ptcchronicle-june2015

JUNE 2015 | PTC INDIA LIMITED | 1

NOT FOR SALE

JUNE 2015

Quarterly Journal from PTC India Limited

2 | PTCHRONICLE | JUNE 2015


From the Chairmans DeskEconomic growth and urbanization has factored increase in power demand surpassing the power supply potential of the country. To garner efficiencies in the market, amendment to Electricity Act 2003 is proposed to encourage competition in serving consumers. Also, with the government increasing the pre-envisaged renewable energy generation targets, the objective of effective utilization of renewable sources is clear and augmented.

Coal block auctioning, subsidizing imported gas prices to augment gas based power generation for stranded gas-based capacities, and governments endeavor to strengthen ties with energy-rich nations - all aim towards improving energy security in Asian energy corridor.

The edition of PTChronicle allows deliberations and knowledge sharing on issues related to power sector with various important stakeholders. With 267 GW of installed capacity, India is the 5th largest electricity market globally, a quantum leap from 10th position a decade ago. Led by the growth in industries and urbanization, demand for power has surpassed the supply and the country is facing energy and peak deficits. Understanding the need for reforms to cater to the growing demands of electricity as well as incentivizing investments into the sector, Electricity Act 2003 was enacted a decade ago which delicensed power generation, recognized power trading and provided open access to transmission and distribution system. To take a step further, the proposed Electricity Amendment Act further brings competition into the retail consumer level and emphasizes the need to set up renewable energy projects.

This 12th edition of PTChronicle deliberates on several issues regarding the changing business scenarios, challenges being faced for the renewable capacity addition with specific focus on solar power, expectations for coal block auctioning process, South Asia regional power market and investment opportunities, challenges and opportunities in the short term bilateral markets, need for strengthening of regulators for market evolution, and UK experience in retail electricity market.

We hope the edition is valued by its readers, and we continue to deliberate on issues and developments relevant to the growth of the power market.

Deepak AmitabhChairman & Managing Director

PTC India Limited

FO

RE

WO

RD

Chief EditorHarish Saran

Editorial TeamSneh Daheriya Shashank Gupta Saurabh Kaura Raghuram C. Soragavi Parvesh Sharma Lavjit Singh Shruti Rai Surinder Sharma

Editorial Address:PTC India Ltd., 2nd Floor, NBCC Tower, 15, Bhikaji Cama Place, New Delhi 110066

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Editorial

The pace at which the Indian power market is exhibiting the inherent dynamism across the value chain needs to be appreciated. Coal block auctioning and allocation of coal blocks, implementation of National Transmission Asset Management Centre for transmission planning, introduction and planning of separation of content and carriage, a move embarking on increasing competition in retail power supply and delivering value to end consumers, revision and increase of renewable energy targets to 175000 MW by 2022 based on growth in India's environmental stewardship, all expressing clearly the potential and future growth story of the sector.

The key to sustainability will prove to be continuing reforms to address inefficiencies and irregularities in the sector, and successful implementation of the same. This edition of PTChronicle will deliberate on the multifarious power sector developments, and regional power markets in South Asia aimed towards improving synergies and resource mobilization in the sub-continent.

Power trading has been a subject of discussion right from the very first day of its existence. There have been various impediments for the growth of the power trading in the Indian Power Sector. Bottlenecks being experienced are issues related to creditworthiness of the distribution utilities, open access restrictions, fuel shortage and transmission congestion. The evolving policy framework for reforms in the sector are expected to create solutions to these bottlenecks gradually. Aggregation and disaggregation of contracts as envisaged by CERC in its staff paper may open up new avenues for the short term bilateral markets however, the collective open access provisions for such transactions similar to power exchange will be needed for effective implementation of aggregation and disaggregation.

We thank you for your continued support and solicit your suggestions to make PTChronicle more enriched with each edition.

Harish SaranExecutive Director

PTC India Limited


Your feedback is valuable to us. Kindly share them at [email protected]

C O N T E N T

INDIAN POWER MARKET - IMPROVING BUSINESS PARADIGM 8Deepak Amitabh CMD, PTC India Limited

CHALLENGES OF SOLAR POWER - GRID PARITY 20Dr. Rajib K. MishraDirector (BD & Marketing)PTC India Limited

PLANNING FOR GRID STABILITY - SOLAR PV 32Vijay BishtExecutive VP, PTC India Financial Services Ltd.

SOUTH ASIA - ENABLING A SUCCESSFUL REGIONAL POWER MARKET 22Harish SaranExecutive Director, PTC India Limited

SHORT TERM BILATERAL MARKET - CHALLENGES & OPPORTUNITIES 36Md. ZeyauddinAVP, PTC India Limited

THE PTC TIMESCURRENT UPDATES - POWER SECTOR 12

MARKET WATCH 28

POWER SUPPLY POSITION 30


All the contents of PTChronicle are only for general information and/or use. Such contents do not constitute advice and should not be relied upon in making (or refraining from making) any decision. Any specific advice or replies to queries in any part of the journal is/are the personal opinion of such experts/consultants/persons and are not subscribed to by PTC India. PTChronicle has employed due care and caution in compilation of data for preparing this journal. The information or data of photographs have been compiled from various sources including newspapers, websites, etc. PTChronicle does not guarantee the accuracy, adequacy or completeness of any data/information that was furnished by external reports and is not responsible for any error or omission or for the results obtained from the use of such data/ information.

COAL MINES AUCTION - NEED FOR TANGIBLE SUCCESS 38Arpit AgarwalManager, PTC India Limited

STRENGTHENING OF REGULATORS - A MUST FOR MARKET EVOLUTION 44Manan ThaperSr. Manager, Price Waterhouse Coopers

POLICY INSTRUMENTS FOR RENEWABLE ENERGY - EFFICACY ANALYSIS 48Sapan ThaparFaculty, TERI

RETAIL ELECTRICITY MARKET - UK EXPERIENCE 42Sneh DaheriyaAVP, PTC India Limited

APPLICATION OF ARBITRATION CLAUSE - IN POWER PURCHASE AGREEMENTS 46R. D. GuptaEx Director, Commercial, NTPC &Ex Member, UPERC


Deepak AmitabhChairman & Managing Director, PTC Group

INDIAN POWER MARKET IMPROVING BUSINESS PARADIGM

CMD Speaks


India - The 10th largest economy in the world by nominal GDP and 3rd largest by Purchasing Power Parity to have an annual growth rate of 7.4% in 2014-15 and as per the IMF forecast the same would grow by 7.5% in FY 2015-16. Union Budget has pegged GDP growth at 8-8.5% in 2015-16.

As per World Bank, India is on course to overtake China to claim the position as the world's fastest growing economy in the next two years. Implementation has stepped up during the fourth quarter, supported by opening up of the coal industry to private investors, deregulation of diesel prices to reduce the fiscal subsidy bill, relaxation of labor market laws, and linking of cash transfers with efforts to increase financial inclusion.

The power sector in India has witnessed credible growth in the last financial year meeting the targets for energy generation growth (achievement of 8% growth viz-a-viz 5.77% targeted growth), capacity addition exceeding the targets (installation of 22566 MW as compared to target of 17830 MW in FY 2014-15), successful auctioning and allocation of a number of coal blocks. However, lower PLF, poor financial health of discoms, high peak power deficit, stranded generation capacity and transmission congestion are still a matter of concern. As on 31st March, 2015, country's installed capacity stood at 267.6 GW with Coal based capacity at 164.6 GW, Gas based at 23 GW, Nuclear at 5.78 GW, Hydro at 41.2 GW and renewables at 31.7 GW. In renewables, Small Hydro capacity is at 3.8 GW, Wind at 21 GW, Biomass at 4 GW, Waste to Energy at 0.1 GW and solar installed capacity is 2.63 GW. Addition of 22101 ckt km transmission lines till March 2015 has created better transmission availability and should boost the power market which was struggling from transmission congestion. Per capita consumption of electricity in the country is 957 which is one of the lowest in the world.

The cause of worry is low PLF due to fuel shortage, transmission constraints, payment issues from discoms and plant inefficiencies. All India PLF was around 66% - Coal projects running at 65%, and Gas based at 21%. Central Sector coal projects had higher PLF of 75% as compared to Private sector projects (IPP -61% and private utilities 69%). State sector coal projects PLF are lowest at 59%. There is a need to relook at the plants which


are highly inefficient as they are blocking other required infrastructure as well, which may be available to other projects if the highly inefficient plants are discontinued.

Coal Auctioning of 33 blocks (out of which 5 mines from Schedule II and 4 from Schedule III mines have been earmarked for power sector) has taken place. Further, out of 42 mines earmarked for allotment to power sector, 26 mines have been allotted to Central and State Govt companies for power sector usage. Government is expecting coal auction proceeds to be more than two lakh crore rupees which include e-auction proceeds, royalty and upfront payment. There have been few disputes and obstacles in the transition phase, such as compensation to prior allottees, issues related to low bidding price in some bids, etc. Despite few issues, the opening up of the coal mining to the private companies is a historical development in the country and is expected to bring in transparency, higher efficiency and pace in the mining sector and mitigate fuel shortage issues to the power projects.

