Power Sector Analysis

Sector AnalysisPower

Power Sector Overview- 1/2Source:1. http://www.forbes.com/sites/williampentland/2013/08/26/worlds-39-largest-electric-power-plants/2. http://www.powermin.nic.in/indian_electricity_scenario/introduction.htm3. Power Sector in India, White paper on Implementation Challenges and Opportunities,For release at the Energy Summit, Nagpur - January 20104. Annual Report, Reliance Power FY12-132OverviewIndia is 3rd largest power produce in Asia, after China and JapanThree Gorges Dam is the largest power producing station in the world with a capacity of 22.5 GW1The current installed generation capacity in India is 225793.1 MW or 225 GW as on 30-06-20132The current installed transmission capacity is only 13% of the total installed generation capacity in 20103It is largely coal basedIndia has tough time matching the supply to the power demandChallenges4The power sector faced a slowdown in 2012-13 primarily due to fuel constraints`(both coal and gas) and challenging policy environment. The growth in electricity generation fell to just 4 per cent in 2012-13 compared to 8.1 per cent in 2011-12A major impediment for the sector has been the undue delay in getting regulatory clearances due to lengthy decision making process which involve different ministries both at the Central and State government levels. As a step towards mitigating these problems, the government has established the Cabinet Committee on Investment (CCI), in Jan2013, which aims to fast track regulatory clearances and resolve inter ministerial differences at the Central Cabinet levelThe financial health of electricity distribution Companies (Discoms) is an area of major concern threatening the very viability of the power sector. Execution Risk- Power projects are highly capital intensive and have a long development and construction phase thus exposing them to various macroeconomic as well as project specific risks.

3Power Sector Overview- 2/2

Installed Power Generation CapacityPower Generation FY12-13

1 Unit = 1KWhAbove fig. have been adopted from Reliance Power Annual Report FY12-13Units that Confuse You!Transmission Network- Ckt Km.Transmission Capacity or Inter Regional Transfer Capacity- MVAGeneration Capacity- GW or MWSupply/Demand- Billion Units, where 1 Unit = 1KWh4Quick FactsSource:*http://www.thehindu.com/business/Industry/alstom-bets-big-on-indian-high-voltage-transmission-market/article4902201.ece**http://www.thehindubusinessline.com/companies/india-has-2b-market-potential-for-highvoltage-transmission-lines-alstom/article4897821.ece#***http://www.thehindu.com/news/national/karnataka/national-power-grid-to-be-operational-from-2014/article3994001.eceNational Power Grid (NPG)Northern, Eastern, Western and North-Eastern (NEW grid) have been integratedProject (Rs. 2000 Cr.) to link southern regional power grid with that of other regions in the country to help transmit excess power from other regions to the south***NPG will be operational from Jan14This inter-State project envisages linking Raichur and Solapur besides Solapur and Pune through 750-kv transmission lines as part of the efforts to integrate the southern grid with the NEW gridDiff. weather pattern across India Diff. Power requirements at diff. times

HVDC- High-Voltage, Direct CurrentA HVDC electric power transmission system uses direct current for the bulk transmission of electrical power, in contrast with the more common alternating current systems.For long-distance transmission and bulk power transmission, HVDC systems may be less expensive and suffer lower electrical losses. Als0, HVDC is a flexible option, especially because it enables the switching of the direction of transmission depending on where demand isFor shorter distances, the higher cost of DC conversion equipment compared to an AC system may still be warranted, due to other benefits of direct current links.Due to the high capital expenditure upon HVDC transmission, this market is due for steady, incremental growth in the coming yearsAsia dominates the HVDC transmission marketGlobal power equipment manufacturer Alstom expects the Indian high-voltage transmission market to be worth euro 2 billion by 2018*Alstom is working on the 1,365-km Champa (Chattisgarh) to Kurukshetra (Haryana) 800 kV-3,000 MW HVDC transmission line, on behalf of PGCILHVDC has emerged the key technology for inter-connecting regions and countries for electricity transfer, as it helps transmit more power with less infrastructureHVDC improves quality, stability and reliability of electricity**5Quick FactsTransmission and Distribution LossEnergy losses occur in the process of supplying electricity to consumers due to technical and commercial losses. The technical losses are due to energy dissipated in the conductors and equipment used for transmission, transformation, sub- transmission and distribution of power. These technical losses are inherent in a system and can be reduced to an optimum level. The losses can be further sub grouped depending upon the stage of power transformation & transmission system as Transmission Losses (400kV/220kV/132kV/66kV), as Sub transmission losses (33kV /11kV) and Distribution losses (11kV/0.4kv). Aggregated technical and commercial LossIn absence of feeder metering in the past, substantial portion of T&D loss, including theft of electricity was attributed to agricultural consumption. While, agricultural consumption was around 20-25%, utilities were showing it as 35-40% and correspondingly T&D losses were shown as 20-25%. Also, T&D loss was being computed by showing electricity bills issued to consumers as accrued income, and not on the basis of actual collection. Therefore, T&D loss figures did not capture the major gap between the billing and the collection, over and above large scale of theft. To get over this problem, the concept of Aggregate Technical & Commercial (ATC) loss was introduced. It has been targeted to reduce the T&D loss by 3% from the current loss level of about 40%.1One per cent ATC loss is equivalent to Rs 85 cr. and the energy sector will save at least Rs 255 cr. annuallyAT&C losses in India are at 27%3 (2011)Union power ministry's Accelerated Power Development & Reforms Programme (APDRP), 2002-03, was set up with an objective of reducing ATC power losses to 15%2Source:1. http://newindianexpress.com/states/odisha/Rs-3600-crore-power-sector-plan-to-cut-Transmission-and-Distribution-loss/2013/07/26/article1702694.ece2. http://articles.timesofindia.indiatimes.com/2011-08-23/infrastructure/29917886_1_power-grid-power-generation-power-ministry3. CRISIL Research & http://planningcommission.nic.in/aboutus/committee/wrkgrp12/wg_power1904.pdf6

Energy Flow from Generation to Consumers-Losses Point of View

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HT-High Tension VoltageLT- High Tension VoltageQuick FactsMain reasons for Technical LossesOverloading of existing lines and substation equipments Absence of up gradation of old lines and equipmentsLow HT: LT* ratio Poor repair and maintenance of equipments Non-installation of capacitors for power factor correctionMain reasons for Commercial LossesLow metering/ billing/ collection efficiency Theft of electricity by illegal connection Tampering of metering system Low accountability of employees and corruption Absence of Energy Audit and AccountingWhat is Govt. doing to control AT&C Losses?To bring the losses and make the distribution sector commercially viable, Accelerated Power Development Program (APDP) was launched in 2000-2001 as a last meansSlowly, government realized that there is an urgent need not only for the development of the distribution sector, but complete reforms of the existing infrastructure. This led to the birth of Accelerated Power Development and Reforms Program (APDRP) during 2002-2003 The objective of APDRP were:Improving financial viability of State Power UtilitiesReduction of AT & C losses to around 10%-15%Improving customer satisfactionIncreasing reliability &quality of power supplyR-APDRP (Restructured APDRP) was the governments renewed attempt to revive the power sector reforms in the year 2008. It seeks to eliminate the faults of the former avatar APDRPTotal outlay is Rs. 57,577 Cr. Projects under the scheme are taken up in two parts. Part-A of the project is aimed at establishing IT enabled system for energy accounting and auditing and SCADA (supervisory control and data acquisition) for big cities (with population of 4 lakhs.Part-B is for regular distribution, up-gradation and strengthening projects.The outlay for Part-A is Rs 10,000 cr. and that for Part-B Rs 40,000 cr..The programme will cover all urban areas, cities and towns with a population of more than 30,000Calculating AT&C Losses8Power-Supply Chain

9Power-Supply Chain- Agreements and Payments Power Generation Company E.g. NTPCPower Distribution CompanyE.g. Maharashtra State Electricity Distribution CompanyFuel Supplier E.g. Coal IndiaPower Purchase Agreement (PPA)Fuel Supply Agreement (FSA)ConsumerRetail/IndustrialPower Transmission Company E.g. PGCILPaysIn the absence of power purchase agreements, units will not receive any coal from Coal India, which is the latest condition for receiving coal under the fuel supply agreements**http://epaper.timesofindia.com/Default/Layout/Includes/ETNEW/ArtWin.asp?From=Archive&Source=Page&Skin=ETNEW&BaseHref=ETM%2F2013%2F09%2F09&ViewMode=HTML&PageLabel=13&EntityId=Ar01304&AppName=1Awarded through bidding process against tender issued by State Distribution Companies10Cost Structure- GenerationNTPC2FY12-13FY11-12Commercial Generation(MUs)230993220696ExpensesRs. CrRs. Per KWhRs. CrRs. Per KWhFuel41018.251.7841635.461.89Employee Benefits3360.120.153101.710.14General Admin and Other Expense4211.220.183588.790.16Total48589.592.1048325.962.19Average Tariff FY12-13Rs. 2.90 / KWh1Average Tariff FY11-12Rs. 2.94 / KWh1. Adjustments from previous years not considered2. NTPC Annual Report FY12-13

