State Planning Board & Institute of Social and Economic Change Seminar on 11th Five Year Plan of Karnataka: Perspectives 4-5, May 2007, Vikasa Soudha, Bangalore Power Sector Reforms in Karnataka Shankar Sharma Consultant to Electricity Industry Mysore

Power Sector Reforms in Karnataka Background The state of Karnataka can proudly be considered a pioneer in the development of many areas of Electricity first hydro-electric station in Asia longest high voltage transmission line first to promote the use of electricity in residences and agriculture But since 1973 it has been a sad story of power- cuts

Power Sector Reforms in Karnataka

Load Growth and Generation Potential Generating capacity KW in 1902 to 5489 MW in 2007 (increase of 7600 times) Total power availability has increased to 7,784 MW (increase of about 10,800 times) Per capita consumption – 146 kWH in to about 600 at present Direct encouragement for electricity use in agriculture and domestic use since 1970s

Power Sector Reforms in Karnataka Load Growth and Generation Potential (.. Contd) Since Sharavathy Project in 80s – addition of 4,800 MW of generating capacity and 1,200 MW of Karnataka’s share in Central Sector Power Load growth forecast for Karnataka is expected to be a CAGR figure of about 5%

Power Sector Reforms in Karnataka Load Growth and Generation Potential (.. Contd) What will be the availability of primary energy sources after we run out of our own economically extractable coal reserve (in about 40 years);  Petroleum product import expected to reach 90% of our consumption by 2015 AD - how are we going to ensure energy security? Against assessed hydro potential of 6,602 MW, 3,400 MW has been utilized so far Rest will be difficult to harness due to huge impact on the environment and stiff opposition from the public

Power Sector Reforms in Karnataka Load Growth and Generation Potential (.. Contd) No known reserves of fossil fuels in Karnataka Establishing power stations based on coal, gas or diesel is fraught with uncertainty of fuels Example of Yelahanka and Bidadi Nuclear Power - difficulty in getting adequate supply of Uranium, safety, and stiff public opposition

Power Sector Reforms in Karnataka Load Growth and Generation Potential (.. Contd) So, how are we going to ensure energy security in future?

Power Sector Reforms in Karnataka How efficient is the electricity industry ? About 35% of the cost of supply is not recovered Untargeted and unscientifically based subsidies Inefficiency in usage in all sectors: agriculture, industry& commerce, domestic etc, has resulted in artificial shortages Huge AT&C losses : 35%? Or 40 %? Poor quality of supply; low availability & reliability State has failed to ensure adequate electricity to all by conventional means during the past 60 years Inspite of this the state has progressed reasonably well

Power Sector Reforms in Karnataka How efficient is the electricity industry ? (contd..) Agriculture sector – about 40% energy loss Non-agricultural sector –about 25% energy loss Demand Side Management – 20 % savings possible Huge scope in energy conservation Of the total 1,414,907 IP sets as on only % were metered

Power Sector Reforms in Karnataka How efficient is the electricity industry ? (contd..) Cycle efficiency of coal conversion to electricity is only about 31%, and can be increased to only about 39% Overall efficiency of coal to electricity to end use application – about 10-15% All these will affect the power supply position & economy of the state We should consider suitable alternative to bridge the gap between demand and supply

Power Sector Reforms in Karnataka Inefficient electricity industry - impact on society Gross power availability 7,784 MW; net power availability should be about 7,000 MW; but maximum demand met was 5,811 MW Overall industry efficiency only about 50% Need to plan 50% more capacity than needed Inefficiency in managing the existing capacity is the prime reason for the power cuts each year

Power Sector Reforms in Karnataka Inefficient electricity industry - impact on society (contd..) Authorities planning for coal, or gas or diesel based power stations - state has no known reserve of fossil fuels Planning for more of base load stations where as the deficit is largely during peak hours Simulation study by D. Narasimha Rao, Visiting Faculty, IIM Bangalore Study result - excess base generation capacity by year 2015, and likely thermal PLF of less than 35% Huge burden on the state/ society

Power Sector Reforms in Karnataka Inefficient electricity industry - impact on society (contd..) in terms of purchasing power parity the power tariffs for industry and commerce are among the highest IP sets were supplied about 37% of the total energy almost free of charges Industries (about 25% of total energy) about 14 times that of the IP set consumers Commercial consumers (about 4% of total energy) paid about 3 times that of the domestic consumers, who consumed about 9% of the total energy ( ) Continued power shortages and poor quality of supply

