Connectivity is the buzzword today.
Every kind of connectivity is expanding – 5G phones, TV channels, highways, faster trains, more airports, satellite Wi-Fi (coming soon). Billions of rupees are being poured into connectivity.
No, I am not alleging that this is money being thrown away, apart from the 'investments' in the bottomless pit of a certain communications company (which shall remain unnamed for fear of brickbats).
Better connectivity, they say, means higher efficiency and lower costs. For instance, highways and dedicated freight corridors are expected to reduce India’s logistics costs from 13%-14% of gross domestic product (GDP) to 8%, matching global standards.
(National Council of Applied Economic Research -NCAER-says that it is already at around 8%-9%, but that’s another story.)
Let’s turn to a connectivity which we need 24x7 – electricity.
Bijli is now a primary need and steady and limitless power supply is taken for granted.
Happily, there is no shortage of electricity. Power production capacity exceeds 420 gigawatts (GW) today, while peak demand is 250GW.
What’s the problem then, you ask?
Ah – all this power has to reach the consumer, you know.
Therein lies the rub – about one-fifth (20%) of it simply 'disappears' somewhere.
Let me explain.
India has a vast network of electric lines that connect power producers to power consumers all across the country. This is called the India grid (IG). Earlier, we had five separate regional power grids, which have been progressively combined into one massive IG by 2013.
As you can easily figure out, IG is a patchwork of multiple systems, equipment and power lines, some of which are quite old. Putting all these bits and pieces together was a huge challenge in itself, but keeping the whole structure working non-stop, 24x7, is an even bigger challenge.
As may be expected, IG is not a very efficient network. Many losses in the system mean that all the electricity that is produced does not generate revenue. This wastage is called T&D (transmission and distribution) losses.
Much of the T&D losses arise from inefficiencies in the power grid equipment, such as:
- Losses in the power transmission lines due to the inherent nature of electricity – resistive, capacitive, and inductive losses.
- Losses in transformers, and switchgear.
- Losses due to imbalances in supply and demand of power.
Apart from these 'technical' losses, there are also 'non-technical' losses – mainly theft of electricity.
All in all, about 20% of the power produced by our power plants is 'lost in transit', i.e., a big chunk of it doesn’t reach consumers and some consumers don’t pay for the power they use.
(Incidentally, the government is trying to reduce the theft of electricity by installing ‘smart’ meters which are said to prevent theft. Unfortunately, as against a plan to install over 230mn (million) such meters by 2025, only 8mn have been installed by December 2023.)
Back to T&D losses. How are other countries doing?
The world average of T&D losses is about 8%. US and most of Europe score around 5%-6%, as does China. The average for developing countries is said to be 16%.
Going by these numbers, our T&D losses are 12% higher than the international norm.
How much does this cost our country?
Here are the numbers:
- India consumed 1,221bn (billion) units of power during April-December 2023, which can be extrapolated into an annual demand of approximately 1,830bn units.
- 12% loss = 220bn units.
- At Rs7.5 per unit, this amounts to Rs1,650bn, or Rs1.65 lakh crore every year.
Since it is a recurring annual loss, one should look at its net present value (NPV) at the Reserve Bank of India (RBI) repo rate (6.5%) over 15 years – Rs22 lakh crore.
Put differently, this means that reducing our T&D loss by just 1% will save our country Rs1.83 lakh crore in today’s money.
Apart from the losses, India grid faces another problem – stability.
Renewable power plants (mostly solar) are being built at great speed, the target being 500GW by 2030, about 1.5 times today’s number. While renewable power is clean and cheap, it comes with two problems:
- Fossil fuel power plants produce electricity at a steady rate with a very stable frequency, which is easy for a power grid to handle and distribute. Solar/ wind power is much more volatile, and consequently more difficult to manage.
- Huge chunks of solar power are coming up in far corners of our country, e.g. the 30GW solar plant in Gujarat. This power needs to go to far-off places, but the effective capacity of the grid to transfer power between regions is said to be limited, probably around 50GW or so.
If we keep loading our grid with more power production from one side, and more demand from the other, we might see a repeat of the disastrous grid failures in 2012, when half our population was without electricity for many hours.
There is, therefore, a good case for investing in our power grid, to reduce our losses and save money, as well as protect our population from power failures. Besides, lower grid losses mean that less coal will be burnt and less pollution created.
It should be possible to identify some areas where investment in grid equipment will produce the quickest results. For example, in FY21-22 transmission losses in the western region amounted to 9,713GW hours; twice that of the eastern region, suggesting a good starting point.
Apart from replacing ageing and inefficient equipment in the grid, there is scope for reconductoring power lines, i.e., replacing the existing power cables with new-generation cables. These can carry twice as much power with lower losses, besides saving the costs of building additional power lines to carry the ever-increasing loads.
Bottom line - money needs to be spent on our power grid, not only on power plants.
Will we see some hefty allocations for the India grid in the coming Budget, Madam FM?
(Deserting engineering after a year in a factory, Amitabha Banerjee did an MBA in the US and returned to India. Choosing work-to-live over live-to-work, he joined banking and worked for various banks in India and the Middle East. Post-retirement, he returned to his hometown Kolkata and is now spending his golden years travelling the world, playing bridge, befriending Netflix & Prime Video and writing in his wife’s travel blog.)
