First smart city builds in Gujarat

India’s push to accommodate a booming urban population and attract investment rests in large part with dozens of “smart” cities like the one being built on the dusty banks of the Sabarmati river in western India.

So far, it boasts modern underground infrastructure, two office blocks and not much else.

The plan, however, is for a meticulously planned metropolis complete with gleaming towers, drinking water on tap, automated waste collection and a dedicated power supply – luxuries to many Indians.

With an urban population set to rise by more than 400 million people to 814 million by 2050, India faces the kind of mass urbanisation only seen before in China, and many of its biggest cities are already bursting at the seams.

Ahead of his election last May, Prime Minister Narendra Modi promised 100 so-called smart cities by 2022 to help meet the rush.

At a cost of about $1 trillion, according to estimates from consultants KPMG, the plan is also crucial to Modi’s ambition of attracting investment while providing jobs for the million or more Indians who join the workforce every month.

His grand scheme, still a nebulous concept involving quality communications and infrastructure, is beginning to take shape outside Gandhinagar, capital of the state of Gujarat, with the first “smart” city the government hopes will provide a model for India’s urban future.

“Most (Indian) cities have not been planned in an integrated way,” said Jagan Shah, director of the National Institute of Urban Affairs which is helping the government set guidelines for the new developments.

Among the challenges to getting new cities built or existing cities transformed is the lack of experts who can make such huge projects work and attracting private finance.

“To get the private sector in, there is a lot of risk mitigation that needs to happen because nobody wants a risky proposition,” he told Reuters, stressing the need for detailed planning.

To build smart cities, India allocated 60 billion rupees ($962 million) in its annual federal budget for the financial year starting April 1, even as it spent just a fraction of last year’s allocation of 70.6 billion rupees, said Shah.

OLD CITIES OR NEW?

Gujarat International Finance Tec-City (GIFT), as the smart city is called, will double up as a financial hub, with tax and other breaks to lure banks, brokerages and other businesses.

Developed in partnership with IL&FS Engineering and Construction, it aims to compete with India’s own financial capital of Mumbai as well as overseas rivals like Dubai and Singapore.

Pressure on India’s existing urban centres is already intense, with cities like Mumbai gridlocked by traffic and hampered by poor infrastructure and a lack of amenities like parks and effective public transport.

Yet some experts believe that building new cities may not be the answer to India’s swelling urban population.

“To address India’s urbanisation challenge we have to start looking at our existing cities,” said Shirish Sankhe, director at consultant McKinsey and Company, India.

He added that new cities would be only a small part of the solution relative to brownfield projects.

India has built planned cities in the past, including Chandigarh, designed by French architect Le Corbusier, and Gandhinagar itself. But the scale of its current push is unprecedented.

A bird’s eye view from atop one of the two office buildings on the 886-acre GIFT site, a venture which began when Modi was chief minister of Gujarat, shows little sign yet of the 9 billion rupees spent on the first phase.

But the sandy plain hides infrastructure including an underground tunnel for utilities, a first in India.

WHAT MAKES A CITY “SMART”?

The government has yet to decide what exactly will make a city “smart”, but the programme is expected to include building new centres as well as adapting existing ones.

A detailed definition with guidelines is due soon, said the National Institute of Urban Affairs’ Shah.

Existing cities like Dholera and Surat in Gujarat, and Visakhapatnam in the east, have already begun work to transform into smart cities with help from companies such as Microsoft Corp, IBM Corp and Cisco Systems.

Beyond GIFT, greenfield projects are likely to face hurdles including land acquisition rights and lengthy approval processes, as well as finding the right location.

GIFT has the advantage of being flanked by a river on one side and a national highway on the other, and also sits between Gujarat’s political capital of Gandhinagar and its business hub of Ahmedabad, with a large international airport.

The key, experts say, is time.

“Physical masterplanning takes time. Complexity is built into this. And my sense is it is probably going to take longer than what most people think,” said McKinsey’s Sankhe.

