The race to zero
The power demand outlook remains muted as economies are going through deep recessions caused by the pandemic. That has not, however, stopped the march of green power.
Or prevented new sustainability commitments by corporate leaders, with Reliance Industries the latest to reveal plans to go “net-zero”. A few key announcements capture the trends of the moment: Resilient clean power investments: Investment in new renewable energy capacity remained resilient in the first half of the year, according to the latest update from BloombergNEF, rising 5 per cent to $132 billion.
Powering reforms: Transforming India’s power sector through GARUDA
One of the long-term impacts of the Covid-19 pandemic on the power sector is likely to be depressed energy demand. A recent study by TERI indicates this reduction maybe 5-10% over the next five years. India’s goal of installing 450GW of renewable energy looks to be a challenge anyway, but this will be an even bigger challenge if India has overcapacity due to lower-than-expected demand.
Enter GARUDA. This innovation proposes to retire old, inefficient coal plants by bundling them with new and cheaper renewable energy (RE) capacity. GARUDA does this by employing a “blended tariff”that amortises the cost of decommissioning over the term of the RE power purchase agreement, such that the financial burden on the distribution companies is almost negligible. The RE tariff would be discovered through competitive auction, as is the norm now.
We chose the name GARUDA as the objective is the renewal and transformation of the power sector, not its diminution.
Decommissioning thermal plants
India has a total coal fleet of 170+ plants across the country, amounting to 205,000MW. Several plants are old and inefficient—the oldest is 57 years old, and the lowest plant load factor is 21%. Of these, 58 plants amounting to 45,000 MW of coal plants are over 20 years of age, with an average plant load factor of 62%, and tariffs ranging between Rs 1.87- 7.03/kWh.
Research by CPI and ReConnect Energy suggests that there is a strong economic and environmental case for decommissioning many of these plants—up to 60% of plants amounting to 28,000MW. The criteria used to identify these plants are a combination of age, plant load factor, tariff, and suitability for the installation of flue gas desulphurisation units. This last is an important category mandated in 2015 by the ministry of environment, forests and climate change and the Supreme Court to mitigate the growing problem of air pollution in India, and has since suffered implementation deadlines slipping from 2017 to 2022, also unlikely to be met. Flue gas desulphurisation units oblige higher tariffs and also require land and water, so typically older plants cannot afford them.
Of the 48 plants identified for retirement, 26 plants, or more than half, are located in or near urban areas. State-owned gencos own most of these plants–discoms own 36 plants aggregating to 21,000 MW, and National Thermal Power Corporation (NTPC) owns eight plants aggregating to 5,000MW.
The GARUDA tariff would include the normal tariff for the new renewable energy plant plus the cost of decommissioning the old fossil fuel plant. The bidder would build such RE capacity to match the generation of the retiring thermal plant. Ideally, the bidder would be a combination of a RE independent power producer and a specialised decommissioning contractor. The learnings from the Rewa solar IPP would be a helpful starting point for designing the risk allocation among the parties.
Our analysis estimates that impact of decommissioning 500 MW of coal capacity with equivalent hybrid renewable capacity ranges between Rs 0.03-0.05 per kWh. It is assumed that the decommissioning cost, net of scrap value, ranges between Rs 70-105 crore per 500 MW.
Adding renewable capacity
Critics of retiring existing coal-based capacity say this will create challenges for system reliability and resource adequacy. This is one of the reasons plants are often retrofitted and used by state utilities beyond the end of their life. Renewable energy offers infirm power adding costs for grid balancing. However, two reliable alternatives are emerging—one, hybrid renewable systems that include solar and wind together, as they collectively complement each other in terms of generation hours during the day; and, two, battery energy storage systems, as costs are declining fast and new business models are being invented. With these advances, a competitive price point can be discovered through the auction for round-the-clock renewable energy supply, providing a technically feasible way to replace coal.
