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Energy Finance Workshop - II

Edition: October - December 2018

On October 23 and 24, 2018, Citizen consumer and civic Action Group, Center for Financial Accountability (CFA), New Delhi, and Public Advocacy Initiatives for Rights and Values in India (PAIRVI), New Delhi, organized a two-day workshop on Energy Finance. This was the second workshop, following the workshop conducted in June 2018, and built on the topics covered in the latter. This workshop was attended by environmental activists, researchers, and individuals working on issues around access to energy, clean energy transition, and environment.


The workshop started with a session on Renewable energy- opportunities and challenges in India by Mr. Soumya Dutta from PAIRVI. He started by listing out reasons for the need for a transition to renewable energy from coal, oil, and gas. The first reason is their contribution to the climate crisis, through extreme climate events that impact 4% of the global population (like the recent wildfires in Europe and USA), and a much larger population is impacted if we include slow onset climate events like the upward shift of the Himalayan apple belt. The second reason is that coal burning is responsible for around 60% of air pollution. He then moved on to the opportunities and challenges in the shift from our current high energy consumption pattern which is based on non-renewable and highly polluting energy sources like coal, oil, and gas to low energy consumption based on renewable and non-polluting energy sources like solar and wind. Mr. Dutta said India consumes 637 kg of oil equivalent of energy per person per year. Currently, 81% of this energy requirement is met by coal, oil or gas. The challenge in front of us is to shift our current consumption as well as future energy requirement to renewable sources. There are six major renewable energy sources- solar, wind, biomass, geothermal, tidal and ocean thermal energy. More than half of India’s average annual energy consumption of 637 kg of oil equivalent is consumption in the form of process heat for residential and industrial purposes. These process heat requirements, such as heating water, cooking food, and even industrial heat requirement that fall below 600 ℃, can all be met by solar energy, he said.

The challenges and opportunities for electricity in India were also discussed. Mr. Dutta noted that India’s total installed capacity of power generation at 345 GW is almost double that of our peak demand of 175 GW, with 90 GW capacity in the pipeline. India has enough surplus installed capacity, to connect 18 crore people without electricity to the grid, and provide reliable power to the 30 crore people who are now dependant on non-reliable sources. Talking about the renewable energy sector in India, Mr. Soumya Dutta said that solar and wind energy are commercially most viable. He listed their continuous availability (of sun and wind), cost, and variable nature as their challenges. Regarding availability, he said that solar power generation requires roughly 2.5 acre land per MW capacity while for rooftop solar technology, an area of 100 square-feet is needed per KW capacity. In India, 4 lakh MW of solar capacity installation would require less than 0.1% of India’s total landmass and the cost of solar at ₹2.4 per unit (KWh) of power is much less than that of coal at ₹3.7 per unit. Commercial solar power generation, unlike coal-based power plants, does not have any recurrent coal and water requirement. This makes solar photovoltaic plants located in a reasonably sunny place the cheapest electricity generation source in India.

Wind-based power generation is a mature technology that has existed for nearly three decades and it makes up 34000 MW of total 70000 MW of installed renewable power generation capacity in India. As the wind speed increases with height, doubling the minimum hub height to 100 meters or more in a wind turbine can lead to an eightfold increase in the power generation. He said that Tamil Nadu, with an installed wind power capacity of 7800 MW, is one of the major wind-positive sites in India along with Gujarat, Maharashtra, and Rajasthan. The cost of wind power generation is ₹2.4 per unit, which makes it very competitive compared to nuclear (₹6.9 per unit), gas (₹4.5 per unit) and coal (₹3.7 per unit).

The next session by Mr. Martin Scherfler from Auroville Consulting was about “Community-level solar energy systems (solar village) and solar energy for agriculture”. For the solar village project, he apprised the audience about the initiative to reach 100 villages by 2030. He said that this initiative would focus on the utilization of existing infrastructure, grid stability, co-utilization of land and greenhouse gases emission reduction. Explaining about the project financials, he said that all the 100 MW of power produced in each village would be sold to third parties or to the state utility, thus generating revenue for the village. The aim is to develop this model on community ownership through village level self-help groups, revenue sharing, and participatory budgeting. Each village would get 10% of the total revenue generated from their village while the rest 90% would go into a revolving fund which would be used to reach out to more villages. For initial funding, Mr. Martin said they have developed a solar village search engine, using which would help generate funds for the solar village project.

Next, speaking about the project on solar energy and agriculture, he informed that the motivation for it is the plan of the Tamil Nadu government to introduce grid-connected solar systems for agricultural consumers. After establishing a link between free electricity and increased energy demand leading to reduced soil fertility and groundwater depletion, he presented an integrated approach using solar power with efficient irrigation pumps, precision irrigation technologies, and crop patterns to address the issue of energy in agriculture.  


