Indian power sector an overview


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Power Sector Scenario.

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Indian power sector an overview

  2. 2. ISSUES & CHALLENGES <ul><li>Power Shortage and Capacity Addition </li></ul><ul><li>Paying for Power – Tariff Rationalisation </li></ul><ul><li>Efficiency and Quality of Service </li></ul><ul><li>Open Access and Competition </li></ul><ul><li>Effective and Independent Regulation </li></ul>
  3. 3. EVOLUTION OF ELECTRICITY SECTOR IN INDIA <ul><li>Total installed capacity in 1947 : 1300 MW. </li></ul><ul><li>Pre-1948, all generation privately-owned. Licensed & regulated by Govt. under Indian Electricity Act, 1910. </li></ul><ul><li>Govt’s role as regulator only. </li></ul><ul><li>Retail distribution only around generating stations. </li></ul><ul><li>No transmission. </li></ul>
  4. 4. ELECTRICITY NATIONALISATION IN 1948 <ul><li>Post–Independence, Electricity( Supply) Act, 1948, aimed to increase access to electricity. </li></ul><ul><li>Transmission to wider hinterland of generating stations – creation of grid. </li></ul><ul><li>All privately-owned generating stations nationalised with some exceptions. </li></ul><ul><li>Creation of vertically-integrated SEBs as quasi-commercial entities. </li></ul><ul><li>Govt. becomes owner and operator in addition to being regulator . </li></ul>
  5. 5. DOWNWARD SLIDE <ul><li>By early 90’s, State Electricity Boards, formed in 50’s and 60’s as quasi-commercial entities, were bankrupt. Accumulated losses of the SEBs exceeded Rs.26,000 crores in 2000-01. Unpaid dues to central power generating companies alone exceeded Rs. 40,000 crores. </li></ul><ul><li>Total return of SEBs in 2005-06 was </li></ul><ul><li>(-) 26%. </li></ul><ul><li>No funds for creating new generation capacity or renovation and replacement of assets. </li></ul><ul><li> </li></ul>
  6. 6. INDIA’S INSTALLED CAPACITY BY SECTOR (as on 01 MARCH 2009) SECTOR MW % age States 76,115.77 52.50 Central 48,970.99 34.00 Private 22,628.75 13.50 TOTAL 1,47,715 100.00
  7. 7. INDIA’S INSTALLED CAPACITY BY FUEL (as on 01 MARCH 2009) Fuel MW % age Total Thermal 93,475.34 64.6 Coal 77,398.88 53.3 Gas 14,876.71 10.5 Oil 1,199.75 0.9 Hydro 36,877.76 24.7 Nuclear 4,120.00 2.9 Renewable 13,242.41 7.7 Total 1,47,715 100.00
  8. 8. 14-A INSTALLED CAPACITY VIS-À-VIS CHINA 1950 1980 1985 1990 1995 2000 2007 713 132 96.2
  9. 9. ELECTRICITY GENERATION IN SELECTED COUNTRIES 2006 ( in Terawatt hours ) COUNTRY GENERATION % age of total World 19027.7 U.S.A 4,254.0 22.4 China 2,834.4 14.9 Japan 1,150.3 6.0 Russia 992.5 5.2 India 726.7 3.8
  10. 10. PER CAPITA ELECTRICITY CONSUMPTION IN SELECTED COUNTRIES (in Kwh per annum) (Key World Energy Statistics, 2007) World Average 2,596 OECD 8,365 Middle East 2,980 Latin America 1,695 Africa 563 Asia 646 China 1,802 India 612
  11. 11. PER CAPITA CONSUMPTION OF ELECTRICITY IN INDIA YEAR PER CAPITA CONSUMPTION 1950 15 KWh / per year 2007 612 KWh / per year 2012 - Target 1000 KWh / per year
  13. 13. POWER FOR ALL BY 2012 <ul><li>Required capacity addition – 2,00,000 MW by 2012. </li></ul><ul><li>Funds required – Rs. 9,00,000 crores including transmission systems at 2002-03 prices.( Estimates by CEA ) </li></ul><ul><li>Minimum investment required : 5% of 2003-04 GDP i.e, annual investment of Rs. 1271.5 billion. ( Estimates by Planning Commission ) </li></ul>
  14. 14. ENVIRONMENT FOR PRIVATE INVESTMENT <ul><li>Private Sector participation in generation permitted in 1991 but little private sector interest. </li></ul><ul><li>Lenders found SEBs( sole buyers from generating companies) unviable buyers. </li></ul><ul><li>Lenders unwilling to finance generation projects due to poor revenue in downstream Distribution . </li></ul><ul><li>Led to realisation that Distribution reforms critical for SEB viability and overall reform of the power sector. </li></ul>
