ARTICLE IN PRESS

Energy Policy 37 (2009) 1004–1011

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Energy Policy

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Evacuation infrastructure for new generating station: Options availablein Indian context

Mohit Goyal a,b,�

a Indian Institute of Management (IIM), Ahmedabad, Indiab Department of Electrical Engineering, Indian Institute of Technology (IIT), Delhi, India

a r t i c l e i n f o

Article history:

Received 8 October 2008

Accepted 6 November 2008Available online 21 December 2008

Keywords:

Evacuation facility

Renewable energy sources

Dedicated transmission line

15/$ - see front matter & 2008 Elsevier Ltd. A

016/j.enpol.2008.11.005

esponding author at: House Number 105

. Tel.: +919814735056.

ail address: goyal.mohit@gmail.com

a b s t r a c t

Facing a deficit of 9% in power generation, India needs to harness all forms of generation including

renewable energy (RE) which presently contributes less than 8% to total generation capacity. To increase

the same, concerns of RE developers are being addressed by the government and regulatory bodies.

One such concern is availability of transmission grid for evacuation of power. Transmission lines

required for power evacuation from RE generators are typically not included in their network plan by

the transmission utility. Considering the financial health and underperformance of these utilities,

even if the required transmission lines are included in the network plan, RE developers are uncertain

and unsure of the timely execution of the plan. Ministry of Power has earlier notified guidelines

[Government of India, Ministry of Power, 2006a. Resolution on tariff based competitive-bidding

guidelines for transmission service; Government of India, Ministry of Power, 2006b. Resolution

on guidelines for encouraging competition in development of transmission projects] for enabling

private sector participation in transmission to enable the private developers to build the required

evacuation infrastructure. This paper evaluates the options available as per the legislative and

regulatory framework in India through which the evacuation infrastructure for the RE projects can

be built by the transmission utility or the potential investors. The key concept of ‘‘dedicated

transmission line’’, which has been a keenly debated and often a misunderstood issue, is also discussed

in great detail.

& 2008 Elsevier Ltd. All rights reserved.

1. Introduction

Government of India has an ambitious mission of ‘‘Power forall by 2012’’ with plans to enhance installed generation capacityby more than 78,000 MW(source: MoP) during 2007–2012. Asignificant portion of this capacity addition is proposed to bethrough renewable energy (RE) sources. Ministry of New andRenewable Resources (MNRE) has announced a target capacityaddition of 15,000 MW (source: MNRE) for the period 2007–2012,through renewable energy resources with a capital outlay of overone billion US dollars.

In order to achieve the RE capacity addition targets, anexpansion of the regional transmission network and enhancementof interregional capacity to transmit power would be required.The latter is required because energy resources are unevenlydistributed in the country and power needs to be carried overgreat distances to areas where load centers exist. An outlay of

ll rights reserved.

6, Sector 42B, Chandigarh

Rs. 700 billion (source: MoP) is envisaged during the XIth planperiod in the Central Sector Transmission Sector, out of whichPGCIL (Central Transmission Utility (CTU), public owned) hasplanned to invest about Rs. 410 billion on its own and theremaining Rs. 290 billion is expected to be brought in by theprivate investors identified based on the JV/IPTC route (theseroutes of investment are discussed later).

Although central/state sector governments and regulatorycommissions have come out with enabling policies for thepromotion of RE sources, the issue of providing grid connectivityto these generating stations remains a grave concern for REdevelopers. Most of the potential sites for wind and small hydro-based generation with access to evacuation infrastructure havebeen developed/harnessed. However, potential sites where theevacuation infrastructure is unavailable are still to be harnessed.Private developers have approached the government and StateElectricity Regulatory Commission (SERC) in order to addressthis issue.

In the following sections, we discuss the different optionsavailable to the RE developers to address the issue of evacuationinfrastructure. Subsequently each option available is discussedconsidering the interests and capabilities of the RE developers.

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M. Goyal / Energy Policy 37 (2009) 1004–1011 1005

2. Available options

In a typical situation, a site for installation of a RE-based powerplant is identified, but there is no infrastructure for evacuation ofpower generated from such a site. Solution to this situation wouldrequire clarity on who builds the transmission line and how torecover the transmission charges and from whom to recover thesetransmission charges. From the developer’s point of view, he caneither build the line on his own or ask the State TransmissionUtility (STU)/Central Transmission Utility (CTU) to build thetransmission line.

Once the transmission line for evacuation purposes has beenidentified, (Fig. 1)—options available for building the evacuationline, can help the developer and the utilities identify the optionsand routes available to them for undertaking the construction ofthe transmission line.