As far as power market is concerned, out of total electricity generation, around 9.5% is transacted through Short term. Bilateral contracts through traders, term ahead contracts in the power exchanges and directly between discoms constitute around 5%, day ahead collective transactions on power exchanges is around 2.5% and around 2% is through Unscheduled Interchange (UI). There is a need to introduce ancillary market to reduce the UI volume to bring in stability and grid security in the system. Ancillary market is in a position to supplement the renewable energy market. CERC had issued a staff paper on introducing ancillary services in the Indian electricity market which talked about introduction of Frequency Support Ancillary Services, Voltage Control Ancillary Services and Black Start Ancillary Services. For optimum ancillary services procurement, load generation balance forecasting at national and regional grid levels as well as state grid level is essential. CERC has also recently issued draft (Ancillary Services Operations) Regulations, 2015 for creating ancillary market in the country.

Prices of the electricity in short term transactions through traders were ~4.33 /kWh in the month of March, 15 and the prices in the day ahead market varied from minimum of Rs 0.5 to Rs 15/kWh with an average price of Rs 2.87/kWh. Initially, when the short term market was under development stage say in year 2005-2008, the short term rates were higher than the long term rates, however, in last few years, short term rates are lower than the long term power procurement rates. Higher rates provided incentive for setting up of power projects and capacity addition at a fast pace creating more surplus power in the market, making it a buyer's market. Loss making discoms are finding it difficult to buy short term power at a higher rate and tend to opt for power cut, resulting in tilting the market more towards buyers. Southern region having transmission constraints and less merchant capacity is factoring increase in the prices in the region. However, as transmission connectivity gets strengthened with other regions in the country, this anomaly is expected to reduce.

There is a need to relook

at the plants which are

highly inefficient as

they are blocking other

required infrastructure

as well, which may be

available to other projects

if the highly inefficient

plants are discontinued.


Government is working on a mission to achieve electrification of remaining 20,000 villages by 2020 through measures like off-grid solar power generation. The aim is to extend 24 hour power supply to each house by 2022: 75th year of Independence. Capacity addition for both thermal and renewable energy has been planned to achieve this target along with distribution reforms. Setting up of 5 Ultra Mega Power Projects has been announced in the Union Budget for FY 2015-16 on plug and play model. All the clearances and linkages will be in place before the projects are awarded by a transparent auction system, promising an improving business environment.

MNRE has revised its target of renewable energy capacity to 175,000 MW till 2022, comprising 100,000 MW of Solar, 60,000 MW of Wind, 10,000 MW of Biomass and 5,000 MW of Small Hydro. Excise duty exemptions have been announced on certain equipments for wind and solar plants. Additional depreciation @ 20% is allowed on new plant and machinery installed by a manufacturing unit or a unit engaged in generation and distribution of power. The effective rate of Clean Energy Cess on coal, lignite and peat is being increased from Rs 100 per tonne to Rs 200 per tonne with the scheduled rate being increased from Rs 100/ tonne to Rs 300/tonne. Increase in clean energy cess on coal/lignite by Rs 100/tonne though will be passed on to customers automatically under current PPAs, indicating that players with significant merchant power exposure will get adversely impacted with this provision.

Electricity amendments are with the Parliamentary Standing Committee on Energy, which invited public comment allowing various stakeholders and institutions to provide their comments. Renewable energy generation of at-least 10% of thermal generation capacity is envisaged. However, there is a need to formulate guidelines clearly outlining the mechanism of absorption of such renewable energy.

The Government is also planning to introduce provisions for reducing cross subsidy surcharge. As the amendment will encourage competition in supply of power to retail consumers through separation of carriage and content, it is imperative to progressively reduce and eliminate cross subsidy surcharge in a definitive timeline for success of this model.

The experience of competitive bidding in the country shows that more than half of the projects have quoted tariffs that would make these projects unviable. Therefore multiple regulatory forums are currently engaged in resolving disputes / issues in the nature of `Compensatory Tariff Mechanisms'. The expected benefit of attractive tariffs

Renewable Energy is expected

to be the future of power sector.

However, grid connectivity and

availability, ancillary services

and creation of market for

renewable energy are essential.

through competitive bidding is misplaced at the current stage of the evolution of India's power industry, as we are still coping with the base level issues of discovering latent demand, finding means to fulfill the demand through physical delivery of electrical energy, resolving transmission and sub-transmission capacity bottlenecks and making Utilities accountable for minimum service level obligations. Price discovery through competitive bidding in the current scenario is unlikely to be efficient due to the structural weaknesses in the market, and regulatory determination of tariff would be the primary route to ensure consumer protection. Therefore, both cost plus and competitive bidding should co-exist, and clarity should be brought in provisions of Section 62 and 63 allowing a licensee to procure power.

Renewable Energy is expected to be the future of power sector. However, grid connectivity and availability, ancillary services and creation of market for renewable energy are essential. Innovative solutions are being thought of to make renewable energy competitive as compared to the conventional energy, such as dollar tariff for solar power, making net metering a part of the Electricity Act, etc. There is also a need to strengthen REC market. Enabling alternative markets such as bilateral trade of RECs through traders may help creating more liquidity in the REC market.

The developments in the power sector at policy level are opening up many opportunities for investment in particular coal mining, supply to retail consumers and development of renewable energy projects. It is the collective efforts of all the stakeholders viz Government, Regulatory bodies, developers, traders, transmission entities, financial institutions and consumers to create sustainable growth and higher efficiency levels in the sector.


HIGHLIGHTS

In an interview with CNBC-TV18's Anuj Singhal and Ekta Batra, RM Malla, the then Managing Director and CEO of PTC India Financial Services, outlined developments in the renewable power space.

The MD said that with solar costs coming down, as well as with the government's renewed focus on alternative sources of energy, the market was staring at an investment of about Rs 12 lakh crore in the next five-seven years.

Addressing a press conference Ajay Jain, Secretary, Energy, Andhra Pradesh, said, Even though the 'Power for All' scheme had projected a capacity addition of 800 MW through wind farms in the State, we expect to augment additional capacity of 1000 MW this fiscal.

The State is planning to install about 6,500 solar pump sets during the year supported by the Central Government (MNRE scheme) and funding from Power Finance Corporation. The beneficiaries are now being identified, he said.

RENEWABLE POWER TO NEED RS 12 LAKH CR INVESTMENT IN 5-7 YRS: PFS

AP TO ADD OVER 1000 MW WIND ENERGY PROJECTS THIS FISCAL

Concerns are beginning to be raised over India's ambitious targets to crank up solar and wind energy production, thanks to the perilous finances at the primary customers: the state government-owned distribution utilities.

The inability of these utilities to effect necessary but unpopular tariff hikes are expected to impact their ability to purchase costlier green power. In consequence, the entire renewable energy industry may add only 4,000-5,000 MW of capacity in the second year of the NDA government, the head of an industry panel on renewable energy said. That compares with the official target to install 100 gigawatts (GW) solar power and 60,000MW wind power by 2022.

RENEWABLE ENERGY GOALS MAY SLIP ON FUNDING GAPS


THE PTC TIMES

SOLAR POWER COST TO COME DOWN TO RS 4.50/UNIT BY DECEMBER 2015

Centre is working on innovative measures which will help in cutting down the cost of solar power by 25-35 per cent to Rs 4.50 per unit by December 2015 Power, Coal and New and Renewable Energy Minister, Mr. Piyush Goyal said.

At present, solar power tariff is about Rs 6-7 per unit. "We are looking at bringing in innovative financing solutions and improve the counter party risk and bring down the cost of solar and wind energy," he added.

National miner Coal India and state-run power producer NTPC have agreed to end their dispute on coal sampling, an outcome that could be related to having a common minister for power and coal.

For nearly two years, NTPC led a pack of state-owned utilities in demanding that fuel sampling be held at the plant-end, even as CIL refused to grant utilities such a liberty.

Both sides now agree by ironing out differences on a new mechanism that involves independent testing laboratories.

According to the new sampling method, which came into effect in September 2014, both buyer and seller are expected to appoint 'independent' agencies (from a list of empanelled vendors), which will collect samples jointly but test them separately.

In case of a discrepancy between two results, a third sample (separated during joint collection of samples) will play decider.

The government aims to turn Gurgaon into a so-called smart city by the end of this year and wants it to be a model for other such projects in the rest of the country, energy minister Piyush Goyal said in an international conference, Gridtech 2015, organized by Power Grid Corporation of India Limited (PGCIL).

The National Democratic Alliance (NDA) government had last year declared its mission to create 100 smart cities with better technology, superior management and modern governance. The project is likely to be rolled out after extensive consultations with stakeholders.

COAL INDIA, NTPC BURY THE HATCHET OVER FUEL SAMPLING

GOVERNMENT AIMS TO MAKE GURGAON A SMART CITY IN SIX MONTHS


HIGHLIGHTS

India has started work on a plan to ensure energy security that's being shaped by a group at the newly established NITI Aayog think tank, Energy Minister Piyush Goyal said.The NDA government is looking to supply adequate power at affordable prices and double electricity generation capacity to two trillion units by 2019, Goyal told delegates at a conference organized by the CII, a lobby group. NITI Aayog has set up a group which is now looking at energy security plans for the next 100 years, Mr. Goyal said.The govt has also put special focus on the importance of energy diplomacy, specifically with reference to building India's relationship with the energy-rich regions of West Asia, Central Asia and the South Asian energy corridor.