Power Sector Reforms in Karnataka Inefficient electricity industry - impact on society Rs. 4 to 6 Crore/MW needed for additional generating capacity – huge burden on the state finances Other infrastructure areas like poverty alleviation, education and health are suffering due to reduced budget allocation State is known to be incurring more than Rs. 2,000 crores of loss each year Coal Power stations without own reserve - increased emission of GHGs; potential for brown clouds, and acid rains

Power Sector Reforms in Karnataka Inefficient electricity industry - impact on society (contd..) Serious concerns about massive damage to the fragile ecology No objective analysis of the real costs (both direct/indirect) to society and projected benefits Large quantity of fresh water will be required Stress on fresh water resources of Karnataka (already the second driest state)

Power Sector Reforms in Karnataka Inefficient electricity industry - impact on society (contd..) Stern Review – ‘Economics of Climate Change’ AND IPCC 4 th Assessment Report 24% of all GHG emissions from power sector in Y % of CO 2 from fossil fuel burning in power stations India may suffer economic costs of about 20 % of its future GDP Mitigation now at a cost of about 1% of present GDP More delay in addressing the Global Warming, the higher cost of mitigation in future

Power Sector Reforms in Karnataka Inefficient electricity industry - impact on society (contd..) “Emissions have been, and continue to be driven, by economic growth; yet stabilization of greenhouse-gas concentrations in the atmosphere is feasible and consistent with continued growth.” “Emissions from deforestation are very significant – they are estimated to represent more than 18% of global emissions” “Curbing deforestation is a highly cost-effective way of reducing greenhouse gas emissions.” Hydro power stations with high negative impact but low benefits, like Gundia in Hassan district, are being planned; Bio-diversity rich Western Ghats have already lost huge areas of thick forests

Power Sector Reforms in Karnataka Inefficient electricity industry - impact on society (contd..) Huge social impact due to rehabilitation problems; some estimates indicate - since 1947 excess of 20 million people have been displaced Free power or very low tariff power to agricultural sector - fast depletion of surface and ground water mushrooming up of a large number of diesel pump sets for agricultural/commercial uses - highly inefficient What our society is doing at present is to supply inefficiently derived energy from limited conventional sources at subsidized rates for highly inefficient and /wasteful end uses, for which the real subsidy cost will be passed on to future generations.

Power Sector Reforms in Karnataka The Questions Even with all the proposed power plants (One UMPP, Nandikur, mega ONGC gas plant at Mangalore, five Coal plants in plains, Bidadi, Gundiya, Bedthi, Aghanshini, Mekedaatu etc.) will all our demand be met? As economists say pouring huge money into these projects will be akin to a bucket with a big hole without efficiency improvement in the whole industry. Where / when do we stop ? But the devastation to general environment, sensitive ecology, people’s displacement, fast depletion of resources is certain. Is such a situation in the interest of the society?

Power Sector Reforms in Karnataka Road ahead Emphasis on all-round efficiency improvement and energy conservation Effective Demand Side Management (DSM) Heavy use of new & renewable energy sources Integrated Resource Management Planning with a holistic approach to the society’s overall needs Strict adherence to commercial viability of every project, when viewed with objective analysis of various societal costs All-round innovativeness, accountability and professionalism Suitable regulatory measures, tariff policies and effective public participation Adoption of international best practices

Power Sector Reforms in Karnataka Road ahead (Contd…) Planning Commission (integrated energy policy document): “India’s conventional energy reserves are limited and we must develop all available and economic alternatives. … Clearly over the next 25 years energy efficiency and conservation are the most important virtual energy supply sources that India possesses.” Planning Commission also estimates that CO 2 generated from energy use can be reduced by 35% through effective deployment of efficiency, DSM measures and renewable. Planning Commission’s main action recommendation for energy security is: “relentlessly pursue energy efficiency and energy conservation as the most important virtual source of domestic energy”.

Power Sector Reforms in Karnataka Road ahead (Contd…) Bureau of Energy Efficiency has estimated : at the prevailing cost of additional energy generation, it costs a unit of energy about one fourth the cost to save than to produce it with new capacity. Demand Side Management (DSM) : use of energy efficient CFLs instead of inefficient incandescent lamps - quickest, surest, and cheapest way of reducing the peak demand and also the annual energy consumption.

