Letter Paper Int. J. on Recent Trends in Engineering & Technology, Vol. 05, No. 02, Mar 2011
Restructuring Developments and Issues in Indian Power System Shafqat Mughal1, Yog Raj Sood (Senior IEEE member) 2 1
Department of Electrical Engineering NIT Hamirpur India Email:
[email protected] 2 Department of Electrical Engineering NIT Hamirpur India Email:
[email protected] Abstract—In India several technological developments have taken place in the electricity sector, mainly in the regulated framework of coordinated dispatch and distribution systems. There is agreement on the overall improvement in efficiency in the sector, but there is no scientific evidence to directly link technological developments with the deregulation process, but the emerging trends will help in proper flow of power from surplus regions to deficit regions and thus try to bring about a balance in the power sector. This paper gives an overview of restructuring developments taken place in Indian power sector. Besides these developments this paper discusses the issues which are present in the way of restructuring of overall Indian power system. Index Terms— Restructuring, Availability based tariff, Power exchange, Bulk power, Open access
I. INTRODUCTION India’s electricity sector is currently undergoing reform to introduce competition to the market. The reform process began in 1990 but the progress in the subsequent years has been slow. India’s total installed capacity of electricity generation has expanded from 105,045.96 MW at the end of 2001–02 to 150323.41MW at the end of June 2009[3]. The government has targeted a capacity addition of 78577MW in the 11PthP Plan. Prior to 2003 the market was characterized by vertical integration with the state electricity boards forming a monopoly and excessive price regulation. Each state’s electricity board was responsible for generation, transmission and distribution within its own jurisdiction. But the SEBs turned loss making and inefficient. In the wake of the growing power needs and the continuous surplus-shortage situations faced in various parts of the country, the government introduced Electricity Act 2003 for restructuring of the power sector and to introduce competition and increase efficiency [4]. It delicensed generation, recognized trading as a separate licensed activity and introduced open access in T&D. Although there are many agenda for the intended reform, one of the priorities is to facilitate nationwide electricity trading at the wholesale level. Such trading activity is expected to develop an efficient wholesale electricity market in India, which is key to the success of the sector’s reform. An open, transparent market place would reveal the inefficiencies of the current system and encourage competition among generators to improve the sector’s economic efficiency. Moreover the ABT under Indian power scenario has brought catalytic change in the real time operation of system, improved grid discipline and plant utilization [6]. The schedule © 2011 ACEEE
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of generation by state generators and purchase of power from central generating stations have thus acquired a meaning. Any deviation from schedule is to be paid through frequency dependant UI rate. Hence, frequency plays important role in real time dispatch decisions. To harness maximum benefits of ABT, it is necessary to predict frequency at any time of the day. II. RESTRUCTURING DEVELOPMENTS IN INDIA India ranks 5th in the world in terms of total installed capacity; it is one of the lowest in terms of per capita consumption of power. The National Electricity Policy (NEP) stipulates power for all and annual per capita consumption of electricity to rise to 1000 units by 2012.India power development program implementation was opened to private sector participation in the earlier Nineties. Existing power supply utilities had to be restructured. By now most of monolithic public sector utilities (State Electricity Boards/ Corporations) have been unbundled. Non Government electricity supply utilities are now in the field contributing to power generation programs and distribution companies have Higher responsibilities-service parameters include customer satisfaction and ensure cash flows Evolving competitive environment in distribution leading to service beyond tariff collection Legal foundation for emergence of competitive or multi-buyer structure in the Indian Power Sector was laid by the Indian Electricity Act 2003 mandating certain restructuring needed for the purpose. The Act also brought in certain legislation empowering the consumers to have a choice to decide a supplier to take power from with multi-user. This is the basic ingredient of competition. The unbundled single buyer model is essentially a chain of connected monopolies. All generating stations who supply electricity in the state sell to the Transco. The Transco in turn procures all electricity that needs to be supplied to end consumers. The discoms can purchase their requirements only from the Transco and consumers in each of the discoms have no choice but to buy their electricity supply from the local distribution company, which has the monopoly to serve in that area. Although the single buyer model could have at best been a transitory model, it was never clear what the eventual structure the electricity supply industry should aim at. However, what it did achieve was ensure that each function of generation, transmission and distribution received the focus of management as it was a separate entity The total installed capacity in the country as
