Month: April 2012

Unscheduled Interchange & Issues

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Introduction
Unscheduled Interchange (UI) is the mechanism developed to improve grid efficiency, grid discipline, accountability and responsibility by imposing charges on those who defer from their scheduled generation or drawal. Unscheduled generation and drawal of electricity puts the whole grid and many other electrical equipment in to danger by dumping large fluctuations in frequencies. Unscheduled Interchange is a part of three part tariff put forward by GoI in the name of Availability Based Tariff on 4th January 2000 at inter-state level. A proposal for ABT, as a three-part tariff, was first mooted in the year 1994 in a report submitted by an International Consultant (ECC Report) to the Government of India. The Government then constituted a National Task Force (NTF) as well as Regional Task Force (RTFs) to debate on various issues in the introduction of ABT for bulk power. Based on the recommendation of NTF, Central Government has prepared a draft notification and submitted to Central Electricity Regulatory Commission (CERC) for finalisation. As a result ABT was implemented at different regions at these dates.
Western Region: 1st July 2002
Northern Region: 1st December 2002
Southern Region: 1st January 2003
Eastern Region: 1st April 2003
North Eastern Region: 1st October 2003
What is “Availability” Based Tariff & UI?
Any power plant is having fixed and variable costs, the fixed cost comprise of interest on loan & working capital, return on equity, O&M expenses, insurance, taxes & depreciation. The variable costs are the fuel costs. In Availability Based Tariff these two costs are treated separately. The payment of fixed cost is dependent on Availability of the plant, i.e. whether the plant is available for MW generation or not on a day to day basis. The amount payable to the company as a part of fixed cost depends on the average availability of the plant over the year. If the average availability of the plant over the year is more than the specified norm of the plant, the generator gets higher payment and vice versa. This first component of the ABT is also called as the “Capacity Charge”.
The second part of this ABT is the variable cost i.e. the energy charge which is charged as per the fuel consumption given by the schedule of the day and not on the actual generation. If there are deviations in generation, i.e. if scheduled generation of the plant is 100 MW and the plant generates 110 MW, the energy charge would still be paid for 100 MW of energy generation and the remaining 10 MW will be paid as per the system conditions prevailing during that extra generation. If the grid already

had surplus power when this extra 10 MW was generated and the frequency was above 50 Hz the rate at which this power is sold will be lower and vice versa.
This leads us to conclude that there are three parts in ABT, 1) Capacity charge 2) Energy charge and the 3) Payment for deviations from schedule at the conditions prevailing at the time of deviation. The negative third part would signify that the payment is made by the generator for violating the schedule.
Before ABT& UI
Prior problem in the Indian power sector was not only the shortage of power but also the difficulty in performing grid operations due to acute indiscipline shown by the generators as well as the beneficiaries. The incentives to the generator were linked to actual generator and not on availability. The generators could pump as much power in the grid as they could irrespective of the frequencies and still get acknowledged for the wastage of the valuable resource. The load serving SEBs would compare the variable cost of their generator to the composite cost of the external generator causing a skewed dispatch. The regional grid operators ironically had a horrifying time trying to get generators backed down to protect the turbines of the same generator causing the situation. On the other end the stated utilities could overdraw from the grid even during deficit and still escape creating a chaos and despair all around.
Sharing of Payments by the affected parties
The energy charge to be paid by the beneficiaries to the generating stations would be the fuel cost for the scheduled energy to be supplied during the day and in case the beneficiary draws more power than what was scheduled then he will have to pay for the excess drawal at a rate dependent on the system conditions prevailing at that time. The rate will be higher if the frequency is lower and low if higher.
Important issues concerning UI
 Compatible software requirement: This is the most important issue faced by the management of power systems. Implementation of software which does all the functions of a power system is user friendly and acceptable to all the persons using it is very much important for the implementation unscheduled interchange. The software should be able to compute all the results desired, should be robust to address all regulatory issues and should be modifiable as per all the state regulatory commission requirements.
 Avoidance of Gaming: The provision of gaming have been done away with a view to provide economic disincentive for over injection by a generating station other than hydro stations in excess of 105% of the declared capacity of the station in a time block or in excess of 101% of the average declared capacity over a day. There also are allegations made against this such as the one made by RRVPNL stating that the provisions would encourage generators

