~~~~ Some thoughts on Piyush Goyal
Many months ago, I told an ex-manager that I admired minister Piyush Goyal's work. He challenged me to demonstrate his competence with data. I got some time now to put this together.
Goyal handles three ministries: Coal, Power and New & Renewable energy. In coal, his performance has been exceptional. In Power, it is good, but not anything great. In NRE, it has just been short of marketing fraud. Paradoxically, Goyal (and the Govt.) spends most of his time spouting achievements of the most fraudulent department, hardly drawing any attention to the stellar work he's doing elsewhere!Coal
In the Ministry of Coal, Goyal predecessors were one Shriprakash Jaiswal in UPA-2 (unknown fellow), Manmohan Singh himself in UPA-1.
~80% of India's coal production is by one PSU, Coal India Limited. ~10% is by other PSUs, and ~10% by the private sector. Therefore, a Union minister has a decent amount of power to influence things.
(BTW, it is misallocation to that 10% private sector that was the cause of the Coalgate scam (whose highlights among other things were Baidyanath Ayurvedic Company gaining vast coal leases, and 85-year-old N.D. Tiwari's madam outing his sexcapades with teenage girls). As usual, the EIA has some excellent visual aids to help understand this sector: http://www.eia.gov/todayinenergy/detail.cfm?id=22652
A glance at Coal India's annual production amply demonstrates the stellar work Goyal has done:https://docs.google.com/spreadsheets/d/13B4pDuRGpNXfu0Jla6zs8rkqhqayoE3GzTDV8SfN2hE/edit?usp=sharing
Some disaster occurred just after March 2010. Coal India suddenly stopped growing, and except for some statistical sputters, was pretty much in suspended animation for 4 whole years. We don't know what went wrong: bad executive appointments, letting labor unions run amok, stifling supply and distribution chains, maybe all of the above. Goyal has to be credited for reversing this, and taking the company to never-before-seen production rates. Another indicator of his success is that import of coal has reduced 7-8%.
We don't know how much money was spent doing this, but it's clear that a turnaround of this proportion cannot occur by just throwing money at the problem. We actually don't know what he actually did, because the Coal ministry's press releases are very terse and sparse: there have only been 13 releases from the ministry this year, and all have been technical and on-point. It also has some amazing targets: it plans to more than double the output of coal, from ~460 MT/y at the start of the Modi regime to 1000 MT/y by 2020! http://pib.nic.in/newsite/erelease.aspx
-- This is solid stuff: lots of infrastructure investment, lots of jobs, auxiliary development, etc.
(Note how CIL production was quite decent through all of UPA-1. Note also how it responds to chaos of the 90's, to stabilize in Vajpayee's final stint. This one PSU's physical production results seems like it can be the barometer of the health of the nation's government!)Power
Power is a much more complex issue. First of all, the Centre only owns 25% of power generating capacity. The states own 34%, and private parties own 41%. [Page 7 of CEA April exec summary]. This greatly limits what a Minister can do -- often just to act as a conduit between the Finance Ministry and the States, and collecting statistics. In this way, it is similar to the Department of Energy in advanced economics -- where the States pull the load and the Federal govt. simply coordinates. Alas, our nation's entire organizational capacity seems to be insufficient to even fill the centre, let alone have well-managed state PSUs.
Still, some progress has been made. The total installed capacity in India is ~300 GW. Of this, coal-based plants contribute the lion's share at 62% (185 GW). The ministry claims that 30 GW of coal-based capacity has been installed in the last 20 months of Modi's regime. Of course, some of this would have been begun before Modi's time, and only commissioned now. Still, it is a 16% increase over installed coal base, and one can believe that Goyal did move stalled projects along.
The real work, I think, has been done in increasing the capacity factors of the installed base. For example, in UPA-2 many coal plants had very unsteady supply of coal, and actually produced only 30-40% of their installed capacity. Goyal has pushed that to 60%, and wants to push it to 90%. His stellar work in the coal ministry would doubtless have helped do this. This is the hard work of securing supplies, stopping pilferage and raising efficiencies.
In addition, gas-based plants, which contribute ~8% (24.5 GW), face a perennial shortage of gas. There is no domestic gas, and imported LNG has been too costly thus far. Improving supplies to these will help their plant capacities as well.
An insightful EIA comparison of capacity factors for different kinds of plants from across the world: http://www.eia.gov/todayinenergy/detail.cfm?id=22832
There has been some talk of laying new transmission lines, but most of that is unverifiable. Note that transmission lines affect the overall numbers in complex ways: if more lines are laid and more customers are served, but production is constant, the performance numbers in terms of deficits and percentages look worse. These must be viewed system-wide.
