Dr. Satish Kumar’s prognosis for the Indian power sector during the 12th Five-Year Plan is far from optimistic. He says, “I would like to note that given our dependence on coal for generation electrical power, one can expect the demand-supply gap to exacerbate further, and also a significant increase in the cost of electricity.” An exclusive interview by Renu Rajaram.
India’s per capita electricity consumption is likely to increase 2.5 times its current level by 2030. What is your outlook on the growth of the power sector in the 12th Five- Year Plan?
Historically, the demand for electricity in India has far outpaced the addition of new generation capacity. In that respect, we have always been a power-deficit country. Similarly, over the past several five-year plans, the new electrical capacity addition has been only about two-thirds of the new electrical generation capacity that was supposed to come online during that given five-year plan.
The 11th Five-Year Plan (followed) this trend. Against a target of 78,000 MW of new capacity, only around 52,000 MW of new capacity will come online. I do not want to sound too pessimistic, but if one were to go by the track record so far, I do not expect that we will be able to meet the planned capacity addition in the 12th Five-Year Plan.
Speaking of the outlook for this five-year plan, I would like to note that given our dependence on coal for generation electrical power, one can expect the demand-supply gap to exacerbate further, and also a significant increase in the cost of electricity.
What will be the generation capacity addition?
The 12th Plan proposes around 75,000 MW of generation capacity addition. But as mentioned earlier, the achieved generation capacity addition has been historically around twothirds of the planned capacity addition. In terms of achieved generation capacity, one can therefore expect a much lower figure.
What will be contribution of the private sector in the next five years?
The demand-supply gap in India with respect to electricity has been increasing over the years. As on date, the electrical supply meets only around 91 per cent of the demand. While some states such as Gujarat are power surplus, states such as Maharashtra are only able to meet about 75 per cent of their total electrical demand.
With this background, we must look at the capacity addition from two perspectives. Firstly, how much of the new capacity addition will plug the existing deficit, and how much will cater to the new demand? Secondly, how much of this new capacity will be actually operational, given the issues with the supply and price of fuel, particularly coal and gas?
In terms of investment, the private sector will continue to have the larger share of investment in new capacity addition— both in thermal power generation and renewable areas.
What is the anticipated total investment in generation segment in the 12th Plan?
Referring to the new generation capacity proposed during the 12th Five-Year Plan, the amount required for investment in generation segment runs into several billions of rupees.
What steps can the government take to address the concerns of the investors?
Without commenting on the specific steps that can be taken by the government to address the concerns of the investors, we can note that the government should realise that the challenges faced by the power sector will have a significant impact on the economy. These challenges lie not just in generation, but also in transmission, distribution, energy efficiency of appliances and systems, and also environmental impact. Particularly with respect to energy efficiency of appliances and systems, the Star Labelling and Super-efficient Equipment and Appliance Deployment (SEAD) programmes are positive steps, which will encourage innovation and development of new energy efficient products.
Also, the PAT (Perform, Achieve and Trade) mechanism provides a market mechanism by means of which organisations which invest in energy efficiency measures and exceed the specific energy consumption targets set for them, will be rewarded by means of tradable emissions certificates. We need similar programmes for other industries that will help offset the investment risks, and provide market-based incentives (and not mere subsidies) that will encourage investments.
How far are we from providing access to electricity for all households by year 2012 as envisaged under the National Electricity Policy?
The issue of Access to electricity has two aspects to it. First of these is the availability of electricity for each and every household. The second is reliability and quality of power. So far, the focus has been on making sure that electricity network, or connecting to the grid, is provided for each and every household. If the data provided by the government were to be referred, (the Planning Commission notes that over 90 per cent of Indian villages have been electrified) major headway has been made on this aspect.
The real challenge lies in ensuring reliability and quality of power. How useful would electrification be if the village gets power only for, say, a couple of hours a day? And what if there is no fixed time when the village will get the electrical supply?
Moreover, what if the electricity is provided at such a low voltage that most of the equipment, say, a fan or a pump, will not work at all? In this case, the access to electricity will coninue to remain a very big challenge.
How can this goal be achieve by end of the 12th Plan period?
One of the steps that the government can take to overcome this challenge is to develop a network of off-grid rural lighting solutions, ideally using renewable energy. This will involve significantly lower capital investment. Several organisations, including Schneider Electric, have solutions available today to set up such a network.
What are your thoughts on Low Carbon Growth Strategy for sustainable development of power sector?
Let us first try to understand what the 2011 report by the Planning Commission titled ‘Interim Report of Expert Group on Low Carbon Strategies for Inclusive Growth’ has to say about low carbon growth for India. We are among the highest emitters of greenhouse gases (GHGs) in the world today. India’s electricity sector constitutes about 38 per cent of the total GHG emissions generated in India. With more and more coalbased thermal power plants coming on-stream in the future, this share will most likely increase.