  15. 15. PAYING FOR POWER – KEY TO BUSINESS <ul><ul><li>Over 40% of energy supplied into state transmission systems is lost, not billed, incorrectly billed or payment not collected </li></ul></ul><ul><ul><li>Reducing to 20% would save Rs. 15-20,000 crores/y ($3.3-4.4 billion) of generation cost (@Rs. 2/kWh) or generate 25% more revenue if billed at the average tariff (Rs. 2.77/kWh) </li></ul></ul><ul><ul><li>Sector is a conduit for about Rs. 20,000 crore ($4.5 billion) of poorly targeted and poorly accounted subsidies each year (from budget & cross-subsidies) </li></ul></ul><ul><ul><li>Even in advanced reforming states, only 55-65% of electricity sales metered </li></ul></ul><ul><ul><li>Tariffs are distorted and do not cover costs </li></ul></ul>
  16. 16. PAYING FOR POWER– KEY TO BUSINESS <ul><li>Billing on presumptive / assessed consumption. </li></ul><ul><li>Poor billing & collection – only 55% of energy generated is billed & only 41% realised. </li></ul><ul><li>High T&D losses( 40- 50 % approx ) – No serious attempt to address issue. </li></ul><ul><li>Tariff recovers on an average 69% of the cost of supply. Domestic recovery : 56%. Agriculture recovery : 15% </li></ul><ul><li>Distribution segment losing Rs. 47,000 crores annually. ( MoP estimates ) </li></ul>
  17. 17. IMPROVE ELECTRICITY MARKET ENVIRONMENT <ul><ul><li>Focus on : </li></ul></ul><ul><ul><ul><li>Commercialization </li></ul></ul></ul><ul><ul><ul><li>Competition </li></ul></ul></ul><ul><ul><ul><li>Private participation </li></ul></ul></ul><ul><ul><ul><li>Governance </li></ul></ul></ul><ul><ul><ul><li>Key challenges : </li></ul></ul></ul><ul><ul><ul><li>What must be done to move from about $6 billion to $20 billion investment/year? </li></ul></ul></ul><ul><ul><ul><li>Accelerated reform of distribution a critical bottleneck </li></ul></ul></ul><ul><ul><ul><li>Resolve fuel supply bottlenecks </li></ul></ul></ul><ul><ul><ul><li>Engage the private sector </li></ul></ul></ul>
  18. 18. FACTORS ATTRACTING INVESTMENT <ul><li>Well-managed reform : Increasing ability of utility to generate internal cash for investment through – </li></ul><ul><ul><li>cost reductions </li></ul></ul><ul><ul><li>timely tariff adjustments to recover the cost of supply, and </li></ul></ul><ul><ul><li>efficient collection of posted tariffs </li></ul></ul><ul><li>Reducing risk & maintaining a healthy regulatory environment : </li></ul><ul><ul><li>creating and maintaining sector structure, regulatory and legal environment conducive to minimization of country/project investment risk </li></ul></ul><ul><ul><li>attracting domestic & foreign equity funding </li></ul></ul>
  19. 19. AGENDA OF REFORM <ul><li>Structural reform: Unbundling of monolithic and vertically-integrated SEBs. Separate entities for generation, transmission & distribution and their corporatisation for transparency & accountability. </li></ul><ul><li>Tariff to be de-politicised and reflect cost of supply. </li></ul><ul><li>Independent regulator to determine tariffs, monitor performance of the utilities and protect consumer interest. </li></ul><ul><li>Private participation in the sector. </li></ul>
  20. 20. SEB MODEL
  24. 24. Reformed Structure in Power Sector Government (Policy) Regulatory Commission (Licensing, monitoring performance, tariff setting & consumer protection) Generation (State-owned utilities & Independent power producers DISCOs DISCOs DISCOs Retail Supply & Distribution Transmission (Also Bulk Purchase) setting and consumer protection ) Generation ( State-owned utilities & IndependentPower Producers) Transmission ( Also bulk purchase in some States )