Letter Paper Int. J. on Recent Trends in Engineering & Technology, Vol. 05, No. 02, Mar 2011 on March 31, 2010 was 159,398.49 MW with State Sector leading with a share of 49.80%, followed by Central Sector with 32 % share and balance 18.20% contributed by Private Sector. The total power available in the country during the year 2009-10 was 771.551 billion units as compared to 723.794 billion units during last year, registering a growth of 6.6%. The sector wise and fuel wise break-up of generation for the year 2009-10 is detailed as under:
*Bhutan Import. Source: CEA’s Reports Although the State Sector accounts for 49.80% of installed capacity, its contribution to national generation is only 45.14%. Central Sector utilities have better performing stations as compared to those of State utilities and contribute 42.03% of nation’s generation with a share of 32% in installed capacity. III. ELECTRICITY ACT 2003 The Electricity Bill 2003, approved in Indian Parliament in May 2003, aims to enhance the scope of power sector reforms. This act consolidates all the existing laws and introduces provisions with respect to new developments in the sector. It focuses on creating competition, protecting consumer interests, rationalizing tariff, etc. All the necessary powers including issue of licenses are given to the regulators which are made independent entities from the government. Some of the major provisions of the Electricity Act are: 1. Generation has been delicensed and captive generation is being freely encouraged and permitted. For hydro projects, an approval of the State Government and clearance from the Central Electricity Authority (CEA) [5] are needed to check the safety aspects and optimum utilization of water resources. 2. Provision for private transmission licensees has been made in this act. 3. Distribution licensees are free to undertake generation and generating companies are free to take up distribution licensees. 4. For rural and remote areas stand alone systems for generation and distribution would be permitted. This provision seems to be aimed at encouraging Captive Power Plants (CPPs) and Distributed Generation (DG). 5. For rural areas decentralized management of distribution through Panchayats, Cooperatives, etc. would be permitted. 6. Regulatory Commissions are authorized to issue a license for power trading and they will fix up the upper limit on power trading margins © 2011 ACEEE
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7. An Appellate Tribunal has been created for disposal of appeals against the decision of the CERC and State Electricity Regulatory Commissions (SERC) so that there is speedy disposal of such matters. The SERC is a mandatory requirement. IV. NATIONAL ELECTRICITY POLICY The National Electricity Policy aims at laying guidelines for accelerated development of the power sector, providing supply of electricity to all areas and protecting interests of consumers and other stakeholders keeping in view availability of energy resources, technology available to exploit these resources, economics of generation using different resources, and energy security issues.The National Electricity policy aims at achieving the following objectives: · Access to Electricity-Available for all households in next five years · Availability of Power-Demand to be fully met by 2012.Energy and peaking shortages to be overcome and adequate spinning reserve to be available · Per capita availability of electricity to be increased over 1000 units by 2012. · Minimum lifeline consumption of 1unit/household/ day as a merit good by year 2012 · Financial Turn around and commercial viability of Electricity sector · Protection of consumer’s interests. The Section 3 (4) of the Act requires the Central Electricity Authority (CEA) to frame a National Electricity Plan once in five years and revise the same from time to time in accordance with the National Electricity Policy. Also, section 73 (a) provides that formulation of short-term and perspective plans for development of the electricity system and coordinating the activities of various planning agencies for the optimal utilization of resources to sub serve the interests of the national economy shall be one of the functions of the CEA. V. THE ABT MECHANISM ABT has been applied in Indian power sector since 2002 and is able to maintain the grid frequency within the specified range of 49.0-50.5 Hz without any single instance of grid failure since then [5]. Indian power system operates as a loosely connected pool regulated by Indian Electricity Grid Code (IEGC) that allows such lose control of frequency [6] ABT has since implemented in various regions of the country as under: Western Region: w.e.f. 1st July, 2002 Northern Region: w.e.f. 1st December, 2002 Southern Region: w.e.f. 1st January, 2003 Eastern Region: w.e.f. 1st April, 2003 ABT comprises of three components: A. Capacity charges This component represents the fixed cost and is linked to the availability of the plant, i.e., its capability to deliver MWs on a day-by-day basis. The total amount payable to the generating company over a year towards the fixed cost would
