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Day2: Fuel supply issues ppt   sunil wadhwa
Day2: Fuel supply issues ppt   sunil wadhwa
Day2: Fuel supply issues ppt   sunil wadhwa
Day2: Fuel supply issues ppt   sunil wadhwa
Day2: Fuel supply issues ppt   sunil wadhwa
Day2: Fuel supply issues ppt   sunil wadhwa
Day2: Fuel supply issues ppt   sunil wadhwa
Day2: Fuel supply issues ppt   sunil wadhwa
Day2: Fuel supply issues ppt   sunil wadhwa
Day2: Fuel supply issues ppt   sunil wadhwa
Day2: Fuel supply issues ppt   sunil wadhwa
Day2: Fuel supply issues ppt   sunil wadhwa
Day2: Fuel supply issues ppt   sunil wadhwa
Day2: Fuel supply issues ppt   sunil wadhwa
Day2: Fuel supply issues ppt   sunil wadhwa
Day2: Fuel supply issues ppt   sunil wadhwa
Day2: Fuel supply issues ppt   sunil wadhwa
Day2: Fuel supply issues ppt   sunil wadhwa
Day2: Fuel supply issues ppt   sunil wadhwa
Day2: Fuel supply issues ppt   sunil wadhwa
Day2: Fuel supply issues ppt   sunil wadhwa
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Day2: Fuel supply issues ppt sunil wadhwa

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Day2: Fuel Supply Issues PPT - Sunil Wadhwa

Day2: Fuel Supply Issues PPT - Sunil Wadhwa

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  • The All India average auxiliary power consumption by the thermal stationsduring 2011-12 reduced to 8.44% from 8.49% during 2010-11. (Source: CEA)
  • The All India average auxiliary power consumption by the thermal stationsduring 2011-12 reduced to 8.44% from 8.49% during 2010-11. (Source: CEA)
  • Transcript

