International Gypsy

Sunday, August 05, 2012

World's Largest Power Outage - Facts and who failed India for the most basic of Infrastructure Services


India suffered what was world's largest ever blackout two days in a row - 670 Million people lost power, miners were trapped underground, subways and trains came to a screeching halt. Businesses are estimated to have lost millions in additional costs and lost production. The Country yet again suffered a huge reputation blow at a time India could rather avoid any further confidence wrecking event.

For much of the Developed world, uninterrupted power is a basic necessity but for majority of Indians, getting-by without power for long hours and sometimes days at a stretch is a routine affair. This outage however was unprecedented. While a lot has already been said about this outage with eye catching headlines, I would try to bring out some facts and share my personal view on who really powered India off.

- India is world's second most populous country, largest democracy, fourth largest economy (PPP terms) and fifth largest electricity producer. India's total power generation capacity at 200 Gigawatts is roughly one fifth of US and sufficient to meet base demand as India's per-capita power consumption is less than a tenth of the US and less than half of China's . Despite such a low per-capita consumption, India's total generation capacity falls short of peak demand by 16%.

- One would think 16% deficit is not as bad as our long power outages even in large metropolitan cities would suggest. The truth is our plants chronically operate at a much lower plant load factor (capacity utilization). This is due to shortage of coal which in turn is due to the government monopoly on coal mining and widespread corruption. India's average PLF across all thermal plants declined from 77.5% in 2009-10 to 73.3% in 2011-12. Bottlenecks in the transmission (electricity grid) infrastructure (grid) exacerbate the shortage.

- Roughly 35% of power we generare is lost to theft, inefficient transmission and free handouts. Most amazing aspect of this statistic is no one knows, inluding our regulators and government, the break up of this 35% loss, i.e. how much is technical losses and how much is because of pilferage, issues with metering etc. In commercial context, this 35% lost power costs $11 billion. To put this loss in context, transmission and distribution losses in the US were estimated at 6.5% in 2007. It would be naive to expect a system to work and grow where more than 35% of total output is lost, it is similarly unreasonable to expect the middle class and industry to pay 100% for 65% of the left over and yet unreliable power. What we have here is a vicious circle.

- Our neighbor China has been adding 6 times more electricity than India in recent years. We despite the acute shortage and a crisis situation achieved only 64% of an already modest target of 78,000 MW of new capacity addition in the 2007-12 eleventh five year plan.

- To emphasize how bad the situation is, it is worth pointing out our grid does not reach 300 million or roughly 30% of our population. Post restoration of grid, 300 million or an entire US stands disconnected from this most basic of infrastructure services.

It is therefore reasonable to ask why we are in such a dire situation after more than 65 years of independence despite having abundant availability of coal, huge untapped hydro-power resources and no lack of capital and skills. Private Sector invested a record $60 billion in setting up power plants in last 5 years but most Private Sector generation capacity is idle due to lack of coal linkages and as a consequence they are in financial stress.

This is yet again an area where our Politicians have failed us miserably. Politicians have used electricity like cash to win votes.

With more than 60% of our population still living in rural areas and engaged in agrarian pursuits, Politicians have won elections with promises of free subsidy to farmers. Our gullible farmers have failed to realize the benefits of a 'paid for' but reliable electricity supply and fallen for a broken system that delivers free but unstable frequency of power few hours a day. Similar is the situation in cities where many of the commercial and residential users have accepted power theft as a way of life to compensate for additional money they spend on running generators and suffering the inconvenience. Needless to mention the widespread power theft that goes on in the slums. Politicians are more than happy to propagate condoning such thefts to win votes in elections.

Solution to the power problem in India rests with a widespread reform of Political culture. Until such time that Coal and Electricity both remain within the Government control, there is little or no hope. I however remain an optimist and count on Indian entrepreneurship and industry to continue to chug along on diesel run generators and captive power plants. Middle class would continue to turn a blind eye as 'Power Inverters', the quintessential Indian household gadget, continues to serve them during power outages. Majority of farmers would continue to put their heart and soul into their field to produce and survive despite the Government. The handful of rich and powerful politically affiliated farmers would continue to generate loads of illicit tax free income, not pay for the electricity they consume, over consume subsidized fertlizers and continue to poison and deplete our ground water as they are the winners of our current politicl culture.

1 Comments:

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