to declare less availability and hence should be deleted. To this the CERC replied that this tendency may not be with the intention of earning more UI but with the intention of avoiding paying UI charges. Also, Shri Padamjeet Singh has argued that gaming is going unchecked in several cases of the gas based power plants. This allegation is not accepted by CERC and it has said that it would like to draw its attention to the commissioner’s order in the petition no. 148/2005 dated 06/02/2007 and the various aspects of scheduling and dispatch has been discussed and resolved. A new provision has also been added in the regulation 6 as follows.
“The Commission may, either suo motu or on a petition filed by RLDC, initiate proceedings against any generating company or seller on charges of gaming and if required, may order an inquiry as decided by the Commission. When the charge of gaming is established in the above inquiry, the Commission may, without prejudice to any other action under the Act or regulations there under, disallow any UI charges received by such generating company or the seller during the period of such gaming.”
 Open Access & Wheeling w.r.t UI: ABT is not directly related to open access and wheeling but its third component (UI) has a great relevance. Open Access regulations 2008 issued by CERC says that UI rate can be applied to such open access transaction where ABT based accounting mechanism is not in place. The provision of CERC for open access is as under:
“20.(4) Any mismatch between the scheduled and the actual drawal at drawal points and scheduled and the actual injection at injection points for the intra-State entities shall be determined by the concerned State Load Despatch Centre and covered in the intra-State UI accounting scheme.
Open Access involves two parties one who supply the power and the other who receives, if there is no appropriate framework, disputes are bound to arise in scheduling, energy accounting and commercial settlement. CERC has been reasonably successful in implementing an appropriate platform for foolproof performance of UI.
 Trading of State’s surplus generation: Suppose a generating station is scheduled to give 100 MW of power to the state but the off-peak demand is only 90 MW in this case the generator has an option of either backing down on supply and save on energy charge anyhow by getting the actual payment required for scheduled generation. The other very attracting option is to trade the surplus 10 MW of power to a third party at a market determined rate without backing out the power supply. This option is most viable if the traded price is higher than the energy charge (mostly the case) which the generator would be getting because the generator is anyway paid for the capacity charge for the scheduled generation i.e. 100 MW.