Discoms do not have the resources to take up this scheme in its entirety in the short-term. We envisage GARUDA to move beyond business-as-usual, whereby some 3-5GW of thermal capacity is decommissioned each year. An accelerated program, with pre-arranged financing, could help the speed and scale up existing decommissioning trends.
The entire GARUDA program would entail an investment of approximately $41 bn. For each 5GW tranche of coal capacity, of the total 28GW program to be offset by two times the RE capacity (10GW), the bidder, would need approximately $218mn of equity. This capital would be mobilised with the assurance of debt financing to the extent of $510mn.
This debt would be pre-arranged as a green bond, or, an emerging financing class—a transition bond, in tranches to grow with the scale-up of the programme. The bond could be backed by development banks and oblige the GOI’s sponsorship/guarantee, and its subscribers could be large scale pension funds with green windows. This “GARUDA bond” would be structured as regular debt, serviced by the earnings from the RE PPA, with an upside that could come from the carbon credits earned from the renewables being injected into the grid.
GARUDA is a win-win for India’s goals, achieving both financial and social benefits.
Financially, GARUDA would save discoms Rs 9,820 crore ($1.3 bn) per year from lower tariffs, even as it results in a younger fleet with better plant utilisation. It also gives a boost to India’s RE sector, which has been slowing down with discom issues. GARUDA would add ~60,000 MW of new RE capacity. Adding significant renewable energy, in turn, would give a strong push to local manufacturing and EPC companies under the “Atmanirbhar Bharat” initiative. Replacing coal-based plants with renewable energy will also have a significant impact on reducing the RPO costs for discoms. And finally, the programme would release land for other uses. The programme identifies 26 urban plants, opening up over 13,000 acres of valuable land, which can create liquidity gains for the state and an increase in income generation of 4x-20x depending on the choice of commercial activity.
The programme would save India 113mn tonnes of GHG emissions annually. Assuming a carbon price of $5/ton, every 500MW of coal retired would produce an estimated $10mn in annual revenue to the investor—nearly equal to the decommissioning costs.
The thermal power sector makes a significant contribution to air pollution in India, for example generating 45% of SOX emissions, most harmful to human health in-country and also among the worst offenders for global warming. Further, as water shortages increase across India, thermal plants are routinely being shut down for lack of water. Implementing the GARUDA project for these older thermal power plants, many of which lack cooling towers which re-use water, would reduce the grossly inefficient use of water in these plants.
Implementing GARUDA would bring multiple transformational benefits to the power sector, improve the PLF and efficiency of old thermal plants, and move India forward in its implementation of renewable energy targets—all without burdening discoms. All this, while addressing critical environmental concerns arising from climate change, air pollution, and water scarcity.
Retiring old, inefficient coal-based power plants by bundling them with new, cheap renewable energy plants would bring multiple transformational benefits to the power sector, improve the PLF and efficiency of old thermal plants
Renewable energy: State has achieved 44% of 2022 target
Out of the total renewable energy target of 2022, the state has till date achieved about 44%. This was revealed in the latest analysis ‘The Curious Case of India’s Discoms’ by energy economist Vibhuti Garg and research analyst Kashish Shah from the Institute for Energy Economics and Financial Analysis (IEEFA).
As per the National Electricity Plan 2018, the state has set a clean energy target of 22 gigawatt (GW) to be achieved by 2022. According to the analysis, the renewable energy installed capacity in the state as of June 2020 is 9.7GW. “The figures highlight the need for a strong policy and investment drive to achieve the target,” the analysis stated.
Out of the total renewable energy target of 2022, the state has till date achieved about 44%. This was revealed in the latest analysis ‘The Curious Case of India’s Discoms’ by energy economist Vibhuti Garg and research analyst Kashish Shah from the Institute for Energy Economics and Financial...
No country will contribute more to the rise in global carbon emissions than India. Energy consumption among its 1.4 billion people is rising fast, with 65 percent of the country’s electrical power currently generated from coal. The world’s filthiest fossil fuel—of which India consumes more than the United States and Japan combined—will “remain ingrained under the fingernails of the nation” because of “politics, economics, and the complications of generating electricity.” So said the Economist in a 2018 briefing.