Letter Paper Int. J. on Recent Trends in Engineering & Technology, Vol. 05, No. 02, Mar 2011 depend on the average availability of the plant over the year. In case the average actually achieved over the year is higher than the specified norm for plant availability the generating company would get a higher payment. In case, the average availability achieved is lower the payment will be lower, hence the name Availability Based Tariff. B. Energy charges Energy (variable) charges shall cover fuel cost and shall be worked out on the basis of paisa/KWH on Ex-bus energy scheduled to be sent out from the generating stations as per the following formula: Energy charge=Rate of unitScheduled Generation
VII. POWER EXCHANGE MECHANISM CERC currently permits the purchase and sale of electricity on a day ahead market basis through exchanges. The Indian markets are based on the auction trade mechanism where bids for the purchase and sale of contracts of one hour duration that cover all 24 hours for the next day are collected by between 10am and 12am. The model adopted by the power exchanges in India is based on that of the Nord pool market. The Indian power market is divided into 10 separate bid areas which have different prices in case the unconstrained electricity flow between biding areas exceeds the available transfer capacity. Flow chart of power exchange mechanism is shown in fig (3)
C. Unscheduled interchange (UI) charges Variation in actual generation /drawal and schedule generation / drawal shall be accounted for through Unscheduled Interchange (UI) charges. UI for generating stations shall be equal to its actual generation minus its scheduled generation. UI for beneficiaries shall be equal to its actual drawal minus to its total scheduled drawal. UI shall be worked out for each 15 minutes time block. VI. ISSUES WITH ABT There is not an iota of doubt that ABT has tackled many major problems in the power system of the country, yet there are many issues which need to be addressed by this tariff system to evolve as one of the finest and important step towards the deregulation of power sector of India Some of the important issues that need to be addressed by ABT are: What happens to the schedule and UI charges in instances of the grid disruption beyond the control of generators and consumers? It is very difficult to determine the availability of generation since it is dependent on sources of generation. Moreover in case of hydro and wind stations availability of generation may not be accurately predicted since the sources of generation are variable. This causes problem in the determination of capacity charges Plants commissioned at different times tend to vary a lot in the efficiency of generating units. Since revenue for the generating unit varies considerably with the efficiency, old plants are at the disadvantages. The investment required to bring them at par with new plants may not be justified by the professed returns. Generator may overstate or understate their availability under ABT regime as the recovery of fixed charges is linked to availability. The unscheduled interchange due to transmission constraints (i.e., due to break down of CTU lines) are not properly defined in ABT scheme. Validated software must be provided for checking the correctness of the regional accounts prepared by RLDC and also for the accounts prepared by constituents, which are to be passed on to their Discoms. To accelerate the process and bring about a complete transformation, a new transparent system is required to cause a paradigm shift in the electric industry in India. © 2011 ACEEE
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Fig. 3- Flow chart of power exchange mechanism
The power exchanges provide a fair and transparent mechanism for efficient price discovery of the power traded. The trading system is based on an auction mechanism and is divided into multiple sessions meant for sell, buy, trade matching and price revision, which provides bidders with sufficient time and information to plan their bidding strategy. It Performs activities of schedule coordination, settlement handling and physical delivery, under a single roof and further assists in creating deep and liquid market on hourly basis for any size of bid. They also eliminate credit risk by performing the role of a counter party to all trade. A new trend that is emerging is that the existing generation companies have reduced their long term power sale commitments from 90-100% to 75-80% and sell the remaining 20-25% through the open market which provides them better returns thus improving their financial position. Power exchanges act as a catalyst for efficient transfer of power at fair and transparent prices using open access. In FY 2006-07, short term market size was worth Rs.7200 cr and it is expected to increase about Rs. 40000 cr in coming five years.