To gain a better understanding of the 4 cases mentioned above,we need to gain clarity on the following concepts:

(1)

Dedicated transmission line (2) CTU/STU network plan (3) JV/IPTC route

In the following section, each concept is discussed in detailalong with presentation of some key SERC orders and examples.

2.1. Dedicated transmission line

The scope of the dedicated transmission line has to beunderstood from provisions of the Electricity Act 2003 (Govern-ment of India, Ministry of Law and Justice, 2003) enacted by theGovernment of India. Section 2(16) of the Electricity Act, 2003defines ‘‘dedicated transmission lines’’ as under:

Does the evacuation line qualify

as a dedicated transmission line?

YesNo

Is the line identified in

CTU/STU network plan?

Case 1: Developer builds

the transmission line

YesNo

Is competition envisagedin building thetransmission line?

Case 2: CTU/STUbuilds the

transmission line.

If STU is unable to

undertake execution, it can

build the project as discussed

in Case 4

Case 3: Potential investor

can build the transmission

line individually or in JV

with STU/CTU

Case 4: Build the project

using either:

(a) JV route

(b) IPTC route

YesNo

Fig. 1. Options available for building the evacuation line.

‘‘dedicated transmission lines’’ means any electric supply-linefor point to point transmission which are required for thepurpose of connecting electric lines or electric plants of acaptive generating plant referred to in section 9 or generatingstation referred to in section 10 to any transmission lines orsub-stations or generating stations, or the load centre, as thecase may be

Section 2(72) of the Electricity Act, 2003 defines ‘‘transmissionlines’’ as under:

‘‘transmission lines means’’ all high pressure cables andoverhead lines (not being an essential part of the distributionsystem of a licencee) transmitting electricity from a generatingstation to another generating station or a sub-station, togetherwith any step-up and step-down transformers, switch-gearand other works necessary to and used for the control of suchcables or overhead lines, and such buildings or part thereof asmay be required to accommodate such transformers, switch-gear and other works.

Section 2(73) of the Electricity Act, 2003 defines ‘‘transmissionlicencee’’ as under:

‘‘transmission licencee’’ means a licencee authorised to estab-lish or operate transmission lines.

Section 2(74) of the Electricity Act, 2003 defines ‘‘transmit’’as under:

‘‘transmit’’ means conveyance of electricity by means oftransmission lines and the expression ‘‘transmission’’ shall beconstrued accordingly.

Thus the dedicated transmission line has been used both inregard to captive generating plant (captive generation station inIndia is a plant in which not less than 26% of the ownership is heldby the captive user(s), and not less than 51% of the aggregateelectricity generated in such plant, determined on an annual basis,is consumed for the captive use) and also a generating companywhich is not a captive generating station. The implications of theabove are therefore common. Section 12 of the Electricity Act,2003 deals with the requirement to take licence and it readas under:

‘‘12. Authorized persons to transmit supply, etc., electricity.No person shall

(a)

transmit electricity; or (b) distribute electricity; or (c) undertake trading in electricity,

unless he is authorized to do so by a licence issued underSection 14, or is exempt under Section 13.’’

A generating company can establish generating station andalso make arrangement for evacuation of energy from thegenerating station to the load centre through tie lines, substationsand dedicated transmission lines without the need to take alicence for transmission under Section 12 read with Section 14 ofthe Electricity Act, 2003.

The evacuation lines which are proposed to be establishedsolely and exclusively used for evacuation of the power from theplace of generation to the load centre and not to be used for thepurpose of carrying out any business of transmission or earningany revenue from such transmission activities or otherwise for thebusiness of distributing electricity to any person shall be outsidethe licensing requirements.

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Captive

Consumer 1

Captive

Consumer 2

Third Party

Consumer

Captive

Power Plant

Stand alone transmission system

Fig. 2. Stand-alone transmission system for connecting a CPP to consumers.

M. Goyal / Energy Policy 37 (2009) 1004–10111006

The term ‘‘dedicated transmission line’’ as defined inSection 2(16) of the Electricity Act, 2003 is distinct form the‘‘transmission lines’’ as defined in Section 2(72) of the said Act.The definition of ‘‘transmission lines’’ cannot be said to includethe dedicated transmission lines as defined in Section 2(16) of thesaid Act. The licence required under Section 12 read with Section 14

of the Act is for undertaking transmission of electricity through

transmission lines and not for establishing dedicated transmission

lines. The dedicated transmission lines are used by the generatingcompanies for their own purpose, namely, to evacuate theelectricity generated by them and not for rendering any serviceto others.

