1 Renewable Energy Experiences Food for thought minus the RE statistics to be found at mnes.nic.in, powermin.nic.in, and Albrecht Kaupp, Manager Indo-German Energy Programme, IGEN

2 The overall statistics as given by (i) integrated energy policy for India (2005), (ii) draft of national electricity plan (2005) and (iii) national electricity policy. Minimum life electricity consumption of 1 kWh/ household and day Access to electricity by all households in2010 Total villages in India587,258 Statistically electrified based on old definition87% Actually electrified based on new definitionNon known Electrified based on 1 kWh/day and householdNot known Electrified based on policy plan quality requirementNot known Villages to be electrified based on old definition77,605 Villages to be electrified based on new policyCould be 200,000 Lifeline of 0.5 kWh per day per household at50% of av. supply cost Villages which will be not connected to a gridestimated 25,000 Per capita supply will rise from 370 kWh now to1000 kWh in 2012 Basic Power Statistic of India

3 (i) Economic growth rate and growth of energy consumption rate is strongly correlated at about 1:1. (ii)Hydro power is the only significant RE contributor at 25% based on MW installed. Contribution to power mix ratio had been steadily declining. (iii)Wind, solar and biomass are contributing about 0.8%. They may contribute 2% to 3% to kWh electricity consumption in (iv)Validated numbers for wind, solar and biomass are difficult to get because official statistics record only MW capacity addition with no reference at what plant load factor or whether the system is still in operation. Other relevant indicators

4 Medium term energy security through conventional fuels. Decoupling of energy growth rate from economic growth rate. Energy efficiency and conservation. Energy modesty is in question. Expansion of conventional power such as atomic power plants, coal & gas fired, as well as hydropower at a rate of 10,000 MW per year. Overseas investment in fossil fuel sources are on the top agenda, while domestic exploration, in particular coal, suffers. National priorities

5 At least 85,000 MW nominal capacity hydropower coming up in the next 15 years (Policy and plan) At least 7,000 MW small hydropower <(25 MW) of more than 1,500 systems in a planning stage (Policy and plan) Realistic 12,000 MW potential biomass power plants fired with real agricultural waste. Size 3-7 MW. (No plan and policy) Wind power market cornered by three major players. (State level different policies, no Centre plan and policy ) Bio-diesel policy and first commercial bio-diesel refinery (30,000 tons/year) presently under construction. Where is the market for commercially viable RE-systems in India?

6 At least 25,000 villages (10-50 kW systems, Policy and plan) Subsidy scheme 90% central subsidy grant contribution, 10% State contribution, applies to each State, not only to North-East region (Policy and plan) Life line tariff 1 US Cent/kWh or at least 50% of supply costs (Recommendation). Conflict of interest with State Electricity Utilities who already suffer large financial losses due to a free power to rural areas policy. Realization of about 10% of supply cost. Where is the market for highly subsidized RE-systems in India?

7 State electricity regulatory commissions (SERC) have authority but do not always practice to approve tariffs for all systems. It sometimes seems that a case law is applied and individual deals are cut. Some States (Maharashtra) have policies similar to the German Renewable Energy Act. Conflict of interest between SERC and power utilities (SEB) who may have to buy expensive green power and are forced to sell at cheap rates. Regulatory constrains and opportunities

8 Alive, impressive, aggressive and successful. Lobbyists all over the place. Their only problem is the market of renewable energy for the rich is about 10% of the market of renewable energy for the poor. In other words, to tap into the market for the poor public and donor agencies subsidies are necessary. The Indian private sector driven renewable energy market

9 Are we supporting accelerated market penetration or accelerated non-sustainable subsidy penetration schemes ? Resulting problem for donors, development banks and public treasury

10 Rural electrification should be more than shedding light at poverty at night

11 Public announcement and stated objectives should be very focused concerning the contribution to which objectives. Select at most two. Ticking off more is pure window dressing. (i)poverty alleviation, (ii)quality of life improvement, (iii)clean energy, (iv)green house gas mitigation, (v)accelerated market penetration of renewable energy technologies, (vi)least cost energy supply solution, (vii)affordable solution for consumer, (viii)economic development of backward areas. 1. What is your fancy?