You need to know about Net neutrality

It is the principle that all traffic on the Internet must be treated equally by Internet service providers. Those advocating Net neutrality believe all bits of data are equal, and, therefore, should not be discriminated on the basis of content, site or user. This has largely been the default mode since Internet started.

NET NEUTRALITY

Net neutrality is a principle that says Internet Service Providers (ISPs) should treat all traffic and content on their networks equally.

How does net neutrality affect you?

The internet is now a level-playing field. Anybody can start up a website, stream music or use social media with the same amount of data that they have purchased with a particular ISP. But in the absence of neutrality, your ISP might favour certain websites over others for which you might have to pay extra. Website A might load at a faster speed than Website B because your ISP has a deal with Website A that Website B cannot afford. It’s like your electricity company charging you extra for using the washing machine, television and microwave oven above and beyond what you are already paying.

Why now?

Late last month, TRAI released a draft consultation paper seeking views from the industry and the general public on the need for regulations for over-the-top (OTT) players such as Whatsapp, Skype, Viber etc, security concerns and net neutrality. The objective of this consultation paper, the regulator said, was to analyse the implications of the growth of OTTs and consider whether or not changes were required in the current regulatory framework.

 What is an OTT?

OTT or over-the-top refers to applications and services which are accessible over the internet and ride on operators’ networks offering internet access services. The best known examples of OTT are Skype, Viber, WhatsApp, e-commerce sites, Ola, Facebook messenger.

India slips in Global Networked #Readiness Index

India has slipped six places to rank 89th on a global Networked Readiness Index, showing a "widespread" weakness in its potential to leverage information and communications technologies for social and economic gains.

While Singapore has replaced Finland on the top of the 143-nation list, prepared by World Economic Forum (WEF), it has called for improvement in India's business and innovation environment, infrastructure and skills availability.

However, India has been ranked on the top globally on a sub-index for competition and affordability.

Overall, India was ranked 83rd last year, and even better at 68th position in 2013.

WEF said India's weakness is widespread, falling in the bottom half of seven of the 10 pillars of the index.

"Major areas that need improvement, according to our analysis, are the country’s business and innovation environment (115th out of 143), infrastructure (115th) and skill availability (102nd).

"The scope for ICT to bring major improvement to the country's overall economic and social development is, therefore, very high," WEF said, while lauding India for a vibrant telephony and Internet market, which has given it top position in terms of competition and affordability.

In the top 10, Singapore is followed by Finland, Sweden, the Netherlands, Norway, Switzerland, the US, the UK, Luxembourg and Japan, which has climbed an impressive six places year-on-year to 10th position.

WEF said the developing and emerging economies are failing to exploit the potential of information and communications technologies (ICT) to drive social and economic transformation and catch up with more advanced nations.

The index also suggests that the gap between the best and worst performing economies is widening. Those in the top 10 per cent have seen twice the level of improvement since 2012 than those in the bottom 10 per cent.

"This demonstrates the scale of the challenge facing developing and emerging nations as they seek to develop the infrastructure, institutions and skills needed to reap the full benefits of ICTs, as only 39 per cent of the global population enjoys access to the Internet despite the fact that more than half now owns a mobile phone," WEF said.

It also said that the progress by the larger emerging markets towards networked readiness has been largely disappointing. The Russian Federation is the highest-placed BRICS nation, climbing nine places in 2015 to 41st.

It is joined in the top half of the ranking by China, which remains at 62. All other members of the group have declined, with South Africa coming next (75th, down five), followed by Brazil (84th, down 15) and India (89th, down six).

Will privatisation help the #Railways?

he Bibek Debroy Committee, which was set up to suggest ways to mobilise resources for the Indian Railways and restructure the Railway Board, has favoured privatisation of rolling stock: wagons and coaches. This has given rise to the impression that private companies will soon be permitted into profitable operations, while the public sector struggles to maintain the required infrastructure.