This can also negate the technical problems associated with backing down of the generator and improve the plant’s efficiency.
 Addressing grid disturbance problems: The whole motto of UI mechanism is to get away with the grid disturbance issues faced by Indian power sector. There was very low frequency down to 48Hz during peak hours due to over drawal by the SEBs and a frequency as high as 51Hz during off-peak hours because of not backing down the generation during this period. This was the case for several hours every day. This caused frequent grid disturbance, tripping of huge turbine & generators, transmission & distribution lines and the supply to huge block of customers was affected for several hours in a day. This was because of the type of tariff structure prevailing during that period. The previous tariff was energy tariff rather than power tariff. It was allowing over drawal by the SEBs during peak hours by compensating the same by under drawing during off-peak hours and all the generators got the same rate of return for 24hours irrespective of the system prevalent operating conditions. All the ABT and UI regulations brought by CERC try to negate these effects and the national grid is moving towards a stable path with no black outs.
 Special meters & communication system requirement: According to ABT, UI has to be determined for each 15-minutes time block. This inherently requires metering of power supply and usage on every 15-minutes time block at very interchange points. These meters are required for both inter-state and intra-state constituencies if the same time block is applied to both. As some states already had meters for 30-meters time block a question was raised that UI metering could be allowed for 30 minutes time range for intra-state UI. Corresponding to the same concern raised, a procedure was adopted as an interim arrangement for determination of UI charges for 15 minutes time block from readings given by 30 minutes recording meters. An advanced communication system is also a must requirement for the recorded data’s to be transmitted to the respective load despatch centres for timely decisions to be made. The responsibility of installation, testing and maintenance of meters and the installation of communication facility for the transmission of data rests with STU.
 Application of UI mechanism to hydro stations: Completely different UI regulations have to be adopted for hydro power generating stations because of its very nature and being a peak load supporter. Calculation of availability in hydro power stations is based on capacity index, different from PLF for thermal stations, energy rates of hydro stations, UI mechanism not applicable for hydro during high flow, system of incentive payments; all these and many other issues puts hydro as a completely different subject for UI mechanism. Hydro stations with storage system should produce power only during peak demands and stop the production during off-peak hours. Also, the energy charge for a hydro generating station is nil, but their
generation is restricted by the flow of water. To replace this behaviour of flow an energy charge is included for hydro.
 Interface options: ABT mechanism should provide interface option between the stakeholders to impart benefits of the system to all. ABT interface and complaint meters should be provided at all injection and drawal points as per the CEA’s (Installation & Operation of meters) regulations, 2006. The time synchronization should be done by Global Positioning System. An IT interface is a must for a smooth and transparent operation of UI mechanism which works for grid improvement and maintenance. IT interface would allow/allows access to the data, data storage by all the stakeholders, allows for preparation of reports based on the data’s, tariff calculation can be done by one and all by just putting in the data, different queries of the stakeholders and beneficiaries can be entered and can be entertained upon very quickly. All these beneficial reasons make an Interface system very essential for the implementation of UI mechanism.
Benefits arising from UI implementation: Huge benefits can be incurred by following the UI mechanism of tariff both on the monetary side as well discipline side. Listed are some of the benefits of the UI mechanism.
1. UI is a real time pricing mechanism: UI rate is dependent on frequency signal received by every generator. Each generator then reacts to this frequency change and adjusts their supply to reach a new allowable frequency level. The decreasing returns by the deviations from the scheduled supply/drawal makes each generator/drawer think before deviating from the scheduled supply/drawal. The collective action thus plays a vital role in the game of making the frequency stable at the equilibrium level. This results in a win-win situation for all the stakeholders.
2. UI can be used for Merit Order Despatch: A perfect market is the one which does not have any one player in it who can guide the proceedings of the market. This tells that every player in a perfectly competitive market is small enough and is aware of the market conditions. Each generator is aware of the UI mechanism and in real time the UI rate applies to all the utility transactions. Each utility has its say in the market and no one can undermine its rights in real time mechanism. This tends to dispatch least cost power first than the other.
3. UI increases efficiency of the grid: Grid efficiency is definitely increased by meeting merit order despatch, charging utilities and beneficiaries for deviating from the scheduled supply/drawal, incentive for withdrawing the load during the peak hours etc.
4. Capacity best matched with load by UI mechanism: It tends to match the demand/supply by provision of incentives/disincentives and for the want of generating more revenues.
5. Power exchange along with UI mechanism: The proponents of the power trading market of India say that the lack of investor confidence in the Indian market is due to absence of the organized day ahead market. Lack of transparency is also a big deterrent towards the same. Introduction of UI has supported the development of a trading market and exchanges which serve for day ahead schedule and real time trading by bringing all the consumers and sellers together on a single platform with standardized contracts, trading procedures and bid formats. This would also lead to much transparency in the pricing mechanism and the confidence of investors is bound to increase.
6. Implications of deviating from scheduled supply/drawal known: If the implications of deviating from a law or a rule are well known the crime/violation of a rule can be controlled on a large scale. This is what UI has done to the Indian power industry in a short time and the progress is being continued at a larger pace. Recent amendments have narrowed the frequency to 50.2-49.5Hz and the overall charges payable for over drawal/under injecting at a frequency lower than 49.5Hz has been increased sharply. This would further help in strengthening the grid discipline. As an example, Uttarakhand Power Corporation Limited, due to the rapid industrialization of the state is finding it very difficult to keep pace of power capacity addition with the growth observed. It has paid more than 370 Crores as UI charges in the period April 2008 to October 2009 due to overdrawing from the central grid. This figure in itself acts as a boost towards power sector development.
7. Improvement in grid parameters such as Frequency and Voltage
8. A mechanism for harnessing Captive & Co-generation: If the existing captive/cogeneration facilities are harnessed within the grid the demand/supply gap in the country can be substantially bridged off. This can be done very quickly by stipulating that any injection or drawal by such plants will be paid for as per the frequency linked UI rate.
9. More consumer load can be catered at any time: This is due to the incentives given for reducing the load during the peak hours. Those who don’t have very important use of power during peak load period can shed their load and gain from it. This is very closely related to the Demand Side Management.
10. UI prevents costly damage to electrical & mechanical equipment: Frequency variation is the very cause of damage to electrical equipments and indirectly to the mechanical equipments too. When frequency management is looked in to so deeply the damage to the equipments is also reduced drastically.

