Regulation Inquiry on Indian Electric Power System

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Regulation Inquiry on Indian Electric Power System

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Regulation Inquiry on

Indian Electric Power SystemJanuary, 2013

Habib Ahmed


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Table of Contents:

Chapter 01: Introduction

1.1 Installed Generation Capacity in Electricity:1.2 The Electricity Act 20031.3 National Electricity Policy:1.4 Energy Deficit and Peak Demand Deficit:

Chapter 02: Generation

2.1 Reserves and Potential for Generation2.2 Reserves and Potential for Generation:2.3 Demand2.4 Per-Capita Energy Consumption & Energy Intensity2.5 Electrical Companies in Generation

Chapter 03: Generation and Wholesale Market

3.1 The Electricity Act 2003 - Generation3.2 Trading and Market Development:3.3 Short Term Power Markets:3.4 Power Exchange (PX):3.5 Issues confronting the Indian Power Markets Development:

Chapter 04: Transmission

4.1 Long Term Access and Short Term Open Access:4.2 The Electricity Act Transmission:4.3 Load Dispatch Center:4.4 Future Plan and Investments in Transmission:4.5 Pricing Method for Transmission:

Chapter 05: Renewables

5.1 Political Commitments to Renewable Energies:5.2 Strategy Implementation Plan 2011-175.3 Policy Initiative to Promote RE5.4 Renewable Purchase Obligation (RPO) Mechanism:5.5 Renewable Energy Certificate (REC):


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Chapter 06: Distribution

6.1 Key Drivers of Distribution System:6.2 Future Investments:

Chapter 07: Retail Market and Tariff

7.1 Retail Market in India:7.2 Process & Principle of Tariff Determination:7.3 Tariffs of Long-Term Sources of Power:7.4 Tariff of Short-Term Transaction of Electricity7.5 Peak & Off-peak Tariff in Bulk Generation

References


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Chapter 01: Introduction to Indian Electric Power System

Energy, as the one of the important building block in human development, acts as a key

factor in determining the economic development of any country. Indian energy sector is

witnessing a rapid growth in areas such as the resource exploration and exploitation,capacity addition, and evolutionized energy sector reforms [2]. However, the growth in

energy supply and resource augmentation has failed to meet the increasing demands

exerted by population growth, and rapid urbanization. This impact of energy shortage can

be clearly seen in the GDP growth, which has a substantial and consistent fall down in

previous 5 years. This shortage is forcing India to rely heavily on imports [2].

India having a high economic growth rates and around 18 % of the worlds population, India

is a significant consumer of energy resources. India with the population of 1.24 billion

people, is the second most populated country in the world. Despite the global financialcrisis, Indias energy demand continues to rise . India consumes most of its energy in

Residential, commercial and agricultural purposes in comparison to China, Japan, Russia,

EU-27 and US. [3] (See Fig. 1.1)

Figure 1.1: Energy Consumption by Sector in 2007: China, India, Japan, Russia, EU-27, and the United

States, Source: IEA World Energy Balances 2009. [3]

This chapter contains the data available in respect of different organizations, agencies, with

different energy sources, along with a brief analysis of reserves, installed capacity,

generation potential, production, consumption, import, export and wholesale prices of

different energy commodities of India.


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1.1 Installed Generation Capacity in Electricity:According to Energy Statistics Report 2012, the total installed capacity of electricity

generation in the country is 206,526 MW, by March 2011 [2]. There has been an increase of

18.654 GW in power generation in 2010, which was 10% more than the capacity of last year.The total installed capacity of power utilities has increased to 173.626 GW.

At the end of March, 2011, thermal power plants accounted for an overwhelming 64% of

the total installed , Hydro power plants accounting for 18.2% and non-utilities accounted for

15.9% of the total installed generation capacity. The share of Nuclear energy was only 2.31%

(4.78 MW).

The geographical distribution of installed generating capacity of electricity indicates that

Western Region accounted for the highest share 30.98%, Southern Region 27.35%, Northern

Region 26.88%, Eastern Region 13.45%, and North Eastern Region 1.35%.

2.2 Grid Interactive Renewables:


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1.2 The Electricity Act 2003The main objective of Electricity Act (EA) 2003 was to consolidate the laws relating to

generation, transmission, distribution, retailing, trading and use of electricity. In addition,

taking measures conductive to promotion of competition, development of electricity

industry, protecting the interest of consumers and sustain the reliability of electricity supply

to all areas. The rationalization of tariffs, ensuring transparent policies, and promotion of

efficient and environment friendly policies were also included in the objective list of EA. The

Power industry structure post EA is shown in Figure 3.1. [4]

Figure 1.4: Power Industry Structure Post Electricity Act 2003 [4]

1.3 National Electricity Policy:The Figure represents the main goal and the vision aligned in front of them giving the

objective of national electricity policy.


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Figure: Power sector goals and vision for the National Electricity Policy [4]

1.4 Energy Deficit and Peak Demand Deficit:In the last decade, India faced an average deficit of 10 per cent and peak demand deficit of

13 per cent. [13] (Shown in Fig. 1.2)

Figure 1.2: Energy Surplus/Deficit in India during the last decade [13]


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Chapter 02: Generation

Indias energy-mix comprises both non-renewable and renewable energy sources. India has

coal, lignite, petroleum and natural gas as non-renewable and wind, solar, small hydro,

biomass, cogeneration bagasse as renewable energy sources.

The natural resources for electricity generation in India are unevenly dispersed and

concentrated in a few pockets. Hydro resources are located in the Himalayan foothills and in

the north-eastern region (NER). Coal reserves are concentrated in Jharkhand, Orissa, West

Bengal, Chhattisgarh, parts of Madhya Pradesh, whereas lignite is located in Tamil Nadu and

Gujarat. North Eastern Region, Sikkim and Bhutan have vast untapped hydro potential

estimated to be about 35000 MW in NER, about 8000 MW in Sikkim and about 15000 MW

in Bhutan. [7]

2.1 Reserves and Potential for Generation:The reserves and potential of non-renewable sources of energy is a pre requisite for

assessing the countrys potential for meeting its future energy needs.

