Power Procurement in India: Analysis of Open Access and Transmission Congestion

Nov, 2014   |   200  Pages   |   Indian Petro Group   |   Format : PDF

EnergylineIndia.com and Energylinetrading.com are pleased to announce the release of the research report- Power Procurement in India: Analysis of Open Access and Transmission Congestion.

The Electricity Act 2003 brought about a series of changes in the power sector in India which was struggling to keep up with the rapidly increasing power demand. The Act puts immense stress on promotion of competition in the power sector which was previously absent from the Indian power market. Policy makers further engraved the concept of competition in India with the enactment of open access and competitive bidding in the electricity sector. Competitive bidding introduced competition between generators, while competition on the distribution side, to bring to end the monopolistic regime of distribution companies, was facilitated by open access which allowed non-discriminatory access to transmission and distribution lines.

Competitive Bidding and its Implications in the Indian Power Market

The report covers Case1 and Case 2 bidding mechanisms, giving details of projects under each mechanism along with the levelized tariffs. The state-wise response under the competitive bidding mechanisms have been discussed in detail, allowing any vendor in the power sector to understand the year-wise market dynamics prevailing in the Indian power sector. The growth of short term power markets in recent years shows the potential of the emerging power exchanges in India. The trend signifies the market movement from long term power procurement to short term power market, indicating power market development in India.

Initiation of Open Access in India

Electricity Act 2003 comprised of provisions for open access for power procurement which allowed any buyer having a power requirement of more than 1MW to procure power directly from any generator or from any distributor, ending the monopolistic regime of state utilities. The report gives a complete overview of the evolution of open access in India along with complete details of state-wise open access consumers and generators. Implications and consequence of open access in various states have been compared to bring out the underlying effects rippling through the market in response to open access.

A Complete Guide to Power Procurement and Open Access

Energy transactions through open access grew at a CAGR of around 20% from 2005 to 2013. While this is an indication of the sector moving fast towards a competitive market, the impediments in terms of banning the free flow of electricity from one region to other thwarts the very existence of power reforms in the country. The report takes a 360 degree view on the power sector while analyzing OA trends in distribution and transmission. The report gives an in depth study on the current short term market dynamics and the importance of OA in market development.

The Way Forward

While some states are aggressively pushing OA and creating the necessary infrastructure to back OA, other states are banning OA by invoking section 11 of EA 2003. Many state governments and utilities have stopped permissions for open access and have also imposed restrictions on movement of power from sellers to users. Maharashtra Electricity Distribution Company Limited has turned down as many as 29 applications for open access since April this year. Gujarat has banned OA buying into the state and similarly, Tamil Nadu has banned OA sales outside the state. The ban on OA coupled with transmission congestion in various parts in India saw a huge decline in short term power transaction in the last 3 months.

Highlights of the report

Study of the recent changes in terms of power procurement through competitive bidding route
Coverage of OA, its rules and regulations, policy preparedness of states for OA
State wise status of OA implementation and various charges levied on consumers
Transmission infrastructure status update and investment in India
Pricing mechanisms and POC charges for power flow from one region to another
Challenges posed due to transmission congestion
Cost of power procurement through Open Access in different states
Challenges, concerns and constraints in evolving a free market and OA implementation
Way forward for India in medium to long term scenario in implementing key reforms in power sector

Table of Contents

Chapter 1: Executive Summary

Chapter 2: Power Procurement in India
2.1 Need for Power Reforms: Present Energy Deficit in India
2.2 Fading State Utilities and Necessity for Competitive Bidding
2.3 The Introduction of Private Sector through IPP Model: Policy on Private Participation in Power Sector in 1991
2.4 Co-Relationship Analysis: Growth of Economy vs. Infrastructure Facilities
2.5 Electricity Act 2003
2.6 Evolution of Competitive Regime: Impact Analysis
2.7 Power Project Bidding under Case1 and Case 2
2.7.1 Task Force Report on Power Sector Investment and Reforms
2.7.2 Guidelines by CERC on Competitive Bidding for Determination of Tariff
2.7.3 Impact of Guidelines
2.8 Power Purchase Cost for States in Competitive Bidding Regime
2.9 Market Movement towards Short Term Power Market

