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Andhra Pradesh Priorities: Energy Distribution - ILFS
- 1. Power Distribution Gaurav Bhatiani, Bhawna Tyagi, and Sonali Chowdhry IL&FS Academy of Applied Development (IAAD) Andhra Pradesh Priorities conference Vijayawada June, 19
- 3. • Largest consumer base: 236 million consumers with a connected load of 561 GW • AT&C Losses in India around 24 percent higher than the established international norms • High financial losses (INR 1,121 billion in 2015-16) resulted in inadequate investments and poor quality of supply • Major reason for high losses in rural areas: • Low tension distribution network spread over long distances serving disperse agriculture connections • Andhra Pradesh is exception among other states with AT&C losses of 12.28 per cent in 2016-17 Power Sector
- 4. This is why my topic is important: High Voltage Distribution System Source: GoI and GoAP, 2017; CEA • APDISCOMs started conversion of LT network to HVDS in 2006 • Out of 14.64 lakh agricultural consumers, 8.97 lakh already covered under this system • AT&C Losses at AP currently lower than all India average 24 per cent • Despite lower AT&C losses, accumulated financial losses of the DISCOMs and subsidy burden increased 13.13% 12.88% 12.58% 12.28% 0% 5% 10% 15% 20% 25% 30% FY14 FY15 FY16 FY17 AT&C Losses Andha Pradesh India
- 5. This is why my topic is important: Energy Efficient Pumpsets • Sales to agriculture consumers around 24% and contribution in revenue only 0.47% in 2015-16 • Losses in rural areas higher due to usage of inefficient pumpsets • Subsidy provided by the State Government increased over the years to INR 3,700 crores in 2017-18 • Ministry of Power initiated pilots in East Godavari district replacing 2496 inefficient pumps with EEPS Source: AERC, 2015; 2016; 2017; 2018
- 6. Intervention I High Voltage Distribution System (HVDS) in Andhra Pradesh
- 7. High Voltage Distribution System (HVDS) • Aims to upgrade existing network serving LT agricultural consumer to HVDS • Replacing existing transformers (mostly 100/63 kVA) with smaller capacity transformers (16/25 kVA) close to the consumer load points • Improve voltage profile, reduce LT Line losses, and lower DTR failure and pumpset burn-out
- 8. Key Assumptions and Costs • LT lines are proposed to be upgraded to HVDS • Life of the project: 25 years • Average HVDS transformer capacity: 16kVA (one transformer per pumpset) • Key cost items include: Cost of Conversion of LT into HT lines and Cost of Transformer • Operation and maintenance expenditure same except for change in DTR failure rate • Total investment required : INR 7,147 crore at 5 % discount rate
- 9. Benefits of HVDS Intervention Key Benefits include: • Reduction in AT&C losses • Lower burnout of pumpsets • Reduction in DTR failure rate • Reduction in carbon emissions (Tol, 2018) Benefits INR Crore (5% Discount Rate) Value of Energy Savings 232 Value of Carbon Saving 45 Savings (Reduction in pumpset failure) 18,944 Savings (Reduction in DTR failure rate) 807 Total Benefits 20,028 Source: Author’s Calculation
- 10. Total Costs, Total Benefits and Benefit-Cost Ratio Intervention Discount Rate Benefit (INR Crore) Cost (INR Crore) BCR HVDS 3% ₹ 25,462 ₹ 7,286 3.49 5% ₹ 20,028 ₹ 7,147 2.80 8% ₹ 14,658 ₹ 6,949 2.11 Source: Author’s Calculation
- 11. Sensitivity Analysis Sensitivity Base Case BCR Case I BCR Case II BCR Capex for HVDS 100% 2.80 110% 2.55 130% 2.16 Frequency of pumpset failure in a year 1 2.80 0.5 1.48 2 5.45 Average cost of repairing a pumpset 100% 2.80 125% 3.46 150% 4.13 Source: Author’s Calculation
- 12. Intervention II High Voltage Distribution System (HVDS) and Energy Efficient Pumpsets (EEPS) in Andhra Pradesh
- 13. Energy Efficient Pumpsets (EEPS) • Aim: To replace existing inefficient pumpsets with BEE five star rated efficient pumpsets • HVDS is a pre-requisite as improving quality of supply is critical to ensure that the new EEPS will not burn out same as old pumpsets • Agriculture is a major inefficient user of power due to unmetered supply and zero marginal tariff • Irrigation pumpsets used are generally inefficient with operating efficiency level of 30% or less
- 14. Key Assumptions and Costs • All pumpsets proposed to be replaced in one year • Life of the project: 25 years • Average size of existing pumpsets: 7 HP • Average size of efficient pumpsets: 5 HP • Old pumpsets will not enter farms through grey market • Key cost items include: Cost of Pumpset, Installation Cost and Meter Cost • Total investment required : INR 14,164 crore at 5 % discount rate
- 15. Benefits in HVDS and EEPS Intervention Key Benefits include: • Reduction in AT&C losses • Energy Savings • Lower burnout of pumpsets • Reduction in DTR failure rate • Reduction in carbon emissions (Tol, 2018) Benefits INR Crore (5% discount rate) Value of Energy Savings 17,819 Value of Carbon Saving 5,724 Savings (Reduction in pumpset failure) 18,944 Savings (Reduction in DTR failure rate) 807 Total Benefits 43,294 Source: Author’s Calculation
