How a centralised energy system failed in the developing world - case study, India
By Nishtha Singh
India is the world's third-largest emitter of greenhouse gases GHG and as part of the Paris Agreement, India’s Nationally Determined Contribution (NDC) is to decrease GHG intensity of GDP by 33% as compared to 2005 levels and install 40% renewable capacity by 2030. The energy sector has a more significant influence on emissions than any other sector in India. In 2014, the energy sector accounted for 68.7% of the emissions in India, out of which 49% were related to electricity and heating. India’s grid electricity is predominantly dependent on coal power plants which provide for 70% of India’s grid electricity.
There is no one-size-fits-all solution that could be used to mitigate carbon emissions globally and identifying solutions after studying local socio-economic conditions could lead to carbon emissions mitigation along with solving related local problems. Emissions reduction solutions should consider both social benefits for the community and private benefits for households. Decentralised energy systems are viewed as the key towards a more sustainable electricity generation system. As well as emission reductions, , there are multiple social benefits that come with green technologies. Let’s examine how a centralised electricity system affects an Indian state, Uttar Pradesh, by considering the state of the local energy sector. Ballia’s energy sector can be studied through the framework of the energy trilemma, which says that energy should be secure, sustainable, and affordable.
Energy Trilemma - Performance of Uttar Pradesh, India
Energy Sustainability
India’s electricity grid has one of the highest emission intensities in the world since it uses cheap and polluting coal in old and inefficient coal power plants, causing higher emissions per kWh of electricity produced.
There are five key emissions associated with coal power plants – Greenhouse Gases (GHG), PM 2.5, Sulphur dioxide (SO2), Mercury (Hg) and Nitrogen Oxide (NOx). Coal combustion results in these emissions because of the fundamental composition of coal and the complex reactions that happen during the combustion. Coal power plants contribute to almost 100% of mercury (Hg) emissions in India. Absence of SO2 and NOx control until 2015 in India along with the high content of mercury in Indian coal makes Indian coal power plants the largest contributor towards global coal combustion health impacts. Even after regulation, as of 2018, no significant improvements have been recorded in emissions reductions from the coal power plants.
Consequently, India is dealing with the worst pollution in the world and Indian coal power plants have a significant role to play in it. This results in substantial health impacts for this densely populated country. Particulate matter pollution causes a loss of 8.8 million disability-adjusted life years (DALY). SO2 and NOx cause 6.1 MDALY per year and 1.7MDALY per year, respectively. The impact of mercury could not be calculated with certainty as there is a way through which it enters the food chain. Mercury emitted into the air eventually settles into water or onto land where it can be washed into water. Once deposited, certain microorganisms can change it into methylmercury, a highly toxic form that builds up in fish, shellfish and animals that eat fish. Most human exposure to mercury is from eating fish and shellfish contaminated with methylmercury.
Impact of coal power plants on human civilization (Oberschelp et al., 2019).
Area under the rectangle represents health impact intensity per coal power plant per region (Oberschelp et al., 2019)
Energy equity and Energy security
In India, energy security and energy equity are closely linked. Energy equity comprises energy affordability and energy accessibility to all. The Indian government focuses on affordability by providing subsidies on electricity. The cost for the utilities/distribution companies to purchase power is 22% lower than the rate at which electricity is provided to the households and farmers in the fiscal year 2016.
Comparison between electricity tariff and cost of producing per unit of electricity in India (Zhang, 2019)
In terms of performance on accessibility, the Indian government has connected 130 million people to the grid since 2013 and claims that it has been successful in getting 100% electrification in the country. 100% electrification means that each household is connected to the national grid. However, only 85% of the population in India have electricity access. Also, the people connected to the grid do not necessarily get electricity supply. This is primarily due to the bad financial condition of India's distribution companies. As of 2018, transmission and distribution (T&D) losses in India were approximately 19.93%. This means that 1 in 5 units produced did not generate any revenue. The majority of T&D loss could be attributed to electricity theft. Rampant electricity theft and billing irregularities lead to an implicit subsidy. Many of the subsidies that the distribution companies provide remain unpaid by the government. This leads to the poor financial performance of the distribution companies who are therefore unable to invest in better infrastructure and increase their production capacity. Consequently, there are limited incentives for distribution companies to invest in areas with a low annual income population. This is seen particularly in rural areas, where it is expensive to provide electricity. For instance, night-time satellite images for 2013, in India, show that areas close to newly electrified villages suffered worse power outages when they were connected to the grid. When the government connects low paying consumers to the grid, the utility distribution companies have fewer means and no intent to invest in upgrading and maintaining the infrastructure to provide service.
Electricity theft in Uttar Pradesh
According to a World Bank report, India loses 1.5% of its GDP due to electricity theft. India is a developing and democratic country. It has a corrupt bureaucracy which enables electricity theft. Given the scale of theft in India and difficulty in identifying individual offenders, it is easy to steal electricity in India, which eventually proves beneficial to households and businesses. However, power theft has wider implications for the country. It leads to government revenue loss and financial losses for distribution utility companies. This stresses their already inadequate financial resources and leads to power shortages while putting legitimate businesses and households in a disadvantageous position. Consequently, due to supply-demand mismatch, businesses either bribe the officials to divert electricity supply to their location or switch away from the national grid and start using diesel generators. If the businesses that were paying for the electricity switch away from the grid to domestic, independent power generation, utility companies face further losses. However, businesses bribing the politicians results in low political will to combat theft.
There are two dominant ways of electricity theft - meter fraud and unmetered use.
Metered fraud – Due to largely corrupt bureaucracy, it is easy to bribe the official who visits to audit a household and sanction the load capacity. This results in businesses and households paying less than what they should. Many times, employees of the utility companies manipulate meter reading for a bribe.
Unmetered use of electricity – In urban areas, apartments could be unmetered as there is a single meter connection in multifamily dwellings. In rural areas, unmetered theft is more rampant. It is expensive for utility companies to install a meter in every household in rural areas and even more costly to monitor and collect the bills at the end of the month. Therefore, agriculture accounts for the major share in theft. India’s agriculture sector is now blamed for the bad state of India’s power sector.
In Uttar Pradesh, theft increases in the months just before the elections. In the areas where electricity theft is highest, the incumbent members of the state assembly are most likely to be elected back to power. Although theft is primarily due to unmetered agricultural use of electricity as theft is the highest in the agriculturally intense localities, residential power theft is also considerable but not as damaging.
Decentralised Energy Systems
Decentralised energy systems, like microgrids, could solve the energy security, sustainability, and equity problem in India. Microgrids are defined as a small network of electricity users with a local source of supply that is usually attached to a centralized national grid but is able to function independently. India is home to an abundant solar energy source and therefore has the potential to transform its energy sector.
Uttar Pradesh is one of the poorest states in India. The state performs worse than the rest of India in terms of elimination of poverty, inequality, and illiteracy. This makes it a fertile ground for electricity theft. Research suggests that one of the reasons that electricity theft exists is because the incumbent politicians benefit from it. By permitting theft, they manipulate the electorate before elections and collect bribes in the process. Investing in a microgrid project would lead to the politicians losing control over electricity distribution. Electricity theft has been a problem in India for decades. Privatisation of the distribution companies could have solved this problem, but the government did not initiate it. This could be because privatization eventually leads to an increase in electricity tariff. Also, privatisation is seen as a political risk. However, another reason could be that the government does not want to lose control over a basic public good, which affects the decisions taken by the electorate. If the government intends to provide basic energy security to people along with tackling air pollution, carbon emissions, and ailing health of the distribution companies, decentralising the energy system is the answer.
