Renewable-Energy Cooperative Model For India : A Step Towards Energy Democracy

India’s electricity sector has transformed itself  from a vertically integrated, monopolistic,  state dominated,  entity to a restructured, corporatized and market oriented sector.  The structure of the electricity sector has been shaped mainly by the predominant energy sources and the least cost technology option for conversion of the same.  Coal & Hydro were the primary energy sources used for electricity generation and the optimum mode of conversion of the two source was to adopt a centralized pit-head concept for coal and large dams for Hydro power generation.   Because of the huge capital required for such plants, these were built by large public sector corporations funded by the tax-payer’s money and loans from World Bank and other multi-lateral organizations.

With the privatization of power in the mid nineties there was a shift from state owned corporations to ownership by few large industrial groups.  These private power generation project continued the same  centralized large power generation concept since most projects were coal / gas  based.  The control shifted from the government to a few private individuals / corporates.  Though these companies were termed private, the money used for funding the power projects were again that of the public – either thru overpriced IPOs or thru the banks and financial institutions who had been entrusted with the hard earned savings of the public.

175 GW RENEWABLE ENERGY TARGET BY 2022

The Government of India’s  plans for achieving 175,000 MW thru renewable energy sources,  is a landmark decision heralding a policy shift – from a focus on coal / gas based  power generation  to renewable energy based power generation,  in line with the global trend.  The renewable energy  based power generation particularly wind & solar also suited the private sector since it mitigated three major risk factors viz fuel, environmental & market.  With an assured take off of power and a reasonable tariff  support schemes from the government and sustained drop in PV prices,   there was a good response for the various schemes brought out by the government and over 7000 MW of solar plants have been set up in a short period of 5 years.

Out of the 100,000 MW of solar capacity addition planned under the 175,000 MW plan, with 7000 MW operational & another 3000 MW under process, there will be 90,000 MW of solar capacity that would have to be set up in the next 5 years.   90,000 MW calls for an investment of  about Rs 450,000 Cr and it is high time that we as a nation deliberated on the critical issue of how we would like the 90,000 MW to be set up.   Whether they should be set up on the  same pattern of centralized power generation & control concept  OR  in a decentralized and democratic  approach.  It is time for us to revisit and take a hard look at the entire concept of centralized power generation & control structure vested in the hands of few large corporations.

RENEWABLE ENERGY TRANSITION- IDEAL WITH TRANSITION TO DECENTRALIZED, DEMOCRATICALLY  CONTROLLED  ENERGY

The earlier post https://www.linkedin.com/pulse/empowering-rural-india-thru-renewable-energy-venkataraman-nagarajan-1?trk=pulse_spock-articles  provides  a detailed analysis on –“ why renewable energy generation”  is  ideally  suited to be developed in a decentralized manner.

The decision to transition from fossil fuel power to renewable based power, therefore has to be accompanied with a corresponding transition in mindset  from  a) large centralized  power plant concept  to large number of small decentralized power plant concept & b) shift in mindset from corporate control of energy to more democratically controlled energy.

Democratic control of renewable energy resources, in particular,is facilitated by the fact that renewable resources are distributed:  solar, wind, biomass   are resources found in various communities. This provides a basis for decentralized development of these resources at the local level through suitable initiatives.

The transition to renewable energy in a decentralized way thru the cooperative approach would benefit large no of persons in the community as opposed to the centralized model which benefits only a few corporates.

A 100 MW solar power plant costing about Rs 500 Crores  can only be set up by few corporates.  However, 100 numbers of 1 MW plant with each costing about Rs 5.0 Cr can be easily set up if 100 groups  consisting of  of about 50-100 people in each group,  were to join together with an investment (without seeking any bank assistance)  in the range of Rs 5.0 lakhs to Rs 10 lakhs each which is within reach of large percentage of population.  With an assured off take  of power at Rs 5 / KWhr ( which is the ball park levellized avoided cost of energy ) by the government,  each 1 MW plant provides a revenue of about Rs 80 Lakhs/ Year which will be a tax free income @ 14%( after deducting O&M  expense )  to the group members instead of the 7% return from banks. This would also channelize the investment from  going into unproductive assets to a productive asset.  100 villages and about 10,000 citizens get benefitted from just 100 MW without counting the huge employment created in setting up and operation & maintenance.

