My Take on Power Sector

Rural Electrification- a distant dream !

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Rural_Electrification.jpegRural Electrification has been one of the key focus areas for the current government.The vision of “Power for All” has been shining brightly in the eyes of government and it aims to electrify all villages by May 2018.The following post will look at the current status of Rural Electrification and various initiatives taken by the government to achieve this target.

Meaning of Electrification

As per the earlier definition of Rural electrification “A village is classified as electrified if electricity is being used within its revenue area for any purpose what. so-ever..” However, the definition needs some revision and the overall purview of Electrification is currently amended definition of Electrification as follows :

Thus,as per the above definition it requires only 10 % of the households in a village to be connected for it to be classified as “electrified”. This implies that even if a large number of households remain un-electrified after covering 10%, still the village will qualify to be called as “Electrified”moreover, the definition doesn’t specify the minimum number of hours of electricity supply in the villages.

Initiatives/Schemes in Rural Electrification

Prima-facie, a couple of major steps have been taken by the earlier government and the current government.Some of these are :

  1. Establishment of REC (Rural Electrification Corporation) : REC was established in the 1969 with the objective of providing finance and promoting finance and promoting rural electrification across the country.Its main objective is to finance and promote rural electrification projects all over the country. It provides financial assistance to State Electricity Boards, State Government Departments and Rural Electric Cooperatives for rural electrification projects as are sponsored by them.
  2. RGGVY (Rajiv Gandhi Grameen Vidyutikaran Yojana) It was launched in April 2005 for attaining the National Common Minimum Program  goal of providing access to electricity to each and every household within a period of 5 years.The scheme was to officially end in 2009 ,however, due to non-attainment of the targets, certain allocation were made for the continuation in the 12th plan period (2012 -17). In terms of achieving the targets of lighting up unelectrified villages, the performance was much better in the initial years than in the last three years of the program.
  3. DDUGY(DeenDayal Upadhyaya Gram jyoti Yojana) : In Dec’14, the government announced DDUGY with some modification to the RGGVY scheme already in progress.It aims feeder segregation and strengthening of sub-transmission and distribution infrastructure in rural areas including metering of distribution transformers/feeders/consumers part from electrification of unelectrified villages,household.
    Villages Electrified
    Source :DDUGJY

     

    Current Status

As per the revised targets set by REC vis-a-vis government of India , 2,21,424 villages to be electrified out of which 95,977 have already been electrified ( Dated 20.04.2016 http://garv.gov.in/dashboard ) . Nine states (AP , Goa , Haryana, Kerala,Maharashtra,Punjab,Sikkim and Tamil Nadu) have achieved 100 % of the village electrification.Bihar is the worst performer in terms of household electrification. While 97 percent of the Bihar’s village are electrified, only 12 percent homes have electricity connections.

Targets 31.03.16
Targets of Balance Un-electrified Villages as on 31.03.2016
 Dilemma of Electrified and “Electricity”
As mentioned earlier around 98 % of the total inhabited villages have been electrified in India till dated but only around 64 % of he households have electricity connections. Many institutions have come up with independent research reports targeting the reality checks of the rural electrification program. A recent report by CEEW states in its report namely “Access to Clean Cooking Energy and Electricity, Survey of states” that only 4-5 % of households get supply for 20 hours or more.  This implies that a large part of electrification and energy access are superficial and the same needs to be cross-verified by third party agencies.
Conclusion
The benefits of energy access and security are no doubt immense as the electricity to distant villages has lead to significant improvements in the living standards of the villagers.In impoverished and undeveloped areas, even small amount of electricity have freed up large amounts of human time and effort.With the advent of rural electrification, use of kerosene oil has seen a significant dip in the recent years ,leading to and environment friendly solution.To ensure energy security in rural areas , a strategy needs to be evolved targeting :
  • Location specific technologies like solar,wind,mini-hydel so that target of electrification reach the granular level of society.
  • Technological improvement required at the micro level so that the systems are well maintained over longer duration with requisite maintenance strategies.
  • Last but not the least, there are still so many villages across India which have not experience the word “Electricity” and they are to be helped with utmost priority.
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UMPPs(Ultra Mega Power Projects) – Tangled things!!

