A three-pronged approach to reforming India's power grid

This past summer, India suffered electrical blackouts unprecedented in history. On 30 July, an initial blackout affected 360 million people. A day later, 600 million people--half of the population of the world's second-most-populous country--were left reeling in the dark. Considering that according to the International Energy Agency, India still has 400 million people without access to reliable electricity, the vast majority of electrified India suddenly found itself cast back centuries.

At the centre of this mess is India's fragile and ageing power grid. It is managed both by a small number of large power transmission companies, and over 75 power distribution companies--most of which are owned by state government. Called the "discoms", this group of firms have been notably mismanaged, and indeed, the companies had US$46 billion of accumulated losses at the end of financial year ending March 2012. Recently, the Indian Cabinet approved a US$35 billion debt restructuring exercise for the discoms, for the second time in less than a decade.

To revamp the Indian grid, the backbone of any power sector, a three-pronged approach is needed.

First, the transmission network needs strengthening. July's blackouts were a result of at least two major factors. The discoms lacked "grid discipline" and were drawing more power than they had agreed to, and the grid operators were unable to maintain system order. At the same time, the five regional grids lack interconnection capacity, which would have allowed regions with surplus to make up shortfalls elsewhere.

India's first grid solution is within the transmission grid itself. Operators need to be given the new systems, which would allow real-time grid management. Indeed, a proposal for putting synchrophasors across the grid has been approved recently and supervisory control and data acquisition (SCADA) systems are slowly being upgraded. At the same time, electrical regulators can institute their own financial systems of sufficiently high penalties for underperformance, and also have the guts to enforce those penalties. Higher interconnection capacity between the regional grids is also essential. Greater interconnection will allow the country to manage more loads, reduce the probability of blackouts, and also accelerate the penetration of renewable energy resources.

The second grid solution comes from managing losses and managing demand at the distribution level. The power distribution grid has suffered for years with little investments in upgrades, leading to high losses between the power plants which generate electricity and the end consumers who use it. The government is currently implementing a US$9 billion plan called the "Restructured Accelerated Power Developments Reforms Programme" to tackle this issue. The programme is progressing slower than its set goals, but it is imperative that the government keeps on pushing on this front.

At the same time, large industrial or commercial consumers obtaining power from the distribution grid can get incrementally better at targeting their peak power usage if prices vary with the time of day. The technology that can measure and manage this flexible power usage already exists: Smart meters, communication networks and display devices. It has been deployed and tested in India and will scale up automatically across the country if state electricity regulators set clear incentives. Consumers will be happier managing their demand during peak and non-peak periods than facing a government diktat shutting their supply every day.

India's third approach to resolving grid distress is to facilitate microgrids. Microgrids are local networks that serve no more than a few megawatts with a dedicated power generation source and loads that are also connected to the larger distribution network. Microgrids already have two testbeds at either end of the demographic pyramid: Wealthy elites and the rural poor.

Most large consumers, such as high-end residential complexes, commercial malls, office spaces or industrial clusters, have two power supply sources: The traditional grid and their mostly diesel-powered backup generators. Smarter microgrids can help manage demand by automatically switching off non-critical power draws during outages, which is when diesel generators are most expensive. They also allows individuals within the system to share generating capacity and pay prices proportional to their usage rather than relying on a fixed per-user fee as is the usual case today. A recent project announced by Echelon Corporation and Grene Robotics' Skynet for a residential complex in Hyderabad is an example.

Microgrids can also serve the 400 million people in India without access to the main power grid. Young entrepreneurs running companies like Husk Power Systems, which uses biomass, and Mera Gao Power, which deploys solar power, are already employing these microgrids to alleviate the problem.

While the government focuses on big ticket solutions such as resolving the financial mess of the discoms, and adding more coal and nuclear power to the system, it should maintain focus on the grid. We cannot afford to let the grid become further outdated. Work needs to be done at transmission, distribution and microgrid levels. Imagine India's energy system in 2020, which has much higher demand, an increased penetration of renewable energy, and costlier coal-fired power… all being carried through today's unstable grid. That would be a disaster in the making.

BY: Ashish Sethia, Bloomberg New Energy Finance