12 It is not really necessary to advertise biomass power plants as clean and green power plants: They smoke as much or even more than any coal fired power plant but nevertheless serve a purpose under objectives (vii) and (viii). Why always equating renewable = clean to justify renewable energy? Example 1: Biomass Power Plants

13 Project Size, (nominal power plant capacity), MW4.5 MW Land area of procurement, km Cultivated area within the procurement area150 Number of land holdings within this area10,000 Rural population in this area50,000 Agricultural labour in this area, people8,000 Price for biomass, moisture free basis, per tonRs US$ Annual value recirculated to rural economy, Rs/US$44,000,000920,000 Permanent jobs created in biomass supply business500 A good example of income generation Biomass Power Plant, Karnataka, India

14 Do not market photovoltaic (PV) systems under the label green house gas mitigation. Smart appraisers will only tell you that you have increased greenhouse gas emissions, because for the same life cycle cost investment, any effort to improve energy efficiency in a fossil fuel fired system would most likely have a 3 to 5 fold greater effect. You may be labeled a hypocrite or a lousy business man taking advantage of a serious climate change problem. Market the system under (ii) where it belongs. Marketing under (i) and (viii) is also misleading. Example 2: PV and Kyoto

15 Those within the command and control area of an RE-system should agree to it in word and spirit, should benefit from the system, and are not exploited. The question often arises: Become beneficiaries victims because we dont listen to them. ? 2. Is everybody on board?

16 A run-off-the-river hydro power project of 50 m3/s river flow which keeps a sacrifice of 0.1 m3/sec in the riverbed, by diverting almost all of the water to gain m in elevation harms all those villages living within the command and control area, and has therefore little acceptance and will only widen the conflict between rural and urban areas for natural resources, in particular if the village is already electrified and power transmitted to urban areas. (About 1600 small hydro power projects (7000 MW) have been identified and are in a planning state in India.) Example 3: Run-off-the River Hydro

17 A 5 MW biomass power plant, firing real agricultural residues, which have so far not found a market and are burned in the field, provides additional income to farmers as well as manages downstream power distribution to villages reducing pilferage and technical losses. Good example of meeting objective (i). Example 4: Biomass Power Plant

18 Subsidizing the investment costs of a renewable energy power system is often the least desirable intervention. If necessary subsidize kWh generation/consumption to ensure that only technologically sound equipment and professional operators/service providers are entering the market. 3. Why subsidizing the wrong end of the system?

19 Fiscal incentives of 100% first year depreciation for wind farms has resulted in at least one hundred wind power mills which never went into operation or worked for a short time only, particularly in cases where over-invoicing took place. The programme died out and was replaced by a preferential tariff based on kWh supplied. Example 5: First wind park policy, India

20 The principle that nonessential goods and services should not be sold at grossly different price levels just for perceived social consideration is too often violated, i.e. market prices for the rich and highly subsidized prices for the poor. 4. Accelerated market penetration or accelerated subsidy scheme?

21 There are two fairly large PV markets for providing electricity to rural areas. The same firms are selling at commercial terms to those who can afford it and at the same time giving systems away at a 50:50 to 90:10 subsidy to the poor if the Government or a sponsor pays the difference. The justification under the heading accelerated market penetration of renewable energy technologies is a lame one, because the market for the poor grows faster then the market for the rich. Therefore this becomes a programme for accelerated unsustainable subsidies. Besides nobody would ever get the idea to subsidize refrigerators at 90% for the poor! Example 6: PV parallel market

22 Dont electrify if you can provide only homeopathic proportions of electricity and have no affordable and cost effective solution to follow demand. Or electrify only at this level for social considerations in areas where it is likely that no economic development will take place for the next 15 years. They exist and are numerous! 5. Homeopathic proportions or real electricity?