Improvements brought about by UI mechanism:
 Grid frequency has drastically reduced from 48 to 52 Hz earlier to 49.5 to 50.5 Hz for most hours in a day.
 The hydro electric utilities are handled in an efficient manner than it was done before.
 States share have acquired a new meaning in the central generating stations and grid discipline is promoted.
 Power deficit states can meet their occasional excess demand by over drawing from the grid and paying the UI charges to the state which has under drawn.
Conclusion:
The UI mechanism has dramatically reduced the problems faced by the Indian power sector in the field of grid management and discipline. It has developed investors’ confidence in investing in Indian power sector by creation of transparent pricing system. UI mechanism in itself supports other reform policies such as open access, demand side management, efficiency, conservation etc. Huge resources of developing India are saved by this mechanism, supporting both over injection as well as under injection depending on the conditions prevailing in the system. It will also be not wrong to say that UI mechanism has alone brought more amount of discipline that could not have been brought by the collective influence of all other reforms. If all the generators participate equally in UI mechanism, it can bring down UI obligation of participants. UI w.r.t demand side management can be brought by implementing intra-state UI mechanism where much work still needs to be done.

References:

– CERC

-Report ” ABC of ABT”

Trading Challenges in Indian Power Sector Scenario

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Power Trading has been a subject of discussion right from the very first day of its existence.Initially,in 2002 when trading was introduced,people who were in to power sector were quite skeptical about its existence in the near future.There has been a number of roadblocks in the path of power trading in Indian power Sector scenario.Some of the major causes about the dilemma about the germination of power trading are low creditworthiness of the distribution utilities,open access restrictions,rising fuel costs,low liquidity in the market etc.

  • The sorrow plight of the DISCOMs is known to everyone who is directly or indirectly related to the power sector.Huge debt of distribution utilities are creating a wider gap between the various development aspects of the Power sector.IPPs and various other GENCOs are not ready to wait for the   over due payments from the DISCOMs.Moreover Traders have not any option to disconnect the supply once the deal has been finalized.Supplying power without ensuring an adequate payment security mechanism is a violation of trading license.
  • Trading margin involves a thin percentage of around 1 % & with the current picture of cash flows of DISCOMs,many traders may exit the business of trading. i.e Working capital of traders > Total capitalization

Limited implementation of Open Access like various states (Tamil Nadu,Orissa etc) are restraining from Open Access (by invoking section 11 of EA 2003)                                                           {Section 11. (Directions to generating companies): — (1) Appropriate 

Government may specify that a generating company shall, in extraordinary
circumstances operate and maintain any generating station in accordance with
the directions of that Government.
Explanation. – For the purposes of this section, the expression “extraordinary
circumstances” means circumstances arising out of threat to security of the
State, public order or a natural calamity or such other circumstances arising in
the public interest.
(2) The Appropriate Commission may offset the adverse financial impact of
the directions referred to in sub-section (1) on any generating company in such
manner as it considers appropriate.}


Imposition of high cross subsidy charges are also coming as hindrance in the roads of Open access implantation.{“Open access means the non-discriminatory provision for the use of transmission lines or distribution system or associated facilities with such lines or system by any licensee or consumer or a person engaged in generation in accordance with the regulations specified by the Appropriate Commission.”}


  • Another problem of large volume of unscheduled interchange (Unscheduled Interchange (UI) is the mechanism developed to improve grid efficiency, grid discipline,
    accountability and responsibility by imposing charges on those who defer from their scheduled
    generation or drawal. Unscheduled generation and drawal of electricity puts the whole grid and many
    other electrical equipment in to danger by dumping large fluctuations in frequencies. Unscheduled
    Interchange is a part of three part tariff put forward by GoI in the name of Availability Based Tariff
    on 4
    th
    January 2000 at inter-state level. A proposal for ABT, as a three-part tariff, was first mooted in
    the year 1994 in a report submitted by an International Consultant (ECC Report) to the Government
    of India. The Government then constituted a National Task Force (NTF) as well as Regional Task
    Force (RTFs) to debate on various issues in the introduction of ABT for bulk power. Based on the
    recommendation of NTF, Central Government has prepared a draft notification and submitted to
    Central Electricity Regulatory Commission (CERC) for finalisation.)