Electricity Generated (MUs)8060Rs. LakhsRs. Per KWhIncome from operations4924885.53ExpensesFuel2562073.18Purchase of energy/coal rejects385170.48other operating expenses7020.01Employee benefits80340.099General Admin Expenses179100.22Total Expenses3213703.99Profitability38%Profitability38%3. http://articles.timesofindia.indiatimes.com/2012-10-16/lucknow/34498086_1_rosa-power-plant-state-grid-uppclReliance Power FY12-13Observation:Even though cost of production for Reliance power is higher, they got into PPA with UP govt. such their profitability was maintained.11Transmission- Power Grid Corporation India Limited (PGCIL)- 1/2PGCIL is a Navratna company with 50%1 market share in the transmission business and has a monopoly in inter-state transmission. Nearly 95%2 of its revenue is generated from the transmission businessThe balance coming from the consulting services provided to power companies in India and abroad and from leasing its optic fibre bandwidth to telecom operators.The cost-plus model which assures a certain return (15.5 per cent return on equity on projects) with no fuel supply risks, provides stability to earnings.The MoP has notified PGCIL as CTU, which performs following functions:provides transmission facilities for interstate transmission of powercontrols power flow and frequencyensures system reliability and congestion managementundertakes energy accounting and billingprovides reactive power support and voltage controldoes investment planning41. http://articles.economictimes.indiatimes.com/2011-12-05/news/30477832_1_transmission-business-power-grid-business-model2. http://www.thehindubusinessline.com/money-wise/stock-insight/power-grid-corporation-buy/article4203773.ece3. Annual Report, PGCIL, FY12-134. IDFC India Infrastructure Report.pdfKey Company Statistics as on April 1, 20133Transmission Line1,00,200CKm of EHV EHVAC & HVDC Sub-stations167Transformation Capacity1,64,763 MVAAvg. Availability of Trans. N/W99.90%

12Transmission- Power Grid Corporation India Limited (PGCIL)*- 2/2The Government of India has allowed independent transmission service providers to set up transmission lines for interstate and intra-state transactions, hence India potentially has competition for the market in the provision of transmission services, But once a company has set up transmission facilities, duplication of resources may not be worthwhile, and hence there will not be any competition in the market.However, the CTU has been given extra-ordinary powers by the Electricity Laws (Amendment) Act, 1998 which may act as barriers to private entry. It states that a transmission license granted may authorise the transmission licensee to construct, maintain, and operate any inter-state transmission system under the direction, control and supervision of the CTU. It further states that the applicant should first obtain the approval of the CTU. Clearly, the PGCIL simultaneously dons the mantle of both player and controller

Source:* IDFC India Infrastructure Report.pdfDID YOU KNOW?POWER GRIDs Telecom Arm POWERTELAll India broadband network of 29,300 KmOnly company in India providing telecom services on overhead optic fibre network using Optical Ground Wire (OPGW) on power transmission lines It earns revenue by leasing the fibre optic network to Telecom Service Providers, Govt. Departments, MNCs, media etc.Cost StructurePGCIL makes capital expenditure in laying out the networkIt charges based on energy withdrawal from the network rather than actual transmission resources used in a particular case*13Transmission Network in India

14DistributionRecent DevelopmentsFinancial Restructuring Plan (FRP)*According to the FRP, State Governments will take over 50% of the short-term liabilities and convert them to bonds, and the remainder will be restructured by banks, by extending the moratorium on the principal and giving better terms for repayment. This assistance will be granted on the condition that the discoms carry out operational and financial reforms including rationalising tariffs, balancing high tension and low tension loads, extending metering to all consumers, and curtailing unauthorised electricity consumption. Some state discoms, such as Punjab and Madhya Pradesh, have declined to participate in the FRP, wanting to manage their finances on their own. The FRP was adopted and started by the end of FY13, in eight states including Tamil Nadu, Andhra Pradesh, Uttar Pradesh, Haryana and Rajasthan, with combined losses of Rs.160,000 crore. The scheme has come under criticism for following the same pattern as older schemes, which may have improved efficiency of discoms, but were unable to mitigate political interference*http://www.idfc.com/pdf/IDFC_16AR_Shareholder_2012_13.pdfThe distribution segment continues to carry electricity from the point where transmission leaves off, that is, at the 66/33 kV level. The standard voltages on the distribution side are therefore 66kV, 33 kV, 22 kV, 11 kV and 400/230 volts, besides 6.6 kV, 3.3 kV and 2.2 kV. Depending upon the quantum of power and the distance involved, lines of appropriate voltages are laid. The main distribution equipment comprises HT and LT lines, transformers, substations, switchgears, capacitors, conductors and meters. HT lines supply electricity to industrial consumers while LT lines carry it to residential and commercial consumers. 15Major Companies in Power Sector Value ChainPower GenerationCompanyPower Generation Capacity(MW)NTPC411841TATA Power85212Adani Power72603NHPC57024Reliance Power25005Others159833Total225000 http://www.ntpc.co.in/index.php?option=com_content&view=article&id=64&Itemid=34&lang=en http://www.tatapower.com/businesses/conventional.aspx3. http://www.adanipower.com/AdPressReleases/15/1/20134. http://www.nhpcindia.com/about-overview.htm 5. http://www.reliancepower.co.in/108/21_101.pdfPower TransmissionPGCILAlstom T&DKalpataru Power Transmission, etcPower DistributionEvery state has its own power Distribution companyPower TradingIndian Energy ExchangePower Exchange IndiaImportant Acts and PoliciesElectricity Act, 20031Salient features of the ActState Government to unbundle the sector with transmission and system operation made independent of any other businesses in the sector, viz., generation, distribution, and trading.No requirement of license for generation and no requirement of techno-economic clearance except for large hydro-generation projects.Captive generation capacity to have open access to the transmission system and not subject to any regulations for its pricing. Definition of captive generators liberalized to include any capacity set up by an association of persons.By de-licensing generation, captive power plants were freely permitted, hydro projects, though would still need clearancesThis was aimed at encouraging small units to setup their own units and meet their energy requirementsAll others- transmission, distribution, and trading require licence from the regulators (CERC or SERCs) depending upon the area of their operations.Independent regulators to regulate the sector including award and revoking of licences, tariff setting consistent with National Electricity Policy, defining and enforcing performance standards and quality of service, and setting Grid Standards.Creation of regulatory fund at the central and state level with accountability to the Parliament and Legislature respectively.Regulators to reduce cross-subsidies and move towards allowing open access to a class of consumers in a phased manner.Multiple distribution licensees allowed for distribution.State Government to pay subsidy in advance. And tariffs to revert back to levels determined by the ERC, if the subsidy is not paid.Stringent measures (punishment and fine) for theft and unauthorized use of electricity including creation of Special Courts for dealing with such cases quickly.Insistence on 100% metering within two years of enactment.Appointment of an Ombudsman and creation of Consumer Grievance Redressal Forum for consumer interest protection.161. Electricity Reforms and Regulations- A Critical Review of Last 10 Years Experience, Ajay Pandey, Sebastian Morris, 2009,Important Acts and PoliciesElectricity Act, 20031Salient features of the ActEstablishment of Appellate Tribunal to fast-track the appeal process on rulings of ERCs with Supreme Court being the final arbiter.CEA to be the body for techno-economic clearances of large hydro projects, for planning (National Plans) and for advice and definition of technical standards.Trading of power has been identified as an independent and licensed activityThrust in rural electrification and provide for management of rural distribution by local rural bodiesProvision for license for free generation and distribution in rural areasCross subsidy to be gradually phased out along

