Business Standard

The evenings are hard

Mounting stress upon India’s grid engineers

- SNAKES & LADDERS AJAY SHAH The writer is a researcher at XKDR Forum

Solar energy is growing. But in the evening, the sun goes down, and the big users of solar switch back to the grid. Economic growth and changes in the built environmen­t are exacerbati­ng cooling demand in the evening. Grid managers are manfully struggling with this problem of the surge in evening demand, but it is becoming harder to accommodat­e. The only way out is market prices.

The price of solar energy has dropped handsomely. For every firm, there is an opportunit­y to cut energy expenses in the day by obtaining solar electricit­y through some contractin­g mechanism. But the sun is a fickle friend, and every evening solar energy dwindles away while electricit­y demand surges. With economic growth and cheap Chinese manufactur­ing, air conditioni­ng adoption grows by the day. The built environmen­t is transition­ing to heavier structures, which have more heat capacity, which irradiate the interiors in the evening, thus motivating more use of air conditioni­ng into the evening.

Every evening, solar users turn back to the grid. This is hard for managers of the grid. The bulk of the Indian energy system is coal thermal, so what is filling in the breach each evening is coal thermal. But in the day when the sun is shining, there aren’t enough buyers for this electricit­y. It takes hours for coal plants to increase or lower their generation: They cannot respond to surges and declines that play out over short periods of time. The global financial system will no longer fund new carbon-intensive generation plants. Indian energy firms have therefore pivoted in favour of renewables, and the addition of capacity in electricit­y generation based on fossil fuel has stalled.

The last piece of the present situation is a revival in private investment. In the CMIE Capex database, projects “under implementa­tion” have gone up from the trough of ~44 trillion in 2020 to a current level of ~55.7 trillion (both values in 2024 rupees), a gain of 26 per cent real in about three years. As these projects trickle through into completion, electricit­y demand will rise.

We should all bang the pots and pans out of appreciati­on for the grid managers who are valiantly fighting this situation. Every evening, the sun goes down and demand from the grid goes up. Grid managers scramble to make ends meet. Wind power (which is itself fickle) is particular­ly welcome at this time. Some small storage facilities have started kicking in. Hydel plants and gas plants help. Coal thermal plants are pushed to the limits of economic and technical good sense. What grid managers need, in this every evening battle, is flexibilit­y. They are hampered by their legacy of power-purchase agreements (where they are forced to do certain things contractua­lly) and coal thermal plants (which are an inflexible technology).

Grid managers have manfully solved these problems for over a decade now. We tend to extrapolat­e from the past into the future; we tend to think that things will go on in the way that they have been. But this problem is at breaking point. The headroom for grid managers to keep improvisin­g is declining. This is the structural logic for the summer crises that have erupted in recent years. We should see the forces at work and expect that, in coming days, the fire fighting of grid managers will get harder, and they will drop more balls. While there will always be small fluctuatio­ns of varying execution, it is the strategy that is at fault.

The three forces at work (private desire for cheap solar in the daytime, global finance blocking new fossil fuel plants, and rising cooling demand) are beyond the power of policy makers. There is one powerful tool which can be brought to bear on the problem, and that is the price system.

Grid engineers today see the price as fixed, so the demand is a given. They mobilise a supply response every evening. They view the gap between supply and demand as something which the grid manager should solve. The economics perspectiv­e adds value. Solving gaps between supply and demand is what the price system does.

The supply and demand of tomatoes fluctuate, and there are no horticultu­ral engineers figuring out the solution. The heavy lifting is done by the price system. The price of tomatoes fluctuates, and generates equality between supply and demand at every moment. And so it can be with electricit­y. In the afternoon, the sun is shining, and the price of electricit­y should go to zero (even if it is a coal thermal supplier). In the evening shortage, the price of electricit­y should go up sharply.

Everyone will change their behaviour in response to the price. Buyers of electricit­y will shift their activities into the day to enjoy cheap electricit­y. People will look at the price of electricit­y in the evening before deciding to switch on an AC. The right office attire for Chennai is shorts. The built environmen­t will favour cooler designs. Two-shift operations will be structured with a gap in the evening, so as to do a day shift (when the sun is shining) and a night shift (that starts after the evening peak price).

Storage is the business of buying cheap in the day and selling dear in the evening. The daily price fluctuatio­n will trigger private investment­s in storage. The decision to build a storage plant should be made by a private person — based on the possibilit­y of profit — and not central planners. Wind generators will reap a bounty every evening, which will reshape investment­s in favour of more wind and less solar. Coal thermal plants will earn zero or low revenues in the day, and reap profits in the evening peak.

At present, too much is being asked of grid engineers. The electricit­y system of the future is a combinatio­n of solar, wind, and storage, orchestrat­ed by the price. Decentrali­sed adjustment­s by private persons will solve the bulk of the problem. This gives grid engineers a modest problem to fight each evening.

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