Power is restored in India, which experienced the worst blackouts in the history of human-generated electricity. An estimated 360 million people lost power on July 30. The next day, over 600 million people were blacked out. With the lights back on, now it’s time to restore the credibility of the sector and the country.
Scores of recommendations have been put forward to prevent this catastrophe in the future. Thermal power producers prescribe ramping up coal-fired power. Clean energy advocates suggest using distributed renewable sources, because coal-generated power causes greenhouse gas emissions and uses a lot of water, which is in short supply. Industry analysts and financial institutions recommend raising electricity prices in line with the underlying fuel costs. Demand to privatize the financially distraught state-owned power distribution companies -- called “discoms” -- is back in the newspaper editorials as well.
These are all valid ideas. Each has a potential to help although they have different degrees of implementation challenges and their impacts would vary. As India rethinks its energy pathway, we need to keep two things in mind.
First, the blackout was the result of at least two things: a lack of grid discipline by discoms, who were drawing more power than they said they would; and a lack of ability by the grid operators to maintain order. As a solution, operators need to be given the technology that allows them to manage the grid in real time and higher interconnection capacity on the power transmission network to manage loads between regions. They also need electricity regulators to set sufficiently high penalties but will have to develop the guts to enforce them.
Second, there is resource scarcity all round. There isn’t enough power in India or enough people who pay up for what they use. Coal is in acute shortage, and water availability is dwindling. Power must be treated like a scarce resource -- conserved and priced according to its value. Neither of those things happens in India as much as they should.
Unlike other goods where discounts are offered for higher consumption, power prices increase as usage rises. That progressive pricing does deter overconsumption, but so would incentives for big consumers to manage (or reduce) demand. Large industrial or commercial consumers 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 exists in the form of 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.
Another solution is to improve India's microgrids, which are local grid 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 have two prime testing grounds in India: wealthy elites and the rural poor.
Most large consumers -- high-end residential complexes, commercial malls, office spaces or industrial clusters -- have two power supply sources: the traditional grid and their mostly diesel-powered back-up generators. Smarter microgrids can help manage demand by automatically switching off non-critical power use 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, which is often the case now. A recent project announced by Echelon Corporation and Grene Robotics’ Skynet for a residential complex in Hyderabad is an example.
Microgrids can also serve people who don't have access to the main power grid. About 400 million people in India are without power or live in energy poverty, according to the International Energy Agency. 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.
Things move slowly in India. Big solutions, such as resolving the financial mess of the discoms and adding more coal or nuclear capacity will take time. Until then, we can't afford to let the grid become further outdated. Work needs to be done at all three levels of the grid -- transmission, distribution and microgrids. Imagine an India ten years from now with even more power demand, and plenty more supply, being carried on today’s unstable grid.
Ashish Sethia leads the Indian operations of Bloomberg New Energy Finance and can be reached on Twitter @asethia or at email@example.com.