There is also quite an active power market, with power sold in 15-minute slabs (96 auctions a day). It has probably been in the work for years, but it's advanced to a degree that even a common man has access to the live market: http://www.vidyutpravah.in
-- note how the power costs shoot up at peak hours
As a result of all this work, India as a whole has had record low power deficit numbers. The power deficit was near 10% for much of UPA-2, and only reluctantly lowered to 4.2% in the election year (trying to get fat babus to work). As soon as Modi and Goyal came on, it dropped to 3.6% and then 2.1%, the lowest ever. Per some models, many states might even have a power surplus
in the coming year: http://economictimes.indiatimes.com/industry/energy/power/for-the-first-time-in-history-india-will-not-have-power-deficit-situation-in-fy17/articleshow/52562666.cms
(Note: power surplus is measured with the transmission infrastructure in place. If a district consumes only 10 MW because it is very backward, 11 MW production would be counted as a 'surplus' of 1 MW even when all people are in the dark)
Of course, overall power surplus does not mean uniform power surplus: remember that states own 34% of the generating capacity and private parties 41%. The power-deficit states may choose to not buy power from outside, because doing so would open up markets and expose subsidy schemes, handouts and corrupt state electricity companies. Karnataka for example does not buy power from anywhere -- it prefers to keep its citizens in the dark rather than break its corrupt discoms. The Centre is trying, but it's a tough battle: http://www.firstpost.com/business/rescuing-state-discoms-uday-can-indeed-bring-a-new-dawn-but-will-states-let-it-rise-2502668.html
The power ministry also talks a lot about giving away LEDs. I doubt these will have any use -- like most giveaways, they will simply be sold in the black market. Maybe overall LED use will increase from that, but it'll probably be as some flashy sign in the city, whereas most village folks will continue to use incadescent bulbs. There is a lot of talk of 'village electrification', but there's no way to vet these numbers, so one can't say. Likewise for so-called transparency in reverse auctions, e-bidding etc. They say they're doing a good job, but there's little to substantiate it.
CEA Exec Summary April 2016: http://www.cea.nic.in/reports/monthly/executivesummary/2016/exe_summary-04.pdf
(note the crappy graph on page 4 lower half.. what to do sir?).MNRE
The Ministry of New & Renewable resources is the most publicized of the lot: there have been 22 press releases on PIB, and uncountable tweets, news stories and soundbytes shared by Goyal himself, Modi, and many others. Indeed, many people, including me before I spent some time on this, identified Goyal with renewable energies and the many revolutions going on in the area.
At the outset, it is clear why it can be dazzling: Prior to Modi's regime, the ministry was carried by lightweights. The total installed capacity for solar was only 2.3 GW. There was a "Jawaharlal Nehru National Solar Mission" started in 2010 that envisioned touching 20 GW in 2020. The expectation was that it would maybe reach half that if all went well.
Suddenly, a revolution started in solar PV. Prices started plummetting post 2010: prices nearly halved, efficiencies rose, and auxiliary equipment became cheap and reliable. No one in MMS' cabinet cared -- how could they, with all the scams.
Enter Modi and Goyal. They declared that India would have 100
GW of solar TIC by 2020, FIVE TIMES the original ambitious target, and FORTY times what was installed thus far. This was a HUGE bet that prices would continue to drop, and probably a very wise one. In addition, plans were announced for 75 GW of other renewables. Considering that the TOTAL installed capacity when Modi entered was just 245 GW, he was proposing that by the end of his term he would add 175/245 = 71% of the ENTIRE CAPACITY OF THE NATION EVER BUILT, IN RENEWABLES ALONE. HOLY COW! And by every measure, they were doing it smartly: no over-centralization, lots of private sector stimulation, lots of internet-based procedures, etc. What was not to fall in love with?
The cracks to start to appear only when one probes deeper. It is not correct to compare total installed capacity of different kinds of generating plants. All that a nuclear, gas or coal plant needs is steady supply of good fuel -- and if it can be ensured, recorded
capacity factors have been nearly 90%. So if a 100 GW of nuclear installed capacity is added, one can reasonably expect it to provide 90 GW baseload for decades.
Not so with solar. The best
achieved capacity have been 20-25%, that too in highly favorable conditions (Deserts, high insolation, low-maintenance environments...). In many places, 10% is hard to get. If we're very generous and accept 20% for India, this 100 GW installed capacity only generates 20 GW in reality -- less than 8% of the actual generated energy mix when Modi came in, certainly not 71%. When measured in 2020, It's going to be an even lower number because conventional installed capacity (with high capacity factors) will grow quietly. It is not sexy at all.