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ET102709_indiaMap
Ultra Mega Power Projects(UMPPs- http://en.wikipedia.org/wiki/Ultra_Mega_Power_Projects) ,launched in 2006 has been facing critical issues like fuel availability,escalation in fuel prices,delay in clearances.During the time of signing of PPAs by these UMPPs, developers were unaware of the fact that the fuel prices could escalate by 10-15%.Power developers are seeking a revision of PPAs to allow pass through of coal costs.TATA power has taken the foremost step relating to imported coal price issue in front of CERC (http://cercind.gov.in/2012/rop/Record%20of%20Proceeding%20in%20159%20of%202012%20CGPL%20.pdf)

Projects Awarded till date..
As of now, PFC(Power Finance Corporation) being the nodal agency has awarded 4 UMPPs – Sasan UMPP in Madhya Pradesh( Reliance Power),Tilaiya UMPP in Jharkhand(R Power),Krishnapatnam UMPP in Andhra Pradesh and MUndra UMPP in Gujarat (TATA Power). Mundra and Krishnapatnam is based on Imported Coal from Indonesia whereas Sasan and Tilaiya have been allotted coal blocks.Tariffs were highly competitive striking an average figure of Rs 1.88/unit.

UMPPs awarded (http://saiindia.gov.in/english/home/Our_Products/Audit_report/Government_Wise/union_audit/recent_reports/union_performance/2012_2013/commercial/Report_No_6/Annexures.pdf)
1. Sasan Power Limited, Sasan UMPP, Madhya Pradesh – Rs 1.196/unit
2. Coastal Gujarat Power Limited, Mundra UMPP, Gujarat – Rs 2.264/unit
3. Coastal Andhra Power Ltd., Krishnapatnam UMPP, Andhra Pradesh – Rs 2.33/unit
4. Jharkhand Integrated Power Ltd., Tilaiya UMPP, Jharkhand – Rs 1.770/unit

Mundra UMPP was first to commence its operations with commissioning of 3 x 800 MW units in 2012 and last unit was synchronized in Jan 2013 which were quite ahead of their schedule. CGPL (Coastal Gujarat Power Ltd.) -TATA’s wholly owned subsidiary(SPV) has been incurring losses due to change in the regulatory framework in Indonesia’s coal regime(http://news.mitraismining.com/pages/IndonesianMiningRegulation.aspx)
In July 2012,TATA Power sought a tariff hike in lieu of change in coal prices as DISCOMs refused to revise the PPA terms.In its tariff petition of TATA,it has stated that hike in Indonesia coal prices will lead to rise in generation cost by Re 0.67- Re 0.70/Unit,thereby denting the cash flow statements of TATA Power.Inspite of this deadlock of tariff,TATA Power continue its operations of Mundra while R Power stalled work at the Krishnapatnam UMPP.R-Power held that the operations could start only after the revision of Standard Bidding Documents signed with DISCOMs.Delhi High Court has suspended the petition filed by R Power and thus they have plans to approach CERC.

On the other hand,Sasan UMPP has made the steady progress. The first 660 MW unit is expected to commission by 2012-13.In Jan 2013,465 kV switchyard was commissioned in order to provided initial start up power.R Power has plans to commission the remaining units with a time interval of 3-4 months.As far as Coal production is concerned from Moher and Mpher Almohri,its much ahead of the targeted time frame. R Power is also struggling with legal hurdles w.r.t ambiguity of coal usage.Company was asked to stop production in the aforesaid coal blocks in lieu of R Power’s linking the Coal Scam by CAG.

R Power’s third UMPP Tilaiya has faced many delays due to challenges in obtaining forest clearances and land acquisition. As of Nov 2013,Stage II forest clearance has been awarded thereby keeping the project in limbo.

Progress Report of UMPPs released by CEA can be found at : http://cea.nic.in/reports/articles/thermal/umpp.pdf

Future Scenario!!
The Power Ministry has identified additional 12 sites to set up UMPPs in different states and these are:
UMPPs in Process:
1.Chhattisgarh Surguja Power Ltd., Chhattisgarh UMPP , District Surguja
2.Orissa Integrated Power Ltd., Orissa UMPP, District Sundargarh
3.Coastal Tamil Nadu Power Ltd., Cheyyur UMPP, Tamil Nadu , District Kanchipuram
4.Tatiya Andhra Mega Power Ltd., Andhra Pradesh 2nd UMPP, District Prakasam
5.Deoghar Mega Power Ltd, Jharkhand 2nd UMP, Disrtict Deoghar
6.Sakhigopal Integrated Power Co. Ltd., Orissa 1st Additional UMPP, District Bhadrak
7.Ghogarpalli Integrated Power Co. Ltd., Orissa 2nd Additional UMPP, District Kalahandi
8.Coastal Maharashtra Mega Power Ltd. Maharashtra UMPP, District Sindhudurg
9.Coastal Karnataka Power Ltd., Karnataka UMPP
10.Bihar UMPP
11.2nd UMPP in Tamil Nadu
12.2nd UMPP in Gujarat