In his report, Debroy has looked at the railway restructuring experiences from multiple countries, including Japan, the United Kingdom, Germany, Sweden, Australia and USA. He says in these countries, which opened up to competition, the entry of competitors lowered prices and led to better services.

DEBROY’S REMEDY

Link increase in passenger fares to better passenger services Create a separate company for railway infrastructure Open access for any new operator who wishes to enter the market for operating trains Separate suburban services and run them as joint ventures with state governments. Private entry into running both freight and passenger trains in competition with Indian Railways Separation of rail track from rolling stock

In the UK, the privatisation of railways was rolled out in 1993 with the separation of railways into 25 train operating companies which were privatised, separation of infrastructure from operation, and appointment of a regulator which granted licences. "The key lesson from the UK is to retain the rail-track and infrastructure as a publicly-owned monopoly, while opening up rolling stock operations for passengers and freight to the private sector," Debroy has said in his 323-page report.

Thus, he recommends following the key features of various international models with focus on the British experiment to achieve two main aims: changing the institutional structure between the government and the Indian Railways and increasing competition. Most of the other recommendations follow from these.

It has said it is imperative to split the three roles of policy making, regulation and operations. Ultimately, it suggests unbundling Indian Railways into two independent organisations: one responsible for the track and infrastructure and another that will operate trains. It has suggested setting up a company which will own the railway infrastructure.

"Provision needs to be made for open access for any new operator who wishes to enter the market for operating trains with non-discriminatory access to the railway infrastructure and a level playing field," the panel has said. It has also recommended amending the Indian Railways Act to allow the private operators to levy tariff. In other words, instead of being fixed by the Indian Railways, fares will be decided by the market.

A senior rail ministry official says segregation of infrastructure and operations has been done the world over. "It leads to simplification of cost recovery for the money spent by the government in setting up the infrastructure. It would be profitable as the government would charge the operator." He adds that in case the infrastructure becomes profitable, there is no bar on the government to have its own operator in the interest of competition. This is what is happening in container business where the government has its own operator, CONCOR, in addition to 15 other private operators. "The problem is that currently, there is no competition as both maintaining the infrastructure and running the operations are done by the government. Similar segregation has worked well in the aviation sector," he says.

The other side
But the British Railway has its share of critics. In a recent research paper, An illusion of success: The consequences of British rail privatisation, Manchester University scholar Andrew Bowman has shown how rising passenger numbers, increased profits and inflated franchise payments to government enabled the train operating companies to argue that privatisation has been successful and delivered on its promises.

Alongside vague assurances about competition, management freedom and increasing the focus on customers' needs, a significant measurable promise was the (eventual) total transfer of costs and financial risks to the private sector, he said. "The system of rail privatisation set out in Britain has achieved almost the exact opposite. The state has been burdened with the financial risks and costs of the rail infrastructure. Meanwhile, the system of accounting creates artificial profitability in an activity that would otherwise be entirely uneconomic for the train operating companies."

So far, the private sector's participation in railways has been muted in India, compared to sectors like ports, telecom, electricity, airports and roads. Several attempts have been made in the past to involve the private sector in wagon procurement and leasing, freight trains and container operations, terminals and warehousing facilities, catering services, and other rail infrastructure through schemes framed by the ministry.

What are the lessons to be learned from these mostly failed efforts? High costs and lower returns, policy uncertainty, absence of a regulator to create a level playing field, the lack of incentives for investors and procedural or operational issues have significantly restricted private sector participation.

Consider, for instance, the wagon investment schemes. The Own Your Wagon Scheme was launched in1992 to tap the private sector for augmenting wagon supply. Under the scheme, private sector firms could procure wagons either through Indian Railways or directly from approved wagon builders, own them and lease them to the railways. In return, they would be paid an annual lease charge. This scheme was revised and recast as the Wagon Investment Scheme in 2005 and the Liberalized Wagon Investment Scheme in 2008. In 2008, yet another scheme was launched to introduce the concept of leasing of railway wagons. Despite several amendments, these schemes did not achieve success.

