A Developing Country’s Perspective of the Smart Grid

 By Rahul Tongia

With Smart Grids, the generational changes aren’t generations of people, but generations of the technology. So, if we assume developing regions aren’t the early adopters for Smart Grids, what does their Smart Grid look like? The nuts and bolts, and even “modules” may be very similar, but the drivers, legacy network, regulations and business case are certainly very different. India is a relatively representative example of many developing regions and their experience with a Smart Grid.

Luckily, the question of what a Smart Grid is doesn’t get asked as much. Through iterations and effort by many stakeholders, many (but not all) policy and utility leaders have a sense of what it is. But they don’t quite understand what it means to them. The questions being discussed in India include “Does this make sense for me?” (esp. given many basics of electricity access aren’t yet done) to “Can I afford it?”

I posit a Smart Grid and smart grid aren’t the same. By analogy, the Internet and internet aren’t the same. The former is the public, globally accessible network running on a layered architecture and a suite of protocols, while the latter is any internetworking system of networks. Similarly, installing smart meters doesn’t make a Smart Grid. That requires a transformation of the utility towards chosen and relevant functionalities, harnessing technology as a means to an end. By this measure, different Smart Grids (especially at a distribution level) can be designed and look quite different.

Indian Drivers and Design

If meter reading, labor cost savings, robustness/resiliency, electric vehicles, and renewables are drivers for developed regions, not all of these apply (yet) for developing regions. Labor is relatively cheap, but many utilities want to automate meter reading to cut losses, both technical and commercial due to pilferage and non-payment.

The second driver is of access and sufficient supply. Not only are hundreds of millions of homes not wired up (mostly in rural areas) but meeting the demand is a major challenge. The per capita consumption is well under 1,000 kWh/year, several times below that of China, let alone the world average, and shortfalls of power result in periodic outages in many areas (“load-shedding” or brownouts).

Theft detection is more tactical than strategic to justify a Smart Grid. In fact, one doesn’t need a Smart Grid to cut down theft – one needs political will – but a smart system with granular data makes it easier to do so. In addition, one major challenge is the peak is growing faster than the average demand, and this is where ambitious plans for renewable energy (RE) don’t necessarily help the capacity (kW).

The Indian peak is thus far in the evening, driven by residences. This also exemplifies a major difference between the West – instead of dealing with fewer but larger consumers, dealing with the peak and shortfall requires dealing with many more small consumers.

Many bigger (especially commercial and industrial) consumers are already digitally metered. Automating the meter reading will only speed up the process, but it won’t change the data available to the utility. Second, many functionalities only work if enough, if not all, the consumers in a line (a feeder) are on a smart system.

Why a Smart Grid will work in India

The first challenge is preparedness. At a human capacity level, much needs to be done. Utilities need to have their building blocks finished, which involves more basic IT systems like computerized databases for consumers, billing, assets (with GIS), etc. Many of these steps are underway, including through Central Government supported programs, but they are still works in progress.

The business case is often positive, but this still leaves a liquidity challenge more than a solvency challenge, i.e., who puts up the cash for a capital-intensive process that takes years to realize the savings? There is a second layer to the cost-benefit analysis (CBA) which should be societal instead of utility-centric. If a utility can use a Smart Grid to end load-shedding, this saves consumers back-up power like batteries and diesel, but without regulatory/pricing changes, that doesn’t help the utility.

Why will this work in India? Unlike the West, barring a few urban pockets, no one in India takes the grid for granted. In the U.S., you tell someone that with a few lifestyle changes, and differential (time of day) pricing, they might save a few dollars a month.

In contrast, if you tell someone in India they could save even Rs. 50 (under a dollar) per month, and by shifting their loads around they would avoid load-shedding, they’d be very interested. They’re already very engaged with the grid – unfortunately not in the best way today. As one could joke, India has the most effective Demand Response program in the world – too bad it’s not voluntary.

Surprises and Synergies

Conventional wisdom indicates that Smart Grids should start in urban areas first, where the demand is higher and average monthly bills are higher. True, but rural areas face far more outages. Most rural Indian homes (88% per NSSO surveys) rely on kerosene for primary or back-up lighting. This is expensive, both for them and taxpayers or oil companies (it is subsidized), on the order of $1/month. In contrast, if I could give them guaranteed lifeline power (for basic lighting and charging a cell phone), that same quantum of electricity would only cost a few cents!

One major challenge is utilities have no means of controlling the load to lifeline (today). With a smart meter, they could. This alone gives viability, even before adding in other benefits like loss reduction, better load profiling (for procuring generation supply), etc.

There are many other changes that can synergize with smart grids, also throwing up other surprises. Renewable energy is growing in importance, and India has especially large targets for RE deployment (175 GW by 2022, from today’s 40 GW). Roof-top solar PV sounds attractive, but one challenge unique to developing regions relates to standard designs where a grid-tie inverter must switch off whenever the grid goes down (for the safety of linemen). But with periodic load-shedding, that means the homeowner may suffer, especially when they believe their system should supply them solar power. The solution is emerging, hybrid grid-tie inverters than can also operate on isolated (islanding) mode.

India is also urbanizing rapidly, and the Prime Minister has announced ambitious plans to make 100 Smart Cities. Smart Grids can be an anchor for Smart Cities.

Making Smart Grids Happen

Smart Meters are a significant cost in the system, and can be an even higher share in India than many other countries given low-cost IT solutions for the back-end. How can we enable them? One shocker for many people is the high cost of land and housing in India, not just in relative terms (purchasing power adjusted) but even in absolute terms. One idea is to extend Tim Wu and Derek Slater’s “Homes with Tails” model for optical fibers for broadband, where the last hop service drop (to the pole) is part of the homeowner’s responsibility, in return for which the service provider is ready from there on in a plug-and-play model. Similarly, if the consumer just gets (rather, pays for) the incremental costs of a smart meter, the wide area communications, back-end, etc. are ready.

So for basic urban homes costing tens of thousands of dollars (often much more), asking them to pay the incremental hardware only cost of the meter to make it smart (perhaps ~$15 above and beyond a good digital meter in high volumes) isn’t a stretch. In return, they can get zero load-shedding, and far more flexible pricing plans and informative billing.

Ultimately, Smart Grids will work not because people are enamored with technology, but because the alternatives and business as usual haven’t worked. As the former president of Harvard, Derek Bok, observed, “If you think education is expensive, try ignorance.” Same applies for Smart Grids, with high opportunity and hidden costs under Business As Usual.

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