Indian Power Sector ReformsHits and Misses in last two decades
Dr. Rajib K MishraExecutive Director
PTC India Limited
SECTION
1. INDIAN POWER SECTOR – AN OVERVIEW
2. DEVELOPMENT OF INDIAN POWER SECTOR (1947-2012)
3. INDIAN POWER MARKET
4. INVESTMENT POTENTIAL – IN INDIA
5. CHALLENGES AND WAY FORWARD – INDIAN POWER SECTOR
6. TAKEAWAYS FOR AFRICAN COUNTRIES
Contents
SECTION
1. INDIAN POWER SECTOR – AN OVERVIEW
Indian Power Sector
4
Total Installed Capacity ~ 200 GW
India: Electricity Sector
5
Year wise Energy Deficit Key Highlights
� 5th largest generation capacity (187 GW, 4% of
global power generation); mostly thermal dependent
� Growth in demand for power outstripping the
growth in generation and capacity addition
� T & D losses at 33 % (among the highest)
�Planning to establish an integrated National Power
Grid in the country with about 200,000 MW generation
capacities and 37,700 MW of inter-regional power
transfer capacity (current – 22,400 MW)
� With facilitation of inter-regional transmission,
trading activities are set to gain momentum with
subduing location constraints on generation
capacities
Power Supply Position in 2012
Energy Details 2011-12
Peak Requirement 136 GW
Peak Availability 118 GW
Power Deficit 17 GW (12.9%)
6.3
2.74
6.65.32
9.911.1
10.18.5
16.6
11.912.7
9.8
0
2
4
6
8
10
12
14
16
18
2007-08 2008-09 2009-10 2010-11
Growth
Energy
DeficitPeak
Deficit
6
� Integrated Energy Policy by Planning Commission, Government of India
� GDP growth Versus Electricity growth – Elasticity >1
� Electricity has to grow by 10% if economy grows at 9%
� Success rate in last 3 plan periods is ~50%
� GoI’s capacity for budgetary support limited
� Private investment in power sector is serving as an indicator for rapid growth
� Sector is vying to be investor-friendly through framing market serving regulatory and policy initiatives, thereby promoting competition across the value chain.
India: Electricity Sector
153220
306
425
575
778
155233
337
488
685
960
0
200
400
600
800
1000
1200
2006-07 2011-12 2016-17 2021-22 2026-27 2031-32
GW
8% GDP Growth 9% GDP growth
� Coal – In Central India
Chhattisgarh : 58000 MW
Orissa : 30000 MW
Jharkhand : 15000 MW
Madhya Pradesh:16000 MW
� Hydro – In North Eastern & Northern
Himalayan region
� Coastal based
Andhra Pradesh: 24000 MW
Tamil Nadu : 10000 MW
Gujarat : 11000 MW
Expected Installed Capacity (2025) : 6,00,000MW
Lara
Partabpur
Talcher/Ib Valley
Krishnapatnam
NEPAL
KorbaBhopalIndore
Tadri
Girye
Kaiga
Thiruvananthapuram
Pipavav
Kudankulam
SR
Bangalore
Kayamkulam
WR
Tarapur
Mumbai
Cuddalore
Ennore
Akaltara
Raipur
Hyderabad
RAPP
Gandhinagar
Mudra
Delhi
Ludhiana
NR
Jaipur
Jammu
SasanVindhyachal
Lucknow
Load Centre Based GenerationUltra-Mega Generation
Hydro Based GenerationCoastal Generation
Coal Based generation
Nuclear generation
BhubaneswarDarlipali
VizagSimhadri
LEGEND
Load-Centre
NERGuwahati
Koderma
SIKKIM
Kolkata
ERPatna
NECKCHICKEN
BHUTAN
DESHBANGLA
MY
AN
MM
AR
Mangalore
KozhikodeSouth MadrasChennai Energy resources (coal, water etc.)
are unevenly distributed
Energy Resources Map
Power Supply Scenario
100152
218
437
323
2007 2012 2017 2022 2027Year
GW
Peak Demand
132220
306
575
425
2007 2012 2017 2022 2027Year
GW
73 GW
101 GW119 GW
150 GWInstalled Capacity Requirement
During 12th plan
During 13th plan
During 11th plan
205
Future Power Scenario
36874
26783
15043
28600
14400
57000
0
10000
20000
30000
40000
50000
60000
Central Sector State Sector Private Sector
XI Plan
XII Plan
Central Sector State Sector Private Sector Total
36874 (47%) 26783(34%) 15043(19%) 78700
28600 (28%) 14400(15%) 57000 (57%) 100000
XI
XII
Change in Generation Profile
Prospective investors should obtain and review the offering documents relating to the units or shares of any Fund, including the description of risk
factors/investment considerations contained in the offering documents, prior to making any decision to invest in such units or shares.
