PAT

PAT(Perform, Achieve and Trade)- A Review!

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NMEEE
With the advent of rapid industrialization, India’s energy consumption has increased significantly. According to BP Statistical review of world energy 2014 (http://www.bp.com/content/dam/bp/pdf/Energy-economics/statistical-review-2014/BP-statistical-review-of-world-energy-2014-full-report.pdf) the country’s primary energy consumption increased by 70 % from about 345 mtoe(millions tons of oil equivalent) in 2004 to 595 mtoe in 2013.However the energy mix has not changed much as in present day scenario also, the major source of energy is non-conventional sources of energy.ENERGY MIX
Although there has been significant increase in the share of Renewable sources of Energy, but there is a long way to go for Indian power sector to increase the dependency on RE sources of power. Given the paucity of fossil fuel sources of power generation and their adverse impact on the environment through GHG emissions, it is domineering to formulate the policies that are more related to the sustainable development. The role of Energy efficiency has gained significance in the recent times because ample amount of research as well implementation work has been done at the Generation side of the power sector. The country’s energy conservation potential is estimated at around 23% with industrial as well agriculture sectors having the majority scope of efficiency enhancement. Taking this into account government launched the Perform, Achieve and Trade (PAT) scheme in July 2012, which is aimed at accelerating the energy efficiency in the industrial sector.

PAT-an overview (http://beeindia.in/schemes/schemes.php?id=9)
PAT is the flagship scheme of the National Mission on Enhanced Energy Efficiency (NMEEE) which was launched in 2008.This is a market based mechanism to enhance cost effectiveness of improvements in energy efficiency in energy intensive large industries and facilities, through certification on energy savings certificates (ESCerts) that could be traded. In its first cycle that extends from 1st April, 2012 to 31st march, 2015, PAT covers industrial units in 8 energy intensive sectors which account for around 60% of the India’s total primary energy consumption. The 8 sectors include Power, Fertiliser, cement, pulp and paper, textiles, chlor-alkali, iron and steel and aluminum industries which consumer high energy than the threshold levels thereby raising an alarm bells. The same units have been identified as DCs (Designated Consumers) Under the PAT scheme, these DCs (478 in number) are expected to achieve energy savings of 6.686 mtoe of which more than 80% us expected to come from the thermal plants, iron and steel and cement sectors.
Achievement > Target = ESCerts
•Achievement < Target = Purchase ESCerts /Penalty

PAT Steps: Formulation of PAT Concept has taken place with the advent of following series of steps:
PAT Process
PAT Reporting Requirements: BEE being he nodal agency for the PAT program formulated the guidelines for the PAT scheme after exhaustive workshops and consultations with the industrial players. The data submitted by DCs through various forms is an integral part of establishing the targets. The DCs are also required to follow mandatory reporting requirements for the entire PAT cycle. As a first step, DCs were required to submit the action plan to the respective SDAs (State Designated Agencies) by June 2012 ,which included proposed energy savings along with estimated investments and subsequently the energy savings are replied back with filled Form 1.Meanshile a performance assessment document, Form A to need to be submitted to the SDA and BEE once in three years. After the submission of Form 1 and Form A, the DC is required to hire accredited Energy Auditor (AEA) from the list of BEE-empanelled AEAs for the verification of the forms submitted by the particular industry. A submit of verification Form B is submitted to the SDA and BEE by June 2015.After proof reading the documents by BEE, ESCerts will be recommended by Ministry of Power by August,2015.Trading of ESCerts will be done through Power Exchanges.

Bottlenecks involved: Although we are approaching the 2nd cycle of the PAT scheme, but there has been a couple of hindrances that ate ultimately blocking the path to efficient India. These are:
Diversity of DCs: The biggest implementation challenge is the diversity of DCs in terms of their energy profile, processes and technology deployed as well as their end products. This leads to cumbersome process of settings benchmarks for the various DCs.
Factoring most efficient technologies: In order to bring at par, most efficient technologies need to be accounted too for credible benchmarking.
Lack of Skilled Manpower: It has been observed that there is a dire shortage of skilled manpower in the sector which can lead to the betterment of the energy efficient sub sector in Indian context.
Lack of Energy Accounting Infrastructure: Due to lack of efficient and stable energy management infrastructure, there is a need to step up the morale of the investors in this regard too that is perhaps the first step towards the energy reduction roadmap.
BEE being the nodal agency for the PAT scheme need to very stringent on its guidelines and road map issued to various DCs. Although the scheme is still in nascent stage but if the things are not kept in line at this point of time, then it might defeat the sole purpose of designing the PAT scheme which will lead to sustainable INDIA.
References : CEA,Power Magazines,CERC, BEE and various popular print media concerning power sector.
PAT Booklet – http://beeindia.in/NMEEE/PAT%20Consultation%20Document_10Jan2011.pdf

