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Tag Archives | power supply

Towards 24×7 Electricity Supply in Andhra Pradesh

The emergence of Andhra Pradesh as a power surplus state is a testament to the cooperation between the Union and State governments.

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Image courtesy of The Hindu

By Revendra (@adj_r_squared)

The AP Reorganisation Act – 2014 put the state of Andhra Pradesh at a huge disadvantage with its provisions that favoured more power supply to the state of Telangana. As a result, the state faced a capacity loss of 1,142 megawatts (MW) and an annual energy shortage of 8,700 mega units (MU). After the reorganisation of Andhra Pradesh, the state had a total generation capacity of 8,307 MW (as per power allocation), 6.9% of energy deficit and 17.6% of peak deficit units.

The major thermal power stations (Dr. N. Tata Rao TPS, Rayalaseema TPS, and Simhadri TPS) had coal stocks lower than the specified critical levels, not lasting for more than a day. The finances of the DISCOMS too did not look encouraging. The higher purchase power agreements rate and lower power tariffs led to a debt of Rs. 11,000 crores, and the capital expenditure loans and bond-related liabilities came to about Rs. 3,700 crores to the DISCOMS. The interests on these debts burden the DISCOMS with Rs. 330 crores annually. Lastly, the average per unit price was around Rs. 7.30, burdening both consumers, and the government.

Energy resources

Andhra Pradesh has negligible sources of non-renewable energy. No coal deposits exist, and the crude oil and natural gas reserves are estimated at 13.19 million tonnes and 48.44 billion cubic meters respectively. Though the sources of renewable energy estimated at 54,916MW, look promising, only 2192.6MW of this electricity produced is connected to the grid. Thus, the infrastructure is not available to harness renewable energy to produce electricity for consumption in the state.

Power for All

In addition to the lack of energy resources ailing DISCOMs and the poor state of power sector, the growing energy and peak demand are estimated to be 82,392 MU and 13,436 MW respectively by FY2018–19. Together, these issues presented significant challenges to put the State’s power sector back on track. Without dodging a bullet, both the State and Union governments got to the bottom of the issues, and jointly came up with the “Power for All” initiative to provide reliable 24×7 power to the domestic, industrial and commercial consumers, supply 9 hours per day of electricity to the agricultural consumers, electrification of all unconnected households, augmentation of generation and distribution capacity to meet the projected demand, and keep the transmission and distribution losses to a minimum.

This ambitious “Power for All” initiative requires resolve and a systematic approach from both governments to ensure fuel resources for thermal and gas-based power plants, electrification of all households in the state, and the financial turnaround of the DISCOMs.

The first challenge is to address the unavailability of energy or fuel resources. In the last two years, the coal supply to power plants has significantly improved with the coal stocks’ availability ranging from 2 weeks to 2 months of consumption per power plant. Additionally, coal reserves of approximately 930 million tonnes were allotted to the Government of Andhra Pradesh. The domestic coal suppliers have certain constraints to match the demand of thermal power plants in Andhra Pradesh. Keeping this in mind, Andhra Pradesh is permitted to import coal stocks of 3-5 metric tonnes per annum till 2019. The LNG fuel is available to generate only 500MW of the 2770MW of installed LNG based power plants in the state. These initiatives are taken by the Union to allocate gas in a phased manner to all power plants before 2019.

The second priority is electrification of un-electrified households and strengthening the systems of distribution and transmission networks, and improving the electricity access in rural and urban areas. A sum of Rs. 899.8 crores was sanctioned through the Deendayal Upadhyaya Gram Jyoti Yojana for rural areas, and Rs. 653.95 crores were sanctioned under Integrated Power Development Scheme (IPDS) for urban areas. The funds from IPDS were reserved to establish IT-enabled data, disaster recovery and customer care centres, and improve meter-based billing and efficiency in collections.

The Ujwal DISCOM Assurance Yojana (UDAY) provided benefits of Rs. 4,200 crores during the turnaround period, saving Rs. 330 crores to the DISCOMS annually. Further, the state DISCOMS will enjoy a benefit of Rs. 6,200 crores every year post-turnaround period.

Apart from these, to meet the immediate power requirements, the Union Ministry of Power is providing 525MW of power to Andhra Pradesh from the Central Generating Stations. At the power exchange, average price per unit is less than Rs. 3.00. The Andhra Pradesh government has benefitted by procuring 385MW from the power exchange.