    • 1. Fuel Supply Issues: Risks & Mitigation Measures The 14th Regulators & Policymakers Retreat Goa, India August 1-4, 2013 Sunil Wadhwa CEO, IL&FS Energy Development Company Limited
    • 2. Contents Background1 Fuel supply Issues/ Risks2 2 Risk mitigation measures – for discussion3 2 Summary4
    • 3. Overview of the Indian Economy • India’s economy grew at an average of 7.4% per year for the 5 years to end 2011 – IMF estimates growth rate will remain above 6% per year for the 5 years to end 2016 • India’s fast growing economy driving increasing demand for power – 4th largest energy consumer in the world – To meet this demand, India’s annual electricity generation grew by over 70% in 2002 -12 • A fragile rupee is likely to contribute to the rising import bill of the country thereby resulting in increase in the Current Account Deficit. India recorded a CAD of 18.10 USD Billion in the first quarter of 2013. 3 3
    • 4. India Energy Mix • India’s primary energy consumption increased 2.5 times global average in the last decade [India CAGR: 5.9%, global CAGR: 2.5%] • During same period, India transitioned from being world’s 7th largest primary energy consumer to 4th largest • While oil is the world’s largest primary energy source, coal is the dominant source of energy in India. • The share of natural gas is significantly lower than the global average, primarily due to supply side constraints. 4 4 Coal, 53% Hydroelectricity, 5% Natural gas, 10% Nuclear energy, 1% Oil, 29% Renewables, 2% Coal, 30% Hydroelectricity, 6% Natural gas, 24% Nuclear energy, 5% Oil, 34% Renewables, 1% INDIAWORLD Rising Primary Energy Consumption (% y-o-y growth) Primary Energy Mix – World and India, 2010 Source: BP Statistical Review, 2011 Source: BP Statistical Review, 2011 -4% -2% 0% 2% 4% 6% 8% 10% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 World India Linear (India)
    • 5. India Energy Scenario – Demand 5 5 Trends in Consumption of Conventional Sources of Energy in India Source: Ministry of Statistics, GoI, 2013 Year Coal Lignite Crude Oil** Natural Gas*** Electricity* Million Tonnes Billion Cubic Metres GWh 2005-06 407.04 30.34 130.11 31.03 411,887 2006-07 430.83 30.80 146.55 30.79 455,748 2007-08 457.08 34.66 156.10 31.48 510,889 2008-09 492.76 31.79 160.77 31.75 562,888 2009-10 532.04 34.43 192.77 46.51 620,251 2010-11 532.69 37.69 206.15 51.25 684,324 2011-12 535.88 41.88 211.42 46.48 755,847 CAGR of consumpti on from 2005-06 to 2011-12 4.10% 4.71% 7.18% 5.94% 9.06% Source: Ministry of Statistics, GoI, 2013 Note: * Includes thermal, hydro & nuclear electricity from utilities. ** Crude oil in terms of refinery crude throughput. *** off take Use of conventional sources of energy for electricity increasing compared to other uses
    • 6. Snapshot of India’s Power Sector 38% 20% 8% 29% 6% Share of power sector in Total Primary Energy Demand (%), 2011 Power Industry Transport Building Others 779 2648 2730 8012 0 1000 2000 3000 4000 5000 6000 7000 8000 9000 India China World OECD Per capita electricity consumption (kWh/capita), 2011 6 Source: IEA 2011 6 Power sector (38%) highest consumer of primary energy in the country. India’s per capita electricity consumption one-third of the world average. Source: IEA 2011 India’s power demand to double in 10 years Source: CEA
    • 7. Fuel Related Issues – Coal Domestic Coal • Stagnating domestic production • Production from current domestic coal reserves barely sufficient to meet requirement of existing FSAs • Regulations not conducive for private investment in mining • Infrastructure adds further stress on development – railroads, washeries, domestic manufacturing capacity of mining equipment & machinery Imported Coal • Coal imports grew 5 times from 20MTs to 101MTs in the last decade • Almost entire 12th Plan thermal capacity will have to depend upon imported coal • Import dependence [seem imperative] – further surge in fuel imports is likely to strain public and private finances and foreign exchange reserves and widen fiscal and trade deficits • Capacity of importing ports 53% 5% 10% 1% 29% 2% COAL 7 7 0 20 40 60 80 100 120 2000-01 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 MillionTonnes Trends in Net Coal Imports in India from 2000-01 to 2011-12 Source: Ministry of Statistics, GoI, 2013
    • 8. Fuel Related Issues – Gas • Declining domestic production. May boost with new pricing formula. • Infrastructure – lack of integrated national gas grid; southern and eastern parts of the country suffer from lack of connectivity • Affordability will be an issue – power consumer is highly price-sensitive . • City Gas Distribution – lack of adequate gas pipeline infrastructure for bringing gas to city households 53% 5% 10% 1% 29% 2% GAS 8 8
    • 9. Fuel Related Issues – Oil • Import dependence – crude oil imports account for 73% of our total oil consumption in 2011-12 • Net imports of crude oil more than doubled from 74MTs to 172MTs in the last decade • Pricing – current subsidized pricing structure does not incentivize consumers for prudent use of fuels, nor does it incentivize the producer 9 9 0 20 40 60 80 100 120 140 160 180 200 2000-01 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 MillionTonnes Trends in Net Crude Oil Imports in India from 2000-01 to 2011-12 Source: Ministry of Statistics, GoI, 2013 53% 5% 10% 1% 29% 2% OIL