Strictly Private & Confidential
� 765kV/400kV lines: about 1,03,000 ckms
� 220kV lines: about 132,000 ckms
� HVDC Bipole(±500kV): 7,500 ckms – 3 nos.
� HVDC Back-to-back: 7 nos. (3000MW)
� FSC – 22 nos.; TCSC – 6 nos.
POWER MAP OF INDIA
Prospective investors should obtain and review the offering documents relating to the units or shares of any Fund, including the description of risk
factors/investment considerations contained in the offering documents, prior to making any decision to invest in such units or shares.
Strictly Private & Confidential
Jharkhand –6500 MW
NER –5000 MW
Orissa –23,000 MW
T.N.–10,000 MW
AP–24,000 MW
Chhattisgarh.–58,000 MW
Proposed 11 nos. High Capacity Transmission Corrido rs for IPP Projects
SECTION
2. DEVELOPMENT OF INDIAN POWER SECTOR (1947-2012)
Development of Power Sector - Decade Trend
1947 – 1990 : Command and Control Economy-Allocation of resources by the Government (budgetary grants)
-Government took active part in setting priorities for the economy
-Formation of State Electricity Boards and Central Electricity Authority
-Limited scope for private participation
1991 – 2000 : Liberalization of Indian Economy-Increased emphasis on private sector power generation
-Limited extent of FDI participation
-Gradual improvement in the enabling regulatory environment
-Formation of CERC
2001 onwards : Progressive Liberalization & Refo rms-Electricity Act 2003
-National Electricity Policy 2005
-National Tariff Policy 2006
-Restructured Accelerated Power Development & Reforms Program (RAPDRP)
-National Mission for Enhanced Energy Efficiency under National Action Plan
for Climate Change
15
� The Electricity Act 2003 created liberal and transparent framework for Power Development
� It facilitated investment by creating competitive environment and reforming distribution segment of power industry.
� Entry Barriers removed/reduced
• De-licensed generation.
• Freedom to captive generation including group captive.
• Recognizing trading as an independent activity.
• Open access in transmission already in place.
� Open access to consumers above 1 MW
� Multiple licenses in distribution.
� Regulatory Commissions- to develop market; to fix tariff.
Various provisions of the Electricity Act 2003 have removed the barriers
to entry of private players in different segments of electricity industry,
including distribution
Development of Power Sector – Electricity Act
TransmissionTransmission
Distribution
Generation
Power Trading: PTC India Financing: PFC, PFS, REC
Private Private - Licensees
Development of Power SectorOptimal roles played across the Value Chain
NEW Grid
SouthGrid
South
West
North
East
Northeast
Central Grid
Five Regional Grids
Five Frequencies
October 1991
East and Northeast
synchronized
March 2003West synchronized With East & Northeast
August 2006North synchronized With Central Grid
Five Regional GridsTwo Frequencies
Installed Capacity 200 GW
MERGING OF MARKETS
SECTION
3. Development of Indian Power Market
19
• PTC India (formed in 1999) as a GoI initiative for development of power market and incentivizing market based investments in power sector
• A vibrant, growing power market
– Stable growth and consolidation
– Market development/monitoring in the domain of Regulators
• The Power Market is evolving to maximize competition across generation, open to all market participants and increase competition over price rather than cost.
Key Features: Indian Power Market
19
G
T
D/R
Consumers
G
T / SB T / SB
D/R
Consumers
G G G G G G G EG G G G G EG
T / MO T / MO
D/RD/R
Consumers
D
R R R R
No Competition• No choice• Government makes
decision
Generation Competition• Single buyer has choice
Wholesale Competition• Distribution/retail
companies have choice
Retail Competition• Consumers have choice
ConsumersConsumers
= Who has choice
MO = Market OperatorEG = Embedded Generator
G
T
D/R
Consumers
G
T / SB T / SB
D/R
Consumers
G G G G G G G EG G G G G EG
T / MO T / MO
D/RD/R
Consumers
D
R R R R
No Competition• No choice• Government makes
decision
Generation Competition• Single buyer has choice
Wholesale Competition• Distribution/retail
companies have choice
Retail Competition• Consumers have choice
ConsumersConsumers
= Who has choice
MO = Market OperatorEG = Embedded Generator Indian market is here
Evolving Power Industry Structure
21
Impact of Electricity Trading
21
Generators Transmission Bulk Users Society
22
� Total volume traded in short term market in 2010-11 was
81.56 BUs (including UI), an increase of 24 % YOY
� Excluding UI, bilateral market (both bilateral traders and
direct between Discoms) constitute 71% of the short-term
market (rest 29% contribution from exchanges)
� Weighted average price of electricity on exchanges was
lower than bilateral market which shows that users are
ready to pay premium for delivery certainty
� Size of the bilateral traders’ market in monetary terms –
Rs. 13,271 crore
Short-term Market – Bilateral Trade
Total size of Power market:
~Rs. 18,500 Crores
Data for 2010-11
23
� First National level PX Indian Energy Exchange (IEX) : promoted by PTC Group, commenced
operation in 2008
� Another exchange PXIL followed, third exchange is on anvil
� IEX: ~ 90 % market share
� Growing Portfolio: more than 1000 participants
� Trade:
� Day Ahead Market (DAM) – 25% of short-term market
� Term Ahead Market (TAM) – 4% of short-term market
� Size of the power exchange in monetary terms – more than Rs. 5000 Crores
� PX begun trade of Renewable Energy Certificates ( RECs)
Power Exchanges
Data for 2010-11
24
� REC concept seeks to address the mismatch between availability of RE sources and the
requirement of the obligated entities to meet their RPO
� Also expected to encourage RE capacity addition in States where there is potential for RE
generation
• A total of 1258046 RECs have been issued since inception of REC mechanism, of which
1086924 RECs have been redeemed through Power Exchanges
• The REC Mechanism has created a nation wide market for Renewable Energy generators.
