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Reducing distribution losses to boost India’s Power Sector

Andhra Pradesh has already made a strong start on conversion of LT network to HVDS and managed to reduce losses to 12%
 
Inadequate and poor quality power supply means frequent interruptions, poor voltage levels, and dissatisfied consumers across much of the country.
 
Adding up all the losses in the system – including the losses due to energy dissipated in conductors, transformers and other equipment, along with pilferage by those who bypass meters, and losses from failure to recover the amount billed to consumers – India’s total energy losses came to 24 percent in 2015-16, significantly more than international norms.
 
This, however, is an improvement on 2003-04 when the same losses were 38 percent. Progress was made because of national and state level reforms. Researchers Dr Gaurav Bhatiani, Chief Operating Officer, IL&FS and his colleagues Bhawna Tyagi, and Sonali Chowdhry look at state-level solutions for India.
 
They zeroed in on the agriculture sector, one of the most inefficient electricity users. In the 1960s, the rural electrification programme was introduced to enhance agricultural output using groundwater for irrigation.
 
Due to unmetered supply and the flat rate electricity tariff provided for irrigation, the number of pumpsets increased substantially — and unregulated and free water has contributed to over-exploitation of groundwater resources. Subsidised power intended to benefit farmers allowed problems such as pilferage and theft, and disguised losses from the utilities, which degraded their finances.
 
The ultimate burden of losses is on the State Governments which collectively spent ₹36,758 crore in FY 14, ₹45,584 crore in FY15 and ₹55,283 in FY 16 (annual growth of 23%) on subsidising utilities for supplying low cost electricity for irrigation.
 
Low-tension distribution networks a bad model
 
One of the major reasons for the high losses was the adoption of a low-tension distribution network spread over long distances to serve dispersed, small, individual agriculture connections. This resulted not only in high technical losses, but also in theft facilitated by unmetered supply and the flat tariff.
 
The degradation of the utilities’ finances has adversely affected farmers by making the supply and quality of power unpredictable and by providing it mainly during the night hours. This resulted in frequent failure of pumpsets, forcing farmers to use inefficient motors, and keep the pumpsets constantly on, wasting energy and overexploitation of groundwater.
 
All in all, this is a vicious cycle in which farmers, distribution companies, and State Governments alike all face ever-increasing losses.
 
Solutions to reduce losses
 
The researchers propose two solutions — The first is to introduce a high-voltage distribution system (HVDS), by upgrading the net-work and replacing transformers.
 
Andhra Pradesh has already made a strong start on conversion of LT network to HVDS and managed to reduce losses to 12 percent, demonstrating that this approach works. Completing the upgrade would cost ₹7,147 crore. The biggest saving would come from the fact that pumpsets wouldn’t fail so often. That alone would be worth ₹18,944 crore.
 
Factoring in carbon savings, energy savings, and the reduction in transformer failure, the total benefits would come to ₹20,028.
In short, each rupee invested would generate a return worth more than two rupees.
 
The second solution proposed by the researchers i.e. replacing inefficient pumpsets with energy efficient ones further enhances the return on investment.  The total costs would be almost twice as large, because we would need not only the high-voltage distribution system to be set up, but also replace all existing pumps.
 
Yet, the total benefits would grow even more, allowing each rupee to generate three rupees of social benefits, both through lower pump breakage, along with energy savings and carbon savings.
 
Both these interventions will also result in a significant indirect benefit by enabling reduction in the subsidy by Governments for irrigation amounting to at-least ₹3,000 crore, which can be redirected to other areas.
 
Anandajit Goswami of the TERI School of Advanced Studies, and Kaushik Ranjan Bandyopadhyay of the Indian Institute of Management examine rising energy demand in buildings, which is accompanied by a rise in electricity use leading to a rapid in-crease in carbon emissions and aggravating power shortages. They show the benefits of using water or salt-based thermal energy storage in buildings, and find the investment would have a return worth more than two rupees for every rupee spent.
 
This highlights both the lasting challenges that can be caused by well-meaning policy decisions such as the low-tension distribution network and introducing energy efficient pumpsets but also the opportunities that exist to reduce losses in the power sector. This would be a win-win for everyone.

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