The term ‘‘dedicated transmission line’’ has been defined notwith reference to any transmission line but with reference toevacuation of power only (electric supply line). The electric supplyline, as per the provisions of the Act is distinct form transmissionline. The term ‘‘power system’’ defined in Section 2(50) specifiestransmission or main transmission line under Clause (b) distinctfrom electric supply lines dealt in Clause (g). Thus, the legislaturehas consciously used different expressions in regard to dedicatedtransmission line and with reference to Section 10 the expressionused are tie lines, substations and dedicated transmission linesand not transmission or main transmission lines.

The various provisions of the Electricity Act, 2003 are requiredto be considered harmoniously and in accordance with the well-established principles of purposive interpretation. The intentionof the legislature is clear, namely, that the tie lines, substationsand dedicated transmission lines are for evacuation of power tothe load center. The generating company uses such evacuationlines for the purpose of delivering electricity to the purchaser atthe place where evacuation of energy ends and energy isaccounted for payment at the place of delivery and not at theplace of generation.

The concept of dedicated transmission line under the Elec-tricity Act, 2003 is the same as in Section 15A and 18A of theElectricity (Supply) Act, 1948. The main transmission line is usedin the above provisions of the Electricity (Supply) Act, 1948 also inthe context of evacuation of power from the place of generation tothe load centre. It is in this context that a generating companydoes not require licence for evacuation of power from the place ofgeneration to the load centre or to the place where it can getconnected to the grid.

The dedicated transmission line cannot extend to the place of

installation of consumers. In this regard it is important to note thatthe term ‘‘load centre’’ is used in Sections 38, 39, etc. of theElectricity Act, 2003 read with the definition of ‘‘dedicatedtransmission line’’. The load centre is different than the connection

to the installation of the consumers. The connection to theinstallation of the consumers is mentioned in Section 2(19)dealing with the distribution system.

If the intention of the legislature was that the dedicatedtransmission line could be taken to the premises or installation ofthe consumers, it would have so specified in the definition of‘‘dedicated transmission line’’. The legislature consciously usedthe expression ‘‘load centre’’ and not ‘‘installation of theconsumers’’ in the definition of dedicated transmission line.Furthermore, the other expressions used in the definition‘‘dedicated transmission line’’ are ‘‘any transmission line’’ or‘‘substation’’ or ‘‘generating station’’. Accordingly, the term ‘‘loadcentre’’ should have a meaning ejusdem generis with the aboveexpressions. In short, the dedicated transmission line is not a

distribution system connected to the installation of the premises.In view of the above, if a captive generating plant wishes to

establish a line connecting to the premises of the consumers orconnecting a place where the electricity is to be consumed, itwould amount to transmission and distribution of electricity and,

therefore, would require a licence under Section 12 read withSection 14 of the Electricity Act, 2003. No captive generatingstation can, therefore, transmit or distribute electricity, i.e., laydown a line to carry electricity from the place of captivegeneration to the place of consumption without a licence underSection 12 read with Section 14 of the Act.

This issue has already been decided in the judgment of theHonble High Court in Bhushan Steel Limited’s case which had setaside the decision taken by the Maharashtra Electricity RegulatoryCommission allowing a dedicated line to be constructed bycaptive power unit without licence. The Special Leave Petitionfiled against the decision of the Bombay High Court was dismissedby the Honorable Supreme Court. In the circumstances, it is notopen to the captive power units to claim that they can lay downdedicated transmission line for taking electricity from the place ofgeneration to the place of consumer for end-use.

Consider a captive power plant as shown in Fig. 2—stand alone

transmission system for connecting a CPP to consumers, which haslaid down its own cables and transmission lines for connecting toits captive consumers. Such a transmission line does not qualify asa dedicated transmission line and the CPP would require atransmission license conducting such an operation.

2.2. CTU/STU network plan

The Electricity Act, through provisions of Section 38(2)(b),38(2)(c) as well as Section 39(2)(b) and 39(2)(c) requires the CTUand STU, respectively, to discharge all functions of networkplanning and coordination. This is further emphasized in theNational Electricity Policy and National Electricity Plan.

According to Section 3(4) of the Electricity Act, CEA has toprepare the National Electricity Plan. This is reiterated in theNational Electricity Policy (para 3.2) which provides that ‘‘the CEAshall prepare short-term and perspective plan. The NationalElectricity Plan would be for a short-term framework of five yearswhile giving a 15-year perspective’’.

According to the National Electricity Policy ‘‘the CTU and STUhave the key responsibility of network planning and developmentbased on the National Electricity Plan in coordination with allconcerned agencies as provided in the Act.’’