Renewable Energy Certificates (RECs)
* - Till Jan, 2012; Source: climate-connect.co.uk, recregistryindia.in
RECs
25
Share of Different Segments
Source: CERC annual report on short-term market
2009-10 2010-11
Bilateral Through Traders 26.36 27.73
Bilateral Between Exchanges 6.59 10.6
Power Exchange Transactions 7.24 15.5
UI Transactions 25.70 27.73
Bilateral Volume Growth
26Source: CERC annual report on short-term market
Power Exchange Volume Growth
27Source: CERC annual report on short-term market
Bilateral Prices Vs. Power Exchange Prices (2010-
11)
28Source: CERC annual report on short-term market
SECTION
4. INVESTMENT POTENTIAL
Potentially Third Largest Market By 2030
Huge Potential For Improvement
32
Private Sector participation imperative to bridge the significant deficit
Power Sector- Investment Pie
33
US$ 600 bnTotal Funding Requirements in Power
40% (US$ 120 bn)Likely Private Sector share in Generation
25% (US$ 25 bn)Likely Private Sector share in
Transmission
5% (US$ 10 bn)Likely Private Sector share in
Distribution
US$ 155 bnTotal Private Sector Investments
~ US$ 40 bnPrivate Sector Equity Outlay (25% of
total investment)
Private Sector Equity Requirements
Compelling opportunity for private equity to lead the initial investments
and exit through public markets once assets mature
Equity Requirements- Private Sector
SECTION
5. Challenges and Way Forward for India
6. Takeaways for African Countries
Challenges – Indian reforms faced
� Financial health of the State Utilities
� High AT&C losses
� Inconsistent Tariff Revisions
� Social Constraints
� Fuel Supply
� Increasing dependence on coal
� Domestic supply of coal not matching the increasing demand
� Escalating prices of imported coal
� Land Acquisition and Environmental Clearances
� Increasing environment stewardship
35
The Way Forward – Indian Power Sector
� Regulatory changes to drive tariff revisions
� Recent appellate order allow SERCs to increase power tariffs on an annual
basis
� The Shunglu committee’s report tries to force cash-strapped state electricity
boards (SEBs) to undertake reforms and become more accountable
� Improving the functioning of regulators: New reforms are intended to increase
transparency in the selection and functioning of SERCs
� Mandatory filing of Annual Revenue Requirements
� Tariff hikes to pass on fuel costs are some of the key measures being
proposed.
36
The Way Forward – Indian Power Sector
� Future tariff structures to have fuel pass-through
� With recent problems in Case 2-based power projects, regulators are in
the process of introducing fuel related escalations as a pass-through in the
tariffs
� Bidding would be based on standard heat rate and fixed capacity charge
� Recent initiatives by the Government on Fuel Supply
� Coal India to sign FSA’s for power capacities where LOA’s have been
issued
� FSA for capacities commissioned by 31 Dec 2011 to be signed for an
estimate 25000 MW thermal capacities.
� FSA for projects under implementation and commissioned by 31 March
2015 to be signed .
� FSA to be signed for 20 years and for projects with PPA’s, FSA to range
between 80% - 90% of coal requirement. 37
Key Takeaways from Indian Experience for Africa
• Reforms from Bottom of the Pyramid – Distribution first, most difficult
• Realistic and pragmatic tariff fixation - Global energy Benchmark
• Development of Power Market – a feel of true demand and supply and boosts confidence of Investors
• The concept of PTC, in the Indian Power sector was basically to provide a payment security mechanism to the IPPs
• Targeted PPP interventions – participation of private sector is the key to encouraging investments
• Ensure Return on investment– Effective Payment Security from the government owned utilities
– Cost reflective or market determined tariffs
• Reducing inefficiencies in infrastructure operations for making more resources available for infrastructure in the region.
• Reduce dependence on subsidies – power should be treated as a Resource
• Faster and smooth implementation and faster clearance
• Effective regulatory and policy interventions – a must for reforms 38
Thank You
39
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