Kerala State Electricity Board Ltd Empowering Kerala since

Kerala State Electricity Board Ltd. Empowering Kerala since 1957 1

SMART GRIDS : INITIATIVES IN KERALA POWER SCENARIO CHALLANGES 2

Remarkable Growth sinception n n n Installed capacity – from 109. 5 MW in 1957 to 2809 MW in 2012 From one Hydel Project to 25 in 2012 Per capita consumption from 19 units(1957) to 502 units(2012) Number of consumers increased from 1, 06, 154 to 105 Lakhs. Number of Domestic consumers increased from 99977 (1957) to 84 Lakhs Currently consumption Growing at 7% Annually 3

Growth of Indian Electricity Sector n n n Installed capacity grown from 1362 MW in 1947 to 2, 28, 721 MW today Electricity generation grown from 4073 MU in 1947 to more than 8, 50, 000 MU today Transmission & Distribution Lines increased from 23, 238 km in 1947 to 79. 5 Lakh km in 2011 Per capita consumption increased from 16 units in 1947 to 813 units as on 2011 Number of electrified villages increased from 3061 in 1950 to 5. 37 Lakh in 2011 Currently consumption growing at 4% annually 4

India’s Installed Capacity Today 5

Power Sector of the Southern Region Tamil Nadu Andhra Pradesh Karnataka Kerala 16161 14227 14198 2822 Maximum Demand 17497 (MW) 18681 11258 3588 Energy 109968 Requirement (MU) 104529 67833 23354 Installed Capacity (MW) 6

KSEB Ltd - Statistics n n n n n 25 KSEB Hydel stations generating 2010. 05 MW 5 Hydel IPPs & 2 Hydel CPPs (56. 36 MW) Total Hydel – 2066. 41 MW 2 Thermal stations (234. 60 MW)- KDPP&BDPP 3 Thermal IPPs& 2 Thermal CPPs (560. 71 MW) Wind (KSEB – 2. 025 MW and 32. 85 MW from private) Total Inst. Capacity in Kerala – 2896. 595 MW Today's peak demand is 3173 MW Annual Energy consumption: 20758 MU Required Annual Revenue: > Rs 10000 cr 7

Consumption pattern of Kerala • Kerala’s consumption is predominantly Domestic, which accounts for 49% of the total consumption, which is only 22% nation wide • Revenue from domestic consumers is only 30% of the total revenue • Industrial consumption is only 30% in Kerala, while it is 45% at the national level 8

Demand as per EPS and energy gap • Present availability from all sources is 3366 MW • Gap of 791 MW at present 9

Dependence on Import of Power including CGS n The energy availed from stations outside Kerala including CGS during 2012 -13 was 65% of the total requirement, whereas only 35% came from internal sources 10

Evolving power market …. . n n Central sector generating stations had a significant role and their generation was shared among states 85% power based on Gadgil formulae; 15% uallocated quota distributed based on political decision of Go. I CGS power shared between regional constituents as per Gadgil formula; Kerala’s entitlement around 8% Allottees used to enter PPA with CGS, tariff was not a consideration as both were Govt. entities 11

Gadgil formula and CGS share n n n Electricity Act 2003 allowed any investor to put up plants without Govt. license Allocation from the CGS to the States through Gadgil formula is no more in place After January 2011, utilities cannot buy power through PPA route even from CGS, but only through tariff based bidding 12

The share of IPPs n n Role of private sector in power generation is increasing Share of IPPs in the total installed capacity of the country has increased from 13688 MW (11%) in 2005 to 72927 MW (32%) today A large chunk of new infrastructure projects in power is expected from private sector DISCOMs are to source power through Case 1 bid from such projects or DISCOMs can initiate such projects through Case 2 bid and own the entire power from the plant 13

DISCOM without CGS power n n n Without Gadgil formulae and CGS power, life of a DISCOM is “Vulnerable” However, KSEB has been exploring an “opportunity” even in this “threat” scenario Out of the total expenditure of KSEB, 70% is accounted for power purchase/generation 14

Cost of CGS Power – emerging trends n n n The tariff of recent CGS plants (Vallur, Simhadri and Jhajjar) are in the range of Rs 3. 80, 3. 90 and 5. 30 per unit; average Rs 4. 20 per unit The indicative tariff of upcoming CGS (Kudgi, Pudimadakka) are over Rs 5. 50 per unit In other words, CGS allocation need not mean power at optimal cost 15