Investment in renewable energy and energy efficiency are the logical paths to be followed for sustainable development of the power sector. The Planning Commission has noted that with a determined effort, there can be at least 11 per cent reduction in CO2 emissions resulting from the power sector by the end of the 12th Five-Year Plan. This includes investment in R&D, energy efficiency, reduction in transmission and distribution losses etc.
One of the challenges with projections is that a change in fuel mix in power generation can disrupt the emissions reductions targets significantly. For example, a recent article from the Associated Press noted that in 2012, Japan would have emitted 15 per cent more GHG gases than it did in 1990. It has been well documented that Japan is a leader in adopting energy efficiency and emissions reductions measures.
So what exactly happened in 2012? The answer lies in the March 2011 tsunami and earthquake. Following the Fukushima disaster, Japan has stopped generating electricity from nuclear plants. Nuclear power used to generate around onethird of the total electricity produced in that country. With the shutdown of nuclear plants, a large portion of the electricity will now be generated from coal. One major event in 2011 now threatens Japan’s emissions reductions programme that was running so well for the past couple of decades.
What kind of government initiatives will help companies adopt sustainability in their systems?
The government has a very important role to play in helping more and more companies to adopt sustainability in their system. The government is a stakeholder in sustainability in a variety of incarnations, be it as a regulator, a facilitator, an investor, and very often as a customer. The government has programmes in place to encourage businesses owned by women and the underprivileged sections of the society. The PAT (Perform, Achieve and Trade) mechanism will bring about a significant shift in the energy efficiency market in India.
The government also has policies to encourage SMEs to invest in energy efficiency measures, via financial institutions such as SIDBI. When it comes to reducing the use of water in manufacturing, recycling programmes, tree plantations etc., the government has programmes, rules, and policies in place. The new Companies Bill also makes it mandatory to invest a part of the profits into Corporate Social Responsibility programmes.
When it comes to incorporating sustainability in the business process, and then reporting it, we do have voluntary sustainable reporting programmes such as the Carbon Disclosure Project (CDP) and Global Reporting Initiative (GRI). Both the CDP and GRI have found acceptance from and participation by many leading Indian corporations. However, these organisations form a very small share of the listed and unlisted companies in India. For a larger impact, a mandatory sustainability reporting programme for all organisations beyond a particular size would really help companies adopt sustainability into their systems. The downside is that some might consider this as excessive regulation.
What are the various sustainable initiatives implemented by Schneider Electric?
Following environmentally sustainable practices and giving back to the society are both a part of Schneider Electric’s DNA. Be it our own manufacturing facilities or offices, dealing with our suppliers, or our BIP BOP (Corporate Social Responsibility) programme, we have established measurable, quantifiable metrics that help us evaluate the impact of our efforts. A testimony to our efforts is the fact that Schneider Electric India won the Golden Peacock Award for Corporate Social Responsibility last month.
Speaking of efforts at an individual factory or office level, let me give you the example of our plant in Hyderabad for example. Since it became operational in 2006, this plant has seen a continuous reduction in its specific energy consumption (energy consumed per unit produced). This plant has also adopted several green manufacturing practices, such as recycling of water, reduction in water use, recycling of waste, capture and reuse of SF6 gas etc.
Not only that, the team at this plant is working with the local villagers to declare a 5 km radius around the plant as a ‘plastic free zone’. They have also engaged with the community in the form of awareness campaign, participation in tree plantation drive and distribution notebooks to school children.
No wonder then that this plant won two major awards over the past couple of years, namely the Frost & Sullivan Green Manufacturing Award and the National Energy Conservation Award (instituted by the Bureau of Energy Efficiency).
As one of the largest players in the markets that we operate in, we look at investments in India as an important aspect of our long-term plans here. And at Schneider Electric, we consider investment in people and the society as very important components of our overall investment plans. I am happy to inform that on the people front, we have invested in mentoring, training and skills development programmes for our employees.
In the area of gender diversity, Schneider Electric has made significant progress—women constituted about 9 per cent of the total workforce in 2009; today, 20 per cent of our employees are women. This figure achieves greater significance when we consider that in the last three years, our workforce has doubled to 15,000.
We certainly have made significant investments in our employees. Schneider Electric has the highest number of trained professionals in the energy efficiency area in India. We have the highest number of CMVP (Certified Measurement and Verification Professionals), and BEE Certified Energy Auditors and Managers compared to our peer group.
Similarly, we believe in walking the talk—we are rolling out measures to reduce the energy consumption of our own facilities and getting ISO 50001 certification for our employees.