Larsen & Toubro (L&T) has secured a turnkey order from NTPC for setting up a 2x660 MW greenfield thermal power plant in Khargone district of Madhya Pradesh on EPC (engineering, procurement and construction) basis a statement by the L&T. It further says - Valued at over Rs 5,580 crore, the project entails design, engineering, manufacture, supply, erection and commissioning of two coal-fired thermal units of 660 MW each with ultra-supercritical (energy efficient) parameters.

Earlier, L&T, through its joint venture company L&T-MHPS Boilers Private Limited, had secured an order worth Rs 1,885 crore from NTPC, in September 2014, for setting up two units of 660 MW each supercritical steam generators for Tanda thermal power plant in Uttar Pradesh.L&T-MHPS Boilers Private Limited is a joint venture between L&T and Japan's Mitsubishi Hitachi Power Systems.

The state-owned power transmission behemoth Power Grid Corporation (PGCIL) is in the final stages of implementing the National Transmission Asset Management Centre (NTAMC) project, a system that would give the company a bird's eye view of its vast network spread across the country and help resolve technical issues quickly.To manage and control such a vast network, we decided, around three years back, that information technology should be leveraged to maximise efficiency, bring about transparency in operations and optimise utilisation of the assets that are spread across the country. This resulted in the conceptualisation of the National

Transmission Asset Management Centre (NTAMC) project, a PGCIL official told.

The project will eventually have national level control centres at Manesar in addition to nine regional control centres that will remotely operate 192 sub-stations of the firm and manage assets. All the sub-stations and assets will have visibility through close circuit cameras with video analytics.The system will provide experts sitting at different location access to theintelligent electronic devices (IEDs) for fault analysis and speedy decision-making even for assets that are located in far flung areas. The system will have facility for automatic fault analysis, making it possible for us to sort out issues in a coordinated manner, the official said.

L&T BAGS ` 5,580-CRORE ORDER FROM NTPC FOR THERMAL POWER PROJECT

AN E-EYE ON NETWORK

NITI AAYOG MAKING A BLUEPRINT TO TACKLE INDIA'S ENERGY WOES


Six coal-rich states are set to reap a bonanza from coal-field auctions in the form of upfront payments, revenue and royalty, the promise of which may have spurred the ruling parties of Odisha and West Bengal to break ranks with the opposition and support the coal mines bill passed by Parliament.

At stake is the Rs.2.097 trillion in bids received for 33 blocks from two rounds of auctions, which will accrue to the states.

While the Biju Janata Dal (BJD)-governed Odisha will get Rs.33,741.94 crore over the life- time of these blocks, the Trinamool Congress (TMC)-led West Bengal will get Rs.13,354.23 crore.

Other states such as Madhya Pradesh, Maharashtra, Jharkhand and Chhattisgarh will get Rs.42,811.44 crore, Rs.2,738.53 crore, Rs.49,272.92 crore and Rs.67,821.18 crore, respectively.

Odisha and West Bengal will also get an upfront payment of Rs.273.89 crore and Rs.143.37 crore, respectively, from these schedule II (operational) and schedule III mines (ready to be mined).

The crucial Coal Mines (Special Provisions) Bill, 2015, won Parliament's approval on 21 March when the Rajya Sabha, where the NDA is in a minority, passed the legislation.

The finances of coal-bearing states are expected to improve thanks to the passage of the bill. More money may accrue from a possible auction of coal linkages through which projects get assured supply of the fuel at a discounted price. The government is to take a call on this shortly.

A total of Rs.3.35 trillion will accrue to the states from 66 blocks, which are being awarded through a mix of auctions and allotments to the state-owned public sector firms, leaving another 138 blocks to be allotted in the next fiscal year, which will add to the proceeds.

Additionally, electricity tariff benefits totaling Rs.69,311 crore will accrue to the state distribution companies.

THE PTC TIMES

CENTRE GAINS LEVERAGE WITH COAL AUCTION WINDFALL FOR STATES

Coal India Ltd. (CIL) was at loggerheads with the coal ministry around six months ago over the latter's directive to halve its lucrative e-auction volumes. It finally settled for keeping its e-auction sales to seven per cent of the total sales.Now, the ministry has allowed CIL to revert to the old system, removing the cap on e-auction volumes with effect from April 2015. This might boost the miner's bottom line in the coming days.The coal ministry has issued a directive to revert to the old system on e-auction volumes, Coal India chairman and managing director Sutirtha Bhattacharya told. According officials, this means Coal India will now be able to increase its e-auction volumes to 10 per cent of total sales, which was the standard practice.However, there is no hard and fast rule. It has gone beyond 12 per cent earlier. But yes, CIL's first priority is to supply coal to the power sector, said an official.

COAL MINISTRY REMOVES CAP ON COAL INDIA'S E- AUCTION SALES


The government's bailout package for gas-based power generation companies would have differential subsidy mechanism and separate bidding for stranded and underutilized plants.

It has classified 14,305 megawatts (MW) as stranded gas-based power capacity, which will get the lion's share in subsidy. Another 9,845 MW with tie-up for domestic gas but an average plant load factor (PLF) of only 32 per cent owing to non-availability of enough fuel, too, would be bailed out but with an overall kitty of Rs 500 crore available.

Since the scheme is primarily intended to address lenders' concerns, all receipts and payments made by distribution companies for purchase of power generated from these plants would be routed through a single "trust and retention" account. This account would be controlled by the lead lender to the power generator.

Other states such as Madhya Pradesh, Maharashtra, Jharkhand and Chhattisgarh will get Rs.42,811.44 crore, Rs.2,738.53 crore, Rs.49,272.92 crore and Rs.67,821.18 crore, respectively.


The government's disinvestment programme for 2015-16 started on a strong note with the 5% stake sale of state-run Rural Electrification Corp. Ltd (REC) through the offer for sale (OFS) route getting oversubscribed by 5.5 times and raising Rs.1,550 crore.

Out of the 49.3 million shares offered for sale at the floor price of Rs.315 per share, 20% were reserved for retail investors placing bids for shares not more than Rs.2 lakh, which were oversubscribed by nine times. Retail investors also got a 5% discount on price bid. After the disinvestment, the government's share in REC will come down to 60.64%.

Shares of REC rose 2.61% to Rs.330.05 each on BSE, while India's benchmark Sensex gained 0.67% to 28,707.75 points. At the end of the day, with total subscription of Rs.7,621 crore, the issue stood oversubscribed by 553%, the highest ever for an OFS, a finance ministry statement said.

JM Financial Institutional Securities Ltd, IL&FS Broking Services Pvt. Ltd and Morgan Stanley India Co. Pvt. Ltd managed the share sale.


HIGHLIGHTS

TWO AUCTIONS TO DETERMINE SUBSIDY FOR GAS-BASED POWER PLANTS

REC SHARE SALE, SUBSCRIBED OVER 5.5 TIMES, EARNS RS.1,550 CRORE

With the option of classifying restructured assets as standard loans no longer available to them, it would appear banks are taking recourses to the 5/25 scheme to refinance stressed loans so as to prevent them from turning into non-performing assets (NPAs).

Led by State Bank of India (SBI), lenders to two subsidiaries of Adani Power Adani Power Maharashtra (APML) and Adani Power Rajasthan (APRL) are in the process of finalising a Rs. 15,000-crore term-loan refinance proposal.

According to sources, bankers have agreed to extend the loan repayment period of 10 years to a repayment option spanning 19 years under the 5/25 scheme of the Reserve Bank of India (RBI). Unlike in the corporate debt restructuring (CDR) cell, where the promoter needed to bring in some equity as a contribution to the recast package, in the case of a refinancing under 5/25, there is no such requirement.

ADANI POWER IN FOR 5/25 MODEL RELIEF


THE PTC TIMES

CLP India arm Jhajjar Power has raised Rs 476 crore through issue of bonds, with partial credit enhancement, to refinance existing debt, the company said on Thursday. The company issued corporate non-convertible bonds for its 1,320 MW coal-fired power plant at Jhajjar in Haryana. The bond, which carries a 50% guarantee from CLP India, has a semi-annual coupon of 9.99% a year and has been issued in two series of equal amounts and will mature in April 2025 and April 2026.

CLP India is the wholly owned subsidiary of Hong Konglisted China Light and Power Holdings. CLP entered the Indian power sector in 2002 with the acquisition of a 655 MW gas-fired power plant in Gujarat. "The Jhajjar plant was financed in 2009 right after the global financial crisis when the cost of funds was very high. That was limiting the profitability of the project. The fund raised now will help us refinance our most expensive Rupee loan," Rajiv Mishra, Managing Director, CLP India told.

Indian Railways (IR) have managed to achieve more than 99% of its estimated revenue target in FY15 albeit a declining passenger traffic onboard thanks to a 14.2% hike in passenger fares and higher than estimated freight revenue.

Total earnings grew by 12.2% to Rs.1,57,881 crore from Rs.1,40,761 crore in FY14. Its freight revenue went up to Rs.1,07,075 crore, beating the revised estimates (RE) by Rs.148 crore.

In FY15, the earning in the passenger segment has grown by some 14.4% to Rs.42,866 crore compared to Rs.37,478 crore the year before. Though IR's passenger traffic has declined by 2.34% to 822.8 crore in FY15, it managed to achieve its revenue target in that segment mainly helped by the increase in fares last June. Railways carried some 842.5 crore people in 2013-14.