- 16. Total Costs, Total Benefits and Benefit-Cost Ratio Intervention Discount Rate Benefit (INR Crore) Cost (INR Crore) BCR HVDS and EEPS 3% ₹ 66,200 ₹ 14,439 4.58 5% ₹ 43,294 ₹ 14,164 3.06 8% ₹ 27,916 ₹ 13,770 2.03 Source: Author’s Calculation
- 17. Sensitivity Analysis Sensitivity Base Case BCR Case I BCR Case II BCR Frequency of pumpset failure in a year 100% 3.06 20% 2.29 40% 4.39 Average cost of repairing pumpset 1 3.06 0.5 3.39 2 3.73 Energy saving due to EEPS 30% 3.06 25% 2.52 50% 3.60 Cost of 7.5 HP pump instead of 5 HP INR 37,676 3.06 INR 43,580 2.87 Fixed cost of power purchase (levelized) INR 0/kWh 3.06 INR 1.0/kWh 3.46 INR 1.5/kWh 3.66 Source: Author’s Calculation
- 18. Summary Table Intervention Discount Rate Benefit (INR Crore) Cost (INR Crore) BCR HVDS 5% ₹ 20,028 ₹ 7,147 2.80 HVDS and EEPS 5% ₹ 43,294 ₹ 14,164 3.06 Source: Author’s Calculation
Editor's Notes
- I am going to disseminate findings of our paper titled “Cost Benefit Analysis of Power Distribution and DSM: High Voltage Distribution System (HVDS) and Energy Efficient Agriculture Pumpsets (EEPS) in Andhra Pradesh”
- India’s Power distribution system has the largest consumer base in the world catering to 236 million consumers with a connected load of 561 GW. However, it is also the weakest link in Indian power system due to technical and management inefficiencies in the system. As a result, the financial condition of Discoms and state electricity board is poor. Main reason behind this has been high distribution losses in the system which have resulted in inadequate investments in the system and poor quality of energy supply Currently in India AT&C losses stood at 24 % which is higher than the established international norms. Moreover, losses in rural areas have been much higher than in urban areas due to lower density as agriculture farms are spread over large area. As a result, low tension wires runs over long distances to serve disperse and relatively small connected load. Along with a definitive regulatory framework, several initiatives have been introduced by government to reduce (AT&C) losses such as Accelerated Power Development and Reforms Programme (APDRP), Ujjwal Discom Assurance Yojana (UDAY) Government of A.P. has been a leader in power distribution reform and agricultural demand side management. It has initiated various energy efficiency measures such as introduction of High Voltage Distribution System (HVDS), replacement of inefficient pumps with energy efficient pumps (EEPS) and amongst others
- To cater the problem of AT&C losses, APDISCOMs had started conversion of LT network into HVDS in 2006 Presently, out of 14.64 lakh agricultural consumers, 8.97 lakh have already been covered under this system AT&C losses in Andhra Pradesh currently at 12.28 per cent lower than the national average of 24 per cent Despite lower AT&C losses, accumulated financial losses of the DISCOMs and subsidy burden has increased.
- Losses are higher in agriculture area as electricity is supplied at subsidised rate. Therefore our study focuses on agriculture consumers as sales to them accounts to 24 percent of the total sales in FY17 whereas the contribution to revenue is around 0.4 percent after excluding subsidy. Financial health of DISCOMs doesn’t get affected as they are getting subsidy from government. However, state government bears the huge burden of subsidy which could be used to finance other priority schemes related to health and education. Therefore, the study proposes second intervention which is HVDS along with Energy efficient pumpset Agriculture sector is considered as one the major inefficient user of electricity as they get power supplied at zero marginal cost which induce them to use highly energy inefficient pumpset for irrigation. Ministry of Power along with Bureau of Energy Efficiency and Energy Efficiency Services Ltd has initiated pilots for improving agriculture pump efficiency in East Godavari district of Andhra Pradesh by replacing 2496 inefficient pumps with EEPS
- In the existing system, low tension wires runs over long distances leading to poor voltage and higher energy losses. Poor quality of supply increased the maintenance and replacement cost to the farmers due to frequent burnout of pumpsets. As a result, farmers tend to resort to inefficient motors with thicker armature coils to withstand higher current and resulting in overloading of transformers. This intervention aims to upgrade existing network serving LT agricultural consumers to HVDS. In this intervention existing LT lines of 0.4KV will be converted to HT lines of 11KV. Also, existing large distribution transformers will be replaced with smaller capacity transformers which will be placed close to consumer load points. Implementation of HVDS will improve voltage profile, reduce LT Line losses, and lower the chances of failure of distribution transformer and pumpset burn-out.