17Electricity Reforms and Regulations- A Critical Review of Last 10 Years Experience, Ajay Pandey, Sebastian Morris, 2009,http://crisil.com/youngthoughtleader/winners/07-Grover-NM.PDFMajor Beenficiaries2Industrial customer- They were sold electricity at higher rates, due to cross subsidy given to farmers, they could either buy electricity through independent power producers, merchant power plants through open access or build their own captive power plantsIndependent power producers- free generation companies from licensing provisions (subjected to certain technical criteria) and allow setting up of dedicated transmission lines fir end user. They can sell to final consumers through open access, this will encourage the IPP, as they might not be forced to sell to bankrupt SEBs, and can choose credit worthy buyersPower equipment manufacturers- Power equipment manufacturers like ABB, Alstom and BHEL were the major beneficiaries of the act. Due to entry of private sector players, they were one of the biggest beneficiaries of the new act.Though the sector open for private players in generation, Transmission and Distribution was still a mainstay of public sector players like PGCIL and SEBs

18Important Acts and PoliciesElectricity Tariff Policy, 2006General Approach to Tariff3Policy aims to create conditions of competition. Towards this end, it specifies that the distribution licensees would procure power (or capacity) competitively for medium and long-term from generators under the procurement guidelines notified on 19th January 2005 through tariff based bids instead of MoU except from PSU generators (who will have to do it after max. 5 years or before, i.e. after 2011).The policy, in line with the Act, specifies that from April 1, 2006 all tariffs would be under MYT (multi-year tariff) framework and should feature 3-5 year control periodThe Tariff Policy specifies debt-equity norm of 70:30. In case equity is more, the excess should be treated as debt but if it is less than the norm, then the actual equity should be considered for tariff fixation. 1.Central Electricity Regulatory Commission (CERC), State Electricity Regulatory Commission (SERC)2. Wheeling is the transportation of electric power (megawatts or megavolt-amperes) over transmission lines3. Electricity Reforms and Regulations- A Critical Review of Last 10 Years Experience, Ajay Pandey, Sebastian Morris, 2009, On Generation Tariff3The policy specifies that the two-part tariff structure should be adopted for all long-term contracts to facilitate merit order dispatch. The ERCs should have time-varying (peak vs. non-peak) fixed charges for better load management. The PPAs should have adequate and bankable payment security mechanisms and in case of persistent default, the generator should be free to sell outside the PPA. In case of coal-based generation, the cost of project may also include reasonable cost of coal beneficiation, coal washeries and dry ash handling and disposal system. The captive generators on the grid should have same terms as other generating stations subject to Availability Based Tariff (ABT) or should be paid actual variable cost and a reasonable capacity charge, which may be different for peak and non-peak hours. Wheeling2 charges for such generators should be known in advance as declared by the SERC119Electricity Tariff Policy, 2006On Distribution Tariff1The Tariff Policy recommends that the State Government should target direct subsidies, than cross-subsidies, for the purpose as spelt out in section 65 of the Act. Only consumers belonging to BPL category may be given special support to the extent of 50% for 30 units a month in line with the National Electricity Policy. The SERCs should notify the roadmap within six months the target latest by 2010-11 for brining tariffs to within +/- 20% of average cost of supply. For every category, the document stresses on the need for recovery of reasonable user charges. Subsidized rates should be permitted only up to a pre-identified level beyond which cost of service should be recovered.Important Acts and PoliciesOn Transmission Tariff1It does not lays clear cut framework for transmission tariffsThough it states that it should be sensitive to quantum, direction and distance of flows. This could be based on zonal postage stamp pricing or MW-mile basis or some other variant based on the principle of system users sharing their respective share of utilization of the networkLosses should be charged on the basis of average losses arrived at after appropriately considering the distance and directional sensitivity, as applicable to relevant voltage levelLoss compensation is reasonable and linked to applicable technical loss benchmarks1. Electricity Reforms and Regulations- A Critical Review of Last 10 Years Experience, Ajay Pandey, Sebastian Morris, 2009, 20Multi Year Tariff1MYT has been proposed in the Electricity Act 2003 to give an element of certainty to all stakeholders. The basic premise is that tariffs would not fluctuate beyond a certain bandwidth unless there are force majeure conditions.The tariff policy announced by the government of India in January 2006 states that the multi-year framework is to be adopted for any tariff determined from April 1, 2006.The consumer would have a fair idea of what to expect in the next three to five years and the distribution company (Discom) would also be able to plan its business having known the likely retail tariff for the control period.The control period is the time duration during which time the principles laid down by the regulatory commission for tariff determination would be held valid. MYT does not mean that the regulatory commissions need to fix an identical tariff, year after year, throughout the control period though, of course, there is no bar if the regulatory commission chooses to do so.The more likely path is that the commission would fix the guidelines which would determine the retail tariffs and having fixed the guidelines, it is expected that the tariffs would operate within a certain band.Ideally, a MYT framework will divide all costs into two broad categories, controllables and non-controllables. Controllables are those costs which are endogenous to the Discoms, E.g. expenditure on administrative and general (A&G) expenses, repair and maintenance (R&M), etc., Non-controllables are those which are external to the utilities over which they have no control, E.g. enhanced expenditure on power purchase due to rise in fuel cost, for example, rise in price of coal, gas, etc 1. http://articles.economictimes.indiatimes.com/2007-02-13/news/27688884_1_control-period-tariff-policy-regulatory-commissionElectricity Tariff Policy, 2006Important Acts and Policies21Multi Year Tariff1 (contd.)The regulatory commission will determine, at the beginning of the control period, how much expenditure would be allowed during the period as far as the controllables are concerned. While doing so, it will take into account legitimate increases on account of growing gross fixed assets (R&M expenses are a percentage of the value of fixed assets), on account of inflation, etc.While fixing all these costs, the regulatory commission would be guided by the base line data at the beginning of the control period. The Discom would be responsible for any increase in the controllable expenditure beyond the stipulated levels and such excess expenditure shall not be allowed as a "pass through" for determination of tariffs.http://articles.economictimes.indiatimes.com/2007-02-13/news/27688884_1_control-period-tariff-policy-regulatory-commissionElectricity Tariff Policy, 2006Important Acts and Policies22Important Acts and Policies-ABThttp://gopalakrishnanprasanth.wordpress.com/article/introduction-to-availability-based-3bk0x32fl4sfh-5/http://powermin.gov.in/distribution/availability_based_tariff.htmhttp://www.npti.in/Download/Distribution/YMPL/third%20party%20papers-technical%20info/ABT.pdfAvailability Based Tariff1 Was introduced first time Jan 4th, 20002 Pre ABT, Tariff structure of power plants was categorized under following3:Fixed Cost: Interest on Loan, ROE, depreciation, O&M expenses, insurance, taxes, interest on working capitalVariable Cost: Fuel cost23Important Acts and Policies-ABT1. Capacity Charges (Fixed)1Fixed charges are payable against the availability (declared capacity) of the generating facility. Fixed charges excluding ROE is payable on a prorated basis for 0-30% availability. Prorated ROE is payable from 30-70% availability. Incentive is payable to the generating station for availability beyond 70%. The incentive is pegged at 0.4% of equity for each percent increase in availability in the 70-85% range. Thereafter, the incentive falls to 0.3%. This decrease in incentive after 85% is aimed at discouraging the generating facility from overloading the units at the cost of maintenance and equipment life. ABT also contains provision for penalizing the generating utility for over/under declaration of the availability. Fixed charges are payable by the beneficiaries in proportion to the allocated capacity and doesnot depend on the actual consumption.2. Energy Charges (Variable)1variable charges are to be paid against the scheduled energy, irrespective of the actual drawl. This splitting is expected to promote power trading.3. Unscheduled Interchange (UI) Charges1A payment for deviations from schedule at a rate based on the system condition, i.e. freq. at that timeIt is negative if power plants are delivering less power than scheduledIf plant is producing 600 MW, but was scheduled for 500 MW, the Energy charges will be paid only for 500 MW, extra 100 MW will paid at a certain rate. If freq of the grid is > 50Hz (surplus power), rate will be smallIf freq of the grid is < 50Hz (deficit power), rate will be higherIf produce = Scheduled, this component is zero New Tariff StructureIt divided the tariff into three parts1. http://gopalakrishnanprasanth.wordpress.com/article/introduction-to-availability-based-3bk0x32fl4sfh-5/24Open Access- 1/4