The story is similar for Container Policy Liberalization, Special Freight Train Operator Scheme, Automobile Freight Train Operator Scheme, Private Freight Terminals Policy and even the Dedicated Freight Corridor Project.

Rail Minister Suresh Prabhu has chalked out a detailed roadmap for facilitating private participation. The ministry has organised at least three large investor meets apart from overseas roadshows in the past eight months to sell projects worth Rs 90,000 crore.

But is there enough corporate interest? The investor meets hosted by the ministry have been attended by representatives of Reliance Infrastructure, Larsen & Toubro, Siemens, Adani Ports, GMR, Tata Infrastructure, Gammon, Jindal Steel and Power, JSW, Bombardier, GE, Alstom, Electromotive Diesel, Bharat Heavy Electricals, NMDC, HSBC and JPMorgan. Most investors in these meets have complained of a lack of permanence in policy governing privatisation but there is no dearth of interest, according to the ministry.

"Indian Railways have informed us of the new policies that have been finalised. We are keen (to invest) and are watching the developments in railways sector," said an executive of a private company who did not want to be named after one such investor meet recently. He added that there is an attempt to correct the imperfections in earlier policies on private participation.

Empowering the ‪#‎states‬

States are in the news these days. Everybody seems to be worried about how the states should get a better deal from the Centre. In recent weeks, many announcements have been made to show how the government’s new initiatives will result in significant financial gains for the states. Going by such claims, it would appear that it is now time to celebrate a new phase of a fair and equitable fiscal relationship between the Centre and the states. Surprisingly, however, not all states seem to be happy. It is, therefore, reasonable to take a close look at these initiatives and assess how real those promised financial gains are and whether they actually represent a new challenge for governance.

One of the most recent and well-publicised pushes towards ensuring for the states a higher share of central revenues came from the 14th Finance Commission. It recommended that the states’ share in the divisible pool of central revenues should be 42 per cent, up by about 10 percentage points. The National Democratic Alliance government of Narendra Modi accepted it and Finance Minister Arun Jaitley announced with an unconcealed sense of pride that the government had agreed to accept that “unprecedented increase” in devolution, which would “empower states with more resources”.

That was what the finance minister said in his Budget speech delivered in February. Accordingly, the net resources the Centre will transfer to the states and Union Territories during 2015-16 are expected to rise to Rs 8.43 lakh crore, over 23 per cent more than were transferred in 2014-15. That should have thrilled the states. But many of them appeared to be a little disappointed and began complaining. The reasons for this reaction were not clear. What, however, became clear was that even as the government increased the tax devolution to states, it also implemented a new formula for funding major programmes under central assistance for state plans.

What does the new formula do? The Union government has decided to stop funding as many as 12 programmes. For another 13 programmes, the Union government’s funding will be reduced. This will leave 23 programmes that will continue to be funded fully by the Centre. The finance ministry’s argument is that the new funding pattern has to be put in place because of the resources that would have otherwise been allocated for 25 schemes have already been subsumed in the award for resources transfer to states made by the 14th Finance Commission. States will still be left with more resources, and will now enjoy a certain freedom to spend them according to their requirements. But questions of capacity and the ability to frame suitable programmes, resisting populist pressures, and implement them successfully will also have to be addressed.

Some states may have also been disturbed after realising that a higher share in the divisible pool of central taxes has already encouraged the Union government to make some clever tax changes in a manner that the incremental revenue does not become part of the divisible pool. In other words, the states do not get any share in the revenues collected as a result of those changes. Thus, wealth tax, whose collections though small were part of the divisible pool, was abolished and instead a surcharge was levied on the tax to be paid by those earning an annual income of over Rs 1 crore. The surcharge, thus, collected will not be shared with the states. Similarly, the excise duty increases on diesel and petrol, introduced during 2014-15, were replaced by cesses, which again were not part of the divisible pool of taxes.

