01/31/2013 04:22 pm ET Updated Apr 02, 2013

Will India Seize the New Energy Opportunity: Utility 2.0?

India stands at a vital fork in the road -- to embrace what Jigar Shah calls "Utility 2.0", the distributed energy vision of the future, or to risk falling off the cliff into a major energy supply emergency by clinging to the centralized, fossil fuel approaches of the past -- Utility 1.0 -- to meets it's rapidly growing energy needs.

Take the latest blow to afflict India's troubled coal-fired power sector: the partial or complete shut-down of fossil generation in Maharashtra State because of water shortages.

Chief minister Prithviraj Chavan said the 1,130-MW Parli thermal power plant in Marathwada could be shut down within a few days due to severe shortage of water. Gas-fired plants are also: crippled Dabhol (1967 MW) is generating only one-third of power of its total capacity, while the Uran plant (867 MW) is generating only half of its total capacity.

So in a single state, India's fossil fuel power sector has lost 2700 MW of power -- 10 percent of the state's total power. And these water constraints are preventing expansion of generation in Maharashtra:

"The state is unable to start new power plants because of water scarcity," the Chief Minister added. "Maharashtra has just 18% irrigation while Punjab has 98%. If Maharashtra had even 50% of irrigation, it would have developed capacity to provide food grain to all states."

Water shortages are one reason many new power plants have been planned for India's coastal regions; but India's interior coal fields cannot be accessed by those plants, so they envisaged cheap imported coal under long term contracts. Those contracts have now been cancelled and India cannot afford imported coal -- so many plants sit partly or wholly idle, or have been suspended or cancelled.

Even when cooling water and coal are made available to coal plants, there is a serious challenge transmitting their power. Preliminary investigations suggest that the unprecedented failure of more than half the nation's grid in late 2012 was caused by the concentration of coal fired power plants in the center of the country, and inadequate transmission capacity to handle their full output.

The reality is thus that for India to meets its electricity needs with coal, it must every single day overcome a triple whammy.

First, it needs affordable and reliable coal to fire its power plants. Second it needs ample surplus water to operate and cool them. And third it needs reliable performance by its antiquated grid.

India currently has none of these. Only grid improvements are, in theory, within its control. Coal prices in Asian marine markets are heavily influenced by monopolistic behavior by Indonesia and high costs of production and periodic disruption by floods in Australia. Access to domestic Indian coal is dependent on finding acceptable ways to relocate the communities that live on top of that coal. The water situation is bad and, with climate change, getting worse -- no solution is evident as current levels of usage are depleting water tables rapidly and rivers are drying up.

A genuine national mobilization around renewable solutions would offer India a way out of this dilemma -- the nation has ample solar, wind, and biomass generating potential. Centralized wind and solar require only the grid -- sun and wind are not subject to the caprices of flood in Australia, resource nationalism in Indonesia, relocation challenges in Jharkhand, the water levels in rivers in Maharashtra, or the ability to move fishing communities out of the way of proposed coastal coal terminals. (Half of the coal fired power plants challenged in India are blocked by the courts.)

And distributed renewable energy doesn't even need to wait for massive investment in more long-distance transmission. Off-grid solutions need no access to power lines at all, and roof-top solar in cities can be empowered with modest, local improvements in the electronic control systems of local distribution systems. Indeed, distributed renewables actually reduce the need for investments in big transmission lines because they provide power where it is needed, and given afternoon peak loads in Indian cities, when it is needed in the case of solar.

But India has not yet grabbed opportunity. While the government talks about its commitment to renewables, and the private sector is salivating for the chance to get into the game, India's bureaucracy and policy environment are bogging renewables progress down badly. China offers an interesting contrast.

My colleague at the Sierra Club, Justin Guay, just wrote a blog laying this out:

"To understand how important the nimble nature of distributed solar can be to a country's market look at what happened in China. Facing an industry meltdown as global market turmoil increased (i.e. massive oversupply), trade wars expanded, and domestic manufacturers faced insolvency the government moved quickly to stimulate domestic demand. Beijing doubled the solar target for 2015 three times in just one year to an astounding 40 GW -- eight times the initial target. But most importantly, the centralization happy Chinese ensured distributed solar programs -- the Golden Sun and Solar Rooftop program -- were in place.

"The result was rapid and impressive. Q4 solar investment grew dramatically and China went from global supplier to a significant source of demand accounting for 1/3 of the global market. Most importantly though, demand is increasingly distributed. Distributed solar growth is expected to exceed 90 percent during 2013 growing to 35 percent of the total Chinese market."

India is, thus far, a different story. In spite of huge load shedding problems in cities, and successful demonstration efforts with roof-top solar in Gujarat, solar entrepreneurs told me there is little progress in backing out expensive, dirty urban diesel back-up because the government and utilities have been unwilling to pay roof-top solar owners the true value of the surplus power they feed into the grid. While the national solar mission has moderately ambitious goals, which the country as a whole is meeting, almost all of the progress has come from one state - Gujarat, outside the financial framework of the national effort. The national effort is failing to scale up.

Justin Guay looks, for example, at the issues facing the state of Tamil Nadu:

"... which has big plans for solar. A recent tender for a whopping 1 GW of solar was met with lukewarm response with only 500 MW secured. If Tamil Nadu is going to live up to the hype (some project it will constitute 40 percent of the Indian market), it's going to need to become intimately familiar with the new normal. [Reliance on distributed solutions.]"

"Creating a third-party financing vehicle (think solar city in the U.S.) backed with public funds (like the World Bank for instance) or replicating dedicated rooftop solar programs (like Gujarat has done) would do the trick."

There seems to me some risk that India may fall into the Pakistani trap: continue to pursue yesterday's energy solutions, even though they are no longer feasible or adequate, until it is too late and an energy shortage becomes an emergency. Then refuse to take the remaining quick fixes, because they are unavoidably too small to solve the entire problem. India is not at this precipice yet. It has time to deploy distributed renewables while teeing up the necessary big steps to prepare itself for a full scale solar and wind revolution, and figuring out just how to make the best possible use of the investments it has already committed in coal and natural gas.

Optimal dispatch of India's existing fossil fuel power plants, while maximizing progress on renewables, can still put India in a healthy energy supply situation. And a distributed revolution doesn't require India to mimic China by becoming a centralized behemoth -- a few policy tweaks would unleash India's tremendous entrepreneurial energy.

But wasting another five years will put this country in deep trouble.

A veteran leader in the environmental movement, Carl Pope is the former executive director and chairman of the Sierra Club. Mr. Pope is co-author -- along with Paul Rauber -- of Strategic Ignorance: Why the Bush Administration Is Recklessly Destroying a Century of Environmental Progress, which the New York Review of Books called "a splendidly fierce book."