Time to shed obsession for coal as future lies in renewable energy

If we are to argue that India still lives in the dark ages, it wouldn’t be an exaggeration. Nearly 60,000 villages still don’t have any electricity connection. So far, the government’s focus has been on electrifying only the main cities of the country while small towns and rural India gets a short shrift of the government’s skewed power policy.

But the transformation of the Indian power sector is not as tedious task as it is made out to be. First, since the existing power plants are overwhelmingly dependent on coal for producing electricity, a lot can be done to improve production of this fossil fuel.  According to data provided by Coal India, 128 of its coal mines are waiting approval for stage -I clearance, while 50 coal mines are waiting for stage-II clearance. “In our country it takes almost seven years just for getting clearances. Getting hold of land may take another two years. How will we develop mines to meet the increasing demand for coal,” asks SN Rao, CMD Coal India.

According to Seshan Balakrishnan, director of infrastructure practice wing of Ernst & Young, the lack of funds for setting up distribution lines and tariffs not being revised in a timely manner have contributed to the current mess. “The state power distribution companies need to unbundle their sector by adopting models such as franchise or privatisation of the distribution utilities.”

Balakrishnan gives the example of the Maharashtra State Electricity Distribution Company that adopted the franchise model for distribution in its Bhiwandi circle.

“The accumulated technical and commercial losses for the company in that area came down from above 50% to 20%. The franchise model can be extremely successful in small areas”, he says.

The Central government has offered a financial restructuring package (FRP) to the state governments to make their distribution sector financially viable. However to avail of the FRP the state governments will have to revise the power tariffs every 3-6 months, which at present does not happen even in 10 years.

But lost in this din is the scope of the renewable energy sector. Currently, the biggest road block for renewable the cost incurred per unit of electricity that it generates. According to Planning Commission, the average cost per unit from solar power plant comes to about Rs10-13 per unit, which is four times the cost of power generated by a thermal power plant. In such a scenario it becomes very difficult to increase the share of solar energy in the basket of electricity generation for the country.

However, the notion that renewable energy is expensive needs to be challenged. Wind energy is already competitive with fossil fuel energy in some parts of India. Even the cost per unit of generating power using solar energy is showing a downward trend.

Data from Bloomberg shows that the investments in clean energy in India received is now worth $10.3 billion in 2011. This is an increase of nearly 52% from the previous financial year. India is also the most favoured nation for foreign investment in the renewable sector and accounts for 4% of global investment in clean energy. Interestingly, the country added 12,230 MW of capacity from renewable energy in the 11th plan.

For the 12th plan the ministry of renewable energy has set a target of adding 30,000 MW capacity of which 15,000 MW is envisaged to come from wind power. If all this comes through, then India can finally emerge from the dark ages, resolve its power supply issues and also clean up the environment.