Coal and Lignite:

India has a good reserve of coal and lignite. The estimated reserves of coal were around 277

billion tones, by the start of 2010. The states of Jharkhand, Orissa, Chhattisgarh, West

Bengal, Andhra Pradesh, Maharashtra and Madhya Pradesh account for more than 99% ofthe total coal reserves in the country. The estimated reserve of lignite was 40 billion tonnes,

of which 80% was in the southern State of Tamil Nadu, by the start of 2010 [1].

Petroleum and Natural Gas:

The estimated reserves of crude oil and natural gas in India as on 31.03.2010 stood at 1206

million metric tonnes (MMT) and 1453 billion cubic meters (BCM), respectively.

Figure 2.1: (a) Estimate Reserves of Natural Gas in India, (b) and Estimate Reserves of Crude Oil in

India


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Geographical distribution of Crude oil indicates that the maximum reserves are in the

Western Offshore (46%) followed by Assam (23%), whereas the maximum reserves of

Natural Gas are in the Western Offshore (40%) followed by Eastern offshore (29%) [1].

Renewable Energy Sources:

Renewable energies have very high potential from various sources in India. The total

renewable power generation capacity by the start of 2010 is estimated as 90,313 MW. The

renewable energy sources such as wind, solar, biomass, small hydro and cogeneration

bagasse play major role. The wind power potential of 48,561 MW (54%), SHP (small-hydro

power) potential of 15,385 MW (17%) and 22,536 MW (25%) from bagasse-based

cogeneration in sugar mills.

The geographic distribution of the estimated potential across States reveals that Karnataka

has the highest share of about 14% (12,948 MW ) followed by Gujarat with 13% (11,364MW) and Andhra Pradesh 10,015 MW (11.1%), mainly on account of wind power potential.

Figure 2.2: The Stepwise Estimated potential of the Renewable Power in India

Figure 2.3: The Trends in Production of Energy in India by Primary Source from 1970-2010-11


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2.2 DemandElectricity sector in India is growing at rapid pace. The present Peak Demand is about

1,15,000 MW and the Installed Capacity is 1,52,380 MW with generation mix is

thermal (63%), hydro (25%), Nuclear (9%) and renewables (9%). The projected PeakDemand in 2012 is about 150 GW and in 2017 is more than 200 GW. The corresponding

Installed capacity requirement in 2012 is about 220 GW and in 2017 is more than 300 GW.

The projected Peak Demand and the Installed Capacity Requirement in next 15 years is

shown in Figure 2.4(a) and Figure 2.4(b) respectively. [7]

(a)

(b)

Figure 2.4: (a) The projected peak demand in India, (b) Projected Installed capacity in India

2.3 Per-Capita Energy Consumption & Energy IntensityPer-Capita Energy Consumption (PEC) during a year is computed as the ratio of estimate of

total energy consumption during the year to the estimated mid- year population of the year.

The estimated PEC is 4816 KWh in 2010-11 with the annual increase of 3.65%. Energy

Intensity is defined as the amount of energy consumed for generating one unit of Gross

Domestic Product.

PEC and Energy Intensity are the most used policy indicators, both at national and

international levels. The energy intensity has decreased to 0.117 KWh in in 2010-11. The

trend in consumption is shown in figure 2.5: [1]


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Figure 2.5: Trend in Per Capita Energy Consumption from 1970 till 2010-11

The energy consumption division categorized in residential, transport, agriculture, Industry and

others are given in Figure 2.6.

Figure 2.6: Sectorial Composition of Commercial Energy Consumption

2.4 Electrical Companies in GenerationIn Table 2.1, the list of big groups of energy generation companies are provided. In India,

there are 337 companies with 256 in private sector, 52 in Public and 9 are in government

sector.


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Table 2.1: Big Groups of India working in the industry

ADAG Adani Avantha Bhoruka

DLF Essar GMR Hinduja

Jaypee Jindal Kalpataru Kalyani

L&T Lanco LNJ Bhilwara Luminous

Mahindra MW Group NSL RPGSai Prasad Shahlon Siva Sujana

Surana Suryachakra TATA Visa

Waaree Wipro
http://www.fundoodata.com/advance_search_results.php?group_id=50&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=50&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=55&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=55&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=64&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=64&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=267&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=19&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=27&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=306&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=306&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=54&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=54&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=16&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=16&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=21&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=21&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=259&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=259&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=86&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=86&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=187&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=209&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=116&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=116&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=206&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=206&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=17&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=17&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=188&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=188&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=258&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=258&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=83&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=211&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=211&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=308&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=308&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=230&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=230&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=159&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=159&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=189&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=189&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=96&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=96&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=1&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=302&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=302&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=131&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=7&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=7&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=7&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id=131&&new_industry_id%5b%5d=142http://www.fundoodata.com/advance_search_results.php?group_id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Chapter 03: Generation and Wholesale Market

3.1 The Electricity Act 2003The main objective of Electricity Act (EA) 2003 was to consolidate the laws relating togeneration, transmission, distribution, retailing, trading and use of electricity. In addition,

taking measures conductive to promotion of competition, development of electricity

industry, protecting the interest of consumers and sustain the reliability of electricity supply

to all areas. The rationalization of tariffs, ensuring transparent policies, and promotion of

efficient and environment friendly policies were also included in the objective list of EA. The

Power industry structure post EA is shown in Figure 3.1. [4]

Figure 3.1: Power Industry Structure Post Electricity Act 2003 [4]

In 2005, the National Electricity Policy (NEP) was developed to ensure the financial viability

of the sector and attract investment. Its main objective was to promote the consistency in

regulatory approaches across jurisdictions for minimising regulatory risks. The consistency in

regulation leads to many other new policies, legislation and regulation development in

coming years, the summary of these developments are exhibit in Table 2.1. [4]