Overview1The Electricity Act, 2003, provides for open access to energy, which contributes the second largest chunk of 20-50% of the total cost of production, next only to raw materials. As such, easier energy availability for industrial development is an issue of paramount importanceAlthough open access to electricity may not reduce its price much due to the prevailing high input costs, it would make it easier for industries to procure power from their source of choice and also potentially reduce power tariff.India now ranked low at 59th place in global competitiveness index of World Economic Forum. Compared to the USA and China (6.9 cents per unit), electricity charges in India are higher at 10 cents, thus making production rather uncompetitiveIndias enegy imports are expected to grow from 26% in 2007 to 40% in 2030 while the USAs will decrease from 33% to 27%, due to shale gas availability, during this period.Open access could go a long way in making Indian costs more competitive as it would ease availability.1. http://www.thehindubusinessline.com/economy/power-traders-demand-open-access-across-india/article4885103.ece#Emerging Industry Structure25What is Open Access?1Open access, a framework for development of power market and for promoting competition, is mandated to allow freedom for consumers (suppliers) to choose suppliers (consumers). Open access to the inter-state transmission network (that is, inter-state open access) was available from the very beginning of the Electricity Act, 2003 coming into effect. The charges for transmission capacity and quantum of power transmitted over it are easily discernible for effecting payments.Open access to the distribution network (that is, intra-state transmission), owned by Discoms, however, was to be implemented in phases on payment of open access charges and charges for cross-subsidy and additional subsidy if any, which were to be progressively reduced to within 20 per cent of the average cost of power by 2010-11.Open access is available for power purchase or sale by utilities or distribution licencees. However, when it relates to generators and consumers, only some of the States have permitted limited open access. Some are permitting open access to generators if they are connected to central transmission network.The irony is that open access has not been allowed to succeed for various reasons, such as apprehension of the State utilities about flight of industrial consumers from their net; non-availability of surplus power at reasonable rates; irrational open access charges; non-availability of open access infrastructure of metering; and segregation of consumers' lines, among other factors.Even though the cross-subsidy surcharge on open access transactions is mandated under Section 39 and 42 of the Act, erecting a high tariff barrier deters customers from purchasing supplies from outside the jurisdiction of Discoms and runs counter to the tariff envisaged in the National Electricity Policy and Tariff Policy.For meeting the demand during acute power shortage, it is observed that some States have misused their powers to block the sale of surplus capacity of captive generators to other States, by inappropriately invoking Section 11 of the Act.1. http://www.thehindubusinessline.com/opinion/make-open-access-in-power-a-reality/article3408885.eceOpen Access- 2/426Open Access1 - 3/4Even as the central government is pushing states for mandatory implementation of open access (OA) for bulk power consumers, an analysis by a regulators body has revealed that contrary to expectations, the consumers in 12 states have had to pay more for power under the new regime1OA at various levels is the hallmark of electricity reforms and the regime has been effective in 20 states since January 2009 on an optional basis. Under the OA regime, bulk consumers enter into bilateral deals with discoms and stay outside the ambit of the regulated tariff system.Analysts, however, reckon that higher prices under the open access regime are due to factors like the steep rise in input costs primarily coal since 2009 and doesn't negate the principle that open access promotes competition. Also, many large consumers must have chosen to pay higher prices for better-quality power from distant discoms.Helped by regulators, discoms have burdened OA consumers with numerous un-prescribed charges and surcharges to increase cost of power for them.Regulators have been levying numerous charges in addition to those prescribedCross-subsidy surcharge liability figures are highly inflated. This is possible because regulators follow different methodologies for calculating cross-subsidy surchargeOnly in eight states Haryana, Karnataka, Maharashtra, Punjab, Rajasthan, Uttar Pradesh, Madhya Pradesh and Gujarat did OA consumers pay less compared with normal consumers.1. http://www.financialexpress.com/news/extra-costs-offset-open-access-gains-for-power/951897/0

27Open Access- 4/4Cost Components of Open Access1Transmission ChargesWheeling chargesOperating chargeUI chargeReactive energy chargeCross subsidy chargeAdditional SurchargeInterconnection surchargeConnectivity surchargeAny other charges

By manipulating above charges, especially, Cross subsidy, SEBs and SERCs make open access of electricity prohibitive.

Now MERC2, on Feb 24, 2013 has increased the cross subsidy surcharge by 60 to 70 paise a unit for industries, which is against the spirit of NTP, 2006, which says, cross subsidy should gradually decrease

http://www.indianelectricity.com/html/pdfall/openaccess/MPERC%20open%20access%20charge%20calculation.pdf28Power Trading and Power Exchanges4 -PTC India Ltdhttp://www.indianelectricity.com/html/pdfall/openaccess/MPERC%20open%20access%20charge%20calculation.pdfhttp://articles.timesofindia.indiatimes.com/2013-02-24/nagpur/37269476_1_open-access-rb-goenka-msedcl In the electric power market, tolling agreements are typically between a power buyer and a power generator, under which the buyer supplies the fuel and receives an amount of power generated based on an assumed heat rate at an agreed cost.PTC Corporate presentation, 2012; http://www.ptcindia.com/downloads.htmlPTC India Ltd. (formerly known as Power Trading Corporation of India Limited), was incorporated in 1999 to undertake trading of power to achieve economic efficiency and security of supply and to develop a vibrant power market in the country.The intent and object of the EA 2003 was to develop power market through increased competition, more players and protect consumer interestsMarket leader in trading of power: ~43%market sharePromoted by industry participants with a credible track record and significant sector experienceNTPC - Indias largest thermal power generatorPOWERGRID - Indias largest Central Transmission Utility (CTU)PFC Development Financial Institution (DFI) dedicated to the power sectorNHPC - Large hydroelectric power generator in IndiaIt has helped in creation of power market in India; Sale of MUs increased from 1,617 MU in FY 2002 to 24,325 MU in FY 2012PTCs business includes Short term, Medium term, Long term (including cross border with Bhutan and Nepal) power trading, banking, fuel intermediation (done by PEL- PTC Energy Ltd.), trading of power through Power Exchanges and Power Tolling3

Key Players and Market Share (2007-08)

29Power Trading and Power Exchanges1 - PTC India Ltd. (contd)Power Tolling Arrangement1PTC Corporate presentation, 2012; http://www.ptcindia.com/downloads.htmlCo-promoter of Indias First National Power Exchange (IEX- Indian Energy Exchange)Has a subsidiary PFS (PFC Finance Services), incorporated in 2006, which has made investments in the following sectors of the energy value chain:Power exchanegsBio-mass, Coal, Wind ProjectsTerm FinancingPresence in value chain:Power TradingDirect Investments in Power projectsFuel IntermediationPower Tolling ArrangementsAdvisory ServicesPower trading business can be categorized as:Short Term tradingMedium Term tradingLong Term tradingCross Border tradingBankingTrading on Power exchangePower TollingCapture Greater Share Of Energy Value Chain By Diversifying Into Related Energy Businesses

30Power Trading and Power Exchanges- IEX1. http://articles.economictimes.indiatimes.com/2013-05-23/news/39475586_1_power-exchange-india-industrial-units-indian-energy-exchangeIndian Energy Exchange1IEX, the country's first energy trading platform, was set up in 28th June, 2008It recorded a 62% increase in trading volume in 2012-13, as frequent electricity outages forced power distributors and industrial units to rely more on it for their needsMore than 22 billion units of electricity were traded on the Indian Energy Exchange (IEX) in 2012-13 compared with 13 billion units a year agoPower generators, distributors and industrial units are the exchange's main members.Volumes growth was also driven by new memberships, which increased 74% over the previous fiscal to 2,322. IEX brought respite to over 2,300 participants, including 1,700 industries, by meeting their electricity needs reliably and competitivelyThe average power price for 2012-13, however, remained at Rs 3.49 per unit, compared with Rs 3.53 in the previous fiscal, due to higher market participation of power producers.In the last five years, trade in Indian power exchanges has increased at a CAGR of 56%. Trades at IEX, set up in 2008-09, and the Power Exchange India, the other power-trading platform in the country, account for 3% of the total electricity generated in the country.Major hurdles in the growth of these exchanges are restricted open access and availability of transmission networkThere are states like West Bengal, Maharashtra, Uttar Pradesh and Delhi where even partial open access has not commenced. Another issue hindering the growth of the power market is inadequate availability of the transmission networks31Latest News and Developments32Electrical Equipment Market + Revision of some facts and figuresMarket Stats Global

Global market size is expected to grow to 29000GW by 2030. Driven by this demand the global EE market is expected to reach $6.6 Trillion ,This translates into ~2% CAGR over the long term. Global trade in EE has reached US$ 453 bn in 2010, with China being the leading exporter of electrical equipment with over 15 percent share. India accounts for less than 1% of the totalshare of exports.

