Understanding the key technical
and economic concepts
Prayas - EGI Skill-share workshop for Tajikistan and Kyrgyzstan
Delegates
November 16-18, 2010, Pune, India
Prayas Energy Group
www.prayaspune.org/peg, energy@prayaspune.org
Interaction Plan
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Overview
Operation & Planning
Discussion
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Overview
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Electricity is a key infrastructure sector
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6-7% steady annual growth
Strong linkages with fuel, environment,
development
Electricity sector is capital intensive
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Large investment for construction and
operation
Long lead times
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Electricity is a key infrastructure
sector – Strong linkages -1
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Fuel
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Fossil, non-renewable
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Large scale renewable ( > 10-25 MW)
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Coal, Natural Gas, Nuclear, Diesel
Excavation, processing, transport/import, depletion
Big Hydro, Big Wind, Big Solar, Big bio-mass
Bio-mass: Land & resource use competition with
agriculture
Small renewable
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Hydro, Wind, Solar, Bio-mass
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Electricity is a key infrastructure
sector – Strong linkages -2
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Environment - Rehabilitation, Pollution, Ground water,
Global warming
 Coal
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Large hydro
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Huge land and water needed leading to displacement and
loss of livelihoods
Pollution: Ash, Sulphur Oxides
The largest contributor for GHG emissions
Submerges forests and villages
Effect river flow and impact livelihoods
Seismic impacts due to dams, reservoirs and tunnels
Nuclear
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Safety, waste disposal
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Electricity is a key infrastructure
sector – Strong linkages -3
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Development - Catalyst to development by
meeting the social & economic needs
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Social needs
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Household, Water pumping, Health, Education, Research
Strong link to quality of life
Economic needs
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Home industry, agriculture activities, manufacturing,
service industry
Multiplier effect and hence linked to economic growth
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Strong Linkages – 4: Correlation between HDI &
Electricity
Source: Dr. Steve Chu, US Department of Energy
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Strong linkages -5: Balancing act of the
roles of electricity - commodity or
development input
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Commodity perspective
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Pricing as per market terms, No subsidy
Short term financial viability is the key
Electricity markets possible: complex to design &
operate; hard to achieve perfect competition
Development input perspective
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Multiplier effect for supply to agriculture, industry,
commercial; Quality of life improvement for
household, community services
Essential: Low demand – price elasticity
Subsidy to supply to the poor
Long term socio-economic
return is key
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Electricity sector is capital intensive
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Capital and time intensive sector
 Investment
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Approximate US$ 1million/MW for Generation,
Equal amount for Transmission & Distribution
Cost varies based on fuel, technology, size, location
Typical thermal power plant needs 3-4 years to
become operational
 Hence need to plan investments well in advance
Generation planning and cost recovery
 High capital investment and long pay back periods,
uncertainty of fuel prices, etc
 Operational cost
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Generation : 70%, Transmission: 15%, Distribution: 15%
Cost recovery: Fixed and variable charges
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Operation & Planning – Generation,
Transmission & Distribution
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Operation & Planning – Electricity
is special
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Cannot be stored
Demand keeps changing with time
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Generation to match demand at every instant
Persistent mismatch -> grid failure and system collapse
Flows according to the laws of Physics, not
commercial contracts
Travels at the speed of light
Large geographical spread - Integrated Grid
operation
Needs constant supervision and control
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Generation Plant Control
Transmission Load Dispatch
Distribution Control
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Operation & Planning – Electricity
is special
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Supply and demand matching
Grid management: frequency control, Load
Dispatch operation, grid failure
Fast coordinated actions needed
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Some without human intervention (protection,
speed governor, capacitor switching ..)
Some by the operator (opening a line for
maintenance, changing generation schedule,
hierarchy ..)
System reliability is a common interest, though
individual players may act in contrary fashion
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Load Dispatch snapshot
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Large mismatch between
load and generation can
lead to Grid Collapse
Pole= Generator
Tent weight = Load
Tent rope = Grid
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Operation & Planning
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Planning
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Demand Forecast
Generation Planning
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Long (5-30 years), Medium (1-5 years), Short (few
hours to 1 year)
Base load, Peak load, Intermediate load
Conventional centralised and Renewable
decentralised
Firm and non-firm power (eg. solar or wind)
Integrating end use efficiency and
development perspective into planning
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Discussion: Complex electricity
sector is crucial for development
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Technically complex, large investment, long lead
times, multiple linkages
Many agencies involved and requires team work of
persons with diverse skills
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Technical
Legal
Finance
Economic
Environmental
Socio-political
Management
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Discussion: Electricity sector and
politics
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High political implications
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Touches most lives
Crucial for livelihood and quality of life
Instances of political ‘storms’ based on electricity issues
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Kyrgyzstan, many Indian States
High scope for corruption & inefficiency, with major
decisions having big impact on common people
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Power purchase contract: 1 c/Unit increase in generation
tariff of a 1000 MW thermal plant = increase of annual
power purchase cost by US$ 60m
10000 MW system, reduction of commercial T&D loss by 5%
= Annual savings of over US$ 100 m (assuming cost of 6
cents/Unit)
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Discussion: Good Governance in
Electricity Sector
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Good governance in Electricity sector essential
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To
To
To
To
address development challenge
address climate/environment challenge
handle political issues
address corruption and inefficiency
Good Governance through developing processes and
capacities to ensure:
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Transparency: Systems and procedures to ensure complete
transparency
Accountability: Of utilities and government to investors and
public
Participation: Informed, meaningful public participation in
planning and operation of the sector
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