Another occasion where the Centre talked about its promise of sharing financial resources with the states was the auction of coal blocks, whose allotment in the past several years had been declared illegal and cancelled by the Supreme Court. As many as 33 coal mine blocks have been auctioned in two phases, fetching an estimated Rs 2 lakh crore by way of revenues from auction bid money and royalty. The Centre will not benefit from this exercise financially. The entire auction and royalty proceeds will go to the states, where the auctioned mining blocks are located. The states of Odisha, Chhattisgarh, Jharkhand, Maharashtra and West Bengal will benefit from the auctions that have been concluded so far.

Shouldn’t the states be happy? Well, if you look at these figures a little more closely, you will realise the big bonanza that the Centre is talking about is a gain that would accrue to them only over the next 30 years or the life of the mining blocks. Break that figure down to arrive at the annual gain for the various states, where the mines are located, and the actual gain does not look too big. Yes, of course, it is true that something is always better than nothing. But the revenues from royalty will start coming in only when coal is produced and sold. So a substantial chunk of those revenues would go to the states only when production of coal begins, which may take some time.

The Centre’s promise of a new deal for the states is a welcome development, whatever may be its shortcomings. In a quasi-federal country like India, it is important that the states enjoy a healthy relationship with the Centre and the country’s financial resources are equitably shared by all states. The problem in delivering that promise arises when there is no forum at the Centre where the states and the Centre can meet and discuss how the resources could be shared and spent. Earlier the Planning Commission used to play that role. The National Institution for Transforming India (NITI) Aayog seems to have a structure where there are committees and sub-committees that would have representation from the states to discuss various issues concerning them and the Centre. But there is no clarity yet on whether such forums of the NITI Aayog can discuss financial allocations for the states. There is a need for a clear delineation of that role and whether the NITI Aayog should play it.

#India tops in remittances, receives $70 bn #Remittances to the developing world are expected to reach $440 bn in 2015, an increase of 0.9% over the previous year

The World Bank has said India continues to be the leading nation in remittances, pulling in $70 billion from its global migrant workforce in 2014.

World Bank’s study of remittance, the money workers and professionals working in foreign lands send back to their native countries, attributed this mainly to weak economic growth in Europe, deterioration of the Russian economy and the depreciation of the euro and ruble.

Remittances to the developing world are expected to reach $440 billion in 2015, an increase of 0.9 per cent over the previous year. Global remittances, including those to high income countries, are projected to grow by 0.4 per cent to $586 billion.

United States, Saudi Arabia, Germany, Russia and the United Arab Emirates (UAE) remained the top five migrant destination countries. India, China, Philippines, Mexico and Nigeria are the top five remittance recipient countries, in terms of value of remittances, the report said.

“Total remittances in 2014 reached $583 billion. This is more than double the ODA (official development assistance) in the world. India received $70 billion, China $64 billion, the Philippines $28 billion. With new thinking, these mega flows can be leveraged to finance development and infrastructure projects,” said Kaushik Basu, World Bank chief economist and senior vice-president.

“Israel and India have shown how macro liquidity crises can be managed by tapping into the wealth of diaspora communities. Mexican migrants have boosted the construction sector. Tajikistan manages to nearly double its consumption by using remittance money. Migrants and remittances are clearly major players in today’s global economy,” Basu said.

“Total remittances in 2014 reached USD 583 billion. This is more than double the ODA in the world. India received USD 70 billion, China USD 64 billion, the Philippines USD 28 billion. With new thinking these mega flows can be leveraged to FINANCE development and infrastructure projects,” said Kaushik Basu, World Bank Chief Economist and Senior Vice President.
“Israel and India have shown how macro liquidity crises can be managed by tapping into the wealth of diaspora communities. Mexican migrants have boosted the construction sector. Tajikistan manages to nearly double its consumption by using remittance money. Migrants and remittances are clearly major players in today’s global economy,” Basu said.
In line with the expected global economic recovery next year, the global flows of remittances are expected to accelerate by 4.1 percent in 2016, to reach an estimated USD6 10 billion, rising to USD 636 billion in 2017.
Remittance flows to developing countries are expected to recover in 2016 to reach USD 459 billion, rising to USD 479 billion in 2017, the World Bank said.
The global average cost of sending USD 200 held steady at 8 per cent of the value of the transaction, as of the last quarter of 2014.
Despite its potential to lower costs, the use of mobile technology in cross-border transactions remains limited, due to the regulatory burden related to combating money laundering and terrorism FINANCING, the report said.
International remittances sent via mobile technology accounted for less than two percent of remittance flows in 2013, according to the latest available data.