RAILWAYS ACHIEVE OVER 99% OF FY15 ESTIMATED REVENUE TARGET

CLP INDIA ISSUES BONDS TO RAISE RS 476 CRORE


The government has abandoned plans to create a specialized asset reconstruction company (ARC) to deal with power sector loans after banks expressed concern over the move.

Last year, the finance ministry proposed the creation of a separate ARC for better handling of bad debts in this crucial infrastructure sector and help revive stuck projects.

The government wanted state-run enterprises, such as Power Finance Corp. Ltd and Rural Electrification Corp. Ltd, and some banks to pick up stakes in the firm. The proposal has now been shelved after banks said they were not willing to be part of such an entity.

An ARC typically buys the bad loans from a bank, looks at ways to make the asset more attractive and then sells it. The idea behind a specialized power sector ARC was to better understand the reasons for projects being stalled and come up with effective solutions to revive them.

At the end of February, outstanding bank loans to the power sector stood at Rs.5.5 trillion, an increase of 13.1% from a year ago, according to Reserve Bank of India data.

The electricity regulator, Gujarat Electricity Regulatory Commission (GERC) allowed an average 2.47 per cent tariff hike for state-run distribution companies, (discoms) and an average 2.36 per cent for private sector player, Torrent Power Limited (TPL).

The tariff hike will put an additional burden of Rs. 781 crore annually on the consumers of the four discoms, controlled by Gujarat Urja Vikas Nigam Limited (GUVNL) while TPL consumers will bear an additional burden of Rs. 160 crore annually. TPL supplies power in Ahmedabad-Gandhinagar and Surat cities.

In its tariff order GERC allowed an overall increase of 13 paise per kilowatt hour (kWh) for the discom consumers except agriculture, below poverty line and those consuming electricity up to 200 units per month.

The overall increase in tariff for TPL consumers is 15 paise per unit. The new tariff is effective from April 1, 2015.

GOVERNMENT DROPS PLAN FOR POWER SECTOR ASSET RECONSTRUCTION FIRM

GUJARAT POWER PANEL HIKES TARIFF BY UP TO 2.5%

HIGHLIGHTS


THE PTC TIMES

PFC TO DISBURSE Rs 44K CRORE LOANS IN FY'16

UTTAR PRADESH GETS FIRST PUBLIC SECTOR POWER PROJECT IN 2 DECADES

DERC SAYS DELHI GOVT FREE TO qUESTION TARIFF REVISIONS IN AN APPROPRIATE FORUM

State-owned lender Power Finance Corporation plans to disburse over Rs 44,000 crore loans during the current FY 2015-16. PFC signed an MoU with the Ministry of Power for the financial year 2015-16. As per the pact, the company will disburse loans worth Rs 44,440 crore during the current fiscal. Target of gross NPAs (non-performing assets) as percentage of loan assets has been kept as 1 percent. PFC, reported 4.83 percent rise in net profit at Rs 1,541.73 crore for the third quarter ended December 31, 2014-15, mainly on account of increase in income from operations. It had reported net profit of Rs 1,534.31 crore in the October-December period of 2013-14 fiscal.

Uttar Pradesh Chief Minister Akhilesh Yadav inaugurated the first unit of the 5002 MW Anpara D thermal power station, the first project in the public sector in over two decades. The project, that was sanctioned in 2008, has been built at a cost of Rs.7,000 crore and will provide electricity to Bhadohi, Ghazipur, Mirzapur and Varanasi, which are extremely backward. The second unit of 500 MW is also expected to start generation by July this year. The last project that had come up in the public sector was the Anpara B project in 1993.

The Delhi Electricity Regulatory Commission (DERC) in a stern message to the state government said the latter's questioning of the quasi-judicial institution's decisions has been inappropriate and unfair. The Delhi Government had written to DERC chairman P.D. Sudhakar questioning the basis of the tariff revisions that resulted in steep hikes in prices to the consumer between 2011 and 2014.

Replying to the letter, the commission said: tariff fixation exercise is a complex one where the commission utilises multiple controls and prudent checks on various elements, including power purchase, capex entitlement and billing system. The commission added that all stakeholders, including consumers and the govt. of Delhi, were free to question the tariff fixation by filing appeals before the Appellate Tribunal for Electricity.


Challenges of Solar Power Grid Parity

Dr Rajib K Mishra, Director,Marketing & Business Development, PTC India Limited

India is blessed with more than 300 days of sunshine, while the coastal states have a lot of wind potential. Major steps are being taken by central and various state governments to tap the renewable energy, create grid parity at the earliest and ensure that the renewable energy certificate market picks up. The challenges facing the country with regard to grid parity and the steps that need to be taken by the government to overcome the hurdles are on a sticky ground.

Nature has endowed some of the states such as Rajasthan and Gujarat with lot of sunshine and solar potential. Similarly coastal states such as Tamil Nadu and Maharashtra have wind potential. But other states are not so privileged in terms of renewable potential. Renewables are not distributed evenly across the country, which has at times inhibited State Electricity Regulatory Commissions (SERCs) from specifying higher renewable purchase obligation (RPO). Renewable Energy Certificate (REC) was perceived to create a nationwide renewable energy market and expected to overcome geographical constraints and provide flexibility to achieve RPO compliance. However REC market has not lived up to the expectation. India is the only country where REC Regulatory Commission (CERC) had to extend the validity of RECs for 24 months.

In the incubation stage for any new technology or policy initiative, government has to support and mitigate risks through several incentives, tax holidays or gap funding. The solar energy also requires such kind of support for initial five years till it reaches grid parity. However, there is another school of thought that propagates the view point that this spoon-feeding may hamper the commercialisation and development of large scale solar

projects. Buyer state utilities today expect a tariff of ` 5.45 per unit for solar power as available under the viability gap funding (VGF) scheme of the Jawaharlal Nehru National Solar Mission and FIT (Feed-in-Tariff) co-exist. Most of the European nations have implemented Feed-in-Tariff. This has enabled most of the European solar developers to draw comfort of de-risking investment and ROI uncertainty. Ministry of New and Renewable Energy (MNRE) has taken several steps to revive REC market including proposed amendment in the Tariff Policy for prescribing RPOs and Electricity Act of 2003. MNRE took initiative for RPO compliance and advised public sector units to procure RECs under corporate social responsibility (CSR). However the unsold RECs inventory in the exchange is a matter of concern for all stakeholders. MNRE has also requested Central Electricity RPO target set by CERC till 2020.

India is the only country where REC and FIT (Feed-in-Tariff) coexist. Grid connectivity and reasonable wheeling charges are other two factors affecting solar development in a big way. As solar would utilise only 6-8 hours of the transmission capacity, it would result in higher landed cost for buying utility for same quantum of power. As on date in India solar energy cost of generation is approximately 30-40 per cent higher than conventional power. Although this has come down drastically in last couple of years. But it is still a challenge to commercially generate and compete purely on electricity prices without attributes and social impact cost. We are expecting grid parity in next 3 years considering the improvement in solar PV technology available today, downward trend of PV solar cells as well as taking into account fossil fuel price increase (both domestic and imported) for conventional power.

Major steps are being taken by central and various state governments to tap the renewable, create grid parity at the earliest and ensure that the renewable energy certificate market picks up.


As opined by Paula Mints, a global renewable energy expert, The PV industry has successfully commoditized its product and is now maturing business models that will, hopefully, allow for more reasonable and sustainable margins. The lease model is one that, in its various iterations, is being pursued by solar firms as well as investors. Third party ownership, however, is unlikely to be a panacea for everything that ails and has historically ailed the PV industry. Vertical integration (typically, manufacturing owning a system business) will also not ameliorate decades.

For large scale development of solar projects there is requirement of Grid Connection, sufficient capacity in Grid/Transmission (Green corridor) and Forecasting & Scheduling. State of the art forecasting is an important aspect of project planning and execution in the case of RE power, owing to the infrequent and variable nature of the resource.

Biggest challenges faced in Germany and Spain having higher mix of renewable in the portfolio is facing challenges due to uncertainty of scheduling and despatching. Better forecasting tools can mitigate this issue. Forecast has two main functions: (1) to inform decision making related to the trade of electricity from wind and solar plants, and (2) to facilitate scheduling of power plants and the operation of the system in the most effective and reliable manner. Inaccurate forecasts may lead to poor scheduling which in turn can result in

a demand-supply mismatch forcing DISCOMs to resort to UIs and to purchase expensive power to bridge the gap. Some of the key measures that could be adopted in this regard are:

Initiation of Integrated resource Planning (IRP) including balancing and scheduling, grid management and Demand Side Management (DSM), Introduction of forecasting regimes and Strengthening of inter-state transfer/trading of renewable power, especially from surplus to deficit regions, including HVDC and smart grids; renewables power should be exempted from intra-state Open Access (OA) and other charges. Other important issue is development of storage and hybrid technologies.

Potential areas of renewable generation are presently not connected strongly with the central grid. The lack of evacuation and dedicated transmission grid for effective evacuation of renewable power has been identified as a key bottleneck in the development of RE sector in India. In this regard, the Government of India has laid out extensive plans for facilitating the flow of renewable power into the national grid. The 'Green Energy Corridors' project is aimed at synchronizing electricity produced from renewable sources, such as solar and wind, with conventional power stations in the grid. This initiative presents a number of challenges in terms of demand-supply mismatch, frequency regulation and enhancing co-operation between utilities.