The British magazine’s briefing perfectly encapsulates the widespread view of India as climate policy’s problem child. But the conventional wisdom couldn’t be more wrong. Little noticed in the West, India is undergoing a green-energy revolution—exceeding targets, breaking records, and quickly making the age of cheap clean energy a reality.
Because of the dominance of India’s coal industry, few experts ever expected India to be on track to significantly exceed two key commitments to the Paris Agreement. One is India’s pledge to increase the share of power-generation capacity that doesn’t use fossil fuels to 40 percent by 2030; today, generation capacity from renewable, hydroelectric, and nuclear sources already reaches 38 percent, putting India on track to comfortably exceed its target. The other commitment is to reduce carbon emissions by 33 to 35 percent (from 2005 levels) by 2030. Today, India looks likely to reduce emissions by as much as 45 percent by 2030, far surpassing its Paris target.
India has set its own ambitious renewable-energy goals—and is exceeding even them. Its fossil-fuel power-generation capacity is presently about 230 gigawatts (GW), of which 205 GW come from coal. When, in 2015, Prime Minister Narendra Modi announced plans to build 175 GW of new renewable-energy capacity by 2022, the announcement was met with skepticism. After all, India at the time only had renewable generating capacity of 34 GW. According to Amitabh Kant, CEO of the government policy think tank NITI Aayog, India has already installed 89 GW of renewable power capacity and will achieve Modi’s 175 GW target as planned.
Modi’s ambition and India’s successes stand in sharp contrast to the United States, where clean-energy initiatives are highly politicized.
And Modi has further raised the stakes: At the September 2019 United Nations Climate Action Summit, he announced a new target of 450 GW of renewable energy capacity by 2030. Motivating him are the deadly pollution in Indian cities, the threat of devastating impacts from climate change, and the high bill for energy imports.
Modi’s ambition and India’s successes stand in sharp contrast to the United States, where clean-energy initiatives are highly politicized. The Democratic nominee for president, former Vice President Joe Biden, has developed an ambitious $2 trillion plan to produce 100 percent of the country’s energy from cleaner sources by 2050, but even if he wins on Nov. 3, this is all but certain to face opposition and roadblocks. India, on the other hand, was able to impose a tax on coal production equivalent to $6 per ton with nearly unanimous approval from the 36 political parties represented in the Indian parliament.
India’s clean-energy initiatives have the wind at their back thanks to global advances in green technology—especially solar power, wind power, and energy storage. These technologies are progressing exponentially and have entered a virtuous cycle: As prices for these technologies fall, demand for them rises, and as production is expanded to meet demand, prices fall some more, all of which contributes to accelerating adoption. When Bell Labs built its first solar photovoltaic panel in 1954, the panel cost $1,000 per watt of electrical power it could generate. By 2008, the modules used in solar arrays cost $3.65 per watt; by 2018, that figure had fallen to less than 40 cents. In India that year, solar power generation crossed an important threshold, becoming cheaper than coal (by 14 percent on a “levelized” basis, which adjusts for the impact of subsidies, construction costs, and financing). Fast-plunging costs have allowed India to increase its solar-power generation capacity more than tenfold since 2015.
Other renewables, too, follow this trend. Wind power became cost-competitive with coal in 2018, and costs continue to plummet. Battery technology, once the crucial weak link in renewable energy, is rapidly approaching the point where it solves a critical problem that has held most clean energy back: Solar panels only generate power when the sun shines and windmills only turn when it is windy. Until now, the dirty secret of green power has been that every gigawatt of sometimes-on, sometimes-off renewable generating capacity has required another gigawatt of fossil-fuel power generation capacity to stand by as a backup. Batteries resolve that conundrum by storing power and releasing it when needed; a more brute-force, low-tech method of storing wind or solar power is to pump water up a hill into a reservoir, from where it can generate hydroelectric power on demand.
