1. Need to robustly build upon success of recent years

Need to robustly build upon success of recent years

Dual role of PGCIL, Open Access among issues that must be resolved

Updated: March 30, 2016 1:28 AM

Amongst the large number of challenges that have buffeted the power sector, transmission has been a relative success story. India has one of the largest interconnected grids in the world that handles a single frequency synchronised grid interactive capacity of more than 300 GW from utility and captive generation sources. The flows on the grid are in the proximity of 150 GW and large power transfers happen from one part of the country to the other across a deeply meshed network. The country has drawn lessons from past grid failures and gone on to operate the grid at much stricter tolerance levels. Seen in the context of wide seasonal and time-of- day variations in demand and the large number of transactions enabled by the grid from distribution companies and end users through market arrangements, these achievements are indeed noteworthy.

To put matters in context, the Indian power grid operates with the participation of more than 3,000 generators, a hundred or so distribution companies and thousands of open access users on a given day. It operates under the jurisdiction of a National regulator and independent regulators in every state which derive the powers to regulate the grid from the Electricity Act, 2003, a landmark statute that has engendered open market operations under regulatory oversight. Even in conditions of severe shortages that have since been significantly addressed, a competitive power market on two parallel spot exchanges has been successfully introduced and operated for close to a decade. All these complex transactions rely on the underlying delivery capability of the physical grid and the associated operating principles and pricing methodologies.

The physical capacity of the transmission grid is expanding rapidly. The 12th Plan (2012-17) envisages expansion of the grid by 1,07,440 circuit kilometres (ckm) of transmission lines and 2,82,740 MVA of transformation capacity, a target which is set to be largely achieved. Seen in the context of the 1,97,927 ckt km of lines and 2,57,439 MVA of transformation capacity that existed as of March 2007, this scale of addition in a five-year period is creditable, especially in light of the challenges that transmission faces on land acquisition, right of way, environment and forest clearances. Coupled with the slower growth of demand in the grid than expected, this has led to a situation of relative adequacy.

This base needs to be built upon robustly. Despite the current slowdown in electricity demand caused by underlying economic factors and also end-use efficiency, India’s energy needs are expected to grow significantly in the coming years. The resources to cater to the growth are often concentrated and the mainstays of coal and renewable energy are concentrated in pockets that are often at considerable distance from the demand centres. The power generated has to be conveyed across the country resulting in higher demands on the transmission grid. Renewables in particular would need special attention on transmission because of the intermittency of generation that would require active transmission and generation resource management for grid balancing. These have the attention of the planners, but the complicated nature of the problem would demand transmission capacity, technology upgrades, and in general deep focus on transmission development and management.

It would be beyond the remit and capacity of the state-owned transmission entities to execute the massive expansion required on their own. Private sector participation is a necessity. Even as private sector interest is strong, the slew of bottlenecks encountered in developing projects through Tariff Based Competitive Bidding (TBCB) remain a deterrent. While the mechanism itself is well conceived, there are challenges on the quality of detailed project reports (DPR), land acquisition issues, consents and clearances, technology specifications, and qualifying requirements.

Apprehensions also exist around the role of Powergrid Corporation of India, which is a system planner on one hand in its role as the Central Transmission Utility (CTU) and a bidder for such projects on the other. Given the large size of the grid, the organisational separation of the two roles of Powergrid remains a pertinent question. At the state level, a similar situation exists, aggravated by the weak institutional capabilities of state transmission utilities.

The issue of open access for the usage of the transmission network remains a lingering issue. Non-discriminatory open access is the bedrock for development and operations of the transmission grid under the Electricity Act, 2003. Yet this fundamental premise has been compromised repeatedly by the state level transmission and distribution network operators, with regulators often turning a blind eye to it. It is imperative that the government and the regulators recognise that India’s power system has reached this level of relative adequacy on account of competitive trade of electricity. That competitive trade is premised on open access of electricity. Governments must accord due importance to the issue of Open Access and the contributions that it has made to the development of electricity infrastructure and markets; else the growth can slow down and the gains of last decade come undone.

By Anish De

The author is Partner and Head of Strategy & Operations, Infrastructure, Government and Health, KPMG in
India. The views are personal

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