The lack of evacuation and

dedicated transmission grid for effective

evacuation of renewable

power has been identified as a key bottleneck in the

development of RE sector in India.


SOUTH ASIAENABLING A SUCCESSFUL REGIONAL POWER MARKET Harish SaranExecutive Director

PTC India Limited


There has been existing regional co-operation between India, Bhutan, Nepal and Bangladesh. Bhutan exports around 1400 MW from existing Hydro projects to different Indian Utilities through PTC India Limited. India supplies power to Nepal through various existing treaties as well as purely on commercial terms. Further with the commissioning of 400 kV D/C transmission link Baharampur(India) - Bheramara (Bangladesh), India is supplying 500 MW power to Bangladesh.

With several generation and associated infrastructure projects already in pipeline mainly from the point of view of cross Border transaction of electricity, it was felt necessary to put in place a robust techno- commercial mechanism for seamless exchange of power in South Asia. Giving a conclusive direction to this effort, a SAARC Framework Agreement for Energy Cooperation (Electricity) has already been finalized which is a crucial step towards developing a SAARC Market for Electricity (SAME) on a regional basis.

The key challenges for establishment of a successful South Asian Power market as envisaged are:

1. Investment for creation of a robust physical Infrastructure for seamless flow of electricity

2. Creating an orderly marketplace for all buyers and sellers which would provide a fair, neutral, robust, transparent and quick discovery process

3. Creating an inclusive marketplace through deliberation of common regional energy cooperation framework covering:

a. Inclusion of regional best practices

b. Addressing issues unique to participating countries

c. Harmonized techno-commercial terms and conditions

This paper discusses about various investments being made for bolstering the existing electrical infrastructure integrating South Asian power grid along with anticipated issues for execution of these projects.

India-Bangladesh

It is expected that the electricity demand would be 38,700 MW in Bangladesh by the year 2030. The aggregated investments for generation, transmission and related facilities are found to be at Taka 4.8 trillion (US$ 69.5 billion). The annual average of the investment amounts to Tk 241 billion (US$ 3.5 billion).

Operational Inter Connection Interconnection: Baharampur (India) -

Bheramara (Bangladesh) 400 kV D/c line

500 MW HVDC B/b stn at Bheramara (Bangladesh) TransferCapacity: 500MW (upgradable to

1000 MW) Commissioned:Oct,2013

Interconnection 1:Surjyamaninagar (India) - Comilla (North) & Comilla (South) 400 kV D/C line (to be op. at 132kV)Interconnection2:System Strengthening IndiaSide 400KVFarakka-BehrampurD/C RemovalofLILOofFarakka-JeeratS/C LILOofabovelineatSagardighi LILOofSagardighi-SubhasgramatJeeratBangladeshSide Bheramara-Ishurdi230KVD/C 500MWHVDCbacktobackconverterunitat

Bhermara

Following is detail of existing and proposed Inter connections between India and Bangladesh:

Transmission map for existing and proposed Interconnection


India-Bhutan

Currently, PTC is purchasing surplus power from the following projects in Bhutan for onward supply to Indian Utilities:

Chukha (336 MW) Tala (1020 MW) Kurichhu (60 MW)

Total of 10825 MW new hydro plants under Bilateral & JVs are expected to be added BY 2020 in Bhutan. Most of them are export oriented. The details are as given below.

Minimum of 5000 MW will be exported to India by the year 2020. Further; the Hydro capacity by the end of 2030 is likely to be around 26500 MW. Assuming 8 to 10 Crore per MW, The total investment required is 82,672(15.27Billion USD) to 1, 03,340 Crore (19.09 Billion USD) is required.

India- Nepal:

The Current Installed Generation Capacity in Nepal is 770.9 MW of which 712.99 MW is through Hydroelectricity and 766.4 MW is on-grid.

By 2018/2019 Nepal would be having around 2050 MW of Installed capacity. The detail of Operational & Upcoming projects is given below:

Following is detail of existing and proposed Inter connections between India and Nepal:

Presently, the Power is being exchanged and traded mainly through 33kV and 132kV links along the Indo-Nepal border.

A Cross Border Transmission line between India & Nepal is under construction with the details as given below:

Dhalkebar Muzaffarpur (400 kV DC)- Likely commissioning by December 2015

Indian Portion :

Line length : 86.43 km; Estimated cost : Rs. 131.75 Crs. (USD 29.28 million)

Implementation by Cross Border Power Transmission Company Pvt. Ltd. (CPTC) [IL&FS(38%),PGCIL (26%), SJVNL (26%) and NEA (10% )]

Nepalese Portion :

Line length : 39 km ; Estimated cost : Rs. 127.54 Crs. (USD 28.34 million)

Implementation by Power Transmission Company Nepal Ltd. (PTCN) [ NEA(50%), PGCIL (26%), FIs of Nepal (14%), IL&FS (10%)]

SNo

Projects InitialCapacity/Re-visedCapacityinMW

StartDateFY

CODFY Mode

1 Punatsangchhu - I 1,200 2009 2015 Bilateral (40:60)

2 Mangdechhu 720 2010 2017 Bilateral (30:70)

3 Punatsangchhu - II 990/1020 2010 2017 Bilateral (40:60)

4 SunkoshReservoir 4060/2585 2011 2020 Bilateral (40:60)

5 Kuri-Gongri 1800/2640 2012 2020 Bilateral (40:60)

6 AmochhuReservoir 620/540 2012 2018 Bilateral (40:60)

7 Kholongchhu 600 2012 2018 JointVenture-SJVNL

8 Chamkharchhu - I 670/770 2012 2018 JointVenture-NHPC

9 Wangchhu 600/570 2012 2019 JointVenture-SJVNL

10 BunakhaReservoir 180 2012 2020 JointVenture-THDC

Total 10825

Following is detail of existing and proposed Inter connections between India and Bhutan:


OperationalInterconnectionChukha Birpara 220kV 3 ckts Kuruchu-Geylegphug(Bhutan)Salakati(NER)132kVS/cTala Siliguri 400kV 2x D/c lineUnderImplementation1stofthe3000MWHVDCterminalbeingestablished at Alipurduar along with 6000MWNER-NR/WRinterconnector

UnderImplementationInterconnection(BhutanPortion):Punatsangchu-I HEP (1200 MW) Lhamoizingkha(BhutanBorder)400kV2xD/c.Interconnection(IndianPortion): Lhamoizingkha(BhutanBorder)Alipurduar400kV D/c (Quad) Jigmeling Alipurduar 400 kV D/c (quad) line

Status NEA IPP

UnderOperation(718MW) 478MW 240MW

Under Construction 862MW 358MW

PPA Concluded IPP 502 MW

LargeProjectsinPipeline 3,900 MW (including Arun III, Upper Karnali,LowerArun,TamakoshiIII,UpperTamor,UpperMarshyangdi,etc.

OtherLargeprojects Karnalichisapani;Pancheshor;Koshietc


India- Sri Lanka:

By 2032, the total installed capacity will be 6985 MW of which 4600 MW capacity addition would be through coal only and 714 MW from Nonconventional renewable

energy. With this, the thermal share is likely to go up from 49% to 68% by 2032.

Following is detail of existing and proposed Inter connections between India and Sri Lanka:

A transmission link between India & Sri Lanka of 400 kV, 127 km HVDC line with submarine cable is being set up with a transfer capability of 500 MW with the details as given below.

India (Madurai) Sri Lanka (Anuradhapura) HVDC bipole line : 360 km

(Stage-I: 500 MW; Stage-II: 1000 MW)

Indian Territory : 130 km Sea Route : 120 km Sri Lankan Territory : 110 km Tentative cost : Rs. 5000 Cr. (USD 867 Million) Rs. 3300 Cr. (USD 645 Million) (Stage-I) & Rs. 1700 Cr. (USD 222 Million) (Stage-II)




Issues and Risks in investment and financing of Power projects, CBET infrastructures

Issues

Risk Profile Viability of the Projects Lenders concerns Viability of the Power Sector Source funding and financing options

Risks

Regulatory and country risks Time overrun vis--vis Cost over run Natural calamities Geological risks Hydrological uncertainty Evacuation of power Finding suitable buyer for sale of Power Off-takers creditworthiness

Issues to be addressed in the process of development are investment capabilities, lack of market information, viability of buyers, inadequacies in institutional mechanism, environment and social concerns. Cross border trading in electricity has technical considerations as well as political and economic ones. Pricing should be such that both sides benefit. For example, if one party has a lot of inexpensive hydro power, during monsoon seasons then it may benefit from selling it at lower price to a neighbor rather than having the water spill. There is necessity of larger perspective while planning, obviously through integrated approach for the entire SAARC (South Asian Association for Regional Cooperation) region. Both Generation capacity and Transmission interconnection capacity are to be enhanced. To be adopted is common principle/ methodology for tariff determination, operational protocol, security / reliability and regulation. To be evolved also is the Contractual Agreement that addresses principal obligations that are equitable, risk sharing, issues related to financial and payment commercial and legal, dispute resolution and arbitration.

