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  1. 1. India’s Power Sector
  2. 2. Content <ul><li>Transmission & Distribution </li></ul><ul><li>How T & D losses Occurs </li></ul><ul><li>Government steps to reduce the losses </li></ul><ul><li>Strategy to improve the T & D Losses </li></ul><ul><li>Conclusion </li></ul>
  3. 3. Transmission & Distribution <ul><li>Transmission Capacity is currently only 13 % of its distribution Capacity. Country is divided in Five regional interconnection Power Transmission system grids </li></ul><ul><ul><li>North </li></ul></ul><ul><ul><li>North East </li></ul></ul><ul><ul><li>Southern </li></ul></ul><ul><ul><li>Eastern </li></ul></ul><ul><ul><li>Western Region </li></ul></ul><ul><li>Technology for electricity transmission and distribution is based on Alternative Current and high voltage direct current </li></ul><ul><li>Distribution is considered the weakest link in power sector. It occurs both the side at utility as well as Consumer Indian Transmission and Distribution losses are 33%, that is substantially higher than comparison with America, Europe, Korea etc. </li></ul>
  4. 4. Transmission <ul><li>Transmission of electricity is defined as bulk transfer of power over a long distance at a high voltage, generally of 132 KV and above. In India bulk transmission has increased from 3708 ckm in 1950 to more than 265,000 ckm today. The entire country has been divided into five regions for transmission systems, namely Northern Region, North Eastern Region, Eastern Region, Southern Region and Western Region. The interconnected transmission system within each region is also called the regional grid. </li></ul><ul><li>The Government of India has an ambitious mission of ‘POWER FOR ALL BY 2012’ . This mission would require that our installed generation capacity should be at least 2, 00,000 MW by 2012 from the present level of 1, 14,000 MW. To be able to reach this power to the entire country an expansion of the regional transmission network and inter regional capacity to transmit power would be essential. The latter is required because resources are unevenly distributed in the country and power needs to be carried great distances to areas where load centres exist. </li></ul><ul><li>The transmission system planning in the country, in the past, had traditionally been linked to generation projects as part of the evacuation system. Ability of the power system to safely withstand a contingency without generation rescheduling or load-shedding was the main criteria for planning the transmission system. However, due to various reasons such as spatial development of load in the network, non-commissioning of load centre generating units originally planned and deficit in reactive compensation, certain pockets in the power system could not safely operate even under normal conditions. This had necessitated backing down of generation and operating at a lower load generation balance in the past. Transmission planning has therefore moved away from the earlier generation evacuation system planning to integrated system planning. </li></ul><ul><li>While the predominant technology for electricity transmission and distribution has been Alternating Current (AC) technology, High Voltage Direct Current (HVDC) technology has also been used for interconnection of all regional grids across the country and for bulk transmission of power over long distances. </li></ul><ul><li>Certain provisions in the Electricity Act 2003 such as open access to the transmission and distribution network, recognition of power trading as a distinct activity, the liberal definition of a captive generating plant and provision for supply in rural areas are expected to introduce and encourage competition in the electricity sector. It is expected that all the above measures on the generation, transmission and distribution front would result in formation of a robust electricity grid in the c </li></ul>