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Table 3.1: The summary of Legislative, Policy and Regulatory Developments [4]

Policy/Legislation/Regulation Year Key Focus

ERC Act 1998 Independent regulation

Electricity Act 2003 Sector reorganisation and

competitive markets

National Electricity Policy 2005 Overall sector development

National Tariff Policy 2006 Performance based regulation

Guidelines for Competitive Bidding 2006 Transparent tariff based

bidding for new generation

Rural Electrification Policy 2006 Access to all by 2011-12

Hydropower policy 2008 Accelerated hydropower

development

Terms and Conditions of Tariff, CERC 2009 Generation and Transmission

tariff determination

Indian Electricity Grid Code

Regulations

2010 Grid operations with

competitive markets and

renewables

REC Regulations 2010 Trading of renewable energy

certificates

Power Market Regulations 2010 Transparent power market

operations

Sharing of Transmission Charges

Regulations

2010 Efficient transmission pricing

3.2 Trading and Market Development:The National Electricity Policy (NEP) contains the policies related to overall Power market

design guidelines including the creation of suitable Power Exchange to be developed by

Government of India. Power Purchase Agreement (PPA) to be assigned to the distribution

companies were subjected to be mutually assigns. Central Electricity Regulatory Commission

(CERC) was authorized to issue interstate trading licence including the authorization fortrading throughout the country. SERC also was responsible to issue the licence for trading

within the State. The unallocated power from central generating station was progressively

released for trading. New generators were permitted to sell portion of capacities through

trading arrangements without committing it through the long term PPA. [4]

The electricity market in India consists of several markets where producers, qualified

consumers, suppliers, and wholesale trade exist in the form of different products. The

generic overview of different type of Indian power market is shown in Figure 3.2 [6].


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Figure 3.2: Indian Power Markets Generic Overview [6]

3.3 Short Term Power Markets:Short term transaction of electricity refers to the contracts of less than one year period for

electricity transacted under bilateral transactions. The short-term power market comprised

11 per cent of the total electricity procured in India in 2011-12. The balance 89 per cent of

generation was procured mainly by Distribution companies through long-term contracts and

short-term intra-state transactions.

3.4 Power Exchange (PX):The First PX (Indian Energy Exchange Ltd) started operation on 27th June 2008. The basic

guidelines from the CERC for the power exchange market mention that PZ should be a

voluntary platform where multiple PXs can be allowed and PX would be bilateral and

Unscheduled Interchange (UI) mechanism. CERC will not get involved in the day to day

functioning and exchange of PX design.

3.4.1 Day Ahead Market (DAM):The day-ahead market (DAM) in India has two order types, Hourly or portfolio orders and

block orders. The hourly orders have a minimum requirement of one hour with different

price and quantity pair option. On the other hand the block orders are mostly relational

block bid or consecutive hours during the same day in which customized block bid is

allowed. DAM requires the firm commitment to purchase or sell. The required order

characteristics are as following:

SLDC Clearance should be 1 MW


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Minimum Order quantity can be less than 1 MW Minimum volume step: 0.1 MW Minimum price step: Rs 1 per MWh ( 0.1p/kWh)

Figure 3.3: IEX Monthly Average Spot Price [6]

In Figure 3.3, The IEX monthly Average sport price is exhibited from the June 2008 till

February 2011 for the day-ahead market. Also, the time line for scheduling of collective-day

ahead market is shown in Figure 3.4, illustrating a time line where market participant place

their bid before 12:00 in the afternoon and PX send provision unconstrained solution at

13:00 and further on the process continues and ends at 18:00 where RLDCs and SLDCs

incorporate collective transactions in the daily schedule.

Figure 3.4: The Time Line for scheduling of Collective, Day Ahead Market [6]


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The other power exchange markets include term ahead markets such as weekly market,

daily market, day-ahead contingency market and Intra-day market. [6]

3.4.2 Renewable Energy Certificate Market (REC)The main reason to create REC Certificate was that the Renewable sources are not spread

evenly across country, and many states with no or little RE were not able to promote RE.

The other important reasons were such as it is difficult to carry out inter-State sales using

CERC-OA Regulations for large scale deployment of RE due to following reasons: [14]

Transaction would be expensive due to low capacity factors of RE Most RE generators are difficult to schedule Intra-state balancing systems have not yet stabilized RE generators are not connected to STU but to Discoms

REC mechanism separates the electricity generated by RES to distribution company but REC

control is transferred to obligated entity (buyer) and their price is based on market rate as

per power exchange, as shown in Figure 3.5.

Figure 3.5: Procedure of Sales of REC at Power Exchange [6]

3.5 Issues confronting the Indian Power Markets Development:The very nature of Indian Markets poses unique challenges in their development and

product as well. Therefore, the Indian Markets are substantially different from power

markets elsewhere in the world. There are many changes and improvements are required


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from the regulators and power exchange authorities to ensure smooth functioning of the

power markets. Some of the important highlighted matters are summarized as following: [5]

The markets lack participation and liquidity. Appropriate steps, such as introductionof innovative products, must be taken up and financial assistance should be provided

to encourage wider participation.

The operating staff and participants need to be adequately trained The Power Markets needs to be defined clearly and appropriately, keeping in mind

the aspects of tenure and geography.

Besides, medium term contracts its high time to introduce financial products in themarkets with power as the underlying asset.

The products and trading methods need to keep price volatility in check and an openauction methodology is perhaps more apt in the context.

In view of the varied inherent characteristics of different term contracts, pricingmechanism needs to be developed accordingly. Also, the regulatory jurisdiction over

pricing norms needs to be clearly defined


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Chapter 04: Transmission

In India, both the central and state governments are responsible for the development of the

electricity sector. The central generation utilities are NTPC, NHPC, THDC, NEEPCO, SJVNL,

NLC etc. and POWERGRID is the central transmission utility. [7]

India as a country is distributed into five electrical regions. They are Northern (NR), Eastern

(ER), Western (WR), Southern (SR) and North Eastern (NER). However, they all are

synchronously interconnected and operating as a single grid with the capacity about

110,000 MW [7]. The power map in Figure 4.1 shows the national grid of India.