Summary of all the proposed/Existing High Voltage Cross Border Interconnections

Following is the summary of all the proposed/Existing High Voltage Cross Border Interconnections

The table below discusses the tentative cost for these Cross border Transmission Interconnections

S.No Countries InterconnectionDescription Capacity(MW)

1 Bhutan-India GridreinforcementtoevacuatepowerfromPunatsangchhuI&II Reinforcementof2100MW

2 Nepal-India Dhalkebar-Muzaffarpur400kVline 1000 MW

3 SriLanka-India 400 kV, 127 km HVDC line with submarine cablew 500 MW in the short term

4 Bangladesh-India 400 kV HVDC back to back synchronous link 500 MW

5 India-Pakistan 220 kV in the short term(could be upgraded to 400 kV later) 250-500 MW

S.No Interconnection Description Capacity(MW) Cost(USDMillion)

1 India-Bhutan GridreinforcementtoevacuatepowerfromPunatsangchhu I & II

Totalgridreinforcementof2100MW 140-160 (2020 estimate)

2 India-Nepal Dhalkebar-Muzaffarpur400kVline 1000 MW 186 (2010 estimate) including internal transmission upgrade

3 India-SriLanka HVDC line with sub-sea cable 500 MW in the short term USD 867 Million

4 India-Bangladesh HVDV back to back asynchronous link 500 MW 192-250 million (2011 estimate)

5 India-Pakistan 220 kV in the short term, 400 kV in the long term 250-500 MW 50-150 million (2012 estimate)

6 CASA 1000 and India-Pakistan interconnection

HVDC&500kVHVACforCASA 1300 MW Approx 1 billion (2011 estimate)


PrestigiousProjectsundertaken: - Presidential Estate - AIIMS - Safdarjung Hospital - IGESIC (Rohini) - Dr. Ram Manohar Lohia Hospital - ESIC Hospital (Jhilmil) - National Archives

MoUwithBureauofEnergyEfficiency & EESL

ConductingInvestmentGradeEnergy Audits & preparing DPRs

ImplementingEnergyEfficiencysolutions through ESCO model

PTC India Limited2nd Floor, NBCC Tower, 15 Bhikaji Cama Place,New Delhi - 110066

EnergyEfficiencyServicesPTC has been continuously making strides in the direction of Energy Efficiency Management. PTC's engagement with Bureau of Energy Efficiency (BEE) under Ministry of Power has been extended for a further period of 5 years to undertake Energy efficiency projects and also to seize emerging opportunities such as perform, achieve, and trade (PAT).


Bilateral prices remained higher than IEX and PXIL prices(execeptformonthofAugust).

Daily Prices - Indian Energy Exchange (IEX)

MARKETWATCH

Daily Prices - Power Exchange India Limited (PXIL)

Max. Price : 3.95 Min. Price : 1.29 Avg. Price : 2.79

Weighted Average Prices (November 2014 - March 2015)

Max. Price : 3.26 Min. Price : 1.85 Avg. Price : 2.63

Total Short Term Contract Volume (November 2014 - March 2015)Total Short Term Contract Volume (November 2014 - March 2015)

PTC India Limited

Source:CERC Market Monitoring Report Indian Energy Exchange Power Exchange India Ltd.

Total Volume Traded in Short Term vs Total Generation (November 2014 - March 2015)


Top 5 Purchase

Bilateral Trade And Power Exchange Market

Top 5 Sellers

MillionUnits(MUs) MillionUnits(MUs)

MARKET TRADE

POWER TRADING MARKET SIZE

Thetradingdatacorrespondsto purchaseandsalemadeinthe monthofMarch,2015

Top 5 Purchase

SPOT MARKET

Top 5 Sellers

MillionUnits(MUs) MillionUnits(MUs)

Year

Electricity Transacted

through Traders (BU)

Price of Electricity Transacted

through Traders (Rs/

kWh)

Size of bilateral

Trader Market (Rs Crore)

Electricity Transacted

through Power

Exchanges (BU)

Price of Electricity Transacted

through Power

Exchanges (Rs/kWh)

Size of Power Exchange

Market (Rs Crore)

Total Size of the bilateral

trader + Power

Exchange Market (Rs

Crore)2009-10 26.72 5.26 14055 7.19 4.96 3563 176172010-11 27.70 4.79 13268 15.52 3.47 5389 186572011-12 35.84 4.18 14979 15.54 3.57 5553 205322012-13 36.12 4.33 15624 23.54 3.67 8648 242722013-14 35.11 4.29 15061 30.67 2.90 8891 23952

Ma

rk

et

Ou

tl

OO

kBILATERAL MARKET


POWER SUPPLY POSITION

Ownership/ Sector

Modewise Breakup

Thermal

Coal Gas Diesel Total Nuclear Hydro RES (MNRE) Grand Total

State 58,101 6,974 603 65,678 0 27,482 1,919 95,079

Private 58,405 8,568 597 67,571 0 2,694 33,858 104,122

Central 48,130 7,520 0 55,650 5,780 11,091 0 72,521

Total 164,636 23,062 1,200 188,898 5,780 41,267 35,777 271,722

All India Installed Capacity as on 31st March, 2015 (in MW)

Installed Capacity ( Mar 2015) Renewable Grid Connected Installed Capacity ( Mar 2015)


POWER SUPPLY POSITIONState Wise Power Supply Situation ( FY 2015)

Region State/UT Energy Req. MUs

Energy Availability, MUs

Surplus Deficit (-)%

Peak Demand MWs

Peak Met, MWs

Surplus/ Deficit (-)%

Northern Chandigarh 1,616 1,616 0 367 367 0

Delhi 29,213 29,073 -0.5 6,006 5,925 -1.3

Haryana 46,615 46,432 -0.4 9,152 9,152 0

HimachalPradesh 8,807 8,728 -0.9 1,422 1,422 0

Jammu&Kashmir 16,214 13,119 -19.1 2,554 2,043 -20

Punjab 48,457 47,972 -1 11,534 10,023 -13.1

Rajasthan 65,730 65,323 -0.6 10,642 10,642 0

UttarPradesh 103,249 87,132 -15.6 15,670 13,003 -17

Uttarakhand 12,445 12,072 -3 1,930 1,930 0

Western Chhattisgarh 21,210 20,940 -1.3 3,817 3,638 -4.7

Gujarat 96,235 96,211 0 13,603 13,499 -0.8

MadhyaPradesh 53,737 53,445 -0.5 9,755 9,717 -0.4

Maharashtra 135,217 133,397 -1.3 20,147 19,804 -1.7

Daman&Diu 2,047 2,047 0 301 301 0

DNH 5,339 5,337 0 714 714 0

Goa 3,932 3,895 -0.9 501 489 -2.4

Southern AndhraPradesh 59,174 56,289 -4.9 7,144 6,784 -5

Telangana 43,186 40,493 -6.2 7,884 6,755 -14.3

Karnataka 62,679 59,961 -4.3 10,001 9,549 -4.5

Kerala 22,411 22,079 -1.5 3,760 3,594 -4.4

TamilNadu 95,660 92,652 -3.1 13,663 13,498 -1.2

Puducherry 2,393 2,367 -1.1 389 348 -10.5

Lakshadweep 48 48 0 8 8 0

EasternRegion Bihar 19,013 18,479 -2.8 2,994 2,874 -4

DVC 18,121 17,628 -2.7 2,653 2,590 -2.4

Jharkhand 7,540 7,343 -2.6 1,075 1,055 -1.9

Odisha 26,067 25,638 -1.6 3,814 3,764 -1.3

WestBengal 46,157 45,909 -0.5 7,544 7,524 -0.3

Sikkim 396 396 0 83 83 0

Andaman-Nicobar 240 180 -25 40 32 -20

North-EasternRegion ArunachalPradesh 677 610 -9.9 139 126 -9.4

Assam 8,555 7,926 -7.4 1,450 1,257 -13.3

Manipur 705 678 -3.8 150 146 -2.7

Meghalaya 1,936 1,634 -15.6 370 367 -0.8

Mizoram 453 425 -6.2 90 88 -2.2

Nagaland 689 661 -4.1 140 128 -8.6

Tripura 1,210 1,048 -13.4 310 266 -14.2

AllIndia 1,067,085 1,028,955 -3.6 148,166 141,160 -4.7


PLANNING FOR GRID STABILITY: SOLAR PV

Vjay BishtExecutive VP, PTC India Financial Services Ltd.

Thanks to the National Solar Power Mission, the solar power capacity in the country is poised to increase in a rapid way in the next 4 to 5 years from the present installed capacity of around 3 GW. The new government has scaled up the target for solar capacity. The revised target is to achieve 100 GW of solar capacity by 2022 as compared to the earlier target of 20 GW. Though the target has been scaled many fold, how much would be actually commissioned, keeping in view the Indian ground reality would be difficult to guess as of now. The Indian ground reality of topsy-turvy policies, state govt priorities, land acquisition issues etc may lead to derailment of capacity addition targets. Nevertheless, the decision of the new government on not to act on the 'anti-dumping duty' (ADD) recommendation of the previous govt has shown the new govt's commitment and vision for solar power.

Had the decision of high ADD imposed, there would have been severe setback to the capacity addition in solar. Infact, till the clarity on ADD came, many developers had kept their solar plans in abeyance as the projects which were awarded to them after tough competitive bidding would have become unviable with increase in the cost of solar panels on account of increase in duty on imported cells and modules. With the clarity on AAD, the developers are back on their plans to complete their on-going projects at the earliest and are also looking aggressively for new bids. India can now look forward for rapid addition of solar capacity in the grid.