  5. 5. Distribution <ul><li>Due to lack of adequate investment on T&D works, the T&D losses have been consistently on higher side, and reached to the level of 32.86% in the year 2000-01.The reduction of these losses was essential to bring economic viability to the State Utilities. </li></ul><ul><li>As the T&D loss was not able to capture all the losses in the net work, concept of Aggregate Technical and Commercial (AT&C) loss was introduced. AT&C loss captures technical as well as commercial losses in the network and is a true indicator of total losses in the system. </li></ul><ul><li>High technical losses in the system are primarily due to inadequate investments over the years for system improvement works, which has resulted in unplanned extensions of the distribution lines, overloading of the system elements like transformers and conductors, and lack of adequate reactive power support. </li></ul><ul><li>The commercial losses are mainly due to low metering efficiency, theft & pilferages. This may be eliminated by improving metering efficiency, proper energy accounting & auditing and improved billing & collection efficiency. Fixing of accountability of the personnel / feeder managers may help considerably in reduction of AT&C loss. </li></ul><ul><li>With the initiative of the Government of India and of the States, the Accelerated Power Development & Reform Programme (APDRP) was launched in 2001, for the strengthening of Sub � Transmission and Distribution network and reduction in AT&C losses. </li></ul><ul><li>The main objective of the programme was to bring Aggregate Technical & Commercial (AT&C) losses below 15% in five years in urban and in high-density areas. The programme, along with other initiatives of the Government of India and of the States, has led to reduction in the overall AT&C loss from 38.86% in 2001-02 to 34.54% in 2005-06. The commercial loss of the State Power Utilities reduced significantly during this period from Rs. 29331 Crore to Rs. 19546 Crore. The loss as percentage of turnover was reduced from 33% in 2000-01 to 16.60% in 2005-06. </li></ul><ul><li>The APDRP programme has been restructured by the Government of India, in order that reliable and verifiable baseline data of revenue and enegry in APDRP Project areas is attained over an IT plateform and that AT& C loss reduction is achieved on a sustained basis. The Restructured APDRP (R-APDRP) was launched by MoP, Gol in July 2008 as a central sector scheme for XI plan. The scheme comprises of two parts-Part-A & Part-B, Part-A of the scheme being dedicated to establishment of IT enabled system for achieving reliable & verifiable baseline data system in all towns with population greater than 30,000 as per 2001 census (10,000 for Special Category Status). Installation of SCADA/DMS for towns with population greater than 4 lakhs & annual input energy greater than 350MU is also envisaged under Part-A. 100% loan is provided under R-APDRP for Part-A projects & shall be converted to grant on completion and verification of same by Third Party independent evaluating agencies (TPIEA) being appointed by MoP. MoP, Gol has earmarked Rs. 10,000 Crores for R-APDRP Part-A. </li></ul><ul><li>Part-B of the scheme deals with regular Sub Transmission & Distribution system strengthening & upgradation projects.The focus for Part-B is on AT&C loss reduction on sustainable basis.25% loan is provided under Part-B projects and upto 50% of scheme cost is convertible to grant depending on extent of maintaining AT&C loss level at 15% level for five years. For special category states, 90% loan is provided by GOI for Part-b projects and entire GOI loan shall be converted to grant in five tranches depending on extent of maintaining AT&C loss level at 15% level for five years. MoP , Gol has earmarked sanctioning of schemes upto Rs. 40,000 Crores under R-APDRP Part-B. Of this, upto Rs. 20,000 Crore would be converted to grant depending on extent to which utilities reduce AT&C losses in project areas. </li></ul><ul><li>R-APDRP also has provision for Capacity Building of Utility personnel and development of franchises through Part-C of the scheme. Few pilot projects adopting innovations are also envisaged under Part-C. </li></ul>
  6. 6. Natural Gas <ul><li>Natural gas pricing set by the Indian government </li></ul><ul><li>Attempts towards deregulation delayed several times </li></ul><ul><li>Natural gas from private suppliers have higher prices than state suppliers </li></ul><ul><li>Shortage of natural gas & consumer willingness to pay more will lead to higher prices if deregulated </li></ul>
