The cost of electricity: 

The cost of electricity:

Context:

• How can electricity be made affordable, reliable and secure

What are the levels of the cost of electricity?

• The cost of electricity can be divided into plant-level costs, grid-level costs, and other costs
• Plant-level costs consist of capital, operation and maintenance, and fuelling cost
• For nuclear power plants, capital cost is high, but fuelling cost is low
• For coal-fired power plants, capital cost is low, but fuelling cost is high
• The capital cost of solar and wind is continuously decreasing; fuelling cost is nil

What are the factors determine the price of electricity?

• Currently, there is no specific pricing policy assigned to the electricity operators in India
• A distributor buys electricity from a generator and adds transmission, distribution charges and profit (margin) to it
• Also, the complex interactions among various generators connected to the grid system influence the price of electricity

What is the benefit of variable renewable energy (VRE) sources?

• They have nil-fueling cost. Example: solar energy

What are the components of Grid-level costs and the VRE?

• Grid-level costs have several components like grid connection, grid extension and reinforcement, short-term balancing costs, and long-term costs for maintaining adequate backup supply.
• The generators with large capacity based on variable renewable energy (VRE) sources have been connected to the grid in recent times.
• VRE sources demand much higher backup, grid connection and reinforcement costs. This aspect needs attention during policy formulation.
• A grid manager must ensure the balance of variable renewable energy and base-load technologies (coal, nuclear, hydropower etc.) to meet the peak load in the evening when solar power is not available.
• According to the Nuclear Energy Agency system cost of VRE sources is much higher than nuclear and coal.

What are the non-categorized or other costs?

• They include those arising from the influence of electricity generation on health, influence on existing generation capacity due to adding new capacity, cost of accidents, security of supplies and net energy gain for society
• In the Economic Survey 2016-17 (Volume 2), the term ‘social cost of carbon’ was used to represent the economic cost of greenhouse gas emissions
• The survey also adds health costs, costs of intermittency, the opportunity cost of land, cost of government incentives and cost arising from stranded assets
• The survey estimates that the total social cost of renewables was around three times that of coal

What is the way out?

• India needs to cater a policy framework that integrates all low-carbon energy technologies with coal in a manner that ensures reliability and security of electric supply along with affordability and climate resilient development