominated by renewables. As things stand, the distribution sector already struggles to meet consumer demand, despite the availability of power, due to various technical and financial reasons. ‘Load-shedding’ is still an everyday reality in most parts of the country. What will happen when these additional renewables start supplying power and exacerbating grid volatility?

Whether our Discoms could manage large-scale capacity integration both financially and technically is a tough question to answer, given that they cannot currently ensure 24x7 power. The Ujjwal Discom Assurance Yojana (UDAY) scheme was launched in 2015 with the singular goal of helping Discoms get rid of their debts. It has instead led to increased burdens on states, worsening their own fiscal positions. The 2017 data shows that whilst in certain cases Discom losses have reduced, several other states have actually missed the scheme’s targets. This means they have not been able to reduce the aggregate cost of supply (ACS) or increase aggregate revenue realization (ARR) per unit of power.

(Image credit: The Economic Times)

The reason

One of the key concerns is that the majority of Indian Discoms are yet to embrace modern technical methods for day-ahead, and real-time load management, which are increasingly based on data science and Artificial Intelligence (AI). This results in extra buffer in projections, and expensive procurement decisions in short-term markets. It also drives load shedding, as supplying zero power is an easier option than the effort to forecast and find the cheapest power. Additional charges, and indirectly even penalties, are in large part passed on to end-consumers and industries (such as Agriculture) in the form of tariff hikes.

Some tough numbers

There is a common and consistent message found in the plethora of reports and research papers about what ails the Indian power sector. The poor financial health of the sector, particularly Discoms, is having a substantial follow-through impact on the country and GDP. In terms of the impact on key industries, analyses and modelling by USAID-SARI/Energy estimated that power shortages in some large states could result in up to 13.3% loss of value from Agriculture's total contribution to GDP.

According to a 2015 World Bank report, total Utility sector finances in India have continued to worsen in recent years; reaching losses of over Rs 60,000 crores ($14 billion) during this decade - equivalent to 0.7 percent of GDP. Imagine the opportunity cost of these losses, which are equivalent to 44 percent of India’s total spending on health care, or 23 percent on education. Another 2015 World Bank analysis, found for even just a few Indian Discoms, a whopping Rs 900 crores of losses were simply due to inefficiencies and thus avoidable.

Consequences

Given these crucial parts of India’s power infrastructure are so weak, it might actually be a travesty to create 227GW of additional green power, as it will remain out of reach for most end-users. 24x7 electricity is still a pipe dream for the majority of households and commercial consumers. One of the reasons for load shedding is the inability to appropriately match supply with demand, due to the non-availability of effective tools for load forecasting and distribution management. Supply-side modernisation should be a priority.

(Image credit: Nepal mountain News)

The solution

Some forward-looking Discoms have now implemented AI-based software solutions. Amongst other drivers, these solutions help them address their main financial pain-point of intraday deviation penalty payments, which can be in the range of Rs 15-20 lakhs per quarter for those in the 2,000 MW+ peak-load category. Some bigger states, such as Maharashtra and Uttar Pradesh, are now coming up with demand forecasting and procurement optimisation tenders for the same. Rather than years of planning, these intelligent methods can be deployed within months, and results become visible within the same year. Above all, software measures are far cheaper, and therefore offer much higher benefit-to-cost ratios, than hardware interventions.

Conclusion

If we compare India’s share of renewables now to Central Electricity Authority (CEA) projections for 2022, generation intermittency will increase significantly. Operators have done some good work in managing the grid over recent years, and the government is on the right track by pushing renewables to solve our energy security and pollution problems. But key stakeholders including operators, regulators, and state governments, must now work together to protect and serve end-users.

To benefit citizens, Indian Discoms must improve their operations with enhanced demand forecasting methods, for ensuring 24x7 supply at the most affordable price. Forecasting for load and renewable generation can no longer be done in isolation, and both should be part of an integrated system. Intelligent data science-based, and AI-driven software solutions may be the missing piece to move us towards this vision, and ensure affordable and abundant energy for all.