Chapter 3: Standard Bidding Guidelines for Power Procurement
3.1 Study of Guidelines under Standard Bidding Document (SBD) Framed in 2005
3.2 Applicability and Types of Power Procurement through Competitive Bidding
3.3 Schedules for Bid Process under Standard Bidding Document
3.4 Amendments under Standard Model Bidding Document (MBD)
3.5 Design-Build-Finance-Operate-Transfer (DBFOT) Model for Long Term Power Procurement under Case 2
3.6 Design-Build-Finance-Own-Operate (DBFOO) Model for Case 1
3.6.1 Case 1 Bidding Tender under New MPSA Guidelines
3.6.2 Recent Amendments in Case-1 and Case-2 Bidding Mechanism: MPSA and MAPP Model
3.7 Major Regulatory Guidelines for Short Term Power Procurement
3.8 Comparative Analysis of all the Models under MPSA (Case 1 and Case 2 Long Term) and MAPP (Case 1 Medium Term)
3.9 Case1 and Case2 Models at Present
3.9.1 Case 2 Bidding under DBFOT Model and UMPP Bidding under Case 2
3.9.2 Case 1 Bidding
3.10 Lesson Learned under Competitive Bidding
3.10.1 Compensatory Tariff Allowed for Adani Power and Tata Power for Fuel Price Adjustments

Chapter 4: Role of Open Access in Supplementing Competitive Environment
4.1 Need of Open Access in India in Facilitating Power from One Region to Another
4.2 Evolving Regulatory Scenario for Adoption of Open Access
4.2.1 De-licensing of Power Generation
4.2.2 Deregulation in the Bulk Power Procurement
4.2.3 Competition in the Retail Power Business
4.3 Detailed Analysis of Relevant Sections under Electricity Act 2003 Pertaining to Open Access
4.3.1 Provisions for Open Access in the Indian Electricity Act, 2003
4.3.2 Provision for Open Access in National Electricity Policy, 2005
4.3.3 Provision for Open Access in National Tariff Policy
4.4 Nature and Classification of Open Access
4.5 Comparison Matrix and the Strategy Adopted by Utilities in their Power Portfolio

Chapter 5: Impact of Open Access in India: An Overview
5.1 Value Chain in Power Sector
5.2 Changes in Generation Business Models
5.2.1 Additional Revenue Source from Short Term Selling of Surplus Power
5.2.2 Preference and Risk Mitigation in Power Selling Business
5.3 Concerns by Distribution Utilities on Open Access
5.3.1 Effective Planning Tool for Contingency Requirement
5.3.2 Impact on Commercials: Switching of High Value Consumers to Other Utilities
5.3.3 Challenges of Efficiency Improvement
5.4 Impact on Power Traders and Exchanges
5.4.1 Market Development through Increased Number of Participants
5.4.2 Effect on Trading Margins
5.5 Impact on Bulk Power Consumers
5.6 Insufficient Transmission of Power: Hindrance by Transmission Utilities on Open Access
5.6.1 Stress on Network Planning and Development
5.6.2 Congestion Management
5.6.3 Infrastructure Development

Chapter 6: Implementation and Deviations of Open Access
6.1 State Wise Eligibility Criteria
6.2 State wise Open Access Consumer Analysis
6.2.1 Types of Open Access Consumers
6.2.2 Status on OA Consumers in India
6.3 State-wise Comparison of Volumes Transacted under OA
6.4 Issues and Challenges
6.4.1 Invoking of Section-11 under EA 2003 for OA Denial
6.4.2 Grounds for Confrontation between OA Consumers and State Utilities
6.4.3 Nature of OA Denial
6.4.4 Case Studies of Gujarat and Karnataka