Progress on the bidding process of only 2 UMPPs (Sarguja-CHattisgarh and Bedabahal-Odisha) have stalled as the coal block areas have been classified as No- Go areas. by MoEF. Despite the elimination of problem of Go/No Go areas ,the bad omen of clearances still pending with Sarguja UMPP.Bedabahal UMPP re invited pre qualification bids as it has been awarded green signal as far as MoEF is concerned.
MoP has finalized a new set of SBDs for UMPPs but the approval is still awaited from EGoM.The ministry has proposed separate rounds for Coal linkage and Captive coal blocks. Moreover,the bidding of UMPP will be based on first year tariff rather than 25 year levellised tariff.(http://www.powermin.nic.in/whats_new/pdf/Guideline_for_determination_of_tariff_and_SBD_for_case_1.pdf)
Earlier, in Oct 2012 CERC had suggested revising UMPPs on BOO Model rather than DBFOT Model. Moreover,there was a proposal to supply 100% of the coal to the power plants fulfilling the shortage through coal import.
Thus in the light of various issues,the development if UMPPs have been questioned by power plant developers.There is a need to build flexibility within the PPA structure to deal with uncertainties in a manner that is quantifiable for the prospective investors.

References : PFC India,UMPP,Wikipedia,Powerline Magazine

Indian Coal Sector- Some Recommendations

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Coal India and CHinaET052809_indiaAs discussed in my previous post about the sorrow plight of Indian Coal Sector. The demand supply gap of Indian Domestic sector is increasing with each succeeding year (161MT ;2011-12). Under the umbrella of this mismatch between demand supply of Indigenous coal sector ,various recommendations have been put forward which can be summarized as:

Innovation and Technology:

  1. 1.Increase in Coal Production :Today, as the world has already started looking after a ‘sustainable practice’, in any domain and industrial and commercial practices, we really need to start assessing our potential and compare practices in the country vis-a-vis the other parts of the world which are more advanced in the sector. There can be 4 major advantages with the advent of new technology like Higher returns(IRR),Lower environmental degradation, lower per tonne of ore cost and higher production realization. An example of innovation in coal mining is  moving from smaller capacity shovel to bucket sizes of even 25-30cu m capacities depending on factors like mine geology, size of mine etc. having digging capacities of the order of 11,000 MT/hr.
  2. Effective exploitation of resources: Evaluation of mineral resources required typical geological models and various geological technologies and the prospect of getting coal reserves in those particular areas is heavily dependent on the extracted data. As on April 2011

Total coal resource: Proved -114001.60,Indicated- 137471.10,Inferred- 34389.51, Total – 285862.21 .
Due to various limitations of the renewable sector, there is a need to tap our huge coal reserves. As far coal mining is concerned ,most of the mining practices are Open case mines(around 90%) as compared to Under ground mining thereby leading the drop in net coal production in some areas where the coal seam in as below as 90-100KM.Some of the prominent steps that can lead to increase in coal production are Use of proper and scientifically proven mining technology, Adopting the correct mining method (OCM/Long wall/other variants), Combining smaller mining areas to develop these into one single mine of large capacities, Promoting mining industries to have a maximum level of extraction by giving them incentives/tax rebates, Close monitoring by our government agencies in each mining project to crosscheck,the progress of each mining project in terms of percentage extraction,Meeting targets of mining projects not only in terms of production (per annum),but also on per annum level of extraction to match with the overall mineable reserves of a mining project.

     3. Coal Quality Improvements : Indian Coal is characterized by high ash content, low sulphur,low moisture content. Lower washeability index, lower liberalization size. Due to these peculiar problems in Indian coal, there comes the need to go for importing of coal. CFRI(Central Fuel Research Institute,Dhanbad) has proposed some of the methods to improve wash ability index of the coal  like improved froth floatation process, oil agglomeration process, oleo floatation process.(http://eprints.nmlindia.org/5887/1/Chap_9.PDF)

   4. Improving Infrastructure and transport: One of the major issues being faced by the industry for the coal movement within India is transportation and infrastructure. Following are the major challenges being faced in coal transportation:

-Lack of availability of proper transportation mode for produced coal

• Mismatch between the demand and supply of railway wagons

• Lack of infrastructure to support a coal movement at full capacities

Some of the steps to improve the transport facilities and infrastructural requirements in order to compliment the coal industry rather than hamper its progress are as follows:

• Enhanced road connectivity across mineral zones and consumers

• Infrastructure developments driven by PPP

• Restructuring and/or reallocation of railway networks to connect with the coal

bearing areas

• Doubling of railway routes at places where coal movement is higher

• Enhancing port capacities as well as evacuation efficiency and augmenting the

existing capacities from existing ports.

