Energy Policies for Sustainable Development

Rangan Banerjee Forbes Marshall Chair Professor

Department of Energy Science and Engineering IIT Bombay

Talk at VJTI, Mumbai, January 1, 2015

What is an energy policy?

2

What is a policy?

A policy is a principle or protocol to guide decisions and achieve rational outcomes(Wiki)

3

4

What are the policies related to engineering / science education?

Engineering policies

Regulated/Market

Admissions –Intake

Accredition

Examinations/ Attendance

Pricing- Fees

IP

Research

Promotions/ Salaries

5

Classification of policy Instruments

Regulating instruments

Rationing – emission quotas, mandatory technology

Performance standards, benchmarks

Implied Deregulation-

Emission Permit Trading, Green Certificates

Voluntary Agreements

Fiscal and Financial Instruments- Taxes, subsidies or grants

Supportive Actions

Improvement knowledge, market transparency

Dissemination

Reduce Transaction costs

6

Perrels, IPCC, 2001

Impact of Policy Instruments

7

Perrels, IPCC, 2001

Deciding Energy Policies

Scope

IIT Campus

Powai

Mumbai

Maharashtra

India

Elements

Decide Goals

List out Policy instruments

List out challenges

Existing Institutions and roles

Time Horizon

Analytical framework

8

India -Policy Documents

Five Year Plans

Integrated Energy Policy, 2008

National Action Plan on Climate Change – JNNSM and NMEEE

Electricity Regulation Commission Act 1998

Electricity Act 2003

UMPP 2005

Rural Electrification Policy 2006

9

Energy Policies

Building Codes

Standards and Labelling

Preferential Tariffs

Subsidies, Soft Loans

Carbon Tax

Renewable Energy Certificates, CERs, Certificates and Trading

10

What is sustainable Development?

11

Development that meets the needs of the present without compromising the ability of future generations to meet their own needs. Brundtlant Report WCED 1987 Development without cheating our children

Stages of Technology Development

12

Consumer/ Producer Surplus

Source: Kolstad, 1999

14

Human Development Index

Life expectancy at birth

Education – adult literacy, enrolment

Real GDP per capita (purchasing power

parity)

Index = (Actual – Min)/(Max-Min)

HDI = Average of above indices

HDI and Electricity use

15

Source: Pasternak, 2000

HDI vs Primary Energy supply

16 Source: Steinberger, Roberts, 2009

HDI vs Per capita Carbon emissions

17 Source: Steinberger, Roberts, 2009

Energy consumption vs HDI

18 Dias et al, 2006

2013 HDI calculation

19

Technical notes Human Development Report 2013

Impact of Subsidy

20

Source: UNEP, 2008

21

Soonee et al, 2010

22

Soonee et al, 2010

REC Mechanism

23 Soonee et al, 2010

JNNSM Steps

24

25

Source: CEEW, NRDC, 2012

Phase 1 – Successful bids

26

Source: Prayas report, 2012

Phase 1 – Successful bids

27

Source: Prayas report, 2012

NVVN

28

Source: CEEW, NRDC, 2012

JNNSM by Source

29

Source: CEEW, NRDC, 2012

30 Source: PAT consultation Document, 2011

GEA, Chapter 2

31

Global Poverty

GEA, Chapter 2

32

Historical Household Electrification Rates

GEA, Chapter 19

33

Electrification Of States

34 Greenpeace Report, 2008

Mechanical Power Ladder

GEA, Chapter 19

35

Average Household Energy Use - India

GEA, Chapter 19

36

Energy and Equity

37 Source: GEA, 2012

Residential Electricity Gini (Select countries)

38 Source: Jacobsen, Energy Policy , 2005

Electricity Lorenz Curves India

Urban

Year Rural

GINI Urban

GINI 1999 0.60 0.45

2009 0.43 0.27

2011 0.36 0.23

39

Source: K.Mehta 2014

DSM: Financing through Utility Bill

40 Source: BESCOM, 2006

41 Source: BEE web site

Bachat lamp yojana

Dependence on the carbon market ($12/ tonne initial CER price – reduced to 5$/ tonne)

Payments to CFL manufacturers and/or utilities take 3-4 years

Kerala, Andhra Pradesh, Karnataka, Punjab and Delhi

Target 400 million bulbs

Actual about 25 million bulbs

Lack of investors

42

Lorentz Curve - Inequality

43

A B

44

Decentralized

Renewable

Energy: Biomass

and Small Hydro

Solar Home

Systems

Solar Lanterns Energy-Efficient

Cookstoves

Potential Market

/yr

Rs 94.06 billion Rs 1.26 billion Rs 855 million Rs 1.11 billion

Avg Price

IRs 8 to 13 /kWh

(B)

INR 2 to 2.5 /kWh

(H)

Rs 7,000 - 20,000 Rs500 -1,600 Rs 150 -1,100

Competitive

Advantage

operational

reliability , low

upfront cost.