Chapter 7: Open Access in Transmission Sector
7.1 Overview of the Transmission Infrastructure in India
7.2 Investment Vis--Vis Capacity Addition Trend in India
7.3 Deficiency in Current Transmission Capacity Addition
7.4 Constraints and Challenges of the Transmission Sector
7.4.1 Minimizing the Right of Way (ROW)
7.4.2 Technology and Innovation
7.4.3 Level Playing Field between Private Developers and State Owned Entities
7.4.4 Project Cycle Delay
7.4.5 Insufficient Focus on Up-gradation of Existing Transmission Lines

Chapter 8: Transmission Congestion: A Major Challenge
8.1 Prevailing Transmission Congestion Causes
8.1.1 Congestion Due To High Demand Clusters in a Particular Area
8.2 Transmission Corridor Availability and Booking
8.2.1 Procedure for Transmission Corridor Booking
8.2.2 Recent News on Corridor Allocation
8.2.3 Corridor wise/Control Area-wise TTC/ATC
8.2.4 Advanced Booking System: Priority wise Corridor Booking
8.2.5 Categories of Corridor Booking for STOA
8.3 Trend of Congestion in Power Exchanges: Volumes Curtailed due to Unavailability of Transmission Corridor
8.4 Open Access Applications Rejected due to Congestion

Chapter 9: Open Access Pricing and Short Market Development
9.1 Point of Connection Charges
9.1.1 Regional Postage Stamp Method
9.1.2 Incremental Postage Stamp Method
9.1.3 Zonal Postage Stamp Matrix Method
9.2 Transmission Charges
9.2.1 Costs Associated with Transmission
9.2.2 Allocation of Costs
9.3 Wheeling Charges
9.4 Operating Charges
9.5 Attributed Losses
9.5.1 Wheeling Losses
9.5.2 Transmission Losses
9.6 State Wise Analysis of Open Access Charges
9.6.1 Maharashtra
9.6.2 Andhra Pradesh
9.6.3 Karnataka
9.6.4 Punjab
9.6.5 Tamil Nadu

Chapter 10: Short Term Power Market Development in India: The Journey So Far
10.1 Evolution of Short Term Power Market: Role of Power Exchange and Trading
10.2 Growth Trends for Short Term Power Market
10.2.1 Number of Participants in Power Exchange and Bilateral Trading
10.2.2 Congestion Management for Short Term Power Market: Market Splitting Philosophy

Chapter 11: Challenges, Constraints and Concerns in Implementing Open Access
11.1 Reluctance of States to Implement Open Access in Letter and Spirit
11.2 Litigation Tangles and Regulatory Hurdles
11.3 Infrastructure Challenges: Transmission Corridor Availability
11.3.1 Transmission Corridor in India
11.4 Fear Psychosis among Consumers in Losing Valuable Consumers
11.5 Difficulty for OA Consumers due to Higher Cross Subsidy Charges
11.6 Conflict of Interest between Utilities and State Regulatory Bodies

Chapter 12: Whats in Store for Open Access in India
12.1 Study of International Markets for Implementation of Open Access
Case Study 1: United Kingdom
Case Study II: Victoria, Australia
Case study III: California
12.2 Lesson Learnt from International Market and its Usability in Indian Context
Learning from the UK experience
Learning from Victoria Experience
Learning from Californian Experience
12.3 How Open Access Will Facilitate a Strong Competitive Environment in India

Chapter 13: Conclusion
Annexure I: Trader-wise Major Buyer, Seller with Volume and Average Sale/Purchase Price (For Bilateral Transactions)
Annexure II: Trader-wise Major Buyer, Seller with Volume and Average Sale/Purchase Price (For Power Exchange)
Annexure III: State-wise List of Consumers who Applied for Open Access

