Indian passengers sit on the railway tracks near the platform of Sealdah train station waiting for the resumption of services during a power failure in Kolkata on July 31, 2012.
Even on a good day, millions of people in India are without access to electricity or deal with power outages on a fairly regular basis. However, the massive power failures that hit the country during the last days of July were striking in how widespread they were.
Breaking Energy asked George Currie, Managing Director for Asia Pacific of Black & Veatch’s management consulting business what could have been done to prevent or mitigate the grid failures.
Currie: Considering the rapid increase in India’s power demand, the fast-track addition of generation capacity, reduction of transmission and distribution losses, and improved financing of the power sector by more timely collection of dues by electric utilities could have had a significant impact in avoiding or mitigating this problem. To address these challenges quickly and efficiently will require the implementation of global expertise and best practices.
India’s economic growth creates challenges for the grid that can be addressed via a better regulated, financed and enforced wholesale supply market. A more efficient market would encourage states or utilities to manage issues before the situation arrives at a critical juncture like this one, where the whole grid goes offline. For example, effective, active pricing of a wholesale supply market could promote better overall grid management because the states or utilities could be priced into introducing smaller, and planned, supply interruptions.
The concept of power exchanges is not new in India and lately states requiring more power can purchase it at merchant power rates, though at significantly higher rates. Unfortunately, the issue is that the penalty mechanism for withdrawing too much power under the current system is not strictly enforced and often states find it cheaper to pay the penalty of drawing more power rather than buying merchant power. In addition, transmission wheeling bottlenecks do not always guarantee that a state will be able to actually receive the merchant power even if they are willing to pay for it.
In your view, what will this mean for the country going forward? Will we see a rush to build additional coal plants?
Currie: India is already in the process of expanding its coal generation capacity but many of these projects are delayed due to a number of complex issues. These include coal and gas fuel supply bottlenecks, delays in permitting to add new generation capacity, project construction delays, difficulties in bankability of power purchase agreement (PPA) structures, and credit issues for state-owned electric utilities as off-takers. As these issues are resolved, it will require strong project management and execution skills to successfully design, build and integrate large coal and gas-fired power plants.
Might we see a spike in diesel consumption to power generators?
Currie: A lot of businesses already rely on backup power generation through diesel generators due to the unreliability of grid supplied power. Until the quantity and quality of utility-supplied power improves, continued growth in power demand is likely to result in increasing diesel consumption by the private sector.