Customised

solution.

Kerosene

replacement

Reduced fuel

costs; health

benefits

Business Model

B: Company-

owned minigrids;

electricity priced to

existing fuel

expenditure levels.

H:using existing

grid infrastructure;

paid at

government-

tariffs.

Sold on credit, in

partnership with

local banks. Users

typically pay 10 to

25 percent upfront

and the rest in

installments.

Bulk sales to

corporate, NGO,

and (MFI)

partners; sold

directly to

consumers

through local

retailers.

Sold through

multiproducts rural

distributors and

retailers;

partnerships with

MFIs and NGOs.

Source:IFMR- WRI, 2010

Lonarwadi

Dissoli

Rajmachi

Maharashtra

INDIA

Affordable Access

45

5 kWp Solar PV power plant at Rajmachi Village, Maharashtra

No. of house holds: 29 Connected load : 1.4 kW

46

Measurements

0

200

400

600

800

1000

1200

0:00 2:24 4:48 7:12 9:36 12:00 14:24 16:48 19:12 21:36 0:00

Time (hrs)

Pow

er(

Watt

s)

and V

oltage (

Volts)

VOLTAGE POWER

47

Name of the

plant

Connecte

d

Load

(kW)

Plant

Capacity

Distribution loss

(%)

Plant capacity

factor (%)

Energy cost

Rs / kWh

Existing Designe

d Existing

Designe

d Existing

Designe

d Existing Designed

Solar PV,

Rajmachi 1.4 5 kWp 4 kWp 4.6 0.5 8.3 11.5 32 25

Biomass

gasifier,

Dissoli

6.9 10 kW 10 kW 12.3 2.0 8.8 12 29-37 21-25

Biomass

gasifier,

Lonarwadi

10.7 20 kW 10 kW 14.6 2.7 5.6 14 43-54 16-25

Integrated design-Summary

48

Issues- Low plant capacity factor

Name of the plant

PV Capacity ( kWp)

Inverter capacity

(kVA)

Charge controller

(kW)

Battery capacity

(Ah)

Battery Voltage (Volts)

Distribution Voltage (Volts)

Connected Load (kW)

Plant Capacity

factor (%)

Dound II, Chattisgargh

1 1.5 2 400 48 230 0.3 5.8

Latdadar, Chattisgargh

2 3 3 500 48 230 0.7 7.1

Chatal,Chattisgargh 3 5 5 800 48 230 0.7 4.4

Gudagarh, Chattisgargh

4 5 5 800 48 230 1.2 6.3

Rajmachi, Maharashtra

5 7.5 5 800 120 230 1.4 8.2

Sura, Udaipur, Rajasthan

17.25 15 20 1200 120 230 5.0 7.3

Nurda village, Jharkhand

28 20 25 1200 120 230 9.5 8.5

Anandgarh, Bikaner, Rajasthan.

34.5 2*15 2*20 2*1200 120 230 10 7.5

49

Financing Basics: Risks and Returns

50

Financing Sources

Debt – acquisition of funds by borrowing – corporate or project loans, leasing arrangement

Equity – selling shares for raising capital

Grants and Guarantees

51

Risk- Return Profile

52

Risks

Credit Risk – Creditworthiness

Construction and Development Risk

Operating/Commercial Risk

Political Risk

Financial Risk

Regulatory/Legal Risk

Environmental Risk

Force Majeure

53

54

Financing Instruments

55

Funding Sources and Stages

56

Renewable Energy Investors

57

Source: Nelson et al, 2012

Cost Of Finance – India and US

58

Source: Nelson et al, 2012

Returns on Debt and Equity

59

Source: Nelson et al, 2012

Impact of Debt and Equity

60 Source: Nelson et al, 2012

Selco Case study For profit company – Solar Home

systems – started 1996 – sold about 100,000 SHS

90% of products – credit schemes

Partnership with 9 banks – interest rates between 12-17%

Financing Institutions pay 85% of the amount- monthly payments of Rs 300- 400 over a period of 5 years

Financing/ repayment options – tailormade to end users – paddy farmers – repayment schedule based on crop cycle, street vendors – daily payments – Rs 10