  25. 25. ELECTRICITY ACT 2003 – FRAMEWORK FOR COMPETITION <ul><li>Competition is key to economic and operational efficiency. </li></ul><ul><li>Competition possible in generation and supply – not viable in transmission or wires business. </li></ul><ul><li>Competition through Open Access in transmission & distribution. </li></ul><ul><li>Multiple generators and end-suppliers. </li></ul><ul><li>Trading in power – creating a power exchange. </li></ul>
  26. 26. TARIFF REGULATION – Re-balancing of tariff <ul><li>Setting prices equitable for consumers & investors – enable utility to generate revenues adequate to cover (a) prudent expenditure (b) investment and ©reasonable return on investment. </li></ul><ul><li>Induce economically efficient behaviour by both utility and customers. </li></ul><ul><li>Reduce cross-subsidies. </li></ul><ul><li>Reduce cost of energy services ( by increasing efficiency ) for greater accessibility. </li></ul>
  27. 27. PERFORMANCE REGULATION <ul><li>Regulators’ role to improve efficiency in generation, transmission and distribution. </li></ul><ul><li>PLF improved from 63% in 1995-96 to 78.6 % in 2007-08 due to regulatory oversight. </li></ul><ul><li>AT&C losses in the range of 50% of the power generated. Increased from Rs. 4.1 billion in 1990-91 to Rs. 23.6 billion in 2004-05. </li></ul><ul><li>1% reduction of T&D loss saves </li></ul><ul><li>800 MW of capacity. </li></ul>
  28. 28. QUALITY OF SERVICE REGULATION <ul><li>Earlier State Reform Acts and later Electricity Act, 2003, mandates regulators to prescribe Quality of Service standards </li></ul><ul><li>Guaranteed standards : failure results in automatic penalty and compensation to affected consumers </li></ul><ul><li>Overall standards : no penalty or compensation to individual consumers but benchmarks to be achieved </li></ul>
  29. 29. RELIABILITY STANDARDS <ul><li>SAIDI, or system average interruption </li></ul><ul><li>duration index, is commonly referred to as </li></ul><ul><li>customer minutes of interruption or customer </li></ul><ul><li>hours and is designed to provide information </li></ul><ul><li>as to the average time the customers are </li></ul><ul><li>interrupted. It is the sum of restoration time </li></ul><ul><li>for each interruption event times the number </li></ul><ul><li>of interrupted customers for each interruption </li></ul><ul><li>event divided by the total number of </li></ul><ul><li>customers. </li></ul>
  30. 30. RELIABILITY STANDARDS <ul><li>SAIFI, or system average interruption </li></ul><ul><li>frequency index, is the average frequency of </li></ul><ul><li>sustained interruptions per customer over a </li></ul><ul><li>predefined area. It is the total number of </li></ul><ul><li>customer interruptions divided by the total </li></ul><ul><li>number of customers served. </li></ul>
  31. 31. RELIABILITY STANDARDS <ul><li>CAIDI, or customer average interruption </li></ul><ul><li>duration index, is the average time needed to </li></ul><ul><li>restore service to the average customer per </li></ul><ul><li>sustained interruption. It is the sum of </li></ul><ul><li>customer interruption durations divided by </li></ul><ul><li>the total number of customer interruptions. </li></ul>
  32. 32. RELIABILITY STANDARDS <ul><li>A reliability index that considers momentary interruptions is MAIFI, or momentary average interruption frequency index. </li></ul><ul><li>MAIFI is the total number of customer momentary interruptions divided by the total number of customers served. Momentary interruptions are defined in IEEE Std. 1366 as those that result from each single operation of an interrupting device such as a recloser. </li></ul>
  34. 34. EXPECTED OUTCOME OF REFORMS <ul><li>Improved access to electricity </li></ul><ul><li>Improved quality of supply </li></ul><ul><li>Fair prices for consumers </li></ul><ul><li>Fair rate of return to investors </li></ul><ul><li>Greater involvement of stake-holders </li></ul><ul><li>Greater investment in the sector </li></ul>