Recent Regulations/Amendments in Indian Power Sector

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A transparent Regulatory Framework is required for making the sector viable for its growth as well as invoking investor confidence in the sector. To meet the growing expectations of the manufacturers, investors and consumers, CERC (Central Electricity Regulatory Commission) has amended key regulations and issued orders that can lead to the betterment of the power sector. Some of the amendments done by the regulator can be summarized as follows:

Compensatory tariffs Approved: In Feb’14 CERC allowed compensatory tariff hikes for the two major power sector players namely Tata Power’s Mundra UMPP and Adani’s 4620 MW Coal Based Power Plant located in Gujarat.
( http://www.cercind.gov.in/2013/Reports/COMREP_CGPL.pdf) In lieu of the change in regulations of Indonesian Mining (2011)http://www.indonesiamininglaw.com/tag/iup/, the two players objected of suffering high landed cost of coal and thereby leading to loss on the exchequer’s pocket. Since the tariff revision is effective from April 1, 2013, CERC has directed the concerned DISCOMs to reimburse Rs 3.29 billion to Tata Power and Rs 3.89 billion. Some of the state DISCOMs (Rajasthan,Punjab,Maharashtra) have challenged CERC’s order before the Appellate Tribunal for Electricity (APTEL).Reliance also filed the petition concerning its Tilaiya UMPP in Madhya Pradesh. Adani has been allocated Lohara Coal Block for its project which covered around 75% of the coal requirement for the project but that came under the scanner of Ministry of Environment and Forest thereby leading Adani to hunt for alternate sources for fuel. This ultimately led to escalation of its levelised tariff as defined in the PPA.

Tariff Regulations : In feb’14 CERC came with the new Tariff regulations 2014-19,http://www.cercind.gov.in/2014/regulation/reg21.pdf which put forward many changes leading to strong repulsion from the major players in the market:
o Incentives for players have been linked to Plant Load Factor(PLF) as compared to Plant availability factor(PAF) as described in the earlier regulations.
o The base RoE(The amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation’s profitability by revealing how much profit a company generates with the money shareholders have invested) has been fixed on 15.5 % but FGMO,www.srldc.org/var/ftp/FGMO/FGM%20IN%20SR.ppt has been critically linked with it leading to tough times for Generators.
o Provision of PAT(Perform, Achieve and Trade)http://www.performachievetrade.com/ has also been included in the guidelines issues.
o Heat rate norms have been made more stringent for existing as well as new power plants. The factor has been changed to 1.045 from 1.063 (Kcal/KwH)
o The normative annual PAF has been reduced to 83 % from 85 %.
Responding to CERC Tariff Regulations, NTPC moved to courts against CERC mentioning that the PLF based incentive could hit their profitability.

IEGC Amendment: In Jan’14, CERC issued an amendment to IEGC regulations 2010, further tightening the frequency band to 49.9 Hz – 50.05 Hz from the earlier range of 49.7 Hz -50.2 Hz.http://www.cercind.gov.in/2014/regulation/noti18.pdf In addition to sandwiching the frequency range, Grid integrations has also been pushed further with the inter-connectivity of Raichur-Sholapur transmission line. In context with the change in IEGC regulations, Penalty charges related to deviation mechanism of Unscheduled Interchange (UI) has also been revised.

Open Access Regulations: Apart from the changes concerning LTOA (Long Tern Open Access) and MTOA (Medium Term Open Access) in Interstate Transmission Regulations, 2008 , there have been proposed amendments regarding the connectivity of renewable energy projects of 5 MW – 50 MW capacity with the interactive grid.

Power System Development Fund,http://powermin.nic.in/whats_new/pdf/Operationalization_of_Power_System_Development_Fund_Jan2014.pdf : CERC issues PSDF regulations 2014 replacing the earlier PSDF regulations 2010 and intents to push the investments in the transmission sector. The fund will be maintained through a collection of Congestion charges, deviation settlement charges and reactive energy charges. Primarily the fund will be used for capacity building in the transmission sector including installation of shunt capacitors, series compensators, VAR compensators etc.

PoC Tariff Regulations : In Feb’14 CERC issued a draft amendment regarding the sharing of Inter-state transmission charges and losses regulations, which incorporated the PoC methodology of determining the cost and losses to be shared by the users of the ISTS(Inter State Transmission System)

RE Tariff regulations: In Mar’14 the first amendment to the Terms and Conditions for Tariff determination from RE sources regulations were approved by CERC,http://www.cercind.gov.in/2014/whatsnew/SO354.pdf. The amendment aimed to address various issues faced by biomass plants.

NPEX Plan Shelved : In April’14, CERC passed an order withdrawing its permission for setting up the National Power Exchange (NPEX) http://www.pfcindia.com/Content/National_Power_Exchange_Limited.aspx .Promoters of the Exchange i.e NTPC,NHPC,PFC and TCS voluntarily applied for the closure of the exchange.

In the new future, further key orders are expected that will ultimately (perhaps) helps the revival of the sector.