Policies and Regulations: Without relevant policies measures and regulations every step will be of no use. Government has recommended various policy measures in its report of Coal Competitiveness and they can be summarized as follows: 

  • Auction of Coal licenses/ non coal minerals through competitive bidding and thereby leading to a boost In investor confidence.
  • MMDR Bill 2011 guaranteed annuity of 26 % to the local population, thereby increasing the inclusion of host population in the mining process in particular area.
  • Drafting of national sustainable energy framework for mining areas.
  • Thrust on exploration on mineral resources by AMD, GSI, CMPDIL and MECL and classification of mineral resources as per the United Nations Framework Classification (UNFC) code.
  • Setting up of coal regulatory authority that will act as watch dog for coal pricing mechanism in India.
  • Single window clearance mechanism for taking the clearance such environment, land etc.

Above mentioned recommendations and policy regulations if implemented with proper strategy will ultimately transform India from Coal Importer country to Coal Exporter Country in the near future.

References : Report of Indian Chambers of Commerce,MoP,Newspaper Abstracts etc.

Dark Times in India-Northern Grid Failure

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Two Biggest failures occurred in India on Tuesday i.e 30th &  31st July 2012 when more than half of the population went deprived of electrical power. This has given alarming bells to the Indian power sector as this was the second incident back to back in 2 days.

Collapse was already on the way: On Jun 8th, Northern Regional Power Committee has already warned various northern states about the over drawl of power and Grid discipline should be maintained.Two weeks later on May 17th,CERC directed Northern states like Punjab,Haryana and U.P to restrict their usage/drawl within their specified schedule to LDC,therby maintaining the security of grid. But no action was taken from the aforesaid states owing to political interferences and various other factors which will be taken up later.Moreover,NRLDC issued 319 warnings to these states during the period. Haryana, Uttar Pradesh, Rajasthan, Punjab and Jammu & Kashmir were the prominent ones.So, the grid collapse was hardly sudden and states repeatedly ignored warnings knowingly well that under Articles 142 of the Electricity Act, the maximum penalty is . 1 lakh per violation — what a travesty this is.

Well before jumping in to WHY-WHY Analysis lets see how the Grid works:

Grid Management !!

The Power Grid Corporation of India oversees the distribution of power via its transmission network spread across the country. It has 95,009 circuit-km of transmission network, 1,36,358 MVA  transformation capacity and approximately 28,000 MW inter-regional power transfer capacity. India is divided into five electrical regions, namely, Northern (NR), Eastern (ER), Western (WR), Southern (SR) and North-Eastern (NER). Of these, the four zones NR, ER, WR and NER are inter-connected, and form what is known as the New Grid. The Southern zone is synchronously interconnected to the New Grid. (The further division of states is shown in the infographic). Every zone is then responsible for the power needs of the states that fall under it. There is a load dispatch centre in every zone that oversees the transfer of power from the generating plant to the states and further. Depending on the need, every state then buys power and has to adhere to the withdrawal limit.

Owing to the size of our country, and the fact that the power generating plants are scattered across the terrain, we have a very complex power transmission network in place. But its functioning, from power generation to power distribution is more or less the same across all regional zones. In each zone, power from various power plants is subjected to inter-state transmission, wherein the regional load dispatch centres monitor and control its distribution to the various states in each zone as scheduled. The next step is intra-state transmission, wherein the state load dispatch centre allocates power to various areas within the state, and then at local level. (View diagram). The power is generated at very high voltage, but stepped down at each substation.

The Frequency band of 49.5 to 50.2 has been specified by CERC for efficient working of National Grid but still most of the times the Grid is “Under performing owning to terrible conditions of frequency.

The CAUSE:

Missed Targets: India has missed every capacity addition target since 1951, underscoring the urgency behind Singh’s effort to make $400 billion in investments, or 40 percent of the total spend planned on infrastructure, over the next five years, according to Power Secretary P. Uma Shankar, the top bureaucrat in India’s power ministry, Year on Year Targets are being revised as the year proceeds.Likewise in FY 2011-12,Target revision was like 1,00,000MW to 78700MW to 56000MW. Roadblocks to Installed capacity has been mentioned in my another POST already.