Letter Paper Int. J. on Recent Trends in Engineering & Technology, Vol. 05, No. 02, Mar 2011 VIII. PROBLEMS CONFRONTING RESTRUCTURING OF POWER SYSTEM The achievement of increasing installed power capacity from 1362 MW to over 100,000 MW since independence and electrification of more than 500,000 villages is impressive. However, it is a matter of concern that the annual per capita consumption, at about 350 kWh is among the lowest in the world. Still many households in a large number of villages have no access to electricity. The major reasons for inadequate, erratic and unreliable power supply are: Inadequate power generation capacity. Lack of optimum utilisation of the existing generation capacity. Inadequate inter-regional transmission links. Inadequate and ageing sub-transmission & distribution network leading to power cuts and local failures/faults. Large scale theft and skewed tariff structure. Slow pace of rural electrification. Inefficient use of electricity by the end consumer. The industrial customers still face problems pertaining to accessing their choice of suppliers due to the restrictions (such as invoking Section 11/108 of Electricity Act 2003) imposed by several state governments / SLDCs citing shortages or non – availability of transmission infrastructure. Despite the domestic capacity additions planned by Coal India Ltd, the sector is expected to remain increasingly dependent on coal imports forcing several domestic players to scout for overseas fuel linkages / coal assets for assured supplies. Hydro power projects are expected to face risks on account of factors such as political and environmental protests, delay / cancellation of environmental clearances, delays in land acquisition, poor infrastructure, tunnelling delays, geological surprises, contractual and procurement issues, shortage of skilled man power, difficulties in evacuation of power, etc. In recent times, there have been problems pertaining to evacuation of power in case of generation projects who are unable to identify beneficiaries / tie up transmission through Bulk Power Transmission Agreements (BPTAs) leading to uncertainty in planning / investment in transmission line augmentation (associated transmission system) by transmission utilities / licensees
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IX. CONCLUSION Indian power sector is undergoing reform to introduce competition to the market.Although the fundamental goal of electricity sector reform is to increase efficiency, it is not yet clear how best to achieve this goal. As a matter of fact, there exists diversity in the operation of the wholesale electricity market. No doubt a lot of restructuring developments have taken place in India, but there are still many issues and problems related with it. The need is to identify them and correct them as much as possible. X. REFERENCES [1] Newbery D., Regulation of the Electricity Sector: Comments on Some Alternative Models, presented in the International Seminar on Restructuring and Regulation of the Electric Power Sector, Buenos Aires, Argentina, 1995. [2] Hunt, S. and Shuttleworth, G., Competition and Choice in Electricity (England: John Wiley and Sons, 1996). H. Poor, An Introduction to Signal Detection and Estimation. New York: Springer-Verlag, 1985, ch. 4. [3] Ministry of Power, Government of India Website (http:/ /powermin.nic.in). [4] The Electricity Act 2003.Constitution of India. [5] Central Electricity Regulatory commission (http :// www.cerc.gov.in) [6] Bhanu Bhushan, “ABC of ABT_A Primer on Availability Tariff”, 2005 [7] Central Electricity Authority of India Website (http:// www.cea.nic.in). [8] M. Shahidehpour, M. Alomoush, Restructured electric power systems: Operation, trading and volatility, New York: Marcel Dekker, Inc., 2001. [9] “Open Access in Inter-State Transmission”, CERC, ‘Central Electricity Regulatory Commission’, New Delhi, India, Nov. 2003. [10] S.N. Singh, “Market power”, A short term course on Electric Power System Operation and Management in Restructured Environment, IIT Kanpur, India, pp. A57A70, July 21-25, 2003 [11] Sood Yog Raj, Narayana Prasad Padhy and Gupta H.O.”Wheeling of Power under Deregulated Environment of Power System-A Bibliographical Survey”, IEEE Transactions on Power Systems, Vol.17, No.3, August2002, pp.870-878. [12] Christie Richard D., Wollenberg Bruce F. and Wangesteen Ivar, “Transmission Management in the Deregulated Environment”, Proceedings of IEEE, Vol.88, No.2, February 2000, pp.170-195. [13] Fischetti M.A. “Electric Utilities: Poised for Deregulation”, IEEE Spectrum, May 1986, pp.34-43 [14] Lai Loi Lai, “Power System Restructuring and Deregulation, (book), Publisher: John Wiley and Sons, Ltd., New York, 2001. [15] P. Stephenson, M. Paun, “Electricity market trading,” Power Engineering Journal, vol.15, issue-6, pp.277-288, Dec.2001