List of Figures

Figure 1: Region wise Energy Surplus/Deficit in India (MU, 2014-15)
Figure 2: Factors Triggering Competitive Bidding in India
Figure 3: Pillars of Restructuring & Reform Process in India
Figure 4: Key Features of IPP Policy
Figure 5: Per Capita Consumption Comparison of Electricity in India, World and OECD Countries (kWh)
Figure 6: Expected Electricity Demand Scenario in India (BU, 2009-2017)-Capacity, Production & Production, Demand
Figure 7: Percentage of Capacity Addition Share by Central, State and Private Utilities (5th-11th5 Year Plan)
Figure 8: Sector Wise Capacity Additions: Private, Centre and State Additions (GW, 2005-2014)
Figure 9: Key Highlights of EA 2003
Figure 10: Evolution of Competitive Regime and its Impact
Figure 11: Chronology: Competitive Bidding (Case 1 & Case 2 Projects)
Figure 12: SBD Impact on Stakeholders
Figure 13: State-wise Power Purchase Cost as Percentage of Total Cost for Licensees
Figure 14: Total Volume Traded in Short Term Market (BU, 2007-2013)
Figure 15: Applicability and Type of Procurement under Competitive Bidding
Figure 16: Tariff Structure as per Competitive Bidding Guidelines under SBD 2005
Figure 17: Energy Generation Trend in India (MW, 1996-2014)
Figure 18: Energy Trade through Licensees and Trading Exchanges
Figure 19: Nature of Open Access
Figure 20: B RPL Power Distribution: Long-term and Short-term Purchase
Figure 21: B YPL Power Distribution: Long-term and Short-term Purchase (2012-2013)
Figure 22: TPDDL Power Distribution: Long-term and Short-Term Purchase (2012-2013)
Figure 23: Business Models of Generators
Figure 24: Power consumption by Industries in India (GWh, 2005-2013)
Figure 25: Commercial Power Consumption in India (GWh, 2005-2013)
Figure 26: Installed Power Generation (GW, 6th-11th Five Year Plan)
Figure 27: Transmission capacity (000 Kms, 6th-11th Five Year Plan)
Figure 28: Diversification of OA Consumers
Figure 29: Industrial Segments in IEX (June 2014)
Figure 30: Year Wise Total Volume Traded at IEX (MWh, 2009-2013)
Figure 31: Year Wise Volume Traded by OA Consumers at IEX (MWh, 2009-2013)
Figure 32: Region-wise Volume Transaction of Short term OA (MU, June13-May14)
Figure 33: State-wise Volume Transaction of Short term OA (MU, June13-May14)
Figure 34: Financial Investments in the Electricity Sector (Rs. Trillions, 2002-2017)
Figure 35: N umber of Bilateral Bookings in ADVA, DAYA and FCFS Categories in NRLDC (April14 to June14)
Figure 36: Trend of Congestion in Power Exchanges (May12-April14)
Figure 37: OA Applications Rejected Due to Congestion in NRLDC with Name of Applicant (April14-June14)
Figure 38: Short Term Power Market Classification and Procurement Processes
Figure 39: Number of OA Consumers in IEX (2010-2014)
Figure 40: State-Wise Number of Open Access Consumers and Generators (1st June, 2014)
Figure 41: Cumulative Volumetric Analysis of Top 10 Traders (May13-April14)
Figure 42: C omparison of Prices in Short Term Power Market: PX Price/OTC Price/UI Price (RS/KWh, November13-April14)
Figure 43: Inter regional Transfer Capacity (MW, July 2014)
Figure 44: Load and Generation (MW, July 2014)
Figure 45: Phased Introduction of Power in UK
Figure 46: Reasons for Sluggish Open Access Implementation in India
Figure 47: Benefits of Open Access