The share of coal in total electricity generation is expected to rise marginally from 42% in 2009 to 44% in 2030

Non-hydro renewable energy sources biomass, wind, solar, geothermal, wave and tidal energy are expected to continue gaining share of the market, accounting for almost 9% of generation in 2030, up from 2.5% in 2009. The share of nuclear power is expected to decline from 14% in 2007 to 11% in 2030. There are significant efforts, largely from developed nations, to increase generation from non-renewable sources of energy. But, overall the global power sector is expected to continue its reliance on thermal energy sources.

China which has almost the same demographic size as India, has installed capacity of around 800,000 mw, roughly four times greater than ours. The US has the largest installed capacity of over 1 million mw, but China plans to surpass US with its target of breaching the 1.5 million mw-mark by 2030

The global electrical equipment industry consists of the following two segments: a. Global heavy electrical equipment market power generating equipment, including wind turbines, and other heavy electrical equipments such as power turbines, heavy electrical machinery intended for fixed-use and large electrical systems. b. Global electrical components and equipment market electric power cables, Transformers and electrical switchgear, Transmission Line Towers, etc.

A period of deregulation is being witnessed in the power sectors of most countries, with an increase in the number of independent power distributors and operators who are capable of supplying services at different points in the power sector value chain. India is endowed with huge coal reserves and almost 78% of the coal produced in the country is used for power generation

http://dhi.nic.in/indian_electrical_equipment_ind_mission_plan_2012-22_base_doc.pdf

33Current Size of Indian Market : 110,000 CrIt contributes 1.5% to the nations GDP and 10.5% to the manufacturing GDP. Power deficits range between 9% & 13%

It is estimated that the size of the domestic market in generation equipment is expected to reach US$ 25-30 bn by 2022 (from US$ 5.7 bn in 2011), while that of the T&D equipment industry is estimated to grow to US$ 70-75 bn (from US$ 18.5 bn in 2011). This translates into a CAGR of around 14%.

The industry directly employs around five lakh persons and provides indirect employment to another ten lakh people. Most sub-sectors of the industry also make a large number of products in varied price and quality ranges. Some subsectors comprise a sizeable unorganized segment as well.

More than 83 GW of thermal plants are being developed at present, where foreign players (with Chinese accounting for a major share) have captured close to 45% market share.

The EE industry is projected to provide direct employment to 1.5 million people and indirect employment to 2 million in by 2022 The entire value chain would accountfor a total employment of over 5 million persons.In 201112, Indias exports of electrical equipment were ` 22,200 crores (US$ 4.6 billion), while imports were ` 75,057 crores (US$ 15.7 billion).

Share of coal in Indian Electricity Generation is 68.56 percent (Global av. 42%)

Market Stats GlobalGeneration Capacity : 225 GW , Worlds fifthGDP growing at around 5.0% in FY 12-13 Electricity demand growth 10-12% per annum (to 2017)Installed Capacity 211,766 MW as on Mar 2013 Percentage electrification 65%Losses of State power utilities at about 200,000 Cr (Jan 2012)Renewable generation capacity of 25,856 MW (12.5 % of total generation capacity) .State-level generation companies account for about 47.13% of gen.Private Sector Generation : 29.49% (62459 MW) of total installed capacity .Transmission almost under Public Sector (Power Grid Corp India Ltd)Distribution under State ownership - T&D Losses 28.4 % (FY 2012) Renewable Energy - 12.20 % of installed capacity but about 4% of generated energyTarget to generate 20,000 MW of solar power by 2020 Total manpower in the power sector at the end of 10th plan was approximately 9.5 lakhsIndias Safeguard Agreement with IAEA coupled with NSG waiver will help India to increase its nuclear power capacity rapidly. According to Planning Commission, the nuclear power development target would be 20,000 MW by 2020 and 62,000 MW by 2032. India plans to import the latest reactors of high capacity ratings in large numbers to meet its above targets. With this the countrys nuclear landscape will be rapidly transformed. A large number of reactors, fuel management including re-processing plants, fuel fabrication facilities and waste immobilization plants will have to be built almost simultaneously. Indian industry is looking at huge market unfolding before them over the next two decades through this deal. The nuclear power market is estimated to be at US$ 100 bFor 2011-12, the industry size is estimated at ` 1.20 lakh crores, of which generation equipment segment consisting of BTG contributed `31,000crores while the major T&D equipment segment of transformers, cables, transmission lines, switchgears, capacitors, energy meters, etc., provided the larger share of ` 64,235crores.

EE Market Story - India

35

Foreign companies have received huge bulk orders, primarily from Indian private players for power plants to be commissioned during the 12th and 13th Five Year Plans. As a result, most BTG equipment players in India do not have healthy order books. This scenario would lead to intensified competition for upcoming tenders. A large share of Indias current installed thermal capacity is more than 20 years old. Advanced ultra-supercritical boilers are being developed in the country. Retrofitting andrefurbishing of old existing plants would become a major source of demand in the comingyears. Market Stats IndiaFuel linkages: 65% of Indias power capacity is thermal-based. In such a case fuel linkages (coal, gas, etc.) become very critical. Obtaining secure fuel linkages is a major challenge due to stringent government policies related to environmental and mining clearances. The requirement of coal in power plant in the year 2017 and 2022 is expected to be 900 million MT and 1,180 million MT respectively. Currently close to 140 million MT out of the total 460 MT is imported. Share of domestic supply is expected to dwindle further with more than 150 mining projects of Coal India awaiting clearance from the environment ministry. Specially after coalgate, new licences are not being grantedLand acquisition legal and environmental issuesPower project funding: To meet the investment needs, Indian players will needto search globally for inexpensive sources of funds. Rising inflation is resulting in rising cost of funds in India. Consequently, many players in the power sectorintend to secure investments from other countries. Moreover some countries provide low cost funding to their industries which creates competitive pressure on Indian playersCritical raw material (such as CRGO for transformers and generators) is being imported, as there is no domestic supplier. These results in issues related to the availability and price volatility of raw materials. India consumes 250,000 MT of CRGO sheets, of which only 80,000 MT is prime material, while the others are of second grade quality.ChallengesLack of adequate support Infrastructure i. Domestic testing and calibrating facilities for electrical equipment in India are inadequate and expensive. The country does not have testing facilities for equipment such as high capacity transformers, which manufacturers need to send to countries such as the Netherlands and South Korea for testing, which is time-consuming and expensive. ii. Congested ports and poor quality roads are some infrastructure impediments that constitute a major issue for all industries in the country. iii. Transportation of OCDs(Not sure what OCD is) is a major challenge with lack of proper infrastructure and clarity on regulations. T&D losses in India currently stand at 27%. The losses are largely due to overloading of lines and substation equipment, absence of upgradation of systems, thefts and pilferage etc. These losses cause significant financial impact to the utilities. iv. Poor financial health of state distribution companies is leading to lowered investments in the distribution segment and also lack of payment security for industry players.v. Funds availability is a major issue plaguing the power sector. Lack of funds delays the projects and puts modernisation plans on hold. vi. Need for improvement in design of procurement process and policies of central and state utilities a) There is a need for improvement in procurement design and policies and qualifying criteria (which operate on outdated tendering procedures) and system for awarding contracts, based on L1 criterion. b) Utilities are not awarding projects regularly and are bunching them, leading to sub-optimal capacity utilization. c) Delays by utilities in taking decisions on projects, reviews, etc., is leading to delays in execution. d) Sub optimal quality products are getting approved in the absence of standardprocurement policies and product specifications not defined in time. e) There is a lack of standardization of product specifications, design parameters and ratings for transmission and distribution (T&D) equipment across different utilities. f) There is need for enforcing and monitoring of regulations on power plants (e.g., related to emissions, heat rate) to ensure that good quality equipment gets installed that meets specifications. Currently, power plants look at the capital cost of procurement and do not consider other costs including societal and environmental costs. g) Absence of price variation clauses in certain transmission contracts or projects is leading to imbalance in pricing, which affects the margins of companies in the event of an increase in the price of raw materials and lead to delay in supply. Shortage of skilled technical manpower is major issue faced by the EE industry. Industry is expected to require more than 5 million of direct manpower and another 10 million of indirect manpower by 2022Absorption of new technology by domestic manufacturers and user industries happens at a very slow pace. Utilities procurement policies based on the L1 criterion do not encourage technology development. R&D investments are low in most segments and there is significant lack of dedicated funds for R&D. Lack of strong quality control mechanisms at some Indian manufacturers to test their sub-vendors product qual ity leads to the final product being of poor quality. Most EE manufacturers continue to focus on being equipment or component suppliers and have not graduated to offering complete solutions. Many companies have set up new capacities, while the existing ones are augmenting their existing capacities. Generation equipment (boilers, turbines and generators) production in India is estimated at around ` 26,600 crore (around US$ 5.7 bn). The BTG equipment segment has witnessed significant investment from foreign players who have set up their manufacturing facilities in India. The large demand for BTG equipment makes India an attractive market for these companies.There is significant import of BTG equipment (at ~13%) in the boiler segment, which constitutes a major share of the sector. Imports are predominantly from countries such as China and Korea. Due to the emergence of new technologies such as supercritical technology, the market share of foreign BTG players is significant in the total orders placed.