The third session was “Funding for SagarMala projects - how new and expansion projects are/would be funded, and the role of IFIs in the funding” by Dr. Himanshu Damle of Public Finance Public Accountability Collective (PFPAC), New Delhi. He started by elucidating the concepts of infrastructure, neoliberalism and creative destruction which he said form the bedrock of this gigantic project. He defined infrastructure as the carrying capacity to increase the Gross Domestic Product (GDP) through enhanced trade and economy. The problem with this concept is that it excludes people. He spoke on how the role of common citizens and the government is being completely sidelined and ever-increasing resources are coming under private control in the name of infrastructure development. He said SagarMala is based on the global concept that oceans have not been exploited for their own benefits. He stressed that this project is for exploitation of natural resources and to make sure that goods and services are freely exchanged while turning a blind eye to the local communities living in the areas coming under the project considerations. For the funding of SagarMala, India decided to not go to International Financial Institutes (IFIs) and instead approached National Financial Institutes (NFIs). However, with NFIs reeling under the stress of Non-Performing Assets (NPAs), funds from IFIs were sought for smaller projects within the SagarMala mega project. He said that the scariest idea for securing remainder funding is to seek pension funds and bank deposits to invest in these projects. He said that this unprecedented idea to expose debt instruments of the public to projects that people have no choice or control over is unwarranted.

The next session was on “NPAs and the power sector” by Mr. Rajesh Kumar of CFA, New Delhi. He started his session by stating that it is public money that is being pumped into un-viable projects in the power sector by way of debt financing via banks or through the market. He said that while the NPAs are rising, there is a concomitant rise in inequality. He said that there is a possible connection between just 1% of India’s population owning 58% of the nation’s wealth and the burgeoning NPA, as the defaulters could be from the same 1% of wealthy Indians. He said that India’s power sector has now overtaken the steel sector to emerge as the one with maximum NPAs at ₹ 14 lakh crores. He criticised the Parliamentary Standing Committee on Energy for failing to fix responsibility on who should have been held accountable for the current NPA crisis in the power sector.

The last session of day 1 was by Ms. Harshavardhini Varagunan and Ms. Sharadha Narayanan of CAG. They talked about “Accessing and analysing documents for a power project - how to source documents and use information for community-led campaigns”. As part of this presentation, the various documents that can be accessed from the Central Pollution Control Board (CPCB), respective State Pollution Control Boards (SPCBs), Ministry of Environment, Forests & Climate Change (MoEFCC) and the special website for environmental clearance were detailed. The nature of information that can be obtained from the annual reports of companies, and the Ministry of Corporate Affairs (MCA) website were also mentioned. The nature and availability of information on the Central Electricity Authority (CEA) website were discussed. In this session, the excel tool developed by CAG for monitoring and compliance-related data was explained. 

The second day of the workshop began with a “Case study: financial analysis of ITPCL (an IL&FS subsidiary, with a 1200 MW power plant in Cuddalore, Tamil Nadu)” by Ms. Bhagyashree Rath and Mr. Niraj Bhatt of CAG. The power sector is one of the most stressed sectors, accounting for around 17% of the total NPAs in the country. The financial crisis surrounding the Infrastructure Leasing & Financial Services Limited (IL&FS) group was a trigger to take a closer look into the business of one its major subsidiaries in the power sector, the IL&FS Tamil Nadu Power Company Limited (ITPCL). From their analysis, they showed that ITPCL is under heavy debt and is loss-making. They concluded that with the crisis of IL&FS as well, it is clear that going for fresh investment or expansion is not a viable option when the viability of the operational units itself is questionable.

The next session on day two was on “Pollution monitoring devices” by Mr. Soumya Dutta of PAIRVI. He said that monitoring of air, water and soil quality around thermal power plants was necessary given the highly polluting nature of coal. He demonstrated some simple and inexpensive handheld instruments for measuring air quality, pH and Total Dissolved Solids (TDS) of water, water temperature and radiation levels. He emphasized the need for a carefully designed approach for measuring pollution levels, for which it is important to identify the source of the pollutants. He mentioned that the stack, coal storage yard, and ash pond are the point sources of air pollution while ash pond and coal washing water are the point sources of water pollution. Understanding wind direction and speed using a wind rose is crucial for deciding locations to measure air pollution while the surface topography is crucial for deciding locations to measure water pollution. Because children and the elderly are more vulnerable to ill-effects of pollution, their health is impacted within 2-3 years of a power plant being set up, he said. Pollutants tend to accumulate in fish through a process known as bioaccumulation, making fish the most sensitive receptor of pollution. Citizens can file complaints with the respective SPCBs if they find any parameters that are above the environmental guidelines for power plants issues by CPCB, he said.

The last session on day two was “Analysing the economic, financial and environmental feasibility of a project (an approach)” by Mr. Randheer Singh of CAG. He spoke of simple ways of analysing the financial and environmental feasibility of a project using a 3 step 'ring loop approach' -'skim for familiarity', 'check for consistency' and, 'check the financials'. As part of this exercise, he presented his analysis of the feasibility studies done for the Chennai-Salem Expressway. He highlighted inconsistencies in the report about the number of states in India, errors in the total project cost, and quantification and reporting of trees along the proposed highway. He also noted how the report called the project a highway upgradation project while it is actually a new highway construction project. The feasibility report did not include the cost of rehabilitation and resettlement costs for the affected communities. Overall, he stressed that we should be more vigilant in our reading and analysis of feasibility reports for such large infrastructure projects.

The two-day workshop concluded by discussion and debate on the need to focus on solution-oriented action plans for tackling pollution, making banks financially accountable for their lending, and democratization of decision making in our society.

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