Power Sector Reforms in Karnataka Road ahead (Contd…) Reduction of 10% in peak load of a system can result in saving additional network system cost by more than 10%. Can avoid future need for peak load stations like Varahi project and any need for pumped storage plant Planning Commission - cost effective savings potential at least 10% of the total generation through DSM Effective energy audit of all major consumers

Power Sector Reforms in Karnataka Road ahead (Contd…)

Power Sector Reforms in Karnataka Road ahead (Contd…) Industries in Bangalore and across the state should try and diversify the peak load hours Better design of buildings and street lighting systems Wasteful and unnecessary illumination of commercial buildings, and night time sports Compulsory use of photo sensitive switches in all street lighting systems

Power Sector Reforms in Karnataka Road ahead (Contd…) New & renewable energy sources European Union has a plan to meet 20% of all its energy needs by 2020 AD through N&RES Israel is reported to be targeting 50% Greenpeace has come up with plans to meet 100% & 50% of energy needs of New Zealand and India There are many time tested and techno-economically viable Karnataka has a huge potential

Power Sector Reforms in Karnataka Road ahead (Contd…) New & renewable energy sources

Power Sector Reforms in Karnataka Road ahead (Contd…) New & renewable energy sources Concerns: Two most common issues raised in case of new and renewable energy sources - they are not firm power and that their comparable cost with conventional energy sources is high Reality: Many applications do not require 24 hours supply – can be backed up by battery banks Cost from the conventional energy sources is increasing while that of N&RSE are decreasing. Cost of conventional energy sources is unreal – many hidden costs and subsidies

Power Sector Reforms in Karnataka Integrated resource management approach for sustainable development Integrated Resource Management and a holistic approach to the needs of the society - essential for ensuring energy security on a sustainable basis End consumers not concerned -whether it is grid electricity or not They seek quality and reliable energy at affordable price Many credible ways of achieving this

Power Sector Reforms in Karnataka

Features of the IRM Model: Annual Compounded Growth Rate (ACGR) of 5% Renewable energy sources in this model - assumed to be distributed energy sources Hence the corresponding benefits - viewed as reducing the net demand on the electricity grid Peak hour demand of state Grid - reduced from about 8,000 MW in FY 2011/12 to less than 5,500 MW by effectively deploying various alternatives Annual energy requirement - reduced from about 47,000 MU in FY 2011/12 to about 35,000 MU

Power Sector Reforms in Karnataka Features of the IRM Model: Since annual energy availability is more than 36,000 MU there should be no energy gap either Without having to invest huge sums on fossil fuel or dam based power stations, the projected demand by 2011/12 can be met Huge benefits can accrue to the society by adopting a holistic approach Model has not taken into account the additional generation capacity (Bellary TPS (2*500 MW), Raichur TPS (unit 8, 9 &10), and Karnataka’s share in central sector projects like Kaiga Nuclear project (Unit 3 & 4), Kundankulam Nuclear project (2 * 1000 MW) etc.) There can be considerable surplus with this approach

Power Sector Reforms in Karnataka Features of the IRM Model: Of 5,300 MW of potential benefits about 2,500 MW can be obtained by efficiency improvement, energy conservation and DSM measures in the existing infrastructure As per BEE it requires about Rs. 2,800 crores for saving power equivalent of 2,500 MW Additional generating capacity of 2,500 MW by conventional technology – costs about Rs.11, 250 Crores Benefit of 5,300 MW equivalent - about Rs. 13,374 Crores Stark contrast to the direct cost - about Rs. 24,000 Crores Conceivable luxury of decommissioning of old RTPS and Kaiga !!!

Power Sector Reforms in Karnataka Features of the IRM Model: Taking social & environmental costs into account – effective savings to society will be huge Measures are sustainable No other viable alternative but to adopt such integrated resource management approach

Power Sector Reforms in Karnataka Future options in electricity generation Fossil Fuel Technology – can we have investment outside Hydro Power – are joint ventures outside possible Nuclear Power - ???????? Can these sources be sustainable, environmentally friendly, adequately safe and at acceptable societal costs ???

Power Sector Reforms in Karnataka Organisational framework & human resources for the future Additional mandate for electricity supply companies Performance yardsticks for the electricity companies Need for Professional management State level co-ordination committee Energy Service Companies Effective Public participation towards inclusive growth Recommendations Conclusions

Power Sector Reforms in Karnataka Conclusions Social, economic and environmental issues need a holistic and serious approach There cannot be energy security without overall industry efficiency Addition of fossil fuel / dam based power stations should be last priorities Paradigm shift for industry outlook is needed

Power Sector Reforms in Karnataka Conclusions Indian civilization had attained great heights of human development centuries ago without electricity. Can it sustain tolerable quality of life without a good environment???

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