The Network Plan has to be reviewed every year and wouldinclude the projects for new lines and substations, strengtheningand upgradation of the existing lines and interregional transmis-sion lines. The Network Plan has to clearly identify the scope ofthe project, broad parameters such as design specificationsincluding voltage level, line and conductor configuration, etc.,length of transmission line and probable location of substation orconverter station of HVDC transmission lines.

If any private investor proposes to construct a transmissionline, not being a dedicated transmission line and not included in theNetwork Plan, the required load flow study and other relevant

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M. Goyal / Energy Policy 37 (2009) 1004–1011 1007

studies have to be undertaken by the CTU/STU. The result of suchstudies indicating either inclusion or exclusion of the proposedtransmission line will be communicated to the concerned privateinvestor. The cost of the studies shall be borne by the developer.

2.3. JV/IPTC route

There are two distinct routes for private sector participation intransmission, which are envisaged by the Ministry of Power.Through a joint venture, wherein the CTU/STU shall own at least26% equity and the balance shall be contributed by the jointventure partner (JVP). The JVP can be selected through thecompetitive bidding process, if competition is envisaged inbuilding the transmission line.

The second route is through independent private transmissioncompany (IPTC), wherein 100% equity shall be owned by theprivate entity. The IPTC shall also be selected through acompetitive bidding process. We discuss the two options availableas follows.

2.3.1. JV route

Presently, there is only one instance of implementation oftransmission lines through the joint venture route at the centrallevel. PGCIL (CTU in India) and Tata Power have formed a jointventure company (PGCIL 49%: Tata Power 51%) for implementingthe specific transmission lines associated with Tala HEP. JV partner

for this project was selected through competitive bidding.

Apart from JV with Tata, PGCIL has selected Reliance EnergyLtd. as the JVP for execution of specific transmission linesassociated with Parbati-II and Koldam HEP and has finalizedagreements required for formation of joint venture. In addition,Memorandums of Understanding (MoUs) have been signed byPGCIL with promoters of the following five power projects(as shown in Table 1) to set up joint ventures for implementingthe transmission systems for evacuation of power from thesegeneration projects.

Other example of transmission line presently under construc-tion via the JV route, Torrent Power (Central Electricity RegulatoryCommission, Petition 97/2006, 2007) and PGCIL formed a JV toconstruct a transmission line from Akhakhol to Dehgam PGCILsubstation. JV partner (Torrent Power) for this project was notselected through the competitive bidding route.

Torrent Power is currently building a power plant of 1095 MWcapacity out of which 550 MW would be supplied to SuratElectricity Co., 275 MW to Ahemdabad Electricity Co. and275 MW will be available for sale outside the state. PGCIL carriedout the required study for building the infrastructure for thepower evacuation. PGCIL also stated that since the transmission

Table 1Examples of JV of PGCIL with private developers.

JV partner State Evacuation for

Torrent Power AEC

Ltd.

Gujarat 1095 MW Power from SUGEN Power

Project for consumers in Ahmedabad

and National Grid

ESSAR Power Ltd. Gujarat 1500 MW gas-based power station for

power supply to Gujarat and

neighbouring states

North East Power

Transmission

Co.(P) Ltd.

Tripura 750 MW gas-based power project

Jaiprakash Hydro

Power Ltd.

Himachal

Pradesh

1000 MW Karcham Hydro power project

Jindal Power Ltd. Chhattisgarh Proposed 1000 MW coal-based power

plant in Raigarh district

Teesta Urja Ltd. Sikkim 1200 MW power plant

system would be for Torrent Power generating station, it wouldnot be possible for PGCIL to build the transmission line alone.However PGCIL agreed to enter into JV with Torrent Power toexecute the transmission project. PGCIL board of directors statedthat since the transmission line proposed is solely for use of thegeneration company, selection of the JV partner need not gothrough a competitive bidding process. Torrent Power will build

and own the transmission line. Consequently, Torrent Powerapplied for a transmission license to CERC and further CERCgranted the transmission license to an SPV of Torrent Power whichwould construct the transmission line.

2.3.2. IPTC route

The IPTC route for transmission system has been taken up forthe first time in the Central Sector for the execution of WesternRegion System Strengthening Scheme-II which has been awardedto Reliance Energy Transmission Limited (RETL) in January 2007.This initiative and experience is likely to benefit the CTU and theSTUs, as greater competition will drive down the cost ofimplementation. In the case of bids received from the WesternRegion, the price bids were 25% lower than the benchmark costs(benchmark costs were based on cost plus approach). In addition,MoP has appointed Power Finance Corporation (PFC) as nodalagency for competitive bidding for two projects comprising of 17schemes all over the country for IPTC route.