Figure 4.1: National Grid of India in the Power Map [7]

Power Grid Corporation of India Limited (POWERGRID) is the central transmission utility

responsible for wheeling power of interstate Mega IPPs, central generating utility while

state transmission utility handle resources locally i.e. state generating unit and state level

IPPs. [7]


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The backbone transmission system is mainly through 400 kV AC network with approximately

90,000 circuit kilometres (ckm. =2xroute km) of line length. Highest transmission voltage

level is 765kV with line length of 3120 ckm. [7]

There are about 7,200 ckm of 400 kV system, 5500 MW, +/- 500 kV long distance HVDC

system, an HVDC Monopole of 200 MW and four HVDC Back-to-Back links of 3000MW

capacity. These are supported by about 1,23,000 ckm. of 220kV transmission network. As

mentioned above, all the five regions are interconnected through National Grid comprising

hybrid AC/HVDC system. Present inter-regional transmission capacity of the National Grid is

about 20,800 MW. [7]

Table 4.1: Present Transmission Network, As on March 2009 [7]

Transmission Lines Unit As on March 2009

765 kV ckm 3118

HVDC+/-500 kV ckm 7172

400 kV ckm 89496

220 kV ckm 122960

Total- Transmission Lines ckm 222746

Substations

HVDC Terminal Capacity MW 8700

765 kV MVA 4500

400kV MVA 111202

220 kV MVA 177190Total-AC Substation Capacity MVA 292892

4.1 Long Term Access and Short Term Open Access:Every transmission system is required to meet the transmission needs and Open Access

requirements. In order to schedule the usage of transmission facilities, generators typically

sign long term (> 12 years), medium term (3 months to 3 years), and short term (monthly,

with 4 months limit) open access contracts.

The Long Term Access (LTA) gives the transmission system strength required for addition of

future generation. The Short Term Open Access (STOA) facilitates increased real time

trading, utilizing the inherent margins, provided for required redundancies as per planning

criteria. STOA is necessary for the market determined dispatches resulting in supply at

redurced prices to the distribution utilities and ultimately to the consumers. The volume of

31 Billion unit was traded under STOA in year 2008-09. [7]

4.2 The Electricity Act Transmission:As per the Electricity Act, 2003 the functions of the Central Transmission Utility are to: [7]


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Undertake transmission of energy through inter-State transmission system Discharge all functions of planning & co-ordination for inter-state transmission

system with state transmission utilities, Central Govt., State Govt., Generating

companies, Authority, Licensees etc

Ensure development of an efficient, coordinated and economical system of inter-state transmission lines for smooth flow of electricity from generating stations to

load centres

Exercise supervision & control over the inter-state transmission system Ensure integrated operation of the regional grids through RLDCs

4.3 Load Dispatch Centre:The Regional Load Dispatch Centres fall under the domain of the Central Commission and

State Load Dispatch Centres fall funder the domain of the State Commissions. The

commission approve their fees and charges. These centres are responsible for optimum

scheduling and dispatch of electricity, real time grid operation and energy accounting.

The regional load dispatch centre in India is RLDCs, state load dispatch centres as SLDC and

National load dispatch centre is known as NLDC. NLDC is for scheduling and despatch of

electricity across various regions and also coordinating cross boarder exchanges in real time.

Power System Operation (PSO) in India is being coordinated through five regional and more

than thirty state control centres. In order to accomplish the objectives of security and

economy, Indian system operators have at their disposal a number of tools to manage the

system in real time. These tools range from Supervisory Control and Data Acquisition(SCADA) systems, sophisticated state estimators to safety schemes.

4.4 Future Plan and Investments in Transmission:The future plan in transmission includes high capacity transmission corridors to facilitate

transfer (See Table 4.2) of power from remotely located generation plant to bulk load

centres. It will also facilitate the strengthening of National grid capacity around 37, 000 MW

by 2012. The details of the transmission future plan are given in table 4.2. [7]


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Table 4.2: Transmission Addition Programme in India [7]

Transmission Lines Addition by 2012 (Ckm) Addition by 2017 (Ckm)

765 kV 7,612 25000-30000

HVDC Bipole 11,078 4000 - 6000

400 kV 1,25,000 50000

220 kV 1,50,000 40000

Total 2,93,852 119,000 126,000

Substations Addition by 2012 Addition by 2017

HVDC 14,700 MW 16,000 -22,000 MW

765 kV 53,000 MVA 1,10,000 MVA

400kV 1,45,000 MVA 80,000 MVA

220 kV 2,30,000 MVA 95,000 MVA

Total Capacity 4,28,000MVA 2,85,000MVA

Inter-Regional Transfer

Capacity

38,000 MW 75,000 MW

The Estimated total fund requirement for transmission by 12th

Plan i.e. 2016-17 has been

assessed as USD 42 Billion, 21 Billion for Inter-state and same amount for state sector.

4.5 Pricing Method for Transmission:According to the Electricity Act 2003, The pricing method should be sufficient to fulfil the

following issues: [8]

1. It should be non-discriminatory and the charges for transmission service for allgenerators are in a comparable manner.

2. The region wide transmission cost should be shared among the generators in theregion in an equitable proportion. The transmission pricing and wheeling charge will

reflect the effect of the generator on transmission facilities.

3. It should recover the fixed cost of transmission facilities.4. It should encourage new generators to be established in area which serve to reduce

the constraints over an interface.