Though there is clarity on the policy front, one technical aspect which has the potential to derail the development of renewables, including solar power, emerges from the infirm (i.e. unpredictable) nature of the electricity from these renewables. Except Bio mass/gas, 'Waste to Energy' (WTE) and to some extent Solar Thermal with storage and 'Run-of-River' (RoR) Small Hydro power plants (SHP) with pondage,

electricity from all other renewables viz. Solar Photo Voltaic (PV), Wind, RoR SHP etc. is solely dependent upon the vagaries of nature e.g. energy from solar PV is dependent upon the presence of sun light, whereas energy from Wind project is dependent on blowing of wind. Apart from the infirm nature, the electricity from these renewable are also prone to variability which means the electricity from these renewable is non-controllable i.e. the power output would be a non-steady output. For example, in case of solar PV, the energy output is directly related to the intensity of sun light termed as insolation higher the insolation, higher is the output. Therefore, in case of solar PV electricity starts flowing to the grid after some time past sunrise and ebbs out some time before sunset- typical time of electricity generation would be from 7-8 am to around 5-7 pm with some variations in summers and winters. Further, the electricity from solar PV typically follows a bell curve with peak levels reaching in the afternoon from 11-12 am to 1-2 pm. The output is also susceptible to any shade on the solar panels and therefore is negligible during rainy days.

For the stability of grid, it is pertinent that there is a balance between the demand and supply of electricity at all point of time. If the demand is more than the supply, the frequency would dip and vice versa. In extreme case it may lead to tripping of the entire grid unless load shedding is carried out. Typically, the Indian grid has two peaks - one smaller peak in the morning between 9 to 11 am, when the offices and commercial establishment start functioning and a higher peak in the evening between 7 to 9 pm when the domestic & commercial lighting demand kicks in. The demand reaches its lowest point some time in between 2 to 4 O'clock in the night. This has been general pattern in the Indian grid, with slight variations from state to state, depending upon industrial development and also with variations in weather. For optimum, economical and efficient operation of the grid, the peak demand should be met by peaking power plants viz. gas power plants, storage/pondage hydro power plants or pump storage hydro power plants etc. The base power which is required by the grid for nearly the entire 24 hrs should be met by base power plants viz. coal based thermal power plants, nuclear power plants and to some extent also by large storage hydro power plants. The advantage of peak power plants is that they can be quickly turned on/off, reduce/increase output depending upon the requirements of the grid and thus the operator has control over their operations.


The generation from renewables is entirely dependent on the vagaries of nature and the operator has no control. Therefore, under the renewable power policy, energy from renewable sources is accorded 'must flow' status to the grid and not to be backed down. Apart from environment consideration, the policy of not to back down power from renewables is also financial prudent as the power from renewables have negligible variable cost. The danger to the stability of the grid arises from the 'must flow' status to these renewables, mainly solar pv and wind. If, at any point of time the power demand and supply in the grid are evenly matched and at the same time the share of infirm power from renewables increases, then due to its 'must flow' status, power from base power plants viz. coal based would be required to back down in order to stabilize the grid. This backing down can impact the base power plants (read coal based) by increase in their cost of generation, as the thermal power plants become less efficient on lower 'Plant Load Factor' (PLF). Variable Cost (VC) per unit and Fixed Cost (FC) per unit, both would increase VC due to lower efficiency and FC as the fixed cost would be spread over lower units. This would ultimately increase the cost of electricity to the consumers and would amount to unintentional cross subsidising power from renewables. Backing down of base power plants (if it happens) would also point to insufficient management of the grid and lack of adequate planning.

As of now, the installed capacity of solar PV in India is around 3 GW, wind is at around 21 GW and SHP around 3.8 GW, together they account for ~ 28 GW which is ~ 11% of the entire installed capacity of India of ~ 255 GW ( as on Nov 2014). It is however, pertinent to note that due to low PLF (solar around 17-20% and wind around 20 to 26%) the energy contribution from these renewables to the grid is proportionately less than their percentage share in the installed capacity, at around 4 to 6% as against share of 11% in the installed capacity. Presently there is not much impact on the stability of the grid on account of infirm power from renewables despite its 'must flow' status, though there has been state specific operational issues in some states due to lack of adequate planning. As has happened in the state of Tamil Nadu, where due to inadequate evacuation system in areas with concentration of wind farms, the electricity from the wind farms could not be evacuated due to congestion in the evacuation lines.

Target of adding 100 GW of solar by 2022, however, may alter the present impact of renewables on the operation of the grid. Add to it another 60 GW of planned addition of wind power by 2022 and the scenario may change completely. Though, the entire target may not fructify - what with the Indian ground reality, but even if 60% to 70% target of solar and wind is added to the grid it may add additional renewable capacity of around 100 GW by 2022. In the same period, the planned tentative capacity addition of conventional power projects (mainly coal based & large hydro) is roughly pegged at ~ 138 GW 38 GW in the

remaining period of 12th plan (2012-17) and 100 GW in the 13th plan (2017-22). With the present installed capacity of 255 GW, the total installed capacity by 2022 may touch maximum ~ 493 GW (exist 255 + conventional planned 138 + solar & wind planned 100). This is with assumption that the entire capex for conventional power projects would be commissioned as planned. With some of the ageing coal based plants getting de-rated/de-commissioned by 2022, the installed capacity could be considered around ~ 480 GW.

From the present installed capacity of ~ 28 GW, the total capacity of renewables mainly representing infirm power i.e. Solar PV, Wind & SHP would touch ~ 125 GW (considering de-rating of some of the exiting capacity) by 2022, taking the present share of renewables of around 11% in the installed capacity to around 26% which would correspond to around 12-13% in energy content. Such a high percentage of infirm power in the grid with 'must flow' status may not be prudent to operate the grid economically.

Though some of the power planners have been indicating that the Indian grid can sustain infirm energy content of upto 14-15%, the same is doubtful as the bulk of the infirm 'must flow' power would come to the grid at non-peak hours solar during day time off peak and wind during night time off peak. In comparison, the infirm power capacity (solar & wind) in China presently amounts to ~ 109 GW, which is only ~ 9% of the total installed capacity of ~ 1247 GW.

Some may argue that part capacity of the planned solar addition would comprise small KW size roof top installations which may not impact the grid, but one should not forget the fact that most of the roof top solar installations would take place in grid connected cities and would eventually replace grid power or feed-in to the grid (due to net-metering facility), depending upon the household consumption. The end result would be the same i.e. roof top installations would impact the grid the same way as large MW size land based solar installations would impact. Only the off-grid solar installation would not have any impact on the grid, rather they would eliminate the need to stretch grid to far off area not considered financially viable.


Experience of solar ramp up in some of the European countries is also worth taking into account. Germany which has installed one of the largest solar power capacity of ~ 38 GW, largely of PV, due to lucrative feed-in-tariff (FIT), is suffering from the issues of grid stability. In the 3 year period from 2010 to 2013 Germany added ~ 7 GW of solar capacity every year but did not plan for storage for sucking out the day time electricity from the solar pv. As a result, to stabilise the grid during day time when the solar pv starts pumping, Germany has to resort to exporting power to the neighbouring countries at cheaper rates. Though the combined share of solar & renewable in Germany in capacity amount to around 30%, their contribution in energy terms is only around 5%. Lately, new capacities in solar has started going down due to tightening of govt. policies reduction in FIT and limit on the maximum installed capacity of solar utilities. In Spain, which at one point of time was at the forefront of the solar energy movement, the govt has gone one step ahead and reduced the solar tariff from retrospective date. The reason for such drastic steps were a growing deficit as the govt did't pass to the consumers the high tariff being paid to the solar power developers resulting in ballooning deficit that needed emergent action in order not to derail the economy of the country.

Notwithstanding, the debate on the capacity of Indian grid to withstand the infirm energy/power content it would be prudent to plan for sucking out the infirm 'must flow' power from the grid during off peak hours by suitable storage mechanism in order to utilise the same during peak hours. Different storage mechanism available for storing bulk electricity are :

- Battery storage

- Pump storage hydro power plants

- Solar Thermal with storage

Battery Storage: The conventional bulk storage batteries are not environment friendly and would also require change every 3 to 4 years. Life cycle cost would be higher and therefore suitable only for smaller capacity off-grid utilisation. Recently there has been advancement in rechargeable bulk storage batteries wherein energy would be stored in liquid eliminating solid state interactions in conventional rechargeable batteries. The manufacturers are claiming life of 10 to 15 years and even of 20 years. However, they are very costly as of now and would add around Rs. 12 to 14 in per unit of electricity and thus financially prohibitive. Till this technology matures and the cost comes down, it would not be financially viable for large scale adoption.

Pump Storage Hydro Power Plants: Pump Storage hydro power plants (PSHP) can be one of the techno-economic viable solutions for storing bulk excess infirm power. Though it would consume around 25 to 30% of the power to be stored, it would still be cost effective. However, a number of PSHP are already commissioned in India and

a study would be required whether their full advantage as pump storage plants are being reaped or not. Further, as the existing PSHPs in India are combination of conventional (or natural) hydro power plants and pump storage, pure pump storage hydro plants can be planned to utilise the excess infirm power being fed in the grid. In pure PSHP, there is no need for natural gradient in a river, water can be pumped from a river or a water body to a water reservoir planned at a higher altitude in nearby hills by utilising electricity during off-peak hours. During peaks hours the water stored at higher altitude can be utilised for generating electricity. Such pure PSHP of smaller capacities in the range of ~ 100 to 200 MW can be located nearer to the cluster location of Solar or wind farms in order to avoid transmission losses. As the implementation period for PSHPs is very high as compared to other power projects, the action plan for such storage should start immediately.