A large part of the BTG demand from private sector players for the Twelfth Plan period has also been bid for, making the government sector (largely NTPC) an important customer for the BTG equipment industry segment.

Supercritical technology is gaining prominence in the Indian market. During the Eleventh Plan, the share of supercritical technology was 14%, while in the Twelfth Plan the share of supercritical technology will be more than 60%.Overcapacity in the Chinese BTG segment has resulted in Chinese companies targeting growth markets such as that in India. Chinese companies have received huge bulk orders, primarily from Indian private players for power plants

More than 80 GW of supercritical sets have been awarded by India till date. Foreign players have been the recipients of the major share of such orders. More than 68 GW have been awarded to foreign players, with Chinese players capturing more than 80% of the orders placed on foreign companies. Domestic players lag behind in adding BTG capacity in the super- critical boiler and turbine segments.

A large share of Indias current instal led thermal capacity is more than 20 years old. Renovation and maintenance activities in existing power plants would become a major source of demand in the coming years. The total manufacturing capacity of BTG equipment in the country is about 25,000 megawatt (MW) per annum and is expected to increase to 40,000 MW per annum by 2014-15, once six more joint ventures become operational. As a result, even thegeneration equipment sector will soon be sitting on huge surplus capacity.Generation

GenerationThe move by NTPC in enforcing an offset mechanism (where the supplier of major equipment needs to set up local manufacturing in I ndian as qualifying criteria for the bid) is a welcome move to promote the domestic equipment industry. Some large Indian electrical equipment manufacturers like BHEL, are already expanding their global presence. Indian companies are aggressively targeting exports,

The BTG equipment segment has witnessed significant investment from foreign players who are setting up their manufacturing facilities in India as its an attractive market for these companies. There is significant import of BTG equipment (at around 13%) in the boiler segment, which constitutes a major share of the sector

The investment in transmission infrastructure has been half of that on generation, leading to major inadequacies in the transmission system

Distribution of electricity in India is largely operated by states, with only 57% being distributed by private players. One of the major problems in this segment is high AT&C losses, which continue to be around at 27% . This is substantially higher than the global average of 1015%. The total loss incurred by distribution companies is estimated at around ` 70,000 Crs. in 201011

The capacity utilisation of the T&D equipment industry is broadly only 70%, which is a matter of concern for the industry. At present, supplies electricity to the franchisee at a predetermined price according to the franchisee agreement. The franchisee retains a pre-defined portion of the revenue as charge.

TransmissionTransmission and distribution equipment Indias T&D equipment industry is heterogeneous and manufactures a wide variety of equipment from transmission line towers and transformers to energy meters. The industry is also characterised by its large unorganized segment and the presence of a large number of SMEs. The size of this industry is estimated to be ` 84,000 crore (around US$ 18.5 bn) and exports constitute about ` 18,000 crore (around US$ 4 bn)

Indias T&D equipment industry is heterogeneous and manufactures a wide variety of equipment from transmission line towers, transformers, switchgear to energy meters. The industry is also characterised by the presence of a large number of SMEs. The size of this industry (including other electrical equipment) is estimated to be ` 89,235crores in 201112.Indias electrical equipment industry has witnessed significant growth in the last few years. The major T&D electrical equipment have grown at a CAGR of 23.6% from a small base of ` 18,000 crores in 2005-06 to `64,235 crores in 2011-12

TransmissionInvestment in new technology and modernization, like 1,200 kV transmission lines, +/-800 kVDC transmission, planning of smart grid projects and establishment of the national grid by the Power Grid Corporation of India are major steps towards efficient utilization of energy by evacuating electricity from power surplus regions to meet demand in power deficit regions.

Distribution

Distribution of electricity in India is largely operated by states, with only 57% being distributed by private players. One of the major problems in this segment is high Aggregate Technical & Commercial (AT&C) losses, which continue to be around at 26% against the global average of 1015% in 201011The following are key initiatives that the Indian government has taken to improve distribution: a. Restructured Accelerated Power Development & Reforms Programme (R-APDRP): This programme focuses on actual, demonstrable performance in terms of sustained loss reduction. It aims to establish reliable and automated systems for sustained collection of accurate base line data. It also adopts IT in areas of energy accounting before implementing distribution-strengthening projects, consumer attitude surveys, etc. b. Franchise Model: Distribution companies have been recommended to give urban areas with high losses to private parties on input based franchisee. In this model the purchase of power is primarily at a pre-determined rate, i.e., the input rate from the licensee, thus significantly removing the uncertainty linked to high power procurement costs. c. Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY): This scheme aims at providing access to all rural households and villages. In addition, it intends to provide electricity connection to Below Poverty Line (BPL) families, free of charge. As on 15 April, 2012, a total of `28,169 crores have been released under this scheme The lack of adequate T&D infrastructure and the need to modernise the existing infrastructure calls for significant funding in this sub-sector. Financial institutions such as the Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) have beeninstrumental in providing funds for T&D projects.Major public sector companies involved in the generation of electricity include NTPC, Damodar Valley Corporation (DVC), National Hydroelectric Power Corporation (NHPC), Nuclear Power Corporation of India (NPCI), Andhra Pradesh Power Generation Corporation (APGENCO), Tamil Nadu Electricity Board (TNEB), Maharashtra State Electricity Board (MSEB), Kerala State Electricity Board (KSEB), in Gujarat (MGVCL, PGVCL, DGVCL, UGVCL the four distribution companies one controlling body GUVNL, one generation company GSECL and one transmission company GETCO). The Power Grid Corporation of India is responsible for the inter-state transmission of electricity and the development of the national grid.Players NTPCAccordingly, NTPC has forayed in to hydro power development and is already implementing hydro projects with a capacity of 1,920 MW. NTPC plans to have 9,000 MW of Hydro Power projects in its portfolio by 2017. At present 80% of NTPCs portfolio is based on coal. Even going forward, NTPC plans to add large capacities based on coal. By 2017, NTPC intends to have a more diversified fuel mix with 70% of its capacity based on coal, around 14% based on gas, 12% based on hydro, 3% nuclear and 1% based on renewable energy sources.Considering the benefits of nuclear power generation and strong project management capability of NTPC, the company envisages setting up 2,000 MW of Nuclear Power Capacity by 2017 through a joint venture with Nuclear Power Corporation of India Ltd.The NTPC generates a fourth of all electricity generated in the country BhelMaharatna . Bharat Heavy Electricals Ltd. (BHEL) has developed a demonstration model based on Integrated Gasification Combined Cycle (IGCC) and advanced ultra-supercritical technology. BHEL should be supported by the government to build high capacity commercial units in a time-bound manner. This technology, which is not available in the world for Indian coal, should be made available to other manufacturers. For any R&D project, the user organisation or main beneficiary should be supported by the government for leading the research in a planned and committed manner.It is the 7th largest power equipment manufacturer in the world. In the year 2011, it was ranked ninth most innovative company in the world by US business magazine Forbes. BHEL is the only Indian Engineering company on the list, which contains online retail firm Amazon at the second position with Apple and Google at fifth and seventh positions,respectively.[11] It is also placed at 4th place in Forbes Asia's Fabulous 50 List of 2010.BHEL has a share of 59% in Indias total installed generating capacity contributing 69% (approx.) to the total power generated from utility sets (excluding non-conventional capacity) as of March 31, 2012. The company has been exporting its power and industry segment products and services for over 40 years. BHELs global references are spread across 75 countries. The cumulative overseas installed capacity of BHEL manufactured power plants exceeds 9,000 MW across 21 countries including Malaysia, Oman, Iraq, the UAE, Bhutan, Egypt and New Zealand. Its physical exports range from turnkey projects to after sales services.It became the only company in the world to have integrated facilities to manufacture power project equipment - from boiler to turbine to generator. The company now has 14 manufacturing units across the country and employs 67,000 persons. It manufactures equipment for coal, gas, nuclear and hydel power plants. BHEL-manufactured generating sets, with a capacity of nearly 55000 MW, account for about 65 per cent of the installed capacity in India. Being the only one of its kind in the region, BHEL also accounts for a significant portion of Malaysia's power generation capacity.Faced with the new power policy, BHEL utilised its capacity to produce equipment for the industrial sector, that is, for the non-power sector. Its Tiruchi unit in Tamil Nadu, for example, has produced boilers for use in a range of industries - from paper to petrochemicals76% revenue currently is from Power equipmentBhel continues its 7,000-12,000 mw addition, entry of a player like L&T Power is already enhancing indigenous delivery by 4,000 mw per annum