There are no existing instances of private partnership eitherthrough the joint venture route or IPTC route in the state sector.Developments so far have only taken place at the Central level.The scenario is likely to change in the near future based on theguidelines for private sector participation in the transmissionsector by the Ministry of Power notified on April 17, 2006.

Before we move onto evaluation of the different optionsavailable for creation of the evacuation infrastructure, therisks associated (especially for the private developers) withundertaking the construction of the transmission project arehighlighted below:

2.3.2.1. Pre-construction/project assessment risk

a.

Each transmission line project would require several statutoryclearances from various agencies both at State and Centrallevel. It would depend on the topography and type of crossinglikely in the path of transmission line. Clearances mightbe required for crossing structures like: Forest, Railways,Telephone line crossing, Airport Authority, Defence AreaClearance, etc.

b.

Most of these clearances are required from competentauthorities in the State or Central Government Ministries andas per past trends available in different states, there are no settimelines for obtaining these clearances. The delay in theapprovals could increase the execution time of the project andhence adversely impact the commercial viability of the project.In the JV route, the STU and CTU would play an important partin obtaining these clearances, given its past experience.However, in case of IPTC route, it needs to be ensured thatthere is provision for coordinating/nodal agency to facilitatethe process of obtaining clearances through coordination withrespective ministries.

c.

The estimation of cost of project is based on the detailedproject report (DPR) which is to be prepared by a technicalconsultant. The accuracy of the study is critical, particularly forIPTC route where competitive bidding process is followed. Thebidder would also like to undertake its own pre-feasibilitysurvey and decide on tower positioning, line route, etc. whichcould be different from DPR. In such a case it is important to

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M. Goyal / Energy Policy 37 (2009) 1004–10111008

ensure that the DPR is more of preliminary survey rather thana detailed one as the cost of DPR would eventually have to beincurred by the selected bidder.

2.3.2.2. Project development risk

a.

Land acquisition for substations is a key issue which coulddelay the construction activities. The coordination with JVpartner needs to be ensured. In IPTC route, the responsibility ofland acquisition would be with the nodal agency (CTU/STU/anyother designated agency).

b.

For IPTC route, the bidder has to take all the risks ofproject development including the supply of equipment,construction related activities and commissioning. For JVroute, the risk can be shared with the partner based on therespective strengths.

2.3.2.3. Regulatory/tariff-related risk

a.

The total recovery of the cost plus the allowed return on equityis assured as long as the prescribed availability norms areachieved. Return on Equity is allowed as per the TariffRegulations which are approved by the SERCs for therespective states. The tariff regulations Government of India,Ministry of Power (2006c) are for fixed time frame and are tobe reviewed every five years and any changes in the keyparameters can have an impact on the IRR of the project.

b.

However, in case of competitively bid projects, the tariffs asdetermined based on the competitive bidding process areadopted by the Commission.

2.3.2.4. Payment/off-taker’s risk

a.

Allocation of capacities for the transmission system is ofutmost importance for the recovery of expenses. Any changeson the purchaser side would change the risk profile.

b.

The delay in payment from Distribution Licensees which arestate owned in most states is a potential risk for thedevelopers. Recent reform efforts including regulatorymechanisms to improve efficiency are aimed at improvingthe viability of the distribution companies and this hasyielded results in Andhra Pradesh and Madhya Pradesh tosome extent.

c.

For evacuation projects, the commercial operation date (COD)of the generation project is critical and the completion oftransmission project is closely linked to it. Any changes couldadversely affect the viability of transmission project

3. Option evaluation

In this section, we evaluate the options (cases) of implement-ing the transmission line as discussed in Fig. 1 and impact of eachof these options on the RE developers.

3.1. Case 1

In case the transmission line qualifies as a dedicatedtransmission line, then the potential investor will have to carryout the implementation of the transmission line on his own. Insuch a case:

(1)

Investor will have to fund the capital cost of the transmissionproject.

(2)

Cost of constructing the evacuation line would be embeddedin the generation tariff of the generating station.

(3)

Transmission license would not be required in this case. (4) Potential investor can block the whole transmission capacity

and would not be under any obligation to provide open access.Obligation of providing open access is of prime concern to theRE project developers. Certain wind sites in India, do not haveaccess to transmission infrastructure by miles and cost ofconstructing the evacuation infrastructure is very high. Hencesuch sites are presently unharnessed. However, once theevacuation infrastructure is built (either by the developer orby the CTU/STU), these sites are highly attractive for the REdevelopers. In such a scenario, if a RE developer was to buildthis evacuation line as a dedicated transmission line, thedeveloper would not be obligated to permit open access toother developers who might wish to harness the wind siteafter the evacuation infrastructure is completed. However, thecost of the transmission line would be embedded into thegeneration tariff (which is fixed by the SERCs). So the potentialreturns might go down, but the wind site might be blocked bythe private developer.