Concerted effort to source cheaper power n n Medium term power procurement tied up from 2014 to 2017 400 MW tied up from two public sector power trading companies Average cost Rs 4. 50 per unit This is cheaper than new CGS on offer 16

Concerted effort to source cheaper power – Cont’d n n 400 MW of long term power procurement tied up with TATA Maithon and DVC Procurement for 25 years from 2014 Rates determined by CERC Cost of power works out to Rs 3. 65 per unit 17

Concerted effort to source cheaper power – Cont’d. n n n Case 1 bid initiated for 450 MW from 2016 onwards 25 year power procurement Encouraging bid participation from 24 bidders Price bid to be opened within two months time Rates likely to be lower than new CGS power 18

Concerted effort to source cheaper power – Cont’d n n n A bid for further 400 MW invited 25 year period starting from 2017 onwards Bid process to be completed by August It is for the first time that bids are invited for the entire life of the plant KSEB has taken a strategic shift in tying up power purchase through long term contracts Long term contracts help a predictable cost over a long tenure 19

Considerations for tariff policy n n As of now, 70% of ARR is for power procurement Short term power prices are highly volatile The cost uncertainties reflected heavily on revenue requirement and hence on the tariff This strategic shift of making an “opportunity” out of “threat”, by shifting to long term tie ups of 1250 MW would enable KSEB to optimize on power procurement cost 20

Power procurement cost vs other expenses n n n 20% of ARR is salaries and pension 10% is on interest and finance charges and other operational expenses Even if establishment costs are slashed by 20%, the net saving will only be 6% Slashing 20% is also not realistic mandatory increase in DA, statutory payments, committed finance charges and optimal maintenance More than this saving can be achieved through long term power tie ups 21

Other attempts n n n Efforts initiated to right-size KSEB and professionalise at various levels IIM-K study progressing Post corporatisation master trust being created for pension payments Possibility for swapping loans to be explored once interests rates are reduced by RBI Hoping to cover unbridged revenue gap in ARR in the next 2 years Need for a broad consensus on long term tariff policy with moderate annual increase pegged to an appropriate level of annual inflation 22

Why internal generation is important ? n n Stable grid requires that sufficient energy is generated within Transmission of energy over long distances require huge investment, which add to the cost Insufficient transmission capacity shall always be a concern to Kerala due its geographic positioning Extraneous factors in remote locations should not hold consumer to ransom - Energy security requires that a reasonable share of the demand is met from internal sources 23

Role of Hydel Generation in tariff n n n Kerala’s own hydro generation is to the tune of 6500 MU Without this power procurement cost of KSEB would have been still higher Though capital intensive, hydro power is cheap as there is no recurring fuel charge 24

Hydel and environment n n Despite having projected potential of about 6000 MW, Kerala could develop only about 2050 MW of hydel capacity so far With increasing concern over environment, the trend is shifted towards small and micro power plants Even for SHPs issues of land acquisition, contract management and environmental clearance (Mankulam, Thottiar, Ankkayam) Moreover generation from such plants are ‘infirm’ and more capital intensive 25

Significance of renewable sources n n n State is avowed to the development of renewable energy sources to the fullest Land being scarce, utilisation of waste land is a priority for installing solar power plants KSEB with NHPC plan to set up 50 MW solar project at a marshy plot in West Kallada Roof top solar shall be another ideal choice, for which KSEB has many projects on the anvil Despite the adverse terrain conditions in potential areas, Govt. is taking all efforts in developing wind energy with the help of private developers 26

Renewable sources - Grid connectivity n n n Grid connectivity is essential to the economy of small renewable plants, especially solar In spite of the imperfections of the LT grid, connectivity shall be provided to plants developed as per relevant CEA standards Renewable energy technology at the present level, without storage provisions, shall not be of much benefit to the grid so long as it is not dispatchable 27

Renewable energy n n cont’d A subsidy driven renewable energy program is neither scalable nor sustainable Case of subsidy driven roof top schemes Flagship terrestrial JNNSM program has pegged the cost of power at Rs 5. 50 per unit plus Viability Gap Funding Is this tariff for day time power affordable ? 28

