9 Energy Security

Some 400 Million Indians still dont have access to regular electricity. Electricity demand outstrips supply by about 15-20% in India. On top of that, losses due to theft are unusually high at 30-45%, causing an annual loss of about Rs 20,000 Crores (1 Crore = 10 million) to the state Electricity companies.

To grow at a reasonable pace, India needs a high level of investments to increase the generating capacity. However, it is the transmission and distribution systems which need to be totally overhauled. State run companies have contributed to a large amount of corruption, and have overall, failed the consumer.

But, would allowing a free hand to the market not make it more expensive for the urban consumer?

Yes, it will. But, would an urban consumer prefer to pay less on unreliable power, and then invest significant amount on small generators/battery units, or prefer higher tariffs for a reliable power supply? Evidence suggests that its latter.

But, this is just one part of the story. We still need to cover the rural consumer. It is this segment where participation of private sector will not be easy to develop. Logistically, it would be difficult for any private company to keep a distribution network running for remote villages, and not charge them a surplus for it. Politically, this section of consumers may not be as willing as the urban consumers to actually pay more for better service.

Studies indicate that transmission cost to rural areas can be three times the generation cost. A recent exercise based on Gujarat Electricity Board data has put the true cost of delivery to rural areas at Rs 9 per kWh (kilowatt hour). When the infrastructure cost is computed along with hours of delivery, the total cost can actually be as high as Rs 19 per kWh.

The Govt. of India recently announced a Rs 40,000 Crore project for rural electrification of 115,000 villages through conventional grid.

One interesting way for developing it might lie with the usage of small and clean sources of power - like Solar/Wind powered generators. Policy support could be in the form of compelling the grid to buy any surplus generated out of such small scale power sources. India is home to one of the most abundant solar resources in the world, with 3 million square kilometers of tropical and subtropical land and an average of 250-300 clear sunny days a year.

Perhaps, every village panchayat (the local body) can be given some money (say 300,000) to buy/build a solar/wind/small hydro powered system generating about 1 kilowatt of power supply for local needs (e.g. community TV, some bulbs, one water pump, etc). This could generate a lot of demand for the suppliers of such products, whose prices might come down by achieving more scale. The maintainance and running costs of solar power are minimal.

This is just a hypothetical scenario to illustrate the point - not all villages may have a perennial shortage of electricity. Not all may have a potential for developing such renewable sources. However, if you take this to be the case for all 600,000 villages of India - The total investment required (Rs 18,000 Crores) is no more than the annual losses suffered by the state electricity boards! (Note: 1KW power is clearly insufficient to power an entire village, actual requirement might be 10 times that or more, I am merely using this as an example to illustrate the point.)

Such a solution is cleaner for the environment, requires lesser investment in transmission and distribution, and makes the villagers the stakeholders for their own power needs. They themselves protect and maintain their system in a fair way so as to gain from it.