Typically the meter in such a case would be at the nearesttransmission system and hence losses in the transmission lineupto the nearest substation would be borne by the generatingcompany itself.

3.2. Case 2

In case the transmission line is included in the CTU/STUnetwork plan, then the CTU/STU shall implement the projectitself. There are some downsides to this option from the REdevelopers point of view. Considering the short falls in the targetachieved against target set and the financial situation of mosttransmission companies, investors would not feel comfortableleaving the implementation of the transmission line solely on thetransmission utility itself.

As per this case, if the generator is selling the power to Discomor open access consumer, the ultimate beneficiary would not haveto pay for the charges of the transmission line. Charges for thetransmission line built would be pooled with the ARR require-ment of the CTU/STU.

Various commissions have also passed order dealing with thistype of situation. As per the TNERC (Tamil Nadu State ElectricityRegulator) Order No. 3 dated 15-5-2006 Tamil Nadu ElectricityRegulatory Commission, order number 3 of 2006 (2006), Chair-man, Maharashtra Electricity Regulatory Commission (MERC)holds the view that the STU should be responsible for evacuationand grid connectivity. TNERC has passed the following observationin the same order:

The Commission accepts the views of Chairman, MERC and it isthe responsibility of the STU to have enough spare capacity inall the transmission corridors for free power flow and ensuremaximum grid availability. It is understood that TNEB/STU isunable to evacuate power from the proposed wind energyfarms due to transmission constraints. The Commission directsthe TNEB/STU to create enough transmission infrastructures inthose areas on a war footing and send a report on thecontingency plan with target date to the Commission within45 days of this order.

Regarding the interconnection network up to the pointof grid connection to be executed as DCW work by theTNEB (Tamil Nadu Electricity Board–Public utility) andthe procedure for application and to obtain evacuationfacilities etc.

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M. Goyal / Energy Policy 37 (2009) 1004–1011 1009

Gujarat Electricity Regulatory Commission (GERC) in its OrderNo. 2 of 2006 Gujarat Electricity Regulatory Commission, OrderNo. 2 of 2006 (2006) had suggested two options for thedevelopment of evacuation infrastructure. Under Option-I evacua-tion infrastructure cost is to be borne by the GETCO/distributionlicensee. Under Option-II, cost is to be borne by the developers.

In the same order, most of the stakeholders (Wind Developer,STU, etc.) suggested that GERC should only adopt Option-II. It hasbeen the past practice. It will avoid any ambiguity from tariff aswell as implementation angles. Also it was highlighted that thedevelopers have gained considerable experience in creating powerevacuation facilities. Hence Option-II of allowing the RE deve-lopers to build the transmission infrastructure was a viable oneand preferable to the RE developers. Accordingly GERC decided toapply Option-II and deemed fit to determine the generation tariffaccording to Option-II under which the total evacuation infra-structure cost is to be borne by the developers.

Another state regulation, Rajasthan Electricity RegulatoryCommission (RERC) has passed a judgment Rajasthan ElectricityRegulatory Commission (2007), Rajasthan Electricity RegulatoryCommission (2006) that since wind power plants have lowgestation period and it is not possible to match the commissioningof transmission system required for evacuation if the constructionof evacuation infrastructure is taken after the execution of PPA.RERC direct that Chairman, Rajasthan Renewable Energy Corpora-tion (RREC) shall be included as member of State PowerCommittee and Technical Committee, constituted by RVPN (STUof Rajasthan) so that the required transmission system can beconceived and created well in advance. RREC shall furnish data forenvisaged RE generation in the various pockets of the state.

Once an EHV system is planned by RVPN, the exclusivetransmission system of wind energy generator (WEG) consistingof pooling station and transmission line upto RVPN’s substationupto 30 km thereafter will be drawn by wind generator(s) andtransmission system beyond this will be RVPN’s responsibility.Transmission line beyond 30 km, may be constructed, operatedand maintained by RVPN or prospective transmission licensee,which may include wind generator(s). In latter case transmissioncharges as determined by the commission shall be payable inaddition to generation tariff by distribution licensee purchasingthe wind power (to the generator or transmission licensee). Suchtransmission charges shall be payable by the RVPN. These chargesalong with transmission charges of RVPN’s system shall be pooledto work out transmission charges for use of transmission systemby distribution licensee, open access consumer, deemed licenseeand other licensees. RERC feels that exclusive/internal transmis-sion system upto 30 km can be created by developer(s) at a cost ofabout Rs. 2 million/MW (of ultimate capacity of wind farm).