Need for large capacity base load plant n n The energy gap of 771 MW at present, which shall increase to 2700 MW by 2022, cannot be filled up without having large capacity base load plants set up within the state What options do we have? - Hydro ? - Coal ? - Natural gas ? - ? ? ? 29

Developing Projects in Kerala n Natural gas projects as peaking stations n n n n Seek APM gas to reduce cost These stations could be run as base load stations in exigencies and serve as strategic capacity for the State ~ 1000 MW power could be absorbed in this manner Brahmapuram (350 MW) and BSES (157 MW) have initial advantage of existing pipeline Kayamkulam Stage I (350 MW) conversion already in progress Kayamkulam expansion (350 MW share) may be considered once pipeline is ready and other beneficiary States agree Proposal for tariff pooling taken up with Go. I Utilizing Pet Coke – only constraint is land availability 30

Developing Projects in Kerala n n n cont’d Possibility of getting back “Baitarni” Coal block is high in the changed scenario Project report for 2 X 660 MW ready Environmental concerns are addressable Will solve the issue of power availability in Malabar region substantially Need to be positioned as a initial step for comprehensive development of one of the most backward districts Tariff will be affordable and reduce total cost of power procurement substantially 31

Critical Bottlenecks in Transmission 360 MW 1500 MW NEW Grid 440 MW S 1 S 2 Kerala 32

Critical Bottlenecks in Transmission n n Cont’d The reason why we had to resort to load shedding in recent times is mostly due to extraneous reasons with transmission lines There is a strong case to build up sufficient intrastate and interstate transmission capacity Local interests play against the construction of many lines A case in hand is Edamon-Kochi 400 k. V line, which is held up on petty interests denying the import of power from Koodamkulam 33

Distribution – an overview n n Kerala is proud of its distribution network, which probably links to every household But longer LT lines inevitably add to more distribution loss Dispersed demography does not permit the ideal HT-LT ratio of 1: 1 Despite the above, the T&D loss of Kerala is well above the national level 34

DSM measures in a subsidized energy market n n Studies point to a scope of saving 10 to 15% of energy through DSM measures DSM demands for greater consumer involvement In a subsidized energy market as in Kerala, consumer rewards on conservation is not compensated in economic terms Inefficient KWA pumps, “Petti-Para”, Hi-mast street lights 35

Strategic shift of KSEB Ltd Long term contract – Renewable – DSM n The important strategic shifts recently made in the management of KSEB - Focusing on long term contracts and curtailing short term operations in energy procurement - Maximum emphasis on renewable energy in line with popular expectations and global thinking - Better reaching out to the consumers through and for DSM measures 36

SMART GRID - Introduction Present grid system is facing many problems like: 1 Increase in demand. 2 Unavailability of funds. 3 Large losses incurred. 4 Difficulty in load management etc… Over the past 50 years, electricity networks have not kept pace with modern challenges. 37

SMART GRID – Introduction n cont’d Smart Grid would be the solution for the above explained problems. Solution for what distribution system can and should look like in the future. Provide full visibility and pervasive control over assets and services. 38

SMART GRID – Introduction n cont’d Convergence of information technology and communication technology with power system engineering. Expected to emerge as a well-planned plug-and-play integration of micro grids. The expected distribution system of the future is as shown below: 39

• The following diagram depicts the foundation and layers on which smart grid structure is built. 40

SMART GRID – Definition A smart grid is defined as a grid that accommodates a wide variety of generation options, e. g. central, distributed, intermittent, and mobile. Smart Grids cannot and should not be a replacement for the existing electricity grid but a complement to it. The organic growth and evolution of the smart grid is expected to come through the plug-and-play integration of certain basic structures called intelligent (or smart) micro grids. 41

SMART GRID – Benefits n n n Outage – improved customer service. Loss detection – improved network operation. State estimation – power flow on the distribution grid. Consumer load management – flattened load curve. Self-healing. Motivates & includes consumer. 42

SMART GRID – Inference n n n Exciting yet challenging times lie ahead. Smart grids will have advanced metering, robust communications capability, extensive automation, distributed generation, and distributed storage. A technical advancement that our country should look into so as to meet the energy crisis. 43

Folder for thought n Without more internal generation where we are heading towards ? n Can we sustain without a large capacity coal based plant in the coming 5 to 10 years ? n What does it mean to us that the future nuclear plants shall be Thorium based and our sea shores are an abundant reserve of Thorium? 44

Thank You 45