Restructuring Of Electricity: Power Markets In India

Abstract

Restructuring of power markets in India has been a crucial step to regulate electricity generation, transmission, distribution and pricing. To understand the restructured markets effectively various other topics need to be addressed. This paper talks about the present market scenario, the reforms, the issues and the various restructuring models of the country.

Keywords—restructured, deregulation, electricity reforms, demand, supply

I. Introduction

The task of supplying the nation with reliable, high

quality electrical energy at a reasonable cost is the primary aspect for a nation’s economy. The power sector is an effective engine and a prime mover of the economic growth of the country. In the present Indian scenario, due to the rise in the demand and supply of power, it is a cumbersome task to manage the generation and cost concurrently for one single party. To reduce the monopoly of one organization in the market and to provide good power quality and continue reliable power supply at a reasonable cost for consumers, it is essential to encourage competition in the power market. This can be possible by introducing restructuring and deregulation in the electrical power sector.

II. Power Sector Issues

• Limited fuel: Coal fuels about 55% of India‟s power generation, and this proportion will grow substantially in the next 20 years thus leading to a major depletion of fossil fuel.
• Equipment Shortage: Shortage of various equipment like Boilers, Generators, Turbines, coal-handling plants, ash-handling plants, and construction equipment.
• Transmission & Distribution Losses: India’s aggregate losses average about 32% of electricity which is very high as compared to those of developed countries (6-11%).
• Environment Clearance and Land Acquisition: Power plants and utilities face major constraints and delays regarding the availability of land and obtaining the required environment and other clearances for the projects.
• Old Transmission Networks: The systems installed are outdated and thus prove a much lesser efficiency.
• Inadequate Access to Renewable: Some states have very high renewable energy potential while others have very little renewable energy potential. Also all of the resources cannot be harnessed

III. Reforms

The Government of India has taken several initiatives to invite private sector participation in generation and transmission. Understanding the difficulties faced in the process, various reforms have been introduced in the power sector to support the restructuring of markets. Some of those reforms include the following:

• Unbundling of SEB: Unbundling, tariff rationalization and corporatization of generation, transmission and distribution.
• Setting up of Regulatory Mechanism: Establishing CERC and SERC in 19 states under the Electricity Regulatory Commissions Act, 1998.

IV. Demand and Supply Scenario

India has the fifth-largest generation capacity in the world with a total installed capacity of 229252 MW as of September 2013 and by the 12th Plan (2012–2017), capacity addition close to 100,000 MW is anticipated, around 50% of which is expected to come from the private sector. Although reforms in the energy sector are underway, the pace of reform is different in the sub-sectors viz, power, coal, oil, gas and renewables. The demand for power is increasing at a rapid pace although the generation of power has not increased at the same proportion. The gap between demand and supply of power is quite significant. The shortage of power generation capacity is estimated to be around 2500MW.

V. Current Restructuring

Currently, trading of electric power in India is mostly restricted to players such as SEBs and utilities. Power trading has generated considerable interest among power players, as it is evident from the long list of applications for licenses at Central Electricity Regulatory Commission (CERC). Presently there are seventeen trading licensees to whom CERC has granted licenses for inter-state trading in electricity. These traders apply for open access on behalf of suppliers and buyers to the RLDC depending upon transaction requirement. CERC has made the regulations for open access in inter-state transmission and inter-state trading. The market structure of the current Indian electricity industry is shown in the figure, depicting energy flow and money flow separately.

VI. Study of Restructuring Models

The Central Electricity Authority (CEA) is responsible for power planning at the national level. The day-to-day operation of the regional grid is carried out by Regional Load Dispatch Centers (RLDCs), which are under the operational control of CTU, i.e. Power Grid Corporation of India Ltd. (PGCIL.)

The main function of RLDC is, to carry out the integrated operation of the power system in the region and that of the Regional Electricity Board (REB) is to facilitate grid operation. Presently five REBs exist in India to promote the integrated operation of the regional power systems in India.