3.3. Case 3

In case the transmission project is not included in the networkplan by the CTU/STC and the transmission project cannot attract

Table 2Comparison of the four options available on different parameters.

Case

Is the RE developer required to fund the capital cost for constructing the transmission

Is the RE developer required to have technical expertise in building transmission lines

Is the cost of transmission charges embedded in generation tariff of the RE developer

Is the RE developer required to have a transmission license

Is the RE developer obligated to provide for open access

a Assuming developer of generating plant is not selected as the developer for evac

competition, then in such a case the potential investor can form aJV with the CTU/STU concerned. In such a case:

(1)

line?

?

uatio

Investor would have to provide for the capital cost of thetransmission line

(2)

Investor would be recovering the ARR of the transmissionproject along with a rate of return on the equity (regulated bythe state regulator, currently at 14%) employed.

(3)

Transmission charges for the evacuation infrastructure wouldnot be embedded in the generation tariff and would berecovered separately.

(4)

Investor building the transmission line would require atransmission license.

(5)

Investor will have to provide for open access on thetransmission line. Hence unlike in Case 1, if a developerbuilds the transmission line in JV with the STU, then he wouldnot be able to block the RE site and would be obligated toprovide open access to any developer who wishes to constructa RE plan in that area.

Under the present rules and procedures followed at the state

and central level, if the generator is selling the power to Discom orthe open access consumer, in either case the ultimate beneficiarywould not have to pay for the charges for the transmission line.Charges for the transmission line built would be pooled with theARR requirement of the CTU/STU.

3.4. Case 4

In case the transmission project is to be implemented throughcompetitive bidding process and if another party is selected toexecute the transmission project then:

(1)

No capital cost would be required from the potentialdeveloper of the generating station for building the transmis-sion line for evacuation of power.

(2)

Investor of the generating station would have to apply foraccess to the transmission capacity on the line on a first comefirst serve basis.

(3)

Transmission charges for the evacuation infrastructure built incase 4 would also be recovered just as they are going to berecovered in case 3.

Barring case 1, where the transmission charges would be

embedded into the generation tariff, in the other 3 casestransmission charges would get pooled with the ARR requirementof the respective CTUs/STUs. Table 2 highlights the majordifferences across the four cases for building the transmissionlines required for evacuation.

4. Conclusion

ERCs in Tamil Nadu and Maharashtra Maharashtra ElectricityRegulatory Commission, Case 6 of 2006 (2006) hold a view that

1 2 3 4a

O OO OO O

OO O O

n infrastructure in the competitive bidding.

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Table 3Comparison of different approach followed by Electricity Regulatory Commission in different states.

Maharashtra Gujarat Rajasthan Tamil Nadu

Responsibility of evacuation line upon STU Developer Developer STU

Capexa for transmission line incurred by Developer Developer Developer

Return on Capex of transmission line recovered through In built in gen. tariff In built in gen. tariff None

Cost of transmission line borne by End user of energy End user of energy All consumers of TNEB

a Capex (capital expenditure).

M. Goyal / Energy Policy 37 (2009) 1004–10111010

the infrastructure for evacuation of power is the responsibility ofthe STU. However in Gujarat, GERC has passed an order askingdevelopers of the generating station to bear the cost fordeveloping the infrastructure required for evacuation of powerand in such a case, cost associated with the evacuationinfrastructure would be included in the generation tariff.There is quite a variation in approach of different regulatorycommission towards providing evacuation infrastructure to REprojects. Table 3 provides a snapshot of policies followed by ERCsin respective states.

Based on interactions with RE developers in India, itwas gauged that the RE developers show interest in under-taking the construction of the evacuation infrastructure. Thisoption not only ensures the timely execution of the transmissionproject and mitigates the risk element for the developer but also itdoes not strain the finances of the STU which for most states inIndia are already strained. Hence the paper proposes that theSERCs should put in place a framework by which the REdevelopers can come forward and construct the evacuationinfrastructure themselves.

However, there are some concerns which need to be addressedbefore the regulators can ask the RE developer to constructthe transmission line. Some of these concerns mentioned areas follows:

Given the fact that construction period for a renewable energygeneration plant is short (2–3 years) as compared to conventionalplants (5–6 years), it is advised that the procedure of identifyingwhether the transmission line is to be included in the STU/CTUnetwork plan or not, should be shortened.