The transmission pricing mechanism is based on regional postage stamp and needed to be

revised. The National Electricity Policy (NEP) mandates that the national tariff framework

implemented should be sensitive to direction, distance and related to quantum of power

flow. [8]

In the postage system which was used until now, all the grid users within a region, pay a

uniform transmission charge and share all transmission losses. This system is therefore not

sensitive to the distance and the frequency at which the power is transmitted by the user.

On, the other hand, new mechanism under which the transmission charges and losses

among the grid users are allocated based on the actual utilization of the network by each


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user, taking into account the physical distance of power transmission and peak and off-peak

hours of a day/ season (users only pay for point-to-point transmission of electricity). [8]

The new mechanism would facilitate integration of electricity markets and enhance open

access and competition by obviating the need for pan caking of transmission charges. For

example: Suppose a transaction of power exchange of 1 MW takes place between a state in

WR and a state in ER. In this case, postage stamp rates of both the regions need to be paid,

i.e. (Rs.359+Rs.434=Rs.793). [8]

The maximum transmission cost paid by any state in WR is Rs.288.229. Similar rate would be

paid by the ER constituent, but which would always be lesser than Rs.434. Hence, the

transmission price paid by this type of contract would be lesser than (288.229 + 434.42

=722649). [8]


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Chapter 05: Renewables:

In India, most of the power generation is carried out by conventional energy sources such as

coal and mineral oil based power plants, causing heavy amount of greenhouse gas (GHG)

emissions. The energy crises and environmental impact both leads to concern renewable

energy sources such as solar energy, biomass, wind energy, ocean energy and geothermal

energy, while setting up new power plants. In previous three decades, India has conducted

various activities related to research, production, development, and demonstration in

different renewable energy technologies. This chapter focuses on Indian current status,

achievements, and future aspects of renewables in India.

India has installed the power capacity of 206 GW, with a 13% share of RES. The installed

capacity of energy in India is shown in the Figure 5.1. The wind energy has the major share

in RES capacity, close to 90%. In the last decade, India faced an average deficit of 10 per centand peak demand deficit of 13 per cent [13].

Figure 5.1: Installed capacity of energy in India along with details on RES capacity [13]

It is expected that the RES can play major role in alleviating power shortages in the country,

enhancing energy security while exploring the diversification of fuel sources and theefficient growth with sustainability and environmental concerns. The potential and installed

RES capacity comparison is show in Figure 5.2.

It shows that India has huge potential in RES especially Indian solar potential is practically

unlimited, roughly 20MW per square kilometre. [13]


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Figure 5.2: The comparison between installed and potential capacity of renewables. [13]

In 1990s, the Renewable Energy Sources (RES) capacity was 18MW, and the progress in

increasing RES was kept very slow until the year 2008, as shown in the Table 5.1. However,

in last four years, the contribution from RES is considerable and there capacity share has

increased to 12.16 per cent in 2012.

Table 5.1: Growth of Installed Capacity & Percentage share of RES in the total generating

capacity installed [10].

Year Total Installed Generating

Capacity in India (MW)

Total Installed RES

Generating Capacity (MW)

% of Total

Capacity

1990 63636 18 0.03

1992 69065 32 0.05

1997 85795 902 1.05

2002 105046 1658 1.58

2007 132329 7761 5.862008 143061 11125 7.78

2009 147965 13242 8.95

2010 159398 15521 9.74

2011 173626 18455 10.63

2012 199877 24503 12.26

2017 318414 54503 17.12

5.1 Political Commitments to Renewable Energies:Renewable energy has been an important component of Indias energy planning process

since early 1970. At the government level, political commitment to renewables manifested

itself in the establishment of the first department of Non-conventional Energy Sources in

1982. It was upgraded to a fully independent Ministry of Non-Conventional Energy Sources

(MNES) in 1992. Later in 2006, this ministry was renamed as Ministry of New and

Renewable Energy (MNRE). India is the only country who has a separate Ministry dedicated

to renewables sector. In fact, MNRE is a nodal ministry of the Government of India at the

federal level for all. MNRE has been facilitating the implementation of broad spectrum

programmes harnessing renewable power, use of renewable energy in urban and rural


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areas, cooking and motive power, industrial applications and development of alternate fuels

and applications [12].

Vision:

The Ministrys vision enlisted in the strategic plan for new and renewable energy sector forthe period 2011-2017 are as following [12]:

The reduction of demand-supply gap by promoting RES, decrease in dependency on conventional energy sources green jobs and sustainability through increased reliance on RES The aim of energy security and environmental sustainability through use of local

solutions, portraying the economic, environmental and social benefits of these

technologies.

Portraying economic, environmental and social benefits of Renewable energytechnology

Global leadership in new and renewable energy Provide access to energy based on renewable energy technology

Objective:

Ministrys Objectives enlisted in the strategic plan for new and renewable energy sector for

the period 2011-2017 are as following [12]:

Promote the deployment of grid-interactive renewable power generation projects toaugment contribution of renewables in total electricity mix

Promote renewable energy initiatives for meeting energy demand in rural areas,focussing on lightening needs.

Promote renewable energy initiative to supplement energy requirements inindustrial, commercial and urban areas.

Promote the research, design and development activities at national institutions andindustries involvement on different aspects of new and renewable energy

technologies.

Encourage development of manufacturing industry in RES.

5.2 Strategy Implementation Plan 2011-17The Implementation Plan that has been proposed in this Strategic Plan along with the

process and tools for measuring success of the implementation plan will facilitate

achievement of the ambitious targets and aspirational goals is proposed in the strategic plan

of 2011-17 [12]. The MNREs sector special implementation plan is has been shown in detail

in Table 5.2 below.


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Table 5.2: The Activity Plan for different sector of RES by MNRE [12]

Sector Production, Actions and Strategic Activities Plan

Wind Power Re-powering of existing wind turbines: A pilot scheme would be developed

Wind Resource Assessment: Updating/ expansion of existing data base Off-shore resource assessment

Regular interaction with all stakeholders to periodically address policy,

regulatory, evacuation transmission matters for wind power.

