Monday, May 31, 2010

Power Sector Inefficiency – Economic & Legal Implications

The gross inefficiency in power sector in India 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. Studies by International Energy Agency show that, by 2050, energy efficiency has the potential to be the biggest single source of GHG emission savings in the energy sector.

Installed electricity generating capacity in the country 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. 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. 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.

The inefficiency prevailing in transmission & distribution, and 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. 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, but are also largely resulting in unproductive and non-essential applications.

The unreliable electricity supply has led to serious problems on the social, economic and environmental front whereas the relevant Acts of parliament are not being complied with. 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. People’s displacement is the most serious social implications of large conventional power projects.

As per the report of the 13th finance commission, due to inefficiency of operations the combined losses of electricity companies 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. The ever increasing number of conventional power projects such as dam based, coal based and nuclear power projects, as a consequence of inefficiency in utilizing the existing electricity assets, are demanding large amounts of natural resources such as land, water, coal etc. and are adding huge amounts of pollutants to our environment.

The coal power plants demand large tracts of land and huge quantities of fresh water. They burn enormous quantity of coal and generate mountains of ash, and need opening up of a large number of additional coal mines, which are all below thick forests. The technical efficiency of converting coal energy to electrical energy in Indian power stations is about 30%, which is very low. With high level of losses in transmission, distribution end utilisation 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%.

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. They reduce forest and tree cover, and lead to loss of bio-diversity.

Nuclear power plants have their own share of concerns. The low 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 concerns to the society.

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 63% as compared to about 90% in case of some of the best run power plants such as NTPC plants. The inability to optimize the installed capacity is not much different in nuclear power plants and hydel power plants.

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 avoidable 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.
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 the present low level of 24% in the country.

The prevailing inefficiency will not allow the fulfillment of the stated objectives of National Action Plan on Climate Change (NAPCC) unless a commensurate action plan is implemented earnestly.

Whereas it will be impossible to satiate the ever escalating demand for electricity in our urban areas in the business as usual scenario, 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.

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.

Article by:
Shankar Sharma

Power Policy Analyst