PGCILIn the transmission sector, the Power Grid Corporation of India Ltd. (PGCIL) has developed an experimental 1,200 kilovolt (kV) station at Bina (Madhya Pradesh) with the involvement of domestic electrical equipment manufacturers, EPC (Engineering, Procurement & Construction) contractors, and a foreign expert. This is an excellent model of public-private partnership (PPP) for fast development of new technology / systems and should be replicated in other areas. To increase the capacity of existing transmission lines, stress should be laid on areas such as high surge impedance loading lines and development of high temperature low sag carbon core conductors. Focussed attention should be given to research on superconductivity, under the leadership ofPlayers L&T power has snatched huge chunk of orders In a very quick timehttp://www.financialexpress.com/news/-huge-scope-for-power-equipment-biz-in-india-/596736/1Siemens India is one of the largest players in Transformers Manufacturinghttp://www.business-standard.com/article/economy-policy/boom-time-for-power-equipment-companies-109090200076_1.htmlTwelfth Five Year Plan, around 78 GW of power generation capacity is expected to be added, while another 100 GW is expected in the Thirteenth Five Year PlanDuring the Twelfth Five Year Plan, investments are expected to be worth around US$ 85 bn in generation, US$ 45 bn in transmission and US$ 70 bn in distribution. 5 Year Plans

The government has stipulated Power to al l by 2012 under its National Electricity Policy (NEP), with a target of achieving 1,000 KWh per capita consumption of electricity by 2012.

Fears of a sharp increase in the price of power generated by private power companies have made the Government replace the earlier policy of negotiated power projects, which allowed cost-plus pricing of electricity, with a policy that is based on competitive bidding.ProblemsShortagesTariffsDependence on imported fuelsPoor health of distributionDemand likely to cross 300MWMeasures taken till nowElectricity Act 2003Ultra Mega Power ProjectsTripartite agreements between central govt. , central generators and the statesRecapitalization of State electricity boardsThese measures have proved to be insufficienthttp://dhi.nic.in/dhi_draft_mission_plan_2012-22.pdf

45National Electricity Act-2003 & NEP

Tariff Policy

Policies

Tariff Policy

Tariff Policy

Tariff Policy

Tariff Policy

Indias share in global export of electrical equipment is less than 1%.Switchgears and rotating machines together cover ~36% of the trade market. China is the leading exporter in rotating machines as well as transformers with more than 16% share, while India has less than 2% share in global trade of these products. US is the largest importer of rotating machines as well as transformers.China dominates trade in most of these product segments. Segments such as rotating machines, transformers, lamps, cables are dominated by China with double digit shares in global trade. Countries like Japan, US and Germany dominate trade in a few segments like switchgears, insulators, capacitors etc.

ExportT&D equipment trade Although Indian manufacturers have capacities, imports have grown faster than exports in the recent past, significantly affecting the domestic manufacturing industry. Over the past six years, from 2004 to 2010, Indias trade deficit has almost doubled, increasing from ` 3,823 crore to ` 7,923 crore. Imports increased from ` 7,990 crore to ` 21,764 crore, while exports have grown from ` 4,167 crore to ` 13,840 crore

In 201011, there was more than 15% decline in exports, whereas imports increased by more than 12% from the previous year, thereby widening the trade deficit gap. Import threat is looming large, especially from China, Korea and Germany. Equipment categories that have been impacted include power transformers, HV switchgear, EHV cables, HV insulators, 22 motors, generating sets, and turbines

.

Import With Indian electrical equipment manufacturers having significant capacity to meet the domestic demand for transmission equipment, rising Chinese imports are causing concern to the domestic industry. Chinese companies have brought down prices significantly, but the quality and reliability of their products is not yet assured.

If Chinese manufacturers want to export to India , they have the advantage of nil duties as per our mega power project policy. But, if we want to export to China , our products face taxes and duties of 28-40% in China .In a mega-power project, Indian equipment manufacturers still suffer taxes and levies, whereas Chinese equipment is imported without any BCD, CVD or SAD. Also, Indian manufacturers must follow IBR regulations, which happen to be conservative, and increase equipment weight by around 10%, raising the cost. State assistance to Chinese exporters also widens the gap. In all, Indian manufacturers suffer a disparity of around 14% of the product value. This, on top of the advantage to Chinese exporters due to an artificially undervalued currency.

Import

Source of Electricity (World total year 2008)-CoalOil Natural GasNuclearHydrootherTotalAverage electric power (TWh/year) 8,2631,1114,3012,7313,28856820,261Average electric power (GW) 942.6126.7490.7311.6375.164.82311.4Proportion 41% 5% 21% 13% 16% 3%100%Supercritical steam generators are frequently used for the production of electric power. They operate at supercritical pressure. In contrast to a "subcritical boiler", a supercritical steam generator operates at such a high pressure (over 3,200 psi or 22 MPa) that actual boiling ceases to occur, the boiler has no liquid water - steam separation. There is no generation of steam bubbles within the water, because the pressure is above the critical pressure at which steam bubbles can form. It passes below the critical point as it does work in a high pressure turbine and enters the generator's condenser. This results in slightly less fuel use and therefore less greenhouse gas production. The term "boiler" should not be used for a supercritical pressure steam generator, as no "boiling" actually occurs in this device.GenerationThe average gross efficiency (excluding combined heat and power) of coal-fired power plants is projected to increase slightly from 35% in 2007 to 40% in 2030. New power plants being planned are based on advanced technologies. Supercritical technology is expected to be more widely used in the medium term, with advanced ultra-supercritical technology and integrated gasification combined-cycle plants becoming more widespread after 2020.CoalIndia is endowed with huge coal reserves and almost 78% of the coal produced in the country is used for power generationAs far as renewable energy is concerned it can definitely supplement the power generation, however, even by 2031-32, as per the Integrated Energy Policy, the total contribution from renewable sources including all hydro shall be around 25% of our total installed capacity. In the renewable energy segment wind energy is a significant contributor to the power generation in the country. With a capacity of 10,464 MW, India has the fifth largest wind power installed capacity in the world. The solar insolation in the country is one of highest in the world. Major technology breakthrough in solar could be the catalyst for development of large solar farms and the National Solar Mission shall incentivise development of solar power generation capacity. Hydro power generation is renewable and environmentally benign source of energy and is unaffected by volatility in fuel prices.Seeing the huge power requirements, coal shall continue to remain the major source for power generation in the foreseeable future. In the medium to long term nuclear is also expected to become a major base load power supplier.

Renewable Energy58

The generation generally takes place at voltages around 3.3kV to around 22kV which is medium voltage.The voltage is then stepped up to a level of 110kV or 220 kV (high voltage) or even 400kV (extra high voltage) depending on the amount of power to be transmitted

At distribution stations the power is stepped down to a voltage of 430/250 V for customers taking into account the voltage drop in distribution lines. In India the power supply to the residential premises is at 240V,single phase, 50Hz ac. The three phase supply is at 415V.