The sustained efforts from both the governments led to 100% electrification in the state, an increase in per capita power consumption to 982 units, reduction of the transmission and distribution losses to 9%, addition of 4,265MW of installed power, and reduction of the energy and peak shortages to nil.

The assistance from the Union Ministry of Power has been valuable in realising 24×7 power supply to all domestic, commercial and industrial consumers in Andhra Pradesh.

[Views in this article belong to the author. It is part of a blog series tracking governance in the reorganised Andhra state]

Revendra is a Bangalore based student of Public Policy and tweets at Revendra (@adj_r_squared)

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Karnataka’s confounding solar policy

BESCOM’s inability to purchase power has led to a bizarre solar policy which discourages and limits solar power generation.

The officials at the Karnataka Electricity Regulatory Commission (KERC) recently announced that it would reduce the amount paid to individual producers of electricity using solar panels, which will create disincentives for people from becoming self-sufficient for their energy needs. This has come at a time when Karnataka has been facing an acute power shortage, as was demonstrated by the interminable power cuts in Bangalore over the past few months.

The Union and State government has been trying to encourage citizens to install roof top solar panels and produce electricity for their household consumption. Further, any excess electricity generated can be sold back to the grid at a predetermined rate. This also ties in with Prime Minister Modi’s new thrust on solar energy.

Paying the right price is the only way to encourage households to install solar panels

Paying the right price is the only way to encourage households to install solar panels

The response initially has been lukewarm. Since 2014, when KERC released its Karnataka Solar Policy that envisaged achieving a minimum of 400 MW of grid-connected solar rooftop plants and 1,600 MW of grid-connected utility scale solar projects in the State by 2018. The target for 2014–15 and 2015–16 was 100 MW each. However, only 144 customers have come on board in Karnataka and together, they generate 2.4 MW of power, which is grossly inadequate.

It is in this context that the downward revision of tariff paid to solar power generators seems bizarre. Initially producers were paid Rs.10.5 per unit produced, which was reduced to around Rs.9.51 and is now slated to decrease to Rs.6.50 per unit. The stated reason is that capital costs for installing of the solar panels have reduced. Another absolutely confounding proposal by KERC is to set a cap on power generation per customer. The discussion paper actually states that consumers generating electricity “far in excess of the sanctioned load should not be encouraged”. Imagine a state starved for power and experiencing power cuts up to 8 hours a day in its capital city complaining about excess power generation.

The real reason however, is quite straight forward. BESCOM does not have the money to pay Rs.9.51 per unit generated. Consider the current cost of electricity: a normal urban consumer pays Rs.2.70 per unit up to 30 units, Rs 4 per unit for consumption between 31 and 100 units, Rs 5.25 per unit for consumption between 101 and 200 units and Rs 6.25 per unit beyond 200 units per month. Even for high tension commercial users, the maximum rate applicable is Rs. 7.65 per unit for consumption beyond 200,000 units. Given this scenario, how can BESCOM possibly buy power generated by individual users at Rs. 9.50? It is then no surprise that it wants to reduce the price paid per unit of electricity generated and that it actually fears a situation where there is excess production and distribution of electricity.

The solution is not to reduce the amount paid to people who incur considerable costs in installing solar power. The reduced amount will inevitable further reduce the incentives for consumers to use solar energy. Leaving aside an infinitesimal set of consumers who might want to opt for solar energy out of environmental consciousness, most people will react to financial incentives, even if it manages only to cover the cost of installation over a long period.

The answer lies in BESCOM employing marginal cost pricing for the electricity it produces. The price of electricity in Bangalore (and most of India) is below the market price and thus, electricity supply companies (ESCOMs) have heavy losses in their balance sheets. This hampers the ESCOMs ability to purchase power, whether from private generators of solar power or distribution companies, and supply it to the end user. Raising electricity prices will ensure the supply companies have enough income to purchase electricity and provide uninterrupted power supply. Given the high costs associated with power outages (as this article points out), it is imperative to ensure continuous power supply.

Finally, it is high time that KERC introduced contestability and competition in the power sector. Allow private players into the market who can provide uninterrupted power to all at the market determined prices. Mumbai, for example rarely experiences power outages. This is because there are three suppliers of power: TATA, Reliance and BEST. Competition among private electricity suppliers along with the state electricity board will ensure that prices are market based and there are no interruptions in power supply to domestic, commercial and industrial units.

Anupam Manur is a Policy Analyst at the Takshashila Institution. He tweets@anupammanur

 

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