Regular interaction with States to periodically address land acquisition, E&F

clearance and State policy issues.

Prepare pilot project for off-shore wind

Support development of evacuation & transmission infrastructure for

renewable power

Small Hydro

Power

Draw/ update State specific plans for systematically harnessing SHP potential

in consultation with State Governments

Strengthen project-monitoring system

Regular interaction with States to periodically address land acquisition, E&F

clearance and State policy related issues.

Bio- Energy,

(Biogas)

Following cluster-saturation approach instead of scattered one for installation

of the plants and involving entrepreneurs/

Renewable Energy Service Companies in the operation & maintenance of theplants.

Strengthen project-monitoring

Persuade lagging States to take this up (e.g. UP, Bihar, Haryana).

Energy from

agricultural/crop

residues

Promoting establishment of sustainable fuel linkage systems including

biomass collection, densifying, processing and storage facilities.

Encouraging long-term fuel supply agreement and captive energy plantations

Setting up of such pilot plants

Setting up of Pilot project for pine needles Support R&D project for Rice straw boilers

Getting tariff declared for small biomass gasification plants

Regular interactions with all stakeholders to periodically address policy

/Regulatory matters for the projects.

Biomass Gasifiers Focus on areas having surplus biomass wastes (esp. rice husk, pine needles)for rural electrification/ meeting unmet electricity demand.

Development of entrepreneurs, training of technicians

Promotion of Gasifiers for meeting captive energy needs of industry, esp. rice

mills.


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To encourage Energy Servicing Companies (ESCOs), Co-operative, NGOs, Local

bodies etc. availing the subsidy and balance as bank loan, equity etc.

Bio-Energy

in Industry

Awareness creation in target industriesSeminars/ Workshops

Urban Wastes toEnergy

Sensitising Urban local Bodies about the advantages, potential and

prospects

Solar water

heating

systems:

Focussed attention in Cities and Hill States.

Special attention to cluster based development in industrial sectors.

UNDP/GEF project underway. Policy Guidelines to be issued to States.

Solar steam

generation/

cooling/ cooking

systems

Interaction Meets with industries/ institutions

Pilot projects to improve technology

Tail-end SPV

power plants

Installation of approved plants

Technological/ performance analysis of the plants

Off-grid SPV

Systems

including those

for rural lighting

Rural lighting:

Guidelines formulated; to follow-up with RBI for priority sector lending for

the sector

Capacity building of Bankers

Training of Solar Technicians

Special focus on diesel abatement in Industry, Telecom towers, etc.Biomass

cookstoves

Promoting demonstration projects

Interaction with other Ministries for support policies

Evolving new business models

Review/updation of test protocols and standards

Green

Buildings

Huge capacity building exercise

Develop Centre of Excellence

Solar R&D Implementation of sanctioned projects

Sanction of new projects

Setting up of Centres of Excellence

5.3 Policy Initiative to Promote REThe policy Initiative by national regulation institiution are sumarised in the Figure 5.3 [13], and the

buy-back rate per unit (in Indian Rupees) are shown in Table 5.3.


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Figure 5.3: Policy Initiative to promote RE, [13]


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Table 5.3: The buy-back rate per unit, Renewable power policies-programme-wise

S.No. State / UT Wind Power Small Hydro Pow Biomass Power

1. Andhra Pradesh 3.50 / kwh

fixed for 10 yrs

2.69 (04-05) 2.63 (05-06)

Esc @ 1% for 5 yrs

2. Arunachal Pradesh - - -3. Assam - - -

4. Bihar - - -

Chhatisgarh - - 2.71 (05-06)

5 Gujarat 3.56

fixed for 20 yrs

- 3.00

No escalation.

6. Haryana 4.08

escalation 1.5%

base year 07-08

2.25 (94-95) 4.00biomass

3.74 - cogen.

Esc. @ 2% (base 2007-08)

7. Himachal Pradesh - 2.50 -

8. J & K - - -

9 Jharkhand - - -

10. Karnataka 3.70fixed for 10 yrs 2.90 2.74-cogen.2.88 - biomass

Esc @1% for 10 yrs

(base04-05)

11. Kerala 3.14

fixed for 20 yrs

- 2.80 (2000-01)

Esc @ 5% for 5 yrs

12. Madhya Pradesh 4.03 - 3.36 (constant)

Reducing @ 0.17 per

yr for first four years

2.25 3.33-5.14

Esc. @ 0.03-0.08 for 20 yrs.

13. Maharashtra 3.50 / kwh

Esc. of 0.15 per yr for

13 years from DOC of

the project

2.25

(99-00)

3.05- cogen.

3.04-3.43-biomass

Esc @ 1% for 13 yrs

14. Manipur - - -

15. Meghalaya - - -

16. Mizoram - - -

17. Nagaland - - -

18. Orissa - - -

19. Punjab 3.66 with five annual

escalation @ 5% upto

2012

2.73 (98-99) 3.01 (01-02) Esc @ 3% for 5 yrs

limited to 3.48

20. Rajasthan 4.50 for Jaisalmer,

Jodhpur etc. and 4.28

for pther districts

(base year 08-09)

2.75 (98-99) 3.60-3.96

water-air cooled

21. Sikkim - - -

22. Tamil Nadu 3.39 / kwh (Levelised) - 2.73 (2000-01)*

Esc @ 5 % for 9 yrs

23. Tripura - - -

24. Uttar Pradesh - 2.25 2.86existing plants

2.98new plants

Esc @ 0.04/ year

25. West Bengal 4.00 / kwh

To be decided on case

to case

2.25 2.86existing plants

2.98new plants

Esc @ 0.04/ year

* Rs.2.48 per unit at 5 % escalation for 9 years (2000-01) for off-season power generation using coal/lignite (subjectto ceiling of 90% of HT tariff). Policies for wheeling/ banking/ third part sale vary from state to state


