In an excellent example of crowd-sourcing, the website “Power cuts in India”, launched this summer, invited people to tweet or text information on power cuts in their neighbourhoods. Messages poured in by the hundreds. The site also provided links to newspaper reports on power disruptions and load shedding in different corners of the country. When the seemingly isolated pieces of information were put together, the big picture was clear. India faced an unprecedented and grim situation on the ‘power’ front — one that threatened to bring the country to a standstill.
It is painfully evident that the problem is neither a temporary one nor confined to one part of the country. The malady is pan-Indian and threatens to torment us for a long time.
Given a GDP elasticity factor (amount of electricity required to power 1 percent GDP growth) of 1, we need to ensure an increase of 10 percent in power generation every year. If we need to wipe out existing deficit and bring into the fold about 400 million people who do not have access to power, the target should be much higher. We need an additional 30000 MW every year.
At least, 70 percent of this increase must come from base-load plants that can produce predictable, schedulable electricity round-the-clock and in all seasons. All the rhetoric of adding large doses of clean wind and solar energy can help us feel righteous and green, but these will not serve the immediate purpose, with their characteristics of seasonality, intermittency and unpredictability.
60 percent of our power need is met by coal-based plants, and we continue to place our faith on coal to meet our future requirement. This, we are slowly realising, can be a flawed approach. Large coal plants take many years to come up, if at all. We have not been able to ramp up domestic coal production to meet the growing demand. Relying on imported coal means competing with China for the same sources in Indonesia, Australia and South Africa and paying a high price too. Also, putting all our eggs in the coal basket will lead to serious consequences on the environmental front. The world will hold us accountable for the carbon emission. So we desperately need a second option to help reduce our dependence on coal.
Capacity addition in the form of nuclear plants is desirable, but looks improbable. If an almost-ready is stalled at the last mile, investments in other planned projects may be viewed as fraught with unacceptable risk. Besides, even if we overcome the hurdles and begin work soon, we won’t reap the benefit of power supply for many years.
With limited potential of perennial hydro projects (unlike China), we are left, through a process of elimination, only with the option of gas-based generation. Again, three possibilities present themselves. One, domestic gas sources such as KG-Basin; two, cross-country pipelines; and three, importing liquefied natural gas (LNG) through large tankers and re-gasifying them at LNG terminals.
Domestic supplies from KG Basin have not lived up to promise, and the output right now is less than 50 percent of expected quantity. Even if we manage to step up our exploration and to sort out the technical problems on existing wells, we may have to wait for 3-4 years for things to brighten.
Cross-country pipelines originating in Iran (IPI) and Turkmenistan (TAPI) can help us gain access to large Iranian and Central Asian gas reserves. As these will pass through Pakistan with whom our ‘trust deficit’ has not shrunk to desired levels, the initiatives have not taken off. But the TAPI project can proceed, if Turkmenistan insists on guarantees from Afghanistan and Pakistan to allow delivery of gas to India (or risk losing their share of supplies as well). India could further hedge its risks by negotiating for a back-ended, ‘pay against delivery’ mechanism. It would be in Pakistan’s interest too to accept such an arrangement, as they stand to earn substantial ‘transit fee’ to subsidise their capital costs.
The most promising solution — and one within our control — will be LNG. Though the landed cost at today’s price is $12-14/MMBTU (the corresponding cost of power generated in Rs 7-8/kwh), we must place our bets on this fuel. With huge gas finds in the Americas and in other parts of the world, there is growing optimism that global supplies will be plentiful and that the price of natural gas will cool off in the medium term. Our implementation trajectory must be such that we intersect the future at that golden point.
A concomitant development has been the remarkable progress in LNG transportation. Large LNG carriers ply the oceans and many more are being built. Floating storage vessels have also opened up more options.
If tackled on war-footing and if siting issues are quickly handled, the entire infrastructure of additional LNG terminals, hook-up with the national gas grid, fleet of LNG tankers, and gas-based power plants can be put together in 2-3 years.
Gas, apart from enabling large centralised power plants, will also make it possible to set up distributed, smaller power plants within or outside cities and towns. Every large industry and large commercial building can have its own captive power. This will minimise the need to expand the transmission network, with its associated losses. This will also enable the use of waste heat, improving overall efficiency and reducing the carbon footprint. Gas-based plants offer more flexibility and can be used as peaking plants too.
We can thus target 30,000 MW of additional capacity within three years, using natural gas.
Obviously, we can’t make headway if we don’t abandon our limiting mindset which treats cost of coal-based power as the eternal benchmark, to the detriment of other fuel types. Looking at the multiplier effect on economic growth and given its indispensable role in enhancing the nation’s vitality and security, we need to be prepared to pay a higher price for gas-based electricity. For, this can well be the magic potion we desperately need.