To Make Economic Sense, Renewable Power Needs To Come With An Intermittency Solution

The past week saw reports of retail inflation falling to its lowest level in five years, markets recover from the volatility of the previous week, another passenger train derail, the Election Commission announce the election schedule for the union territory of Jammu and Kashmir, and Prime Minister Narendra Modi address the nation for the ramparts of the Red Fort for the 11th time, on the 77th anniversary of Independence.

But the dominant news related to revelations about Sebi chairperson Madhabi Puri Buch’s financial dealings that many feel compromise her ability to continue in that capacity. The matter needs to be seen in perspective.

That Ms Buch and her husband had made investments in an offshore fund while they had been employed in Singapore, and Vinod Adani had, through several other funds, also made investments in the same fund is being seen as sinister, rather than happenstance. Now, such a perception would be warranted only if, in the fund in question, the Buchs had only Adani and associates as fellow investors and if the fund invested primarily in Adani companies. If the fund had a diversified investor base, and diversified investments, being a co-investor along with Adani would not be a problem.

The allegation that a consultancy company – Agora, the Greek name for an open space, typically of the kind where teachers and students interacted -- with near total concentration of ownership in the hands of Ms Buch, earned sizeable incomes, even as she served as a member and later chairperson of the Board, is potentially more damaging. This would scarce reinforce claims of Ms Buch’s complicity in matters Adani -- unless it turns out that the consultancy’s clientele consisted primarily of Adani companies. However, the operation of such a consultancy is rife with potential conflict of interest -- unless Ms Buch had declared it to Sebi. Sebi rules say such disclosure should be made to a designated authority. A board member claims that such a disclosure had not been made to the Board. But was it made to Ajay Tyagi, who had been Sebi chairman when Ms Buch joined as a member?

It is in the interest of India’s capital markets, millions of Indian investors, and Ms Buch herself, for her to clear the air on the charges that have been raised, preferably by testifying before a standing committee of Parliament. A judicial inquiry would also serve to bring out the truth, but has the disadvantage of potentially calling for the chairperson to stand aside while an inquiry is on. That would mean that merely by making allegations and raising suspicion about regulatory propriety, a third party can disrupt vital regulation in India, even if only for a brief while.

India needs to institute a practice of regulators testifying before assorted Standing Committees of Parliament, as a routine process of accountability. Ms Buch should demand that the practice kick off with her clarification on the charges levelled against her, before the standing committee on finance, which is yet to be formed.

The news that the share of thermal power is slated to come down, and that of renewable energy climb, in India’s overall mix of power generation does not have the drama and excitement surrounding Sebi, but probably is far more significant for the economy. Thermal power will account for 67% of the power generation by the end of 2025-26, says rating agency CRISIL, down from more than 72% in 2023-24. Non-thermal power is not all renewable, however: it also has power from nuclear and hydel sources.

Power generation is, of course, different from generation capacity. Thermal capacity, including coal, gas and diesel, stands at 236,377 MW, renewable sector capacity at 144,752 MW, Hydel at 46,928 MW and Nuclear at 8,180 MW, respectively 53%, 33%, 11% and 2% of the total installed capacity of 442,856.6 MW. Power generation by renewable is far lower than its share in the installed capacity, thanks to the intermittency of generation. When the sun does not shine and when the wind does not blow, renewable power generation stops.

What this means is that renewable power, as part of the power supplied by the grid, is far more expensive than the cost of generating that renewable power. Because renewable power is not available most of the day, thermal power has to be kept available, even if a portion of it does not generate power, as the grid takes in renewable power. That means that part of the thermal power tariff, which covers the capacity charge, has to be paid, even if power generation from that capacity is forgone. That capacity charge must be added to the cost of renewable power. Further, in order to maintain stability of the grid frequency, additional kit and purchase of expensive short-term generation from gas turbines must be resorted to. This cost, too, must be added to the cost of renewable power.

In short, a rising share of renewable power in the total mix is not an unmitigated blessing.

The only way to make renewable power a continuous source of power is to store the generated renewable power. Storing massive quantities in batteries is very expensive, and could raise the demand for battery minerals sky-high, causing environmental degradation and indigenous people unrest in the nations that supply nickel, cobalt, zinc, lithium, copper and aluminium. Another way to store power is to use it to pump water up to a height, from which it can later be run down through pipes to turn a turbine, and generate power. Heating blocks of salt and dipping it in water to use its stored heat to generate steam, with which to turn a turbine, is another way to store renewable power.

Green hydrogen is the most exciting solution on offer. Use the renewable power generated to electrolyse water, separate hydrogen out, and store it or pipe it to the desired destination. The hydrogen can be used to generate power in fuel cells or burned to produce heat and generate power like in a gas turbine. The week saw the government choose 13 companies, including Adani, to receive subsidy for producing electrolysers.

It is remarkable that India did not think of a storage policy to solve the intermittency of renewable power while going in for massive capacity addition of renewable power. Presenting this year’s Budget, the finance minister announced that a storage policy will be formulated.

Better late than never.