Solar Thermal with Storage: Till date, solar thermal power plants were not being looked as financially viable proposition in India due to various reasons ranging from technical to high cost. For the same capacity, as compared to 'solar pv' the 'solar thermal' requires more land and are costly. Solar pv are modular and therefore can be set up in discrete units at the same location as compared to solar thermal which requires construction of the entire plant capacity in one go. Implementation period for solar pv ranges between 6 to 9 months for a medium size plant whereas it takes 28 to 36 months for a solar thermal to be commissioned. Solar thermal requires a minimum threshold capacity of ~ 50 MW for Indian condition, to be viable as compared to solar pv where even a one KW capacity plant can be viable. Solar thermal requires boiler and turbine to generate electricity and thus issues of O&M are similar to coal based thermal power plants as compared to simplicity of O&M in solar pv. Availability of water is another issue, as most of the ideal locations for solar plants thermal or pv are water scare areas. Solar pv doesn't require much water apart from cleaning of the panels, which is not the case with solar thermal which is heavily dependent on water for steam generation/cooling purpose which is akin to coal based thermal power plants.

Despite many disadvantage vis--vis solar pv, solar thermal plants can be designed with storage which means that the excess electricity generated during off-peak can be stored and used during peak hours. Though the capital cost of solar thermal with storage would be higher but the life cycle cost would still be cheaper than other options for bulk storage of electricity. With increased focus on infirm renewables in India specially on solar pv, solar thermal with storage option definitely requires a serious look.


With the de-licensing of Generation sector, the growth in generation capacity addition had been whopping 159% between 10th and 11th plan. Whereas, other links of this chain seemed not too geared up to support the galloping horse i.e. Generation. Domestic coal production grew at the rate of 6.5%, the transmission Infrastructure moved ahead with a snail pace and worst of all, the last link i.e. Distribution had been totally out of sync.

Electricity Act 2003 brought a paradigm shift in the power sector with the De-licensing of Generation, recognizing Trading as a distinct activity, unbundling of SEBs for better efficiency and bringing the provision of non-discriminatory Open Access. But the question is- Was it enough for creating a successful power market?

Power Trading has been a subject of discussion right from the very first day of its existence. There have been several impediments for the growth of power trading in Indian Power Sector. Bottlenecks being experienced for power trading are low creditworthiness of the distribution utilities, open access restrictions, non-availability of fuel, transmission congestion etc.

We will analyze such factors one by one which are collectively pulling back the growth of short term power trading.

Coal- Power plants of around 14,000 MW already commissioned by March 2015 and another about 16,000 MW of capacity expected to come up by 2017 still do not have any assured power off-take arrangement or coal supply. As a resultant to federal decision to allow only 15% of captive coal usage for merchant trading and non-availability of linkage coal, merchant trading would take place mainly on e-auction or imported coal. Again coal ministry has reduced the quantum of e-auction by 50% which would take away another roughly 25-30 million tons of coal from merchant based generation.

Availability of Transmission corridor- Adding to the chronic woe of transmission corridor congestion from NEW Grid to Southern region, other crucial regional interlinks

Mohd. ZeyauddinAVP, PTC India Limited

have also joined the bad bandwagon. There is no corridor available for flow of power from Western region (The region comprising of highest merchant generation) to Northern region (High Demand Region). Whereas very little power flow took place from North-Eastern/ Eastern region to Northern region during winters due to difficulties in simultaneous power flow within NR system. One remarkable observation during the congestion period was the availability of corridor for day ahead/contingency transaction on continuous basis from WR and ER to Northern region while no corridor was available on firm basis which may be a manifestation of conservative approach of the system operator.

Tables below illustrate the corridor positions for flow of power on various Inter regional links:

Table-1 Transfer Capability on Inter regional links in MW *

Table-2 NRLDC simultaneous import data STOA (in MW

Table-3 ER-SR Corridor availability STOA (in MW)

The perceived reason for such a shortfall may be attributable to the prevailing CERC's regulation to allow system strengthening (fresh investment) on the basis of application for Long Term open access. Further, the planning of transmission system is carried out with inherent margins built-up in transmission system to take care of flexibility required for transfer of 15% of unallocated capacity. Current regulation provides for free of cost connectivity to ISTS, lending to a tendency of piggy riding on the existing network. In addition, even if a generator seeks LTA, he still has to stand in the queue for MTOA and

SHORT TERM BILATERAL MARKET-CHALLENGES AND OPPORTUNITIES

A chain is no stronger than its weakest link- Eliyahu Goldratt


STOA and pays again for such scheduling of power and makes double payment. As very few long term tenders are getting finalized, newly added capacities are getting sold on STOA, hence putting pressure on existing transmission infrastructure.

Poor health of Distribution companies- The sorrow plight of the DISCOMs is known to everyone who is directly or indirectly related to the power sector. Huge debt of distribution utilities is creating a wider gap between the various development aspects of the Power sector. IPPs and various other GENCOs are not ready to wait for the overdue payments from the DISCOMs. Moreover Traders hardly have option to discontinue the supply, once a contract is finalized. Power trading is undergoing through a phase when power is being supplied without any adequate payment security mechanism, without a choice to terminate a contract, in case of a payment default. As per the Standard bidding guideline for procurement of power, there is a provision of Letter of credit to be provided by the utility whereas the bidder has to provide Contract Performance Guarantee to the utility. Many utilities have made modifications to the document as per their convenience. The utilities follow the practice of asking the prospective bidders to furnish the bid bond and contract performance guarantee, whereas, they are unwilling to extend any payment security.

In a regime, when the trading margin is capped at meager 4 or 7 Paise/kWh, trading is facing a risk that the Working capital of traders exceeds total capitalization.

Short Term Market performance

After enough deliberation on difficulties for short term power trading, let's have a look at how the short term market has performed lately.

Table below depicts the performance of Short term Market for the last 3 years

Volume of electricity transacted through power exchanges witnessed a sharp increase of about 30% over 2012-13 volume. On the other hand, the volume of electricity transacted through trading licensees witnessed decrease of 2.8% despite overall increase in Short term volumes. In terms of prices, the average price for bilateral market is mainly on account of higher tariffs in Southern Region power market. Because of the tendency of remaining front runner in securing the available resources, Southern region states mostly tie up the available power on bilateral basis also resulting into a smaller power exchange market size.

The lower prices on power exchanges may not reflect

the stabilized operation of Power exchanges but may be a reflection of distress sale by the sellers in Day Ahead market just to sustain their operations (Added capacity being a sunk cost) due to a shrinking bilateral market.

Short Term Market for Open Access Consumers

In the power market community, Open Access consumers and sale of power to Industrial consumers is a much talked about subject. Despite of a power hungry Indian Industrial community, this market segment is still to see the real light of the day. The only silver line in the cloud is that in both power exchanges, Open Access industrial consumers bought 18.07 BU of electricity, which formed 60.20% of the total day ahead volume transacted in the power exchanges during 2013-14 despite of high to very high Cross subsidy surcharge liability on these customers, thanks to remarkably low prices on the Exchanges.

So the question is why bilateral Open Access market is not achieving similar kind of success. One visible reason is higher tariffs asked by the sellers for scheduling of power in advance making it unviable vis--vis power supply from DISCOMs after factoring the Cross subsidy surcharges and other intrinsic risks of scheduling power through Open Access. Other underlying reason is the instability of grid and lack of flexibility available to the Industrial consumer to immediately switch to an alternate supplier, in case of a generation outage (The consumer even has to surrender his Power Exchange NOC to switch to bilateral mode). I will cite one such example of bilateral open access transaction in which a North-East based PTC's consumer was being supplied power from a CTU connected generator in Western region. On one fine day, Western regional load dispatch center revised the schedule during real time forcing the consumer to shut down their continuous operation hence incurring heavy losses. A power exchange being a pooled market somehow also provides immunity to these buyers from generation outages or any region specific grid issue. However, it is felt that sourcing of power through firm contracts is the only long term and enduring solution provided the existing challenges of Cross Subsidy Surcharges and scheduling are done away with. For an uninterrupted supply of power, it is essential that an identified spinning reserve for catering to Industrial consumers is established to plug unscheduled disruptions like generator outage. In addition, the Industrial consumers should also be provided the flexibility to simultaneously participate on Power exchanges, a facility not available to them for implausible reasons.

Conclusion

Amidst all these challenges, Short market is still eying a revival. Thanks to the federal outlook of bringing widespread changes to the regulatory framework like Separation of Carriage and Content, Introduction of General Network Access (GNA), Ideation of a Green Corridor, etc. At this juncture, we just have to patiently watch how this plan is converted to a reality.


The Supreme Court of India through its judgment in August 2014, read with its order in September 2014, cancelled allotment of 204 Coal Mines in India allotted during 1993 to 2010 and concluded that allotment was arbitrary and illegal. Four operating Mines allotted under the applicable law were excluded from the purview of the verdict. However, diversion of coal has been disallowed from such mines. Subsequently, Government, through the President of India, promulgated The Coal Mines (Special Provision

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