SUMMER INTERNSHIP REPORT ON
POWER
PROCUREMENT, SALES & ALIGNED BUSINESS OPPORTUNITIES
DISCOM’s & DEVLOPERS PERSPECTIVE
Under Guidance of
Mr. Ravi Shekhar
SNP Infra Solutions
Ms Karishma Verma
Fellow-CAMPS
AT
SNP Infra Research Solutions
Submitted By:
Shashank Kumar Singh
Roll No : 111
MBA (Power Management)
NATIONAL POWER TRAINING INSTITUTE
राष्ट्रीय विघुत प्रशिक्षण प्रतिष्ठान
(Under Ministry of Power, Government of India)
Affiliated to
MAHARSHI DAYANAND UNIVERSITY, ROHTAK
DECLARATION
I, Shashank Kumar Singