Demand Forecast and capacity
addition planning: Policy and
regulatory process
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
Agenda



Impact and significance
Legal and regulatory framework
Challenges and opportunities
17 Nov 2010
Prayas EGI workshop Pune Nov 2010
2
Break-up of Maharashtra distribution
utility’s revenue requirement
17 Nov 2010
Prayas EGI workshop Pune Nov 2010
3
Important considerations
•
Economic
–
–
•
Fuel specific
–
–
•
Crucial financial implications arising out of contractual
agreements over long periods
Bad planning: Load shedding or high cost short term power
purchase
Locking into a particular fuel technology
Energy security related issues: excessive dependence on a
particular fuel, etc..
Social and environmental
–
–
–
Huge land and water requirement and mining
Displacement and issues related to land acquisition
Emissions and other environmental concerns
17 Nov 2010
Prayas EGI workshop Pune Nov 2010
4
Demand forecast: Indian scenario

Central Electricity Authority agency responsible for planning




Maintains data about installed capacity, generation and status of
various on going projects
Tracks state wise, sector wise demand and growth
Makes state wise, sector wise demand estimations for each five
year plan period
Limitations
Does not undertake demand forecast analysis at each discom
level
 Does not consider seasonal and peak variations
 Undertakes this study after every five years or so
Most state utilities do not undertake independent demand assessment

17 Nov 2010
Prayas EGI workshop Pune Nov 2010
5
Demand supply trend for last 10 years
17 Nov 2010
Prayas EGI workshop Pune Nov 2010
6
Generation and demand served
17 Nov 2010
Prayas EGI workshop Pune Nov 2010
7
Capacity addition Legal framework

What has been tried?


Central corporations such as National Thermal Power
corporation and National Hydro Power Corporation
 Successful but not sufficient
Private investments through Independent Power
Producers (IPP) policy route.
Failed on account of:
 Lack of transparency in signing MoU
 Absence of competition
 Public protests against forceful land acquisitions
 Huge tariff impacts and dismal performance of
most IPPs
17 Nov 2010
Prayas EGI workshop Pune Nov 2010
8
Enron IPP project
Comparison of CCGT Plants Around the World
1400
Enron
Dabhol
1200
Cost per kW ($/kW)
1000
800
600
$/kW
370-600
600-800
800-1000
> 1000
400
200
Plants
18
3
4
3
0
-
500
1,000
1,500
2,000
Capacity MW
17 Nov 2010
2,500
LNG
Prayas EGI workshop Pune Nov 2010
3,000
3,500
NG 1
4,000
NG 2
9
Capacity Addition provisions under
Electricity Act 2003

Consumers buying from DISCOM and paying
regulated tariff



Competitive bidding for power procurement by
DISCOM
Cost-plus tariff determined by regulatory
commission based on regulations and norms
Consumer having choice of supplier


17 Nov 2010
Merchant capacity, captive generation
Power exchanges and trading
Prayas EGI workshop Pune Nov 2010
10
Competitive bidding: Legal framework

Section 63 of Electricity Act:


“Notwithstanding anything contained in section 62,
the Appropriate Commission shall adopt the tariff if
such tariff has been determined through transparent
process of bidding in accordance with the guidelines
issued by the Central Government.”
Bidding guidelines and standard bidding documents
published by Ministry of Power
 Ensuring consistency and transparency in bidding
processes
 Helps in creating level playing filed
17 Nov 2010
Prayas EGI workshop Pune Nov 2010
11
Competitive bidding: Regulatory
framework


“The bid documentation shall be prepared in
accordance with these guidelines and the approval of
the appropriate Regulatory Commission shall be
obtained unless the bid documents are as per the
standard bid documents issued by the Central
Government.”
Adopting the tariff discovered if the same is
consistent with prevailing market rates and subject to
adherence of bidding guidelines and due processes
17 Nov 2010
Prayas EGI workshop Pune Nov 2010
12
Capacity addition through
competitive bidding
17 Nov 2010
Prayas EGI workshop Pune Nov 2010
13
Bidding guidelines
•
Standard bidding documents
• Request for qualification
• Request for proposal
• Power purchase agreement
•
•
Payment security to be made available by procurer
Time lines for each type of process
17 Nov 2010
Prayas EGI workshop Pune Nov 2010
14
Tariff related provisions
Tariff components
Project Name
RJ - Stage I - Adani
Capacity Charge
Non Escalable Escalable

Fuel Charge
Non Escalable

Inland Transportation
Escalable

Non Escalable
Escalable

GJ - Stage I - Adani


GJ - Stage I - Aryan

GJ - Stage II - KSK


MH - Stage I - Adani


MH - Stage I - Lanco


MH - Stage II - IB




MH - Stage II - Adani




MH - Stage II - Emco








Multi part tariff consisting of:
-Capacity charge
-Energy charge
Tariff to expressed in Indian Rupees
“The bidder who has quoted lowest levellised tariff as per
evaluation procedure, shall be considered for the award.”
17 Nov 2010
Prayas EGI workshop Pune Nov 2010
15
Accountability related provisions
•
•
•
“The procurer shall constitute a committee for evaluation of the
bids with at least one member external to the procurer’s
organization and affiliates. The external member shall have
expertise in financial matters / bid evaluation.”
“The evaluation committee shall have the right to reject all
price bids if the rates quoted are not aligned to the
prevailing market prices.”
“..the Evaluation Committee constituted for evaluation of RFP bids
shall provide appropriate certification on conformity of the
bid process bid evaluation according to the provisions of the
RFP document. The procurer shall provide a certificate on the
conformity of the bid process to these guidelines.”
17 Nov 2010
Prayas EGI workshop Pune Nov 2010
16
Transparency related provisions
•
•