And at what cost? The central government's planned subsidies alone are $100 B, or Rs. 6 lakh crore. All this to add 8% to the 2014 mix? If the same amount was spent on coal or nuclear, we could add 3-6x more capacity. One may make the environmental argument, and that's a separate discussion (where are the solar modules manufactured, land use, lifecycle toxicity, etc.), but an important economic decision is being made and I don't believe the options have been made clear.
As with most government programs, the costs don't end with capital. many state governments have agreed to buy power from these plants at anywhere between Rs. 7 - 15 per kW-hr. This, when the market clearing prices are of the order of Rs 1.5-2.5 per kW-hr. The Centre subsidizes this. http://www.vidyutpravah.in/
On top of this, the "entrepreneurs" setting up these plants are getting sweet loans from PSUs.
So if only you had a piece of dry land, you'd apply to set up a small power plant in one of these auctions. If you got lucky, you'd land a 20-year contract where the state government promises Rs. 7 / kW-hr, when in fact it could get it from else where at Rs. 1.5. You would then go to the bank, which would offer you Rs. 15 crore as loan. You would then buy the components from China, assemble them, and start selling power. You pay back the loan from the money you get from the government -- basically, you are a middle man in a futile cycle: your inputs are:
1. PSU loan
2. Guaranteed uptake rate from state govt.
Your outputs are
2. Payback PSU loan with interest to profit PSU
whatever delta goes into your pocket. The output from this futile cycle isn't even relevant -- just 8% of the energy mix. We have 70 years of experience from another such futile cycle, agriculture.Scam 1
: use generators running on subsidized diesel to produce energy that will be sold at guaranteed minimum uptake prices: https://plus.google.com/+MohanKV/posts/4tG9Gu3yGXVScam 2
: Why bother with generating energy in the first place? If a price differential exists between 'normal' electricity and 'renewable' electricity, just buy normal electricity and sell it as 'renewable'. Maybe you'll need to buy a windmill as window-decoration, but it need not even turn one revolution: https://plus.google.com/+MohanKV/posts/gtuHWhP5Muj
If one is serious about setting up large scale solar- and wind-power plants to provide base load(which this government is not, considering that it is all delegated to states and private individuals), one hidden truth is that they have to have a gas or other fossil-fuel backup. If not, the plant can't guarantee an output, and no cash flow can be guaranteed. Would you buy energy from such a plant, or sign a contract with them?
There is also the skills element. With a conventional plant, there is tremendous amount of active employment at all stages, from construction to commissioning to operation. A big power plant is a complex beast, and needs people with specialized skill to work it. This gives a chance for people to develop such skills. As a side result, there is higher education, more professionalism, etc.
In contrast, a solar PV power plant is mostly 'set and forget'. Except for maybe security guards or occasional cleaning/change-outs, there isn't really any skill needed. Running solar PV plants has all the disadvantages of finding a nice oil well in your backyard.Manufacturing
solar-related equipment is another game entirely, and does involve a lot of skill. But that seems to not even feature here.
I'm ignoring some of the smaller developments: better websites, more automation in general, more scrutiny, etc. and also some of the negatives: other avenues to siphon money like power plant insurance, corrupt media, very shallow PR with no solid intellectual backing, etc.
There's an elephant in the room: the net nuclear installed capacity today is only 5.8 GW. That pittance also runs only at 60% capacity factor because it does not get steady fuel (it could easily run at 90%). None of Modi's vaunted phoren trips seem to be bearing fruit yet.
Neither are there any plans to set up more nuclear capacity. It would take 7-8 years, so I have a nasty feeling that the government doesn't care about anything which doesn't bear fruit in 5 years. The ball is entirely in Modi's court -- he holds the DAE.
Nuclear is the only way we can get energy security. Period.
In all this, I am again struck by how much of this is just narrative. Pick a nice story: 'A renewables revolution!', and bolster that story over time. If enough people find the story compelling and beautiful, your job is done. It doesn't really matter what you actually do -- it's only the story that matters.
All of this is written trusting the statistics of past production. It's one thing to fudge forecasts and predictions: hardly anyone gets them right anyway. But stats of the past, like quantity of coal produced or net power deficit in a past month are harder to fudge, because they show up in different forms in different places. So, I feel somewhat more comfortable relying on them.
However, experience with Indian statistics tells me that even very high level budget statistics and sworn Parliamentary written submittals can have fudges that would embarrass a high schooler forging his unit test marks card for dad's sign. Canonical Upamanyu Chatterjee reference: https://plus.google.com/+MohanKV/posts/XCyRFqzmvV9
Relevant postings by PIB: https://docs.google.com/document/d/1L4Ga-YV2ves5SDDOw2OlGuPNGN55cbAiiK9pywu4dr0/edit?usp=sharing