    arising in consideration with ABT.Suppliers and distribution companies are using this as a commercial mechanism nowadays to use this power illegally in literal terms.Appropriate steps are needed to be taken to reduce UI margins below 1% of the total power generated(currently its around 2-3 %)


  • Another road block is the reduction in availability of power from the generating companies in terms of volume.IPPs and captive power producers have taken a back foot in this scenario.
  • Although trading licenses have been issued to no of power traders but in actual terms there are very power traders thereby creating a situation of monopolistic markets.

Solutions Proposed:

  • There is a strong need of power tariff revision in order to address  these issues.Regulators need to more practical while implementing tariff revision steps.
  • More transparency is required in power market including comprehensive information about the fuel availability.
  • Hydro capacity should be ramped to significant levels in order to bridge the demand supply gap of power.
  • Demand predictions should be made at least for four to seven years.

Power trading can ultimately become a tool for efficient power generation in the country.

Capacity addition Challenges to Indian Power Sector

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India being a developing country has put forth various targets that are needed to be achieved in order to become a Competitive Superpower in 2020.(VISION 2020). At present ,Installed capacity of India stands at around 185MU.Targets have been revised time and again by the Indian Government to meet with growing demand.There was a target of adding 78700 MW in last fiscal year,but that target has been revised again to 52000MW.So,Targets are set and then revised time and again to furnish the Political scenario leaving everything regarding power sector in a limbo.There have been many challenges to the capacity addition to the Indian Power Sector.These can be grouped as under:

1) Fuel Concerns
2)Social and Regulatory Concerns
3)Infrastructural Concerns
4) Delay in Financial Closure
The issues can be taken one by one as:-
1) FUEL SUPPLY GAP:

a) Domestic Supply Demand Gap is widening the Fuel shortage in various industries.Nodoubt,The Installed capacity is increasing BUT,there is a big question mark on the Demand Supply Gap.Until Unless this thing is solved,India will not be able to become a Power Honcho.
b)Stringent Environment and forest norms:

Another problem faced by the Indian Power Sector is the Stringent Environment and Forest reforms.In the past year,There have been cases in which Power Plant projects were either cancelled/halted due to non compliance with the environment norms.GO as NO-GO Areas have also come into picture in lieu of environmental norms and regulations.Although to tackle these issues,Special purpose Vehicle(SPV) has come in to picture in case of UMPPs.
c) Land Acquisition Issues:

Land Acquiring has become a major roadblock in the path of setting of Power plants.Although Private Producers are coming with major projects but the main thing that stands as a hurdle is the Land.Generation companies are not getting enough land to set up their power plants.
d) Long term Fuel

Although India is the 3rd largest produces of Coal in the world,still it is in dire straits as far as the Supply of coal is concerned.Last year,Targeted Coal Production was 550Million Tonnes,But it was achieved 533 Million Tonnes and that is only 2 MT Increase as compared to previous year.Moreover,Various regulations have been imposed on the Coal Mining Companies too,Import of Coal has also got a shock as Indonesia,Australia are looking for imposing stricter norms on their Coal Export making the condition more worse for Indian Power Sector.
2) SOCIAL AND REGULATORY CONCERNS:

a) Land Acquisition problems:
Acquiring Land has become as major bottleneck in setting of Power plants.Although,Private as well as PSUs have bigger plans to make India’s installed capacity grow leaps and bounds,But the “Foundation Stone” of Land Acquisition is coming on way due to socioeconomic cause.
b) Water Scarcity for Thermal Projects:
Water being a prime necessity in Domestic as well as industrial use esp. in Thermal power plants has also emerged as a road block to the new Power projects.Water can be termed as “Blood” for Thermal Power Plant.Various Power plants are facing problems due to uneven rainfall conditions and due to social conditions of using river water for power plants.As per analysis,for 1320MW Power plants,it requires around 43 million cubic meters of water per year.
c) Strict Environmental and Forest Clearances:
Getting Forest and environmental has also posed a detrimental effect on the capacity addition of Indian power sector.Number of projects have been brought to a halt due to environmental issues.Already India is ranked high on the pollution erupting countries in the world,therefore deforestation is not allowed.One always like”YOU CAN ELIMINATE THE THINGS FOR SHORT TERM ADVANTAGES/GOALS”.Forests are already on a depleting scale,so Environment ministry is quite dubious of allotting that land for power plants.
3)INFRASTRUCTURAL CONSTRAINTS:

a) Hindrance in obtaining Transmission access:

Having a healthy transmission system has also become a prime necessity in order to commission a power plant.Most of the Land issues come as a road block in the way of Transmission system.Moreover,There is also need to change the archaic Telegraph Act that does not talk about the compensation.Land acquisition is governed by Telegraph Act 1885 which provides for payment of only damages caused due to erection of towers.According to CEA Data,around 120 Power transmission projects have been either delayed or grounded due to various reasons as stated above.
b)Lack of Coal Handling Units:
No Doubt ,the installed capacity is increasing on positive scale,but the Upstream products has got numerous problems.one of which is Coal handling Units.Indian power sector is not sufficient enough to handle coal and thereby fulfilling the demand of the growing India’s power capacity.Lack of efficient systems of Coal handling units are posing a major problems,some of the solutions can be opting for Dust busters to optimize coal usage.
c) Lack of Ash Disposal Facility:
Disposing Ash is also seen as an albatross around government’s neck because,Producers dont have the sole purpose of generating power.Environmental conditions should also be taken into consideration.At present Indian power plants are lacking in this regard to leading to lower capacity addition.
4)DELAYS IN FINANCIAL CLOSURE:

a) Poor Financial Health of SEBs
SEBs(State Electricity Boards) have been bad for past so many years.Some of the problems that are being faced by SEBs is Lower collecting efficient,Power theft etc.According to recent Power Line report,TNEB is having the highest AT & C Losses and quite low collecting efficiency too.There are very few SEBs,which are doing well,still the revenue has become “stagnant” for the past so many years.So untill unless this is revamped in a better way,one cant think of adding more capacity addition to the Indian power sector.
b)Contractual Agreemnet violations including PPAs:
Most prominent case in the hindering of capacity addition is the violation of PPA.There have been a number of projects in which PPA that has been signed between the two parties is not taken as benchmark report to go about it.Companies keep on forcing to revise the PPA.Actually there are two sides of the coin,Input material is getting costly day by day,so it becomes a need for the compny to opt for revised PPA in order to get adequate ROR.
c) Lack of availability of equity and funds:
Banks are not willing to give adequate funds to new players in the market and they are looking for some “guarantee” from their side which banks can take as a base while giving loans.Moreover, Micro finance institutions can’t help bigger power companies which are looking to set large capacity power plants.
Thus,we see there are various bottlenecks that are still coming in the road of capacity addition ,thereby making India devoid of adequate power!!!!!

Education & Training in Power Sector

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Education and Training has become a major aspect in almost each and every industry.Skill Building has become a main instrument in order to push the economy to new heights by leaps and bounds. Although India is the second largest growing economy in the world, but in present time it is in dire straits due to shortage of skilled Manpower in industry. Skilled Manpower is like a “Blood” for industries as if we have good technology available with us but for optimum utilization, one needs to have skilled manpower.

The Working Group on Power has estimated the need for 0.34 million additional manpower (0.26 million technical and 0.08 million non-technical) during the XIIth plan. In order to overcome this problem, National Skill Development Corporation was created in year 2008. According to which, 500 million skilled people has to be created by 2020.Vocational Training Institutes,ITIs,Polytechnics have been set up in various cities to develop skilled manpower. Employee exchange programs should be encouraged on a large scale so that employees should become well versed with the technologies.

Various industries should use a common platform to make well aware other industries in the same vertical in order to eliminate the “knowledge” gap and leading to employee transformation. Like NPTI has open various centres across countries to tackle shortage of skilled Power Plant operators. They are rigorously trained to serve this purpose. Various other industries have also come up with this concept of training and developing manpower like TATA, Reliance, Jindal etc. Various outsourcing organisations like SAMBHAV (Skill Development Organisation) have tied up with industrial honchos. Thus, although there is a dearth of skilled manpower, India is trying to cover up that big gap in order to rise to new level.