- Life of the project has been assumed to be 25 years We have assumed that one consumer will be provided with 1 transformer of 16kVA as this will increase the sense of ownership and responsibility among the farmers. Key cost items include: cost of conversion of LT lines into HVDS, cost of transformer. Operation and maintenance expenditure assumed to be same as in case of counterfactual except for change in the DTR failure rate. According to US AID study, DTR failure rate in low tension distribution network is 15% whereas in case of HVDS failure rate reduced to1 percent (AP HVDS Ex-Ante Evaluation, JICA) Total investment required : INR 7,147 crore at 5 % discount rate (study has not ascribed any scrap value as the same is considered as equal to the cost of collecting and transporting the transformers.)
- On the basis of case studies, implementation of HVDS revealed an average saving of 11 percent but we have taken a conservative approach and took 25 % of this saving which is 2.75 percent as most of the benefits have already been realized in case of Andhra Pradesh Due to reduced voltage fluctuation and better quality of electricity being supplied it will result in lower pumpset burnout rate. Cost saved due to reduction in DTR failure rate which reduces from 15 percent to 1 percent. Total benefit for HVDS is 20,028 crore at 5 percent discount rate. We would like to highlight the fact that major part of benefit comprise of savings due to reduction in pumpset failure. We have taken this estimate from APEPDCL report which states that on an average an agriculture pump failed 2-3 times in a year but we have adopted a conservative approach that every pump fails once in a year.
- Our analysis suggests that up-gradation of the distribution system to HVDS will have net benefit of INR 12,881 crore (at 5 per cent discount rate) with a BCR of 2.80. We have also looked at 3 different discount rates for the study, our BCR ratios are above 1 in all the cases which reveals that this intervention is economically viable at all discount rates.
- We have looked into various risk and uncertainties for this intervention and presented the most sensitive ones in the paper. We have figured out three major risk 1st is the capital investment cost for HVDS which can increase over time period 2nd as we have mention that major benefit comprise from savings due to pumpset failure and to cater that risk we have taken 2 cases of 0.5 and 2 3rd is the cost of repairing the pumpset which can also escalate over the time. After checking for these sensitivities, we can conclude from the table that our project is still economically viable.
- The agriculture sector is one of the major inefficient user of power in India due to unmetered supply and zero marginal tariff. Hence, it provides significant opportunity to reduce AT&C losses and save energy through better demand side management strategies. This intervention aims to replace existing inefficient pumpsets with BEE five star rated efficient pumpsets HVDS is a pre-requisite as improving quality of supply is critical to ensure that the new EEPS will not burn out same as old pumpsets
- Except for additional cost of pumpsets Average size of existing pumpsets: 7 HP With efficiency level 30% inefficient pumpsets will replaced with efficient pumpsets of size 5 HP Old pumpsets will not enter farms through grey market Total investment required : INR 14,164 crore at 5 % discount rate
- Energy savings and carbon savings higher due to improvement in energy efficiency of pumpsets. Total benefits in second intervention is 43294 crore at 5 per cent discount rate
- Second intervention i.e. HVDS combined with EEPS have net benefits of INR 29,130 crore (at 5 per cent discount rate) with a BCR of 3.06. We have also looked at 3 different discount rates for the study, our BCR ratios are above 1 in all the cases which reveals that this intervention is economically viable at all discount rates.
- We have looked into various risk and uncertainties for this intervention and presented the most sensitive ones in the paper. We have figured out three major risk 1st is as we have mention that major benefit comprise from savings due to pumpset failure and to cater that risk we have taken 2 cases of 0.5 and 2 2nd is the cost of repairing the pumpset which can also escalate over the time. 3rd is energy savings due to EEPS either 25 per cent or 50 per cent 4th is if pumpset of average size 7 HP used instead of 5HP 5th If there is increase in fixed power purchase to INR 1 kWh and 1.5 kWh After checking for these sensitivities, we can conclude from the table that our project is still economically viable.
- Our analysis suggests that up-gradation of the distribution system to HVDS will have net benefit of INR 12,881 crore (at 5 per cent discount rate) with a BCR of 2.80. Second intervention i.e. HVDS combined with EEPS have net benefits of INR 29,130 crore (at 5 per cent discount rate) with a BCR of 3.06. Thus, both interventions were economically viable but higher benefits are observed in the latter case.