  7. 7. Industry Structure <ul><li>Power Generation </li></ul><ul><ul><li>Largely owned and operated by central and state governments </li></ul></ul><ul><ul><li>Captive private power plants allowed </li></ul></ul><ul><ul><li>Central Electricity Authority appraises new project proposals </li></ul></ul><ul><li>Transmission </li></ul><ul><ul><li>Wholly owned and managed by govt. entities (REBs & SEBs) </li></ul></ul><ul><ul><li>Interconnection of regional grids by Power Grid Corporation </li></ul></ul><ul><ul><li>Limited trading between regional grids </li></ul></ul><ul><li>Distribution </li></ul><ul><ul><li>Carried out by State Electricity Boards (SEBs) </li></ul></ul><ul><ul><li>Limited private participation in distribution (BSES, CESC, AEC) </li></ul></ul>
  8. 8. Regulation <ul><li>Pre-reform period (before 1991) </li></ul><ul><ul><li>State governments sole price regulators </li></ul></ul><ul><ul><li>Vertically integrated utilities: State Electricity Boards (SEBs) </li></ul></ul><ul><ul><li>Subsidized & free power, cross-subsidies </li></ul></ul><ul><li>Power sector reforms (1991-96) </li></ul><ul><ul><li>Invite private participation in generation: Fast-track projects </li></ul></ul><ul><ul><li>Failure of fast-track projects: low participation from private investors </li></ul></ul><ul><li>Legislations in power sector (1998 onwards) </li></ul><ul><ul><li>Electricity Regulatory Commissions Act, 1998 </li></ul></ul><ul><ul><li>Electricity Act, 2003 </li></ul></ul>
  9. 9. Regulation… <ul><li>Power sector reforms (1991-1996) </li></ul><ul><ul><li>Independent Power Producers (IPPs) </li></ul></ul><ul><ul><li>Build-operate-transfer contracts (BOT) </li></ul></ul><ul><ul><li>Fixed return on investment </li></ul></ul><ul><ul><li>Power Purchase Agreements with SEBs </li></ul></ul><ul><ul><li>Sovereign guarantees </li></ul></ul><ul><ul><li>Enron operated Dabhol Power Corporation failure </li></ul></ul><ul><li>Electricity Regulatory Commissions Act, 1998 </li></ul><ul><ul><li>Setup of Central Electricity Regulatory Commission (CERC) </li></ul></ul><ul><ul><li>Facilitate State Electricity Regulatory Commissions (SERCs) </li></ul></ul>
  10. 10. Regulation… <ul><li>Electricity Act, 2003 </li></ul><ul><ul><li>De-licensing of power generation </li></ul></ul><ul><ul><li>Unbundling of SEBs: Separate generation, transmission and distribution </li></ul></ul><ul><ul><li>Facilitate privatization of unbundled SEBs </li></ul></ul><ul><ul><li>Open access for bulk consumers in specified timeframe </li></ul></ul><ul><ul><li>Gradual reduction of cross-subsidies </li></ul></ul><ul><ul><li>ERCs to regulate prices </li></ul></ul><ul><ul><li>Tariff revision requests to ERCs </li></ul></ul><ul><ul><li>Setup Apellate Tribunals for disputes with ERCs </li></ul></ul>
  11. 11. Other Initiatives in Distribution <ul><li>Distribution Reforms, Upgrades, and Management (DRUM) </li></ul><ul><li>Collaboration with The United States Agency for International Development (USAID) and the Ministry of Power (MoP) </li></ul><ul><li>Focus area </li></ul><ul><ul><li>Improve quality of electricity services </li></ul></ul><ul><ul><li>Focus on rural electrification </li></ul></ul>
  12. 12. Other Initiatives… <ul><li>Improve Power Distribution </li></ul><ul><li>Better Availability and Quality of Electricity </li></ul><ul><li>Enhanced Commercial Orientation and Drive </li></ul><ul><li>Improved Consensus on Distribution Reform Process </li></ul><ul><li>Enhanced Viability of the Sector </li></ul><ul><li>Strengthened Distribution Reform Initiatives of the Ministry of Power (MoP) </li></ul><ul><li>Efficient Utilization of APDRP Funds </li></ul><ul><li>Innovative Financing Mechanisms </li></ul>
  13. 13. Natural Gas Industry <ul><li>Production </li></ul><ul><ul><li>90% production done by state-owned company, Oil & Natural Gas Commission (ONGC) </li></ul></ul><ul><ul><li>Entire production sold to state owned gas transmission company, Gas Authority of India Limited (GAIL) </li></ul></ul><ul><ul><li>Sale price to GAIL determined by Central Government </li></ul></ul><ul><ul><li>GAIL responsible for 90% of sales to end-users </li></ul></ul><ul><ul><li>End-user prices determined by Central Government </li></ul></ul><ul><li>Deregulation </li></ul><ul><ul><li>Prices for private gas distributors deregulated </li></ul></ul><ul><ul><li>Major changes will take more time (5+ years) </li></ul></ul>