List of Tables

Table 1: Region-wise Energy Supply Requirement, Availability, Surplus and Deficit (Northern, Western, Southern, Eastern and North-Eastern Regions of India, 2014-15)
Table 2: Limitation of IPP Policy and its Impact
Table 3: State-Wise Response of Competitive Bidding (As of Dec- 2013)
Table 4: Average Prices of Case 1 and Case 2 Levelised Tariffs, Pit-head UMPPs and Imported Coal based UMPPs
Table 5: Characteristics of Case I and Case II Mechanism
Table 6: Timeline for Case 1 Bidding Process
Table 7: Timeline for Case 2 Bidding Process
Table 8: Key Points of the New Standard Bidding Document for Case 2
Table 9: Case 2 Bidding: State, Project Name, Project Developer, Project Type, Levelized Tariff and Year
Table 10: UMPP Project Details under Case2 Bidding: Name, State, Developer, Fuel, Year and Levelized Tariff
Table 11: Project Details under Case 1 Bidding: Year, Capacity, Developer, State and Levelized Tariff
Table 12: Source wise Installed Generating Capacity: Thermal, Nuclear, Hydro and RES (MW, 1947-2014)
Table 13: Volume of Energy Transacted through Licensees and Trading Exchanges (2004-2014)
Table 14: RInfra-D, TPC-D Dispute: A Case Study
Table 15: BRPL Power Purchase Review (2012-13)
Table 16: BYPL Power Purchase Review (2012-13)
Table 17: TPDDL Power Purchase Review (2012-13)
Table 18: Volume of Electricity Traded, Weighted Average Purchase and Sale Price, and Trading Margin (2005-2014)
Table 19: State-wise Sale, Purchase (MUs)
Table 20: Transmission Network Across India: Total Transmission Lines (CKM)
Table 21: Transmission Network Across India: Total Substation Capacity (CKM)
Table 22: Transmission Line Growth in 5 Years Plans: Central, State and Private (CKM)
Table 23: Trend of Substation Growth in 5 Years Plans: Central, State and Private (CKM)
Table 24: Trend of Investment in the Electricity Sector
Table 25: Capacity Addition Plan by PGCIL till 2017
Table 26: Power Intensity in MW/Meter at Different Voltage Levels
Table 27: Corridor-wise TTC/ATC (MW)
Table 28: Corridor-wise Import, Export TTC/ATC
Table 29: Day-ahead Booking Status of ER-NER Corridor for 1 Day
Table 30: Month-wise Trend of Congestion in Power Exchanges (May12-April14)
Table 31: Transmission, Wheeling Charges and Losses, and Cross Subsidy Charges for Open Access in Maharashtra
Table 32: Transmission, Wheeling Charges and Losses, and Cross Subsidy Charges for Open Access in Andhra Pradesh
Table 33: Transmission, Wheeling Charges and Losses, and Cross Subsidy Charges for Open Access in Karnataka
Table 34: Cross Subsidy Surcharge for Open Access Industrial and Commercial Consumers in Karnataka
Table 35: Transmission, Wheeling Charges and Losses, and Cross Subsidy Charges for Open Access in Punjab
Table 36: Transmission, Wheeling Charges and Losses, and Cross Subsidy Charges for Open Access in Tamil Nadu
Table 37: LTOA, STOA Open Access Transmission Charges
Table 38: Growth in Short Term Transactions (2009-2013)
Table 39: Volume of Electricity Transacted through Traders and Power Exchangers as Percentage of Total Volume of Short-Term Power (2009-2013)
Table 40: Number of OA Consumers in IEX (2010-2014)
Table 41: Category of Trading Licensee, Estimated Volume of Electricity to be Traded and Minimum Net Worth
Table 42: Number of Licensed Traders for Intra State and Interstate Transaction of Power
Table 43: Percentage Share of Top Trading Licensees (May13-April14)
Table 44: Price Discovered in Short Term Market (2008-2013)
Table 45: Transmission System Capacity Addition Estimates in India
Table 46: Phased Introduction of Power in Victoria

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