Indian Power Scenario

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India being a developing economy has a total installed capacity of around 186GW with contribution from thermal power (65%); hydropower generation (21%) and the rest meager amounts have been covered by Renewable and Nuclear Energy. According to report, India’s average energy consumption is around 750units as compared 2600 units of world. Although India is increasing it s installed capacity but on the other hand losses and other issues are creating another set of problems. An Analogy has been designed beautifully by Mr. Deepak Parekh as “ India’s power sector is like a leaking bucket, in which although installed capacity is increasing but there is a content Demand-Supply gap in Electricity produced to electricity realised.However,India’s Electricity scenario can be broadly studied under the following heads:

Generation

India has a vast of pool of resources to generate electricity like coal, natural gas; hydro, nuclear, renewable sources etc.Country’s Installed capacity addition has made a significant jump from 66GW to 186GW in the last 20 years. There are various major drivers to push for increase in capacity like increasing household income, a rapidly growing economy, increasing industrialization etc.In lieu of Generation part, the focus of India is being shifted from non renewable sources of energy (coal, natural gas etc) to renewable sources of energy (wind, solar, tidal, geothermal etc).NTPC is the largest thermal power producer in the country. Although Hydropower plants have long gestation period but still they find a good source of income for the generators because Hydro power plants payback period is quite less. Hydro has a total potential of around 84000MW at 60% Load factor.Moreover, it’s said that Coal based Power Plants are suitable for base load consumption whereas Hydro Power plants are suitable for peak load consumption. Various big Government companies are involved in Hydro power generation in India like NHPC, SJVNL, NEEPCO etc.Although Nuclear Energy is seen as by far the most robust energy producer as it can meet the growing demand of India as whole, but there are various safety related issues attached with. Renewable sources of energy like Solar, Wind, Tidal, and Geothermal are picking up the heat now and India is taking keen interest in utilizing its vast potential of renewable sources of energy. Steps like JNNSM have been taken to promote solar energy and to make it viable for the consumers. As of Dec, 2011 India has around 22.4GW of Installed capacity of renewable energy.

Transmission

Transmission sector is also doing its part in order to India a self sufficient nation. The motto that was decided earlier as POWER FOR ALL BY 2012 is somewhat on a right track. Earlier whole India was divided into 5 regions like Northern, Western, Southern, Eastern and North Eastern Grid. Then Except Southern Grid, remaining 4 grids were transformed and in to one grid called NEW Grid. Transmission lines capacity have been increased from 400KV to 765KV and now to 1200KVAC line.HCTC (High Capacity Transmission Corridor) has been proposed in various regions In order to distribute power from one surplus region of country to power deficit region. At present, In southern India,HCTCs are taken as a major project as there is power surplus of around 14-16 %.Central Transmission Utility (PGCIL) are taking sufficient steps to increase the transmission capacity of India.

 

Distribution

Third pillar of Electricity is Distribution sector. Healthiness of Distribution also plays an important role in the meeting growing demand of energy consumption of India. Open Access has been allowed to all companies who has greater than 1 MW of requirement. Recently Steps have been taken to eliminate cross subsidy charges in order to motivate the Captive power producers. As Demand Supply Gap is increasing on a gradual basis, there is a need to take these types of steps.

Challenges Facing Indian Power Sector

Apart from the various steps taken in a direction of increasing India’s energy sector, there is a gloomy picture of various challenges as well as shortcomings. The burning challenge which India power sector is facing is Coal crisis. As various restrictions have been put by countries like Indonesia, Australia, it has become an Albatross around India’s neck. Although we are crying for Renewable energy but still around 56 % of the power is being generated from Coal only. Moreover, projects like UMPPs also demand huge coal. Stricter environmental norms, land clearances in clearances are also creating much damage to the projects. Water scarcity for various thermal projects has also come into notice and questions are being raised as natural resources being used to the extent of extinction. In transmission sector, Right of Way (ROW) issues are being germinated. AT & C losses are on a high rise. Poor quality of conductors is being used at some places leading to drop in the efficiency of power which consumer gets at the receiving end. There is a lack of skilled and efficient manpower in various sectors of the India power. In case of SEBs, there is some SEBs, no recruitment has been done for the last 20-30 years and leading to high average age in this regard. In case of Renewable energy, the cost of generation is quite high and that’s why power purchases are quite reluctant to but renewable power. Grid Parity has also been a major issue as far as Non conventional sources of energy is concerned. Import of various Electrical equipments from countries like China has also been major factor in increasing the cost of generation as far as renewable sources of energy is concerned.

