turning on power after a power outage shock

The power crisis has taken us by surprise. The question in everyone’s mind is that where have we gone wrong? And who fell? Clearly, there was complacency as the power supply conditions were comfortable for a few years; There was ‘surplus’ capacity. Then there were the stranded coal and gas based power plants which became non-performing assets. However, it was not appreciated that the growth in electricity demand was less than expected due to slower and less energy-intensive economic growth. Strong economic recovery after two waves of COVID-19 and an unexpected heat wave has brought back power cuts. Government is taking emergency measures such as cancellation of passenger trains to enable Indian Railways to transport more coal to power plants and issuing directions to use more imported coal to overcome supply shortfalls .

nature of consumer demand

Having a holistic view of the responsibilities in the supply chain will be helpful in avoiding such repetitions. Under the Electricity Act, it is the responsibility of the Distribution Licensee/Company (Discom) to provide reliable quality and round the clock electricity to all the consumers to meet their full demand. To do this, they enter into contracts with a number of production companies to ensure adequate supplies. These discoms work under the supervision of the State Electricity Regulatory Commissions.

With higher incomes and consequently increased use of air-conditioners and other electrical equipment, the nature of electricity demand is changing qualitatively, with increasing daily and seasonal peaks, and spikes on very hot or cold days. It will only increase in the coming years.

reliable supply side

While demand forecast is inherently uncertain, the question remains whether discoms are building and updating their demand growth projections and outlook in a robust manner with adequate supply arrangements in the medium term. And are the state regulatory commissions demanding these and examining them in a transparent manner. It needs to become central to the regulatory process. To ensure reliable supply to meet unforeseen peaks, as has happened now, there is a need to put in place a supply arrangement with adequate reserve margin. These will be as expensive as the backup private captive diesel generation. Regulatory commissions are required to provide such an expensive peaking power system at the tariff approved by them. The time has come to move to individual peak power purchase contracts in addition to the current system of long term thermal power contracts. Once things are settled, it will also be useful to see whether generators have contractually defaulted in supplying power to discoms, and where Coal India or Indian Railways is in default. There could be a case for tightening their contractual terms with enforceable financial penalties.

In addition, a change in power demand-based timing rates for generators as well as consumers will help. These should be brought in by regulatory commissions. Flattening the demand curve through peak demand moderation and changes in consumer behavior is possible with smart meters. But this will only happen with a strong price signal, a big difference in peak and off-peak rates. The gap should be wide enough that larger consumers may find it appropriate to install sensors and timers, and use cheaper electricity at around 3 o’clock to switch on geysers and washing machines, and increase air conditioner temperature settings by 2°-3°C . In the afternoon on hot days when electricity is expensive. Very high levels of reliability have contracts for high costs, unpredictable peak demand. As the share of uncertain renewable generation increases, the need for backup power will continue to grow. Specific options need to be transparently evaluated and decided. Consumers, the political class and regulatory commissions have a collective responsibility to make optimal decisions for reliable supply, rather than the short-term comfort with little or no tariff hikes, the consequences we are now seeing.

Subsidies and Politics

Free supply of electricity to farmers and households up to a specified level is not a problem as long as the state governments pay for it as provided in the Act, and regulatory commissions do not at the same time act from a political point of view and shame. We do. Far from setting cost-reflective tariffs. The problem is the lack of a meaningful political discussion on the benefits and potential of subsidies in various sectors.

While the problem of delay in payment by discoms is being highlighted and needs to be resolved with a sense of urgency, the problem of coal supply is not due to it. Coal India is not short of cash to be able to increase production. It should be done so fast. Coal India needs to build capacity to ramp up production; And as demand increases, the railways need to move coal in large quantities, as has happened now. Climate change will increase the intensity and frequency of extreme weather events. These capacity cushions should be made as soon as possible and paid for.

some measures

Passive but expensive generation capacity is available – around 15-20 GW of gas-based power plants that can run on imported liquefied natural gas, and 6 GW-8 GW of thermal plants that can run on imported coal. The exercise of the option of purchasing power from these plants and not cutting power will provide immediate relief. But where an outright increase in rates does not seem feasible, consumers who are willing to pay more can be exempted from power cuts with the purchase and supply of more expensive electricity generated from imported coal and gas. This wish can be expressed through resident welfare/industry associations. They could pay for this in their bills through peak demand surcharge. The regulatory commission may check later to see that the surcharge has been calculated correctly.

In order to improve credibility, the discoms are required to bid for storage, with the approval of regulatory commissions. It can also prove to be the cheapest option to meet the peak power requirements in the short term. Large-scale grid storage is in any case essential to achieving the 2030 goals – creating 500 GW of non-fossil fuel capacity, including 450 GW of renewable energy.

Ajay Shankar is a Distinguished Fellow at The Energy and Resources Institute (TERI). He has worked for many years in the Ministry of Power dealing with reforms and the Electricity Act 2003. Views expressed are personal