Aspects of both an ISO and TSO model, the two kinds of restructuring models prevalent around the world, were pondered upon. In an ISO model, transmission companies are also permitted to own, manage and control generation and distribution companies and an independent system operator is created to facilitate open access and competitive markets. Whereas, in TSO model, operation of the grid and ownership of the grid are integrated in a single entity, which is responsible for the development of the transmission system and to provide unbiased open access to all eligible market participants.

The system operation functions at the national level can be handled by central transmission utility while state transmission utilities can manage the State Load Dispatch Centers (SLDCs) similar to the TSO concept. The regional electricity boards will have the responsibility of managing the power exchanges while the Regional Load Dispatch Centers (RLDCs) will manage the overall integrated operation of power systems like outage planning, relay coordination, islanding schemes, etc.

VII. Various Competing Models

• Odisha Model: Orissa was the first state to bring changes in the electric power market after the state Electricity Reform Act became effective in April 1996. It split into three separate entities: Orissa Power Generation Corporation OPGC, Orissa Hydro Power Corporation OHPC and Grid Corporation of Orissa GRIDCO.
• Delhi Model: The Delhi Electricity Reform Act comes into force in March 2001. Soon after the state’s electricity board, establishes six shell companies: holding company, generating company, Transmission Company, three distribution companies, to be operational. 51% of the equity in three distribution companies is sold to two privately owned Indian power companies, Tata Power and BSES. Delhi government retains ownership of the generation.
• Andhra Pradesh Model: State Reforms Act came into force w.e.f. Feb 1999. APSEB unbundled into Andhra Pradesh Transmission Company Ltd. And Andhra Pradesh Generation Company Ltd. Andhra Pradesh Electricity Regulatory Commission has been operational w.e.f. April 1999.
• Haryana Model: State Reforms Act came into force w.e.f. 14.8.1998. SERC became operational w.e.f. 17.8.1998. SEB unbundled into Haryana Power Corporation Ltd. and Haryana Vidyut Prasaran Nigam Ltd, a Trans Co. Two Government-owned distribution companies i.e Uttar Haryana Bijli Vitaran Nigam Ltd.and Dakshin Haryana Bijli Vitaran Nigam Ltd. was established.

VIII. Key Issues In Restructured Markets

• Non-existence of power traders: There is a lack of real-time information and formal market as presently, no power exchange for power trading in the pattern of the stock exchange really exists in the country.
• Lack of Pricing Mechanism: There is a need for a market-driven pricing mechanism. CERC has fixed the trading profit margin as 0.02 Rs/kWh but there is no uniform method for price calculation of traded power. Traders can simply negotiate the energy price between purchasers and suppliers and then add the trading margin.
• Reliability of Supply and Off-take: Contractual obligations can not always be trusted. There is a need for an institution or an authority.
• Lack of Information: Participants need real-time information to evaluate the available options and pick the most competitive deal. Setting up an online bulletin board offering real-time information for the same can be of very much help.
• Risk Management: Spot price variation in the market can be avoided with the help of risk hedging derivative instruments, which can be traded in financial markets for electricity.

IX. References

1. Assessment of restructured Indian power sector: Availability, demand and shortage: Yog Raj Sood, Rajnish Shrivastava, and Naveen Kumar Sharma; International Conference on Power Systems, Energy, Environment
2. An investigative Study about Restructuring of Indian Power Market: Ravindrakumar YadavM. Tech (Electrical Engineering), Prof. Ashok Jhala (Associate Professor and HOD, RKDF COE, Bhopal); IJRASET Volume 4 Issue VIII
3. Indian power system: Issues and Opportunities: Ankur Omer, Smarajit Ghosh, Rajnish Kaushik; International Journal of Advanced Research in Electrical, Electronics and Instrumentation Engineering Vol. 2, Issue 3, March