The Indian diaspora sent home $70 billion (Rs 4.34 lakh crore) in 2014, topping for the seventh year the list of countries receiving money from emigrants, according to data released by the World Bank.

That’s enough to buy India four bullet-train corridors, more than the money the government raised from auctioning 67 coal blocks, and more than the money Indian companies collectively raised from the market in 2014.

The growth rate of foreign currency, however, slowed to 0.6% in 2014 from 1.7% in 2013. The reason, according to the World Bank, could be the appreciation of the rupee against major currencies during the year.

Source: World Bank; Figures in $ billion

Indian remittances have more than tripled over the last decade, from more than $22 billion to more than $70 billion at the end of 2012.

Major inflows continue to be from the United Arab Emirates ($12.63 billion), followed by the United States ($11.18 billion) and Saudi Arabia ($10.84 billion).

Source; World Bank; Figures in $ billion

Around 18% of the $70 billion inflow comes from United Arab Emirates; Indian emigrants in the US contribute 15.88% and those in Saudi Arabia 15.40%.

There are 247 million migrants across the world, larger than the earlier estimate of 232 million. The number is expected to surpass 250 million this year.

Remittances by emigrants to developing countries, including India and China, reached $436 billion in 2014, an increase of 4% from 2013. The forecast for 2015 is moderate growth (0.9%) at $440 billion.

The decline in oil prices has not affected remittances by Indians from Gulf Co-operation Council (GCC) member-countries, World Bank research noted.

“The outlook, however, is uncertain,” said the report. “The substantial financial resources and long-term infrastructure development plans of the GCC countries imply that they will continue to demand migrant workers. However, remittance flows could decline if the oil price were to remain low for a few years.”

The Indian diaspora is about 21 million people, spread across more than 200 countries, including the Principality of Liechtenstein and the People’s Republic of Lao, according to 2012 data, the latest available, of the Ministry of External Affairs.

There are more than 2 million Indians each in the United States and Malaysia. The UAE has about 1.75 millions and Saudi Arabia 1.78 million.

There are a substantial numbers of Indians in Yemen (111,000), Israel (78,000), Iran (4,000), Iraq (9,000), Zambia (20,500) and Zimbabwe (10,500).

Germany proves life with less fossil fuel getting easier

Sitting in a control centre that helps ensure uninterrupted power for 82 million Germans, Gunter Scheibner is proving that renewable energy from the sun and wind can be just as reliable as fossil fuels.

Scheibner, in charge of keeping flows stable over 6,200 miles (9,976 km) of transmission lines in eastern Germany, must keep power from solar and wind in harmony whether it's sunny or overcast, windy or still. In doing so, he's overcoming the great challenge for renewable energy: how to keep supplies steady when the weather doesn't cooperate.

The system Scheibner manages has been so successful thatGermany experiences just 15 minutes a year of outages, compared with 68 minutes in France and more than four hours in Poland. The model in Germany, the biggest economy in the world to rely so heavily on renewables, is being copied from California to China as wind and solar displace traditional fuels such as nuclear and coal.

"Our job has become much more complex," Scheibner said in an interview from the control centre outside Berlin owned by 50Hertz Transmission GmbH, one of Germany's four main grid operators. "It's not an easy mission, and it will cost money. But if you are doing it consciously, then it will be doable. We have already come so far."

Still, the perception of renewable power as a fickle source that must be backed-up by fossil fuels, usually coal, remains. The Edison Electric Institute, an industry group based in Washington, and incumbent producers claim that variable flows from renewables will destabilise the power grid.