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5.5 Renewable Purchase Obligation (RPO) Mechanism:The driver for RPO is the obligation to state commission by the regulatory framework stated

in the section 86(1), is as following [14]:

e) promote cogeneration and generation of electricity from renewable sources of

energy by providing suitable measures for connectivity with the grid and sale of

electricity to any person, and also specify, for purchase of electricity from such

sources, a percentage of the total consumption of electricity in the area of a

distribution licensee;

Using this clause, any state commissions have put significant emphasis on developing

regulations for distribution licenses under their jurisdiction. [14]

NAPCC recommends 5 per cent RPO in 2009-10 with 1 per cent increase till 15% RE by 2020,

and RE Capacity Addition of around 6000MW per annum shall be required to meet the

target envisaged under. [14]

Figure 5.4: RPO Target across the states, with Non-Solar and Solar RPO

The established key features of RPO are specification of the period to five years, the ban on

the purchase of RE from outside the state, refinement requirement for implementation

mechanism. Also, specification of percentage of renewable energy every utility need to

purchase [14].

However, RPO is still weak on the enforcement methodologies. RPO further require

separate percentage for RE sources which are not commercial, and application of RPO to OA

and Captive transactions. In addition, nationwide target for purchase of RE, stronger

enforcement and penalty mechanism, efficient mechanism for purchase of RE, enabling

mechanism for inter-state sales, and mechanism to create competition amongst RE sources[14].


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The earlier RPO regulations, prior to 2010, fail to address nationwide target for purchase of

RE, the enabling mechanism for inter-state sales of RE, and efficient mechanism for

purchase of RE. Also, lack of stronger enforcement and penalty mechanism, and the specific

targets for RE sources which are not yet commercial were another reason for RPO

regulation failure [14].

5.6 Renewable Energy Certificate (REC):The main reason to create REC Certificate was that the Renewable sources are not spread

evenly across country, and many states with no or little RE were not able to promote RE.

The other important reasons were such as it is difficult to carry out inter-State sales using

CERC-OA Regulations for large scale deployment of RE due to following reasons: [14]

Transaction would be expensive due to low capacity factors of RE Most RE generators are difficult to schedule Intra-state balancing systems have not yet stabilized RE generators are not connected to STU but to Discoms

Therefore, a mechanism was needed that will enable inter-state sale and purchase of

renewable energy. Its main objective is to introduce the effective implementation of

Renewable Portfolio Standards (RPS), overcome the geographical constraints and increased

the flexibility of participants. REC could be used to reduce transaction costs for RE

transactions, development of all-encompassing incentive mechanism and enforcement of

penalty mechanism. It is useful to motive different RE technologies to compete with eachother. [14]

In the existing mechanism both REC and electricity generated by renewable energy source

are linked to Distribution Company of the state and the entire tariff are determined by

regulatory commission. However, REC mechanism separates the electricity generated by

RES to distribution company but REC control is transferred to obligated entity (buyer) and

their price is based on market rate as per power exchange. [14] (Shown in Fig. 5.5)

There are two main categories of entities involved to operationalize REC mechanism, central

entities and state entities. The central entities are forum of regulators, central electricity

regulatory commission, central agency (national load despatch centre), power exchanges,

and compliance auditors. The state entities are State electricity regulatory commission,

state load despatch centre, state agencies, eligible entities, and obligated entities. [14]


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Figure 5.5: Concept of REC Mechanism in India

The overview of REC market (Figure 5.6) shows an increase in issuance of REC. Also, more

than 2.1 million REC, have been redeemed so far which means that numbers of redeemed

RECs are not increasing with the same pace. It raises the question about saturation of REC

market. [14]

The key issues and the need for modification to REC framework are as following:

1. Bankability of REC Mechanism2. Long Term Visibility of Floor and Forbearance Price3. Multiple Trading of RE Certificates4. APPC Determination: Uniformity at State Level5. Difficulties in Solar REC Model6. RPO Trajectory and Compliance

Figure 5.6: Overview of REC Market. [14]


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Chapter 06: Distribution

The distribution sector started to receive the attention and investment with the

restructuring of the state electricity boards (SEBs). The Electricity Act 2003, National

Electricity Policy 2005, and National Tariff Policy 2006 play important role in establishing abetter regulation in this sector. However, power distribution is the weakest unit of the

electricity supply chain in India. Some additional heavy investments had been made by the

government in distribution sector through the Rajiv Gandhi Grameen Vidyutikaran Yojna

(RGGVY) and Accelerated Power Development and Reforms Programme (APDRP). In Delhi,

Orissa the private players participation has been encouraged thorough public private

participation and in Mahrashtra, Madhya Paradesh and Uttar Pardesh input based

distribution franchise model has been adapted to increase private participation in this

sector. [7]

The distribution segment starts at the 66/33 kV level where the transmission sector stops.

The main distribution equipment comprises HT and LT lines, transformers, switchgares,

substations, capacitors, conductors and meters. LT lines supply the energy to residential

costumer and HT are dedicated to industrial users. The capacity addition according to the

10th plan is summarized in table 6.1. [7]

Table 6.1 Capacity Addition in the X Plan [7]

Voltage Level Capacity Addition (ckm)

33/22 kV 2631215/11 kV 356726

6.6/3.3/2.2 kV 1694

Upto 500 V 470327

Total 855059

The issues related to distribution companies are open access, distribution losses, efficiency

improvement mechanism, energy efficiency and demand side management, and Tariff

rationalization.

6.1 Key Drivers of Distribution System:1. Continued demand for power: The Integrated Energy Policy predicts that in order to

eradicate poverty, the country's economic growth needs to be at least 8 per cent

annually until 2032 and in that time frame, the power capacity needs to rise to as

high as around 800 GW.

2. Distribution Reforms: Unbundling of the vertically integrated SEBs into functionalentities is a key requirement of the EA 2003.