“The procurer shall publish a RFQ notice in at least two national
newspapers, company website and preferably in trade
magazines also to accord it wide publicity.”
“Procurer shall provide only written interpretation of the
tender document to any bidder / participant and the same shall
be made available to all other bidders.”
“For the purpose of transparency, the procurer shall make the
bids public by indicating all the components of tariff quoted by
all the bidders, after signing of the PPA or PPA becoming
effective, whichever is later. While doing so, only the name of
the successful bidder shall be made public and details of tariffs
quoted by other bidders shall be made public anonymously. The
procurer shall also make public the PPA signed in accordance
with clause 6.1”
17 Nov 2010
Prayas EGI workshop Pune Nov 2010
17
Screen shot of Mahadiscom website
17 Nov 2010
Prayas EGI workshop Pune Nov 2010
18
State
CH
GJ
HY
MH
MP
PU
RJ
UP
Total
Capacity in MW
Case 1 Case 2
1320
6800
1724
1320
4900
1841
3300
1000
4400
16265 10340
 Capacity of 26,605 MW is
currently contracted under
bidding process
Apart from this another
16,000 MW of capacity is
being added under Ultra
Mega Power Policy process
17 Nov 2010
Prayas EGI workshop Pune Nov 2010
19
Capacity Charge – CB Projects v/s Others
1.6
Non - Escalable
1.4
Escalable
1.2
Rs./kWh
1.0
0.8
0.6
0.4
0.2
0.0
MH GJ MH GJ GJ GJ MH MH RJ MH GJ GJ Stage II Stage I - Stage I - Stage I - Stage II Stage II Stage II Stage II Stage I - Stage I - Stage II Stage I - IB
Essar
Adani
Adani
- SP
- Essar - Adani - Emco Adani Lanco
- KSK
Aryan
1.6
1.4
Rs./kWh
2. For other projects which have an
escalable component, the pass
through is at a rate specified by the
CERC and thus not at actuals.
Levelised Capacity Charge (Rs./kWh)
Rs. 4.5 Cr/MW
1.2
1.0
1. Most projects have a fixed capacity
charge for the life time of the PPA and
thus the change in the capacity charge
is not a pass through to the
consumers. – Greater certainty and
Low risk
Rs. 3.5
0.8
0.6
0.4
0.2
0.0
MH GJ MH GJ GJ GJ MH MH RJ MH GJ GJ Stage II Stage I - Stage I - Stage I - Stage II Stage II Stage II Stage II Stage I - Stage I - Stage II Stage I - IB
Essar
Adani
Adani
- SP
- Essar - Adani - Emco Adani Lanco
- KSK
Aryan
17 Nov 2010
Project
Trombay Unit 8
JK LTPS
Parli Unit 6
Kothagudem TPS stage VI - Unit 11
GVK Govidval Sahib
North Chennai TPS - Stage II
Giral LTPS
Rayalaseema TPP St.III
Kakatiya ST-I TPP
Mettur TPS St-III
Prayas EGI workshop Pune Nov 2010
Capex
(Rs.crores
/MW)
4.50
4.50
4.60
4.65
4.90
5.15
5.72
5.80
5.90
5.91
20
Comparison of levelised Variable
charges – CB Projects and Other
Blue – CB; Red – Other Projects
Levelised Variable Charge (Rs./kWh)
4
3.5
3
2.5
2
1.5
1
0.5
0
17 Nov 2010
Prayas EGI workshop Pune Nov 2010
21
Regulatory framework


Mandating distribution companies to prepare power
purchase plan through regulations
Role in determining generation tariff of noncompetitive power procurement
 Transparent scrutiny of all costs and contractual
terms through public hearings
 Allowing/disallowing costs based on performance
norms and benchmarks
 Adjudication of disputes if any, between discom
and generation company
17 Nov 2010
Prayas EGI workshop Pune Nov 2010
22
Challenges




Utilities reluctance towards undertaking proactive
demand forecast and prudent Power purchase
planning
Reluctance towards competitive bidding, preference
to non-transparent or inefficient MoU/cost plus
projects
Lack of transparency in fuel allocation
Lack of consideration of social and environmental
realities
17 Nov 2010
Prayas EGI workshop Pune Nov 2010
23
Opportunities



Provisions for increasing transparency and accountability
related norms and requirements
 E.g. standard bidding documents, reasoned orders,
publishing tenders and agreements on website, etc
Strengthens commission’s role and mandate to prevent
bad projects
 E.g. Uran and Talegaon gas based generation
Collaborative action can force utilities to address the
planning related issues in a more accountable manner
 Joint declaration process in Maharashtra
17 Nov 2010
Prayas EGI workshop Pune Nov 2010
24