Germany's decade-long euro 120-billion ($127.1 billion) investment binge to shift toward low-polluting energy forms is proving critics wrong. The country has raised its share of renewable power for electricity to about 28 per cent, more than any source including lignite. In Scheibner's region, it's more than 40 per cent. When transportation and heating are included, 9 per cent of Germany's energy comes from renewables, triple the US level and six time what the UK uses, according to BP Plc.

Higher concentrations
Researchers studying the grid say that a much higher concentration of renewables - 50 per cent or more - is possible. That will come at a cost. Germany needs to invest euro 6.1 billion a year in its grid by the end of this decade to cope with additional wind and solar farms, the German Institute for Economic Research in Berlin estimated.

"There's a myth among opponents of renewable energy that you need 100 per cent backup spinning all the time, and it's utter nonsense," said Michael Liebreich, founder of Bloomberg New Energy Finance. "Any grid needs flexibility. You can have a nuclear plant shut down by jellyfish or acoal plant closed because of a freeze and you can't shovel in supplies fast enough."

Edison's grid
Traditional grids invented by Thomas Edison draw supplies from a handful of generators fuelled mostly by coal, nuclear and natural gas plants, which can run around the clock. Adding renewables means integrating smaller flows from dozens or even hundreds of plants spread across a wide area, with output that can change from moment to moment.

At the 50Hertz control centre one day late last month, Scheibner was tracking storms that brought snow in the morning, sleet, then short periods of sun as well as gusts of winds that quickly erupted and eased. Mistakes can be costly. An imbalance can lead to brownouts that damage motors and electronics. Power surges can explode transformers and trip circuit breakers.

"We're having some challenging weather," Scheibner said, pointing to a screen showing red bands of storm moving across Germany. "There was a situation in April 2013 when we had a day-ahead forecast of blue skies. The next morning, most of southern Germany was blanketed by fog."

Grid stress
Not everyone is sold on the idea of incorporating more renewables into the grid. Arizona Public Service Co, which supplies power in the US state with the most sunshine, won the backing of regulators to charge homeowners extra fees for solar systems. In Japan, seven utilities have announced limits for how much solar power their grids can absorb.

Germany's network connects four grid companies to 1,315 utilities selling euro 200 billion of electricity a year over 1.1 million miles of lines. The US grid, described as the most complicated machine in the world, draws from 7,000 power plants.

Coal producers and some utilities say intermittent power flows can't replace the reliability of fossil-fuel plants. US grid managers raised concerns that relying on wind, solar and gas alone could stress the grid, according to a November report from the North American Electric Reliability Corporation.

Better batteries
To help smooth out the bumps in renewable supplies, manufacturers are developing a new generation of batteries that can store excess power for when the wind doesn't blow or the sun doesn't shine. Landis+Gyr owned by Toshiba is selling "smart-meters" that will help both consumers and utilities control demand.

Siemens, General Electric and ABB Ltd make grid-control gear and interconnections that link national systems, allowing power from wind and solar farms to be spread over wider regions.

"Very high levels of variable renewable energy can be accommodated both technically and at low cost," said Morgan Bazilian, lead energy specialist at the World Bank.

Renewable energy poses challenges for day-to-day operations and long-term grid development, said Ashley Brown, executive director at Harvard University's Electricity Policy Group.

25 gigawatts
"It makes planning much more difficult," Brown said. "It requires a lot more attention from grid operators."

Reliable estimates on the cost of a more flexible grid are hard to come by. The US grid could absorb as much as 80 per cent of its supplies from renewables by 2050 while keeping investment in transmission within the historical range of $2 billion to $9 billion a year, a 2012 study led by theNational Renewable Energy Laboratory showed.

"In 10 years, we will need to transport 25 gigawatts of renewable power from northern to southern Germany," as atomic reactors in the south are closed, said Scheibner at the 50Hertz centre. "We're in a race against time."