3. Supply codes and Performance Standards: Supply Code lays down standards andprocedures for recovery of electricity charges, billing cycles, disconnections, and


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restoration of service and metering among other things. To protect consumer

interests, the EA2003 requires the SERCs to specify standards of performance for

distribution licensees. The commissions also have to specify the penalty and

compensation to be paid by the licensees to the affected parties if the former fails to

meet the standards. [7]4. Growing consumer awareness: For both SEBs and private companies, consumer

interest is becoming a high priority. Connections are far easier to come by, bill

payments are being streamlined, and complaints are addressed more promptly and

effectively. Utilities in Andhra Pradesh and Delhi have proved to be frontrunners in

establishing high standards of customer service. [7]

5. Tariff rationalization: As per policy objectives, rationalisation of electricity tariffs andreduction of cross-subsidies will take place within a band of +/- 20 per cent by the

end of year 2010-11. However, the consumers below the poverty line (BPL) and who

consume a small quantity of electricity shall continue to receive special supportthrough cross-subsidised tariffs. [7]

6. Improving grid standards: Just about five years ago, Indian grids were both unsafeand unreliable with voltages and frequencies fluctuating way beyond stated or

permissible parameters resulting in frequent grid disturbance and collapses,

equipment damages and/or operations at much lower efficiencies. This in turn

resulted in the inability to enforce merit order despatch, and operational and

commercial disputes ruled. The regulatory mechanisms of the availability based tariff

(ABT) and unscheduled interchange (UI) have created a solid base for maintaining

grid standards. [7]

6.2 Future Investments:There are around 558 projects, that have been sanctioned with an outlay of Rs. 25,679.64

crores for providing electricity to 1,16,124 un-electrified villages, intensive electrification of

3,49,853 already electrified villages, releasing electricity connections to 4.09 crore rural

households including 2.43 crore Below Poverty Line (BPL) households.


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Chapter 07: Retail Market and Tariffs

There has been discussion about the harmonization of retail market models to some level in

India. However, some commonly used indicators to evaluate the success of retail markets

are competition indicator, and competition in Indian electricity retail markets [15]. Thecommonly used competition indicator for retail electricity markets are customer activity,

number of suppliers, correlation between retail and wholesale electricity prices [15].

7.1 Retail Market in India:In India, there are no full-fledged retail markets present. End-users are not participating in

the markets. Integration of renewable resources are going at one end. Upcoming policies

are encouraging the integration of small-scale renewables to the utility grid. At this

situation, it is predicted that advent of Smart Grids in India may enable retail markets whichcan open up competition avenues for the entry of end-users/customers. This requires

metering standards and effective communication protocols. The envisaged future Indian

market structure is shown in Fig. 7.1.

Figure 7.1: Future Overview of Indian Market [17]


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7.2 Process & Principle of Tariff Determination:The NTPC, NHPC, NLC and NEEPCO generating companies tariff deficit was calculated by the

Government of India through project specific notifications, prior to the establishment of

CERC. Later, CERC take the consideration of all the stakeholders and finalized and notifiedthe terms & conditions of tariff for three year period 2001-04. [19]

The Electricity Act 2003, the tariff was determined for the next five years 2004-09. The

notification provided the determination method of tariff as station wise for generation and

line or system wise for transmission. The tariff is usually called the cost plus tariff as the

capital cost of the project is the initial point of the tariff calculation as ex-ante. [19]

7.3 Tariffs of Long-Term Sources of Power:In chapter 02, it can be seen that short term market comprised of power transacted throughlicence traders, bilateral power transactions or unscheduled interchange fulfil approximately

11 per cent of the power requirement of the distribution company during year 2011-2012.

The 89 per cent was met from the power procured under the long term contracts with state

and central government owned power generated companies and independent power

producers (IPP). The central government power generating companies in 2011-12 accounted

for about 42 per cent of the total power generation. [16]

The average prices paid by distribution companies to procure power from central

government companies were between 1.19 and 4.28 rupee/kWh from coal and lignite basedstations, `2.72 and `6.99 per kWh from gas/RLNG based power stations, 8.49 and `12.01 per

kWh from liquid fuel based power station and 0.77 rupee/ kWh and `5.90 rupee/kWh from

hydro stations

7.4 Tariff of Short-Term Transaction of ElectricityBased on the monthly reports and other information collected from various stakeholders,

the trends in tariff of short Term Transaction of electricity are shown in table 7.1

Table 7.1 Tariff for short-term transaction of electricity from 2008 till 2010-11 [19]

Year Price of Electricity

transacted through

Trading Licensees

(`/kWh)

Price of Electricity

transacted through

Power Exchanges

(DAM+TAM)

(`/kWh)

Price of UI (`/kWh)

2008-09 7.29 7.49 6.70

2009-10 5.26 4.96 4.62

2010-11 4.79 3.47 3.91


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7.5 Peak & Off-peak Tariff in Bulk GenerationThe Commission has been deliberating on concept of peak and off peak tariff in bulk

generation for quite some time. The NHPC in 2003 had introduced the peak and off-peak

tariff. Currently, fixed charges and variable charges are evenly distributed for all 24 hours.Another way is the unevenly distribution of peak and off-peak tariff, for example, peak

period to be 3 hours and off-peak period is 21 hours. The distribution of the fixed charges

may be represented as following: [18]

FC= (3/24) X a X FC + (21/24) X b X FC

Where, FC is Fixed Charges per day, a and b are weights for the peak and off-peak

periods, respectively. As it is discussed earlier, fixed charges are uniformly distributed, so

a=b=1. If we take, a= 2in the above equation, we get b=18/21.

FC= 0.25 FC + 0.75 FC

FC (Peak) = 0.25 FC, FC (off-peak) = 0.75 FC

In other words, 25% of the fixed charges shall be allocated to peak period and 75% Fixed

charges shall be allocated to off-peak period (Fixed charges per hour during peak period shall be

2.33 times the Fixed charges per hour for off-peak period) [18]


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References:

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Regulation Inquiry on Indian Electric Power System