The Way Forward

Although There is a gloomy picture of Indian power sector But government is trying it’s hard to take sufficient steps to make it to next level and fulfill the demand supply gap of energy for Indian consumers is concerned. India is taking keen interest in promoting renewable sources of energy especially solar energy and wind energy.JNNSM is the step in the right direction to promote solar energy and the recent competitive bidding of phase 2 of JNNSM is a feather in India’s cap.REC as well as RPO techniques are taken to make renewable energy grow leaps and bounds. In order to improve the health of DISCOMs, franchise model has been proposed in order to improve the financial status of state utilities.Bhiwandi model is quite successful and more steps with the same nature are expected to be taken.APDRP as well as R-APDRP implementation norms have been strengthened by the govenrmnet.Although in states like Tamil Nadu there is some discrepancies, but they are meant to be filled soon. Captive Steps are being taken in the road of Captive coal block mining. Various joint ventures have been made successful in order to promote supercritical technology in case of coal based power plants. Rigorous monitoring of projects at different levels of its commissioning by Ministry of Power, Central electricity authority. Central as well as State regulators are taking sufficient steps in order to reduce the AT & C losses and to increase the billing efficiency of the energy being distributed the state utilities.RRGVY scheme is also taking its upfront and reaching to the consumers by and large. Although various steps are needed to be taken but the Crux of the whole thing lies in only one objective for Indian govt. to be POWER FOR ALL in the near future and thereby making India a super power fulfilling its vision 2020.

Fitch affirms highest grade to RIL’s

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Fitch today affirmed highest grade to Mukesh Ambani-led Reliance Industries’ long-term national rating on the back of the company’s ability to generate robust cash flow from operations and a strong liquidity position.

 

The rating agency has affirmed the company’s National Long Term Rating at ‘AAA’ with a stable outlook.

Besides, the Long-Term Foreign Currency Issuer Default Rating was affirmed at ‘BBB-‘ with a stable outlook and the LT Local Currency IDR at ‘BBB’ with a positive outlook, Fitch said in a statement.

“The ratings reflect RIL’s strong business profile in the oil and gas business with vertical diversification across the supply chain (upstream, refining and petrochemicals), efficient refining operations and dominant position in the Indian petrochemicals sector,” Fitch said.

Besides, the ratings also reflect RIL’s large scale of operations in key product lines, ability to generate robust cash flow from operations and a strong liquidity position.

The ‘AAA’ national rating denotes the highest rating assigned by the agency and is assigned to issuers or obligations with the lowest expectation of default risk.

‘BBB’ denotes a moderate default risk.

Fitch said the upstream earnings before interest taxes declined in fiscal 2012 and is likely to fall further in the short term, owing to fall in natural gas production at Krishna Godavari (KGD6) block since FY11 and the sale of RIL’s 30 per cent stake in its 21 Indian oil and gas blocks to BP Plc.

However, after the Reliance-BP deal, RIL raised USD 7.2 billion, thus “substantially increasing its cash reserves and eliminating any immediate credit concern from falling cash generation from its Indian upstream operations,” it said.

Furthermore, RIL will likely benefit from increased production from its US shale gas JVs from FY13, Fitch said.

“Although gross refining margins – which reduced to USD9 per barrel in 9MFY12 from USD12.2 per barrel in FY09 – tend to be volatile, RIL has mostly maintained these above global benchmark,” Fitch said.

Expected lower gas production from KGD6 and refining and petrochemical margins in FY13 will lead to weaker cash flows in the short-term. But, RIL is likely to maintain comfortable financial risk profile, driven by its low financial leverage and strong liquidity.

“As the largest private sector corporate in India, RIL has easy access to external financing sources. It also has a strong liquidity position, access to significant un-utilised working capital banking lines and treasury stock holdings,” Fitch said.

Fitch, however, said that it lacks clarity on RIL’s strategy of ramping-up domestic gas production and utilisation of significant cash balances. Besides RIL is also exposed to oil commodity price cycles.