The decentralized renewable energy model provides a powerful alternative to the current centralized energy model — one that can be more ecologically sound, more economically beneficial to communities, more effective in creating local employment, more sustainable, and more open to democratic control. In a country where 70% of the population are decentralized and where, despite 98% of the villages having access to grid, do not get electricity, the decentralized grid connected renewable energy model is an excellent  option for providing sustained electricity to all.

Energy Democracy Implies Decentralized Control of Energy. Large, utility -scale, centralized generating systems are based on concentrated financial and economic power. In most cases centralized energy development represents the interests of powerful economic forces aided by a corporate state apparatus.

The development of decentralized energy resources, on the other hand, opens the possibility for communities to participate in the control of their energy resources. The effort to democratize energy — to  wrest control of energy resources and energy policy away from the dominant corporate energy establishment —requires an alternative energy model. The decentralized energy model offers the best prospects for communities to reassert democratic control over energy resources and renewable energy development.

This is a unique opportunity for the Indian citizens. Now that the energy production is becoming affordable they face a choice, that really belongs to them in the first place. After all in the end, the  175 GW  energy transition is going to be paid for largely by citizens:

• As consumers: the costs of energy transition are mainly being charged to consumers

•  As taxpayers: governments use tax money to support companies investing in the energy transition

•  As savers at banks: to finance their projects, all investors borrow the savings of citizens from banks.

RURAL-URBAN ENERGY COOPERATIVE

The electricity supply in India follows the 70/30 principle.  70% of electricity is consumed by the 30% of the urban population and 30% of electricity is consumed by 70% of the rural communities.

The paradox here is that the 30% of the urban consumers are all living mostly in apartments and there is no space available for setting up roof top solar.    On the other hand, the 70% of the rural community who have the space needed for the solar plant do not have the energy need & financial resources needed for setting up the solar plant.

Fairness requires expanding programs in ways that increase options for participation. As a group, ratepayers and/ or taxpayers fund solar incentive programs. Accordingly, as a matter of equity, solar energy programs should be designed in a manner that allows all contributors to participate.

The concept of Renewable energy cooperative provides an unique opportunity  for the consumers in urban area to form a cooperative  in partnership with the rural community.  The village can provide the 5 acre land needed for a 1 MW solar plant, which can form their contribution to the cooperative and against which they get  3-4%  free power ( equivalent value of the land asset ) which would be adequate to meet most of their electricity demand.  About 50-100 urban consumers  can join together and  contribute the amount required for the 1 MW plant and the balance power after adjusting the free power to the village  is either adjusted by the urban members of the cooperative on a virtual net metering basis or sold to the government at the Feed-in-tariff rate set by regulatory commission.

Karnataka had launched the  Farmer’s scheme for  setting up 300 MW which though not in the line of a Renewable energy cooperative,  was a step towards that.   It is understood that the response to the 1MW-3 MW  farmer’s solar scheme was overwhelming  and got oversubscribed within 10 minutes of the start of online application for allocation.

The Karnataka scheme has established that  people are keen to participate in renewable energy generation and the model can be further refined towards promotion thru renewable energy cooperatives.

Citizens now have a choice: either passively undergo the energy transition, or unite and actively take this transition into their own hands. The cooperative concept is not new to India.  We have some of the most successful cooperatives operating in the world.

Under the 175 GW renewable energy plan, there are still 90,000 MW to be allocated.  This entire capacity can be set up thru energy coops.  There is no need for pressurizing the PSUs  and erode their reserves  to set up the renewable energy capacity.  The government needs to only provide a firm PPA commitment for the thousands of 1 MW plant to the energy coops.

Europe has 2500 Renewable Energy Cooperatives.  India can have 90,000 of them by just putting up 1 MW in each village and even then we would have covered less than 20% of the villages.

Energy cooperatives are no different from Group Housing societies that had enabled building large housing complexes in the country.

As a nation, we pride ourselves as the largest democracy in the world.  The 175 GW  transition to renewable energy  “of the people, by the people and for the people “  through  Renewable Energy cooperatives would make India even prouder as the world’s greatest  Energy democracy.