India made green history this year, breaking not one but two records. In January, it conducted the world’s largest tender for renewable power that no longer requires fossil-fuel backup. One company, Greenko, will provide 900 megawatts of uninterrupted, unsubsidized power using a combination of solar panels and hydroelectric storage. Another, ReNew, will supply 300 MW of steady power using solar panels and battery storage. In May, ReNew made another successful bid to provide 400 MW of solar power with battery storage. At a levelized first-year cost of 2.90 rupees ($0.04) per kilowatt-hour, it will be among the world’s lowest rate for uninterrupted renewable power—finally making generating and storing clean energy cheaper than burning coal.
India made green history this year, breaking not one but two records.
India is a major beneficiary of these technological advances because it is rapidly adding generating capacity as it develops, avoiding many of the costly and politically charged adjustments as developed countries replace one energy technology (and its jobs) with another. It also has large stretches of sunny, sparsely populated land for acreage-hungry solar arrays. Low labor costs make the installation and maintenance of renewable generation inexpensive; solar is a low-skilled sector once the panels have left the factory. As India imports the vast majority of its oil and a significant part of its coal, it is happy to replace costly imports with home-generated clean energy, which also helps explain the relative lack of opposition to it.
What’s more, the country’s power supply has been unreliable, its national energy grid feeble, and electricity beyond the reach of nearly 100 million rural homes. As solar panels and battery storage become cheaper and diffuse across the subcontinent, a major impediment to India’s development and prosperity will be removed. That’s something Tata Power and the Rockefeller Foundation hope to accelerate: Last November, they announced a collaborative effort to set up 10,000 so-called microgrids in Indian villages by 2026, connecting more than 5 million households to small distribution networks of local renewable power.
With India’s costs already among the lowest in the world, it is at the cusp of an age of truly competitive, unsubsidized clean energy. When the price of solar panels and batteries falls another 50 percent, as is likely during the next three years, market forces will take over, and Indian consumers will take the clean-energy mantle from the government—something that still looks quite a ways off in most developed countries. As Europe loses momentum in its transition to clean energy, as a possible new U.S. administration struggles to get green policies back on track, and as China makes great strides in finally turning away from fossil fuels, India will play an increasingly important global role in transitioning the planet to a cleaner, safer, more sustainable future.
Gujarat's Kutch to Get India's Largest Renewable Energy Generation Park
India's largest renewable energy generation park will come up in Gujarat with a generation capacity of 30 gigawatts (GW).
The foundation stone of Hybrid Renewable Energy Park near Vighakot village in Gujarat's Kutch district will be laid by Prime Minister Narendra Modi on Tuesday, the PMO said.
During his day-long visit to his home state, the Prime Minister will also lay foundation stone of a desalination plant and a fully automated milk processing and packing plant in Kutch, the statement added.
The Renewable Energy Park will be spread over 72,600 hectares, and have dedicated zones for wind and solar energy storage as well as an exclusive zone for wind park activities.
Harnessing its vast coastline, Gujarat is taking a significant step to transform seawater to potable drinking water with the upcoming desalination plant at Mandvi, Kutch.
The plant with capacity of 10 crore litre per day (100 MLD) will strengthen water security in Gujarat by complementing the Narmada Grid, Sauni network and treated waste water infrastructure.
It will be an important milestone for sustainable and affordable water resource harvesting in the country.
Nearly 8 lakh people across the regions of Mundra, Lakhpat, Abdasa and Nakhatrana talukas will receive desalinated water from this plant, which will also help in sharing the surplus with upstream districts of Bhachau, Rapar and Gandhidham.
It is one of the five upcoming desalination plants in Gujarat -- Dahej (100 MLD), Dwarka (70 MLD), Ghogha Bhavnagar (70 MLD), and Gir Somnath (30 MLD).