Any transmission line identified in the network planshould be built on a priority basis if the developer has startedconstructing the generating station, as the construction periodfor the RE plant is low. This would ensure that the developerdoes not perceive the untimely execution of the evacuationline as a key risk and also the RE sites which were not harnesseduntil now due to lack of access to transmission line wouldget harnessed.

Business model of asking the developer to build the trans-mission line upto a certain distance has been widely acceptedby the RE developers. This model ensures that the line isbuilt on time and cost of constructing the line is minimal.Regulators might consider providing this as another alter-native in their plan to address issues related to evacuationinfrastructure.

There are considerable risks for the RE developer, if it wishes toundertake the transmission line on its own. These risks can besuitable addressed if the STU/CTU were to be involved in theconstruction process. Tamil Nadu has put in place a mechanism bywhich the private developers can ask the STU for help inaddressing some of the key risks involved.

If the issues mentioned above can be addressed, the option ofasking the RE developers to come forward and build thetransmission can be a very attractive one and would help India

in further achieving its objective of increasing the contribution ofRE in total generation capacity installed in India.

Results from the research of the regulatory policy in India andanalysis of the competitive bidding guidelines for participation ofprivate sector in transmission project presented in this paper canbe helpful for other South Asian countries like Vietnam, Cambodia,etc. which have recently encouraged investment in renewableenergy sector. Given the absence of strong transmission grids inthese countries, it is suggested that the options as in Fig. 1—optionsavailable for building the evacuation line should be made availableto the developers. Case 3, as discussed in the paper, seems to be anoptimal framework for the developing countries as it would helpthe developers hedge the risk of non-availability of evacuationinfrastructure and would also mitigate risks associated withundertaking the construction of the transmission projects as thedevelopers can leverage the strengths of the STU.

Appendix A. Supplementary data

Supplementary data associated with this article can be foundin the online version at doi:10.1016/j.enpol.2008.11.005.

References

Central Electricity Regulatory Commission, Petition 97/2006, 2007. In the matter ofapplication for grant of transmission licence to Torrent Power TransmissionPrivate Limited.

Government of India, Ministry of Law and Justice, 2003. The Electricity Act, 2003,No. 36 of 2003, ‘‘An act to consolidate the laws relating to generation,transmission, distribution, trading and use of electricity and generally fortaking measures conducive to development of electricity industry, promotingcompetition therein, protecting interest of consumers and supply of electricityto all areas, rationalization of electricity tariff, ensuring transparent policiesregarding subsidies, promotion of efficient and environmentally benignpolicies constitution of Central Electricity Authority, Regulatory Commissionsand establishment of Appellate Tribunal and for matters connected therewithor incidental thereto.

Government of India, Ministry of Power, 2006a. Resolution on tariff basedcompetitive-bidding guidelines for transmission service.

Government of India, Ministry of Power, 2006b. Resolution on guidelines forencouraging competition in development of transmission projects.

Government of India, Ministry of Power, 2006c. Resolution on tariff policy.Gujarat Electricity Regulatory Commission, Order No. 2 of 2006, 2006. In the

matter of: Determination of price for procurement of power by the distributionlicensees in Gujarat from wind energy projects.

Maharashtra Electricity Regulatory Commission, Case 6 of 2006, 2006. In thematter of long term development of renewable energy sources and associatedregulatory (RPS) framework.

Rajasthan Electricity Regulatory Commission, 2006. In the matter of amendmentsto RERC (Power Purchase & Procurement Process of Distribution Licensees)regulations 2004 and RERC (Terms & Conditions for Determination of Tariff)regulations 2004 under Section 61 & 86 of the Electricity Act 2003.

Rajasthan Electricity Regulatory Commission, 2007. In the matter of determinationof tariff for sale of electricity from wind and biomass based generating stationsto distribution licensee.

Tamil Nadu Electricity Regulatory Commission, order number 3 of 2006, 2006. Inthe matter of: Power purchase and allied issues in respect of non-conventionalenergy sources based generating plants and non-conventional energy sourcesbased co-generation plants.

ARTICLE IN PRESS

M. Goyal / Energy Policy 37 (2009) 1004–1011 1011

Mohit Goyal is an electrical engineer from Indian Institute of Techno-logy (IIT), Delhi. He has two years of work experience working with Pricewa-terhouseCoopers in power sector reforms, developing business strategy andpromotion of renewable energy and power trading. Mohit has worked with MPERCfor 2 years and has supported MPERC on the modules on open access in

transmission and distribution, promoting private sector participation inpower sector, promoting investments in renewable energy and framework forsupporting power market development. He is currently pursuing his MBA fromIndian Institute of Management (IIM), Ahmedabad. He can be reached atgoyal.mohit@gmail.com.