RMU panel generally forms ring system in which distributor is supplied from more than 1 feeders as input to RMU so that in case of failure from any one feeder, power can be fed uninterruptedly from other feeders at the same pointThe underground system is much expensive as compared to overhead system and is only used in areas where safety and good appearance are of prime importance.FaultsTransient Faults: Atransient faultis a fault that is no longer present if power is disconnected for a short time. For eg - momentary tree or bird contact.Persistent Faults: Apersistent faultdoes not disappear when power is disconnected. Faults in undergroundpower cablesare often persistent.These occur due to some external damage.http://www.cccindia.co/corecentre/Database/Docs/DocFiles/Presentation_on_Distribution.pdf

Technical Details Due to high cost of funds in India, private players are seeking low cost funds in international financial markets. Indian private power roducers are sourcing funds from foreign banks which mandate that a part of the equipment supply needs to be sourced from the bank s country of origin.i. The export promotion schemes of the government are not easily available for project exports. ii. Interest Rate Subvention of 2/4 PP on Pre-shipment and Post-shipment credit, earlier provided by the government for various sectors (including engineering) from 1st April 2007 has been discontinued with effect from 30th September 2008. Government of India had introduced a fresh scheme of Interest Rate Subvention of PP for Pre-shipment and Post-shipment credit with effect from 1st December 2008 till 31st March 2010 for various sectors but engineering sector was excluded from this scheme. iii. Lack of competitive long term export financing options. FinancingTo make India the country of choice for production of electrical equipment and reach an output of US$ 100 bn by balancing exports and importsOvercapacity is expected in the generation equipment segment, which would lead to low levels of utilisation. T&D equipment segment is already suffering from capacity under utilisation.

Vision 2022 for the Indian electrical equipment industry is to make India the country of choice for the production of electrical equipment and reach an output of US$ 100 billion by balancing exports and import

FinancingTechnology UpgrationIndian industry as a whole does not give much importance to R&D and spends less than 1% of their sales on R&D. Large companies in other countries spend 5 to 6% of sales on R&D. 90% of T&D equipment anufacturers in India are in the small and medium enterprises (SME) sector, and are generally unable to upgrade echnology and improve their productsR&D in the BTG and T&D sectors takes place at the individual company level in public sector enterprises (PSEs) and in some private companies, but there is no coordinated and collaborative effort by industries and utilities. Therefore, results are generally not forthcoming and the countrys Skill DevelopmentA large number of skilled workers coming out of technical institutes do not possess the required skills and are not employable dependence on the import of technology is very high Forming a Sector Skill Council (SSC) for the electrical equipment industry with support from the National Skill Development Corporation (NSDC) has been proposed to improve the quality of training being provided in the existing institutes. The SSC will consolidate data regarding the number of skilled workers required in different regions of the country. It will have regional offices that will interact with industry to provide training to the workers and also train the teachers, propose changes in curriculum, etc.ExportsExports of electrical equipment in 2011-121 were US$ 4.6 billion, which is about 1.5% of total exports from India, and imports were US$ 15.7 billion, which is about 3.2% of total imports. During the last five years, exports of electrical equipment have increased at a CAGR of 9.7% whereas imports have increased at a CAGR of 27.2%. Clearly, there is an urgent need for reducing the increasing trade deficit.Conversion of Latent DemandDelays in timely commissioning of power projects directly impact the capacity utilisation of the BTG industry and its growth. This also leads to delay in completion of downstream transmission projects that are linked to the evacuation of power from the power projects and thus impacts the growth of transmission equipment industry. Because of high aggregate technical & commercial (AT&C) losses, power distribution utilities are unable take up improvement projects and the demand for distribution equipment is not growing significantly

Problems in achieving visionIPP - Independent Power ProducersSCADA - supervisory control and data acquisitionIndian Electrical & Electronics Manufacturers Association (IEEMA)

DescriptionThere is a significant drop in investor confidence in the last financial year and the continuing policy stalemate is not doing any better for the investor confidence. As per extant policy, Foreign Direct Investment (FDI) up to 100% is permitted in the power sector, under the automatic route, for:Generation and transmission of electric energy produced in hydro electric, coal/lignite based thermal, oil based thermal and gas based thermal power plantNon-Conventional Energy Generation and Distribution;Distribution of elective energy to households, industrial, commercial and other users; andPower Trading

Financinghttp://www.indianpowermarket.com/2013/07/investment-scenario-in-indian-power.htmlForeign players have teamed up with Indian partners to set up base in India. Hinduja Energy India has formed a joint venture with Steag Energy Services (India) for operation and maintenance of power projects. Another player, Toshiba JSW Turbine & Generator Pvt. Ltd., will supply turbines for a Rs. 10,000 crore (USD 1.90 billion) thermal power plant in Karnataka. The Kudgi project is National Thermal Power Corporations (NTPC) first in Karnataka. The total value of the contract is around Rs. 2,300 crore (USD 437.76 million). Neyveli Lignite Corporation Ltd (NLC) plans to set up a 2,000 MW coal-fired power unit in Odisha through a JV with a state government-owned PSU. The proposed investment is of around Rs. 10,000 crore (USD 1.90 billion).

The companies are Mitsubishi Heavy Industries Ltd., Japan with L&T at Gujarat; Hitachi, Japan with BGR at Tamil Nadu; Toshiba, Japan with JSW at Tamil Nadu; Alstom, France with Bharat Forge at Gujarat; Ansaldo Caldie, Italy with Gammon at Tamil Nadu; Babcock & Wilcox, USA with Thermax at Maharashtra; Hitachi Power Europe GmbH (Germany) with BGR at Tamil Nadu. Doosan, Korea (100% FDI) has come to establish its manufacturing facilities on their own strength in Tamil Nadu.

From

Sheet1Promoters32%DVC6.67%FIIs27.76%Fis, Banks, Insurance Companies6.01%Mutual Funds3.23%Others24.33%

Sheet1000000

Shareholding Pattern as on 30th September 2007

Sheet2Trading LicenseesVolumes (MU)PTC #988946.43NVVN332415.60Adani13226.21Tata Power16827.90JSW14796.94Reliance Energy7763.64Lanco260012.21Others2291.08Total21301100.00

Sheet200000000

Market Share

Sheet3

Chart11102911846141881502321301

Trading Volumes (in MUs)

Sheet2

Sheet1FY 0411029FY 0511846FY 0614188FY 0715023FY 0821301

Sheet1

Trading Volumes (in MUs)

SystemDataMarket Prices at Indian Energy Exchange (IEX) INR / MWhMarket Prices in INR / MWh from 12-08-2008 - 19-08-2008Date Hours12-08-200813-08-200814-08-200815-08-200816-08-200817-08-200818-08-200819-08-200800-01-7061.7806715.5005949.0805499.780---01-023300.0007060.0006690.0005949.0305499.740---02-033300.0007060.0006690.0005949.0305499.740---03-044700.0007060.0006690.0005949.0305499.740---04-054700.0007060.0006690.0005949.0305499.740--3999.13005-064700.0007074.8906690.0005949.2705699.480--3999.13006-074999.5007086.0007348.0006091.8006034.500---07-085999.8907600.6307500.8006599.4806499.1405449.0605399.4405249.09008-097600.1507600.6307600.1807057.4006799.9905449.1205399.7805249.15009-108200.6008350.2908340.1007052.4006996.0005449.1205799.5005899.76010-118200.6508350.4208340.2307089.2307249.9705999.4005999.8706299.94011-128297.1308350.8008450.0007083.2307249.6705999.4006349.8006329.33012-138297.6208350.8008450.0007083.2307249.6705999.4006349.8806348.06013-148297.6209000.3408450.0007083.2307149.3405999.9006349.8806348.06014-158297.1309000.3408450.0007083.2307149.3405999.9006349.8906348.07015-168200.9508350.0708450.0006889.2606799.6205999.9006349.8906348.07016-178200.9508199.2908340.6306999.2306799.6205999.9006349.9006348.08017-188350.0508199.7408417.2007500.8007249.9106499.8006777.2506799.14018-198551.4309000.0309000.0408149.4308110.5407199.1307005.5006999.65019-208900.5209000.8709000.9408500.7708685.4308599.4807999.2008449.93020-218900.5209000.8709000.9408500.9708684.8608700.1208699.1708699.88021-228900.5209000.8709000.9408500.7708656.8607500.2207999.0806999.48022-238500.2508500.7509000.3908149.1207249.8506799.470--23-24--6781.1106061.8805775.000---12-08-200813-08-200814-08-200815-08-200816-08-200817-08-200818-08-200819-08-2008High8900.529000.879000.948500.978685.438700.128699.178699.88Low0066905949.035499.740006558.1457721.6427920.2926965.4146816.1474318.4724132.4184446.415

&L&"Arial"&8 Printed by Indian Energy Exchange on 19-08-2008 12:20:30 PM &C&"Arial"&8 Page 1 of 1 &R&"Arial"&8 Execution Time: 18 second(s)