Funding from REEP – meet margin amount for poor customers, reduce interest rate 61

Source: SELCO, 2011

DESI Power

Biomass based power solutions – Bihar- 25 kW to 100 kW Local distributors – decide pricing Registered under CDM and sold CERs to Swiss buyer MNRE funds, Promoters Equity, ICICI Loan Monthly rate based on no of bulbs / loads, Circuit breaker to

limit consumption Irrigation pump users Rs 50/ hour, Household Rs 120- 150 per

month Underground trunk wiring-distribution Enabling micro-enterprises –battery charging station, flour

mill, workshop etc Tie up with Telecom towers – increasing capacity factor

62

Husk Power

Initial funding – prize money 30-100 kW – biomass gasifiers- based on rice

husk Energy audit of households Focus on household demand for lighting Lower production, operating costs – use of

bamboo, asbestos Overhead pole wiring Directly reach end user

63

Level Playing Field – “Externalities”

Energy Systems – Centralised (large grids)

Market distortions, “Hidden” Subsidies for fossil energy

Quantification of Environmental Costs – “Externalities”

Incorporate in Decision Making

Decision Types / Perspectives

System selection Yes/No Best possible amongst options

System / Component Design

Decide Operating Strategy

Decide Policies

End Users

Manufacturers

Utility

Society / Government

Others

Typical Energy Decisions

World- International agreements – GHG, CFC

Nation- Energy policy, pricing, technology development

State – Taxes/Incentives, fund allocation to districts

District – Fund Allocation to blocks, Mouza electrification, Industrial devpt., Coal – elect., fuel / ration shops Sanctions.

Block– Fund Allocation to GPs, Kerosene allocation, industry promotion, marketing support.

Gram Panchayat – Agriculture / irrigation schemes, Co-op industry, request for fuel/ration shop, electricity.

Household – Fuel choice, Device choice.

Energy decisions for district

officials

District Magistrate

Ratifying departmental decisions

Zilla Parishad Sabadhipati

Sanctioning/selecting schemes

Manager, DIC

Sanctioning industries, biogas plant,

Priority list of industries.

DE,WBSEB/Addnl CE(Rural

Elec)

Mouza electrification

Controller food,civil supplies

Distribution of kerosene, coal.

Lead Bank Officer

Preparation of District credit plan

District forest Officer

(DFO, working plan)

Managing forest area

District Planning Officer

Prepares district plan

60

SECONDARY

DATA

REMOTE SENSED

DATA

PRIMARY DATA

DIGITISED MAPS

D A T A B A S E

Identify

indicators/variables

affecting energy

Trends in indicators

ENERGY DSS

SUPPLY

MODULE

DEMAND

MODULE

FUTURE ENERGY

DEMANDS BY

SECTOR /END USE

FEASIBLE ENERGY

SUPPLY SCENARIOS

IMPACT ASSESSMENT /

EVALUATION

DEVELOPMENT

PROFILE

DSS FRAMEWORK

Policy Instruments

Direct Subsidies – Investment subsidies, production subsidies

Taxes/ Duties/ Fiscal Incentives

Legislation

Standards and Labelling

R & D funding/ Demonstrations

Removal of market barriers/ entry barriers

Emissions trading

References

Rockstrom et al, Nature, 2009

GEA, 2012 Chapter 3 & 19 : Global Energy Assessment - Toward a Sustainable Future, Cambridge University Press, Cambridge, UK and New York, NY, USA and the International Institute for Applied Systems Analysis, Laxenburg, Austria.

BEE web site: Bureau of Energy Efficiency (BEE), Government of India, Ministry of Power, New Delhi, http://www.beeindia.in/

Bloomberg, 2014: GLOBAL TRENDS IN RENEWABLE ENERGY INVESTMENT 2014, UNEP and Bloomberg New Energy Finance.

Brundtlant Report WCED 1987

http://cdiac.ornl.gov/trends/co2/graphics/lawdome.gif

http://www.iea.org/statistics/

blog.beliefnet.com

http://www.icicibank.com/html/en/go-green/Index.html

MNRE website: www.mnre.gov.in

TIFAC, 2013: TIFAC Energy Technology Vision 2035 – draft in progress

Ketav Mehta, Dual Degree Thesis, 2014, IIT Bombay

http://www.dilbert.com/

McKinsey, 2010: McKinsey Global Institute, India’s urban awakening: Building inclusive cities, sustaining economic growth, April 2010

BESCOM, 2006

http://www.indiaprwire.com/pressrelease/education/20140128287038.htm