  14. 14. Privatization <ul><li>1991 - Independent Power Producer (IPP) projects </li></ul><ul><ul><li>Set up to solve the generation capacity storage problem </li></ul></ul><ul><ul><li>1994-2000 </li></ul></ul><ul><ul><ul><li>In North America, IPP average cost was $573/kWh </li></ul></ul></ul><ul><ul><ul><li>In India, IPP average cost was $875/kWh </li></ul></ul></ul><ul><ul><ul><li>Global average was $450-600/kWh </li></ul></ul></ul><ul><ul><li>2002 – IPPs make up </li></ul></ul><ul><ul><li>only 3% of national </li></ul></ul><ul><ul><li>generation </li></ul></ul>Utility Worker http://
  15. 15. Privatization … <ul><li>1996 – Orissa began privatizing State Electrical Boards (SEBs) </li></ul><ul><ul><li>Orissa Reform Act </li></ul></ul><ul><ul><ul><li>regulatory committee to impose tariffs and regulate the electricity sector </li></ul></ul></ul><ul><li>1998 – Electricity Regulatory Commissions Act </li></ul><ul><ul><li>Allowed other states to be able to establish similar regulatory committees without separate state act </li></ul></ul><ul><ul><li>Led to Central Electricity Regulatory Commission (CERC) and State Electricity Regulatory Commissions (SERCs) </li></ul></ul><ul><li>Currently – Many states have tried but have been unsuccessful </li></ul><ul><ul><li>Orissa and Delhi are the only two states to have privatized their electrical distribution markets in 1999 and 2002, respectively </li></ul></ul>
  16. 16. <ul><li>2003- Electricity Act (E-Act) </li></ul><ul><ul><li>called for competition in the sector by creating open access in transmission, distribution, and power trading </li></ul></ul><ul><ul><li>“ unbundling” of all State Utility Boards (SEBs) into separate entities </li></ul></ul><ul><ul><li>overruled all other </li></ul></ul><ul><ul><li>previous acts regarding </li></ul></ul><ul><ul><li>the power sector and </li></ul></ul><ul><ul><li>state reform acts </li></ul></ul>Privatization… http:// Andhra Pradesh SEB Sub-Station
  17. 17. E-Act <ul><li>The Electricity Act of 2003 was drafted with the idea that separate utilities would operate more efficiently </li></ul><ul><li>There have been several critics… </li></ul>Protestors http://
  18. 18. Critics of the E-Act <ul><li>Price-Waterhouse-Coopers </li></ul><ul><ul><li>“ Movers and Shapers 2003 Utilities - Europe and US” </li></ul></ul><ul><ul><ul><li>“ the strength of global utilities in the future will be built upon vertically integrated strategies, rather than the pursuit of multi-utility and [specialized] portfolios.” </li></ul></ul></ul><ul><ul><ul><li>More simply put, “vertical integration [is] the most sustainable business strategy” </li></ul></ul></ul><ul><li>Another critic </li></ul><ul><ul><li>stated that “vertically integrated utilities…remain better financial performers and are better able to meet customer needs” </li></ul></ul>
  19. 19. Failure to Meet Deadlines <ul><li>December 2003 (6 month deadline) – seven states and four territories failed to submit a plan to CERC to reorganize their respective SEB into separate companies </li></ul><ul><li>June 2004 – the deadline for open access to the SEB’s transmission lines was delayed </li></ul>
  20. 20. Need for Improvement <ul><li>In many parts of India, anyone not living in a major city is lucky if they have electricity </li></ul><ul><ul><li>A conference in September 2004 stated that “56% of the rural households in [India] do not have an electrical connection” </li></ul></ul><ul><li>Five states (Orissa, Bihar, Jharkand, West Bengal, and Uttar Pradesh) account for 90% of India’s 72,000 un-electrified villages </li></ul><ul><ul><li>An electrical village is one in which at least one household has electricity </li></ul></ul>
  21. 21. Indian Electrical Shortages in 1999
  22. 22. Government’s Role <ul><li>Over the past decade, the government was able to connect about one million households per year </li></ul><ul><li>Central government has stated plans to provide “connections to all…[remaining unelectrified] households in the next five to eight years.” </li></ul><ul><li>Funding for improvements is largely possible by the World Bank </li></ul>
  23. 23. World Bank Lending Lending for India’s Energy and Mining amounted to almost $1.4 billion as of June 2003
  24. 24. The Future <ul><li>In the future, electrical connections are expected to be paid for by tariffs collected by each state government </li></ul><ul><li>Now, the entire market is heavily subsidized and will continue to be until the majority of the population is connected </li></ul>
  25. 25. Questions ?