    • 10. Fuel Related Issues – Hydro • Long processing time for obtaining statutory environment and forest clearances • Civil society and stakeholder concerns and grievances • Geological surprises • Lack of access infrastructure 10 10 53% 5% 10% 1% 29% 2% HYDRO
    • 11. Fuel Related Issues – Renewable Energy • Transmission & evacuation infrastructure – both expansion and integration issues • Variable and infirm nature of power – requirement of ancillary services like spinning reserves, storage solutions, etc • Inadequate legal backing for RPO/REC mechanisms • Issues with regard to physical fuel in case of biomass and waste 53% 5% 10% 1% 29% 2% RENEWABLE ENERGY 11 11
    • 12. Fuel Related Issues - Nuclear • Technological challenges • Anti-nuclear public sentiment • Long processing time for obtaining clearances • Safety & security – disaster management readiness • Disposal of toxic waste 53% 5% 10% 1% 29% 2% NUCLEAR 12 12
    • 13. Suggested Supply Side Risk Mitigation Measures –Thermal I. Incentivize higher fuel efficiency/PLFs • Current PPAs do not sufficiently incentivize: – Investments in bringing higher fuel efficiencies – Improved PLFs • Need to incentivize more fuel efficient plants and higher PLFs: – Grants from NCEF/VGF mechanism for enabling investments or through market based mechanisms like PAT or White Certificates. – Incentives to generators through better PPA terms – Passing incentive to CIL for exceeding FSA supply obligation – Role of CERC/ SERCs is key here • Penalize low fuel efficiency – Obligate purchase of energy certificates – Cancel fuel linkage below certain SHR, decommission such plants 13 13
    • 14. Suggested Supply Side Risk Mitigation Measures –Thermal II. Encourage acquisition of captive coal mines abroad • Production from current domestic coal reserves barely sufficient to meet requirement of existing FSAs • Almost entire 12th Plan thermal capacity will have to depend upon imported coal. In the coming years, fuel imports are bound to go up • Coal price volatility a big risk 14 14
    • 15. Suggested Supply Side Risk Mitigation Measures –Thermal III. Discoms to take over fuel procurement • Consider domestic coal linkage/ allocations directly to Discom as end retail prices fully regulated • Will also avoid allegations of misuse of mines by private allotees • This would create steady market for large MDOs • Price advantage in collective bargaining by Discoms through an aggregator for coal imports • This will completely resolve the issue of risk allocation of fuel between Generators, Procurers/ Discoms 15 15
    • 16. Suggested Supply Side Risk Mitigation Measures – Renewable Energy I. Make RE projects bankable to help solve thermal fuel supply issues • Enforce RPOs • Use NCE funds to support REC market by purchasing unsold RECs/ trade in RECs support • Increase coal cess if required II. Storage batteries [to convert RE to base-load/peak power] vs. green corridor investments [only solving evacuation problem] 16 16
    • 17. Suggested Supply Side Risk Mitigation Measures – Renewable Energy III. AD to be converted to generation based tax breaks (upfront, but reversible if generation lower than GBI norm – level play with IPP) IV. Hybrid electric vehicles • To absorb infirm RE power during off peak periods • In a way, a substitute for storage systems 17
    • 18. Suggested Supply Side Risk Mitigation Measures – Renewable Energy V. Faster implementation of enabling Open Access Regulations – mitigate counterparty risk for new capacities (given the credit rating of Discoms) VI. Off grid generation Cum Distribution Franchisee framework • Currently off-grid generation sold to consumers at the renewable energy power cost • Subsequent entry of Discoms in such areas will make renewable energy assets stranded • Remote area consumers paying capacity low • Solution lies in treating off-grid generation as Discoms purchase and off- grid distribution as Discom distribution • Consumers to pay state regulated tariff • Difference to be settled between Discom and Distribution Franchisee 18 18
    • 19. Suggested Demand Side Risk Mitigation Measures I. Energy efficiency and demand side management • Super Energy Efficient Program • Smart Grid • PAT • Standards & labels • Energy conservation building codes II. Tariff Rationalization • Tariffs, not cost reflective • Electricity perceived as a social commodity • Majority of electricity demand is price elastic • Cost reflective tariffs will reduce irrational consumption, so will AT&C loss reduction do III. Reduction in AT&C losses will lead to prudence in consumption. • 15% reduction in AT&C losses can wipe out all the deficits 19 19
    • 20. In Summary… I. Supply Side Risk Mitigation Measures • Incentivize higher fuel efficiencies and improvement in PLFs • Producers to share PLF incentives with CIL • Discoms to take responsibility of fuel procurement • Use NCEF to support REC market • Evaluate storage independently & vis-à-vis green corridor investment • Upfront AD benefit to be made subject to generation on prorate basis, reversible if generation lower than GBI norm of 13 Mn. Units • Hybrid electric vehicles • Accelerate Open Access/ Create financially healthy demand for future capacities • Offgrid generation and Distribution Franchisee framework II. Demand Side Risk Mitigation Measures • Energy Efficiency • Demand Side Management • Tariff Rationalization • Effective enforcement against theft leading to prudence in consumption 20 20
    • 21. Thank You 21 21

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