Demand-Supply Gap: The average annual increase in demand in India is 75-80 terawatt hours (TWh) per year, up from 50 TWh per year just five years ago. On the other hand, the increase in generation capacity per year does not match this. From 771 TWh in 2010, the capacity to produce power jumped to 811 TWh in 2011. This is leading to an increase in the gap every year. India’s capacity to generate 811 TWh per year — coming from hydro, thermal, gas and nuclear sectors — is 10 per cent short of the demand, and is a mere fifth of China’s capacity.Also, not all of the installed capacity is able to generate power 24 x 7. According to analysis,at any given time,Indian has the capacity to produce 2,05,340 MW.Around 15,000 MW of capacity is lying idle for want of coal or natural gas.According CEA out of 89 Thermal Power Plants, 23 are not running because of shortage of coal. 

Overdrawal :The most possible cause of Grid failure was Overdrawal by Users i.e States from the  National Grid.Generally,States usually contract power purchases a day in advance. Some end up drawing more power than contracted, and are charged a penalty for the additional purchases. When a buyer draws more than its due, the frequency at which the grid operates drops, causing the system to collapse and forcing power plants connected to it to shut down.Ten north Indian power transmission companies and eight electricity dispatch centers had already been censured for drawing more power than their due between Jan. 1 and March 25 and on July 10 the states of Uttar Pradesh, Rajasthan, Punjab and Haryana were ordered by the Planning Commission to cease overdrawals from the grid to maintain its safety.On 30th and 31st July, Overdrawl was above normal and the most alarming condition was w.r.t UP. The states were violating clauses 6.4.8, 6.4.7, 5.4.2 (a) and 5.4.2 (b) of the Grid Code and Regulation 7 of the Central Electricity Regulatory Commission Regulation, 2009, and Section 29 of the Electricity Act. There were 63 instances when the frequency of the northern grid was below the permitted frequency

  • Even after Black out day,States like Haryana and UP are over drawing(Plz see the PSLDC screenshot for 1st August) and frequency graph on the Blackout time is also shown in the figure.
  • Another argument that has been put forward is the over drawl by heavy duty electric water pumps in lieu of saving the crops from scarcity of water.

What Regulations Say!!

A long document has been released by CERC in the year 2010 about the Grid maintenance rules and regulations and the same has been defined in Indian Electricity Grid Code 2005 too. Document can be referred  here. http://www.nldc.in/docs/gridcode.pdf

A Breif Analsysis and Learnings:

This is a grim situation for the Indian Power sector and some solid solutions need to be provided in order to prevent from going in to Black out scenario.

  • Norms that have been laid down by CERC need to be followed more strictly & Just like income-tax tribunals have the power to attach bank accounts of defaulters, CERC should be given more punitive power so that its decisions have the same force as that of a court decree.
  • Free Governor Mode of Operation (FGMO) should be taken in a more serious note.
  • LDC’s should check the demand schedule and thereby maintaining  the system in a streamlined way.
  • States should end the blame game and there is a need of pro activeness from the states in these matters in order to avoid these horrible situations in the near future.
  • Data speaks louder than words. Research by some consulting firms reveals that of the 89,882 MW of private power under development in 2009-10, there was no fuel linkage provided in 57%, construction hadn’t commenced in 91%, there were land acquisition issues in 80% of the cases, financial closure hadn’t happened in 90% and the EPC contract hadn’t been awarded in 86% of the projects. The situation today can, at best, be marginally better. Unless Lord Ganesha drinks milk again, private power development seems to be in all sorts of difficulties and wont kickstart easily.
  • The Electricity Act, 2003, aimed to unfetter the power sector from government control, but the states got bogged down in protests from their own electricity boards, as employees feared privatisation, and held back even basic reforms. Till date, not a single open access has been granted to the private sector under Section 42(2) of the Act.

But first, the discoms will have to be rated, not by handmaidens of the Power Finance Corp but by respected agencies with high credibility. Band-Aid reforms can’t cure cancer in any organ of the body. Cancer requires surgery and chemotherapy, in focused and controlled doses. India’s power sector has been getting Band-Aids as a proxy for bold reforms, whereas what it needs is surgery to complete the process started in 2003 with the introduction of the Electricity Act, which has been wrecked in its implementation.

Reference : Newspapers , Research Paper on FGMO(http://www.itfrindia.org/ICCIC/Vol2/528ICIPCI.pdf,)

CERC Guidelines on Grid Maintenance, Indian Electricity Grid Code.

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”