23 Example 7: Fast demand increase scenario A consumption level of 60 Wh to 300 Wh of electricity per day per household will seldom trigger economic development, although it improves quality of life. The question is not the esoteric issue of providing the minimal electricity supply level that is the least cost and/or most affordable solution at the onset of the project. You have to go beyond this and answer the question of what you are going to do when the first refrigerator in the village arrives, requiring 2 kWh/day, when the present minimal consumption level already burdens a rural household with 10% to 20% of their cash income.

24 Example 8: Philippines PV program All PV systems (SHS, village AC plants, battery charging stations), except two, that the author post-appraised in the Philippines in 1998 and which had been installed between 1985 and 1993 were no longer in operation and had been replaced by either diesel gensets or grid connections. The issue was not inferior technology or services, but economic development that the systems could no longer support. Call it a short lived transition technology.

25 Example 9: Very remote area PV All systems which the author visited in North India (Himachal Pradesh, Spiti, Kinnaur, Tirthan district) in 2000 – 2004 in very remote villages (2- 4 days trekking) were for various reasons not any longer in use.

26 Rural electrification with (renewable) energy power systems should be done in such a way that it does not financially harm public power utilities. Just because it is a renewable energy technology does not mean this principle should be waved. 6. Public power utilities as beneficiaries or victim of Renewables ?

27 It has been observed in the Philippines and India that some utilities are rather reluctant to become the owner of village RE power plants, even if given for free. They either abandoned the system or try to quickly get real electricity to the place. Example 10: Reluctant beneficiary

28 Promote renewable energy power systems in environments and with customers where the still expensive electricity is nevertheless less costly than power from existing conventional systems. 7. Wind power beats easily diesel generator

29 Wind farm operators in South India provide power which is not even firm at about 50% of the cost of conventional diesel generators, because they have target a consumer group which operates diesel generators at high costs of 0.16 US$ per kWh. It is then only a matter of replacing expensive fossil fuel power with wind power (unreliable or not) whenever available to reduce costs of diesel generator set operation. Example 11: Textile industry and wind power

30 In particular grid connected and subsidized renewable energy power systems selling to known customers should only be implemented in combination with a demand side management component to reduce, in a financially attractive way, the technical and commercial losses at the consumer side. 8. Renewable energy + energy efficiency +energy modesty is the mantra

31 None of the proposals seen by the author have compared the costs to generate electricity on the supply side with the avoidable costs of technical and commercial losses. The option to avoid, or reduce supply side subsidies per kWh by moving these subsidies into DSM measures which may even be financially attractive is rarely considered. In other words, whoever claims that his wind park power requires a special tariff which is 30% higher than the average power mix generation costs should answer the question why consumption at the demand side cannot be reduced by 30% at lesser subsidy for the same level of comfort and productivity. Example 12: Systematic denial

32 Village council of Vasant Vihar is looking for an entrepreneur who wants to establish a business in the village, requiring electricity. Entrepreneur should view the power plant as a nucleus to also electrify the village. Choice of technology and system is open although renewable energy technology would be preferable. Many households are willing to pay a reasonable (= affordable) rate. To what extent very poor households will be cross- subsidized and also connected is negotiable. Entrepreneur is not required to electrify public places (street lights, community hall, village centre). Entrepreneur may also provide other services on request and against payment. Village is prepared to provide a business development and electrification grant through the HelpTheVillages fund. For more details download village profile and infrastructure from Serious business proposal: Rarely happens

33 Village council of Vasant Vihar has been informed that the village has been selected by the Government for electrification. The technology and system must be renewable energy since funding comes from a special purpose grant to promote renewable energy systems. The technology provider has been selected and no competitive bidding will take place. In order to keep the system alive for the next 5 years a repair and maintenance fund has been established and rural barefoot solar energy warriors will be trained to service the systems. Since most people are poor in this village, only marginal cash contributions are to be expected. As a community service all public places are provided with electricity for lighting. In order to satisfy one grant conditionality it is planned to show that a few households are engaging in cottage industry activities to demonstrate economic development in the village. For profit technology and service providers need not apply. Barefoot solar energy warriors: A true story

34 My final salute goes to the Indian Himalaya, a favorite battle field of various philosophies and strategies for renewable energy markets. The Abode of the Gods and Sadhus will survive it all. The battle field Jogin 6465 m