Modi will also lay the foundation stone of the fully automated milk processing and packing plant at Sarhad Dairy Anjar, Kutch. The plant costing Rs 121 crore will have the capacity to process 2 lakh litres per day.
Gujarat Chief Minister Vijay Rupani will be present on the occasion. The Prime Minister will also undertake a visit to the White Rann, followed by participation in a cultural programme.
India starts work on power project despite Pakistan's objections
Despite Pakistans repeated objections over Indias intentions to construct a power project on the Chenab River in Jammu and Kashmir, New Delhi has decided to go ahead with the construction work of the project, maintaining that it does not violate terms of the Indus Water Treaty (IWT).
Pakistan has raised its concerns with the World Bank, stating that India's project was not in consistency with the IWT.
Pakistan has maintained that the Indus, Jhelum and Chenab rivers are reserved for the country, while the Ravi, Beas and the Sutlej rivers are reserved for India under the IWT, signed in 1960 between the two nations,
Islamabad has repeatedly stated that it has serious concerns over designs of the Pakal Dul, Ratle and Lower Kalnai projects, insisting that India would be using the reservoirs to create deliberate and artificial water shortage or cause flooding in Pakistan.
"These projects have been designed in violation of the IWT," said a government official.
Official sources have confirmed to IANS that Pakistan has approached the World Bank with a fresh protest.
However, Islamabad's efforts do not seem to hinder India as the Narendra Modi-led government has decided to go ahead with the construction of the 850 megawatt Ratle hydroelectric power project, approval of which came during a recent meeting chaired by the Prime Minister.
In 2019, India had accepted Pakistan's request for inspection of the hydropower project on the Chenab basin.
After the visit of the Pakistani delegation, Islamabad had raised objections over Pakal Dul's design being in violation of the Sindh Taas Agreement of 2012.
"Pakistan had demanded that the freeboard height should be reduced from seven-feet to two-feet and the installation of the seal way gates should be done with an additional 40 metres in order to bring 1,620 metres and align it with sea level," said a government official.
While Pakistan is hopeful that its fresh protests with the World Bank would yield results and help in stopping India from what it calls, blocking the country's water through construction of its reservoirs, Modi inaugurated the projects and is all set to start the construction work also.
Pakistani government officials maintain that this is New Delhi's rivalry with Islamabad and its ambitions to create hurdles for the country by blocking its water and using it for flooding whenever it deems fit.
India signs strategic partnership agreement with IEA
India and the International Energy Agency- IEA on January 27, 2021, signed a framework for a strategic partnership in order to strengthen cooperation and mutual trust and for enhancing global energy stability, security, and sustainability.
The Memorandum of Understanding was signed by Dr. Fatih Birol, Executive Director of International Energy Agency, and Sanjiv Nandan Sahai, Secretary (Power). Birol from IEA termed the signing of the agreement a historic and huge step forward for global energy governance.
The International Energy Agency Secretariat will be responsible for the implementation of the cooperative activities in India under the framework. The Secretariat will also facilitate the discussion between India and IEA members for further developing the strategic partnership in the energy sector.
As per the official statement by the Ministry of Power, the partnership between India and IEA will lead to an extensive exchange of knowledge in the energy sector. It will also be a stepping stone for India towards becoming a full member of the Paris-based IEA.
Through the framework agreement, the Indian government plans on taking essential steps to promote and encourage strategic and technical cooperation in the different areas of the energy sector.
Contents of the Strategic Partnership:
The contents will be jointly decided by the members of IEA and India. It will include:
• A phased increase in the responsibilities and benefits for India as a strategic partner of IEA.
• Building on the existing areas of work within Association and CETP- Clean Energy Transitions Programme, such as clean and sustainable energy, energy security, enhancing petroleum storage capacity in India, energy efficiency, expansion of the gas-based economy in India, etc.
About International Energy Sector:
The International Energy Sector was created in 1974 in order to help coordinate a collective response to the major disruptions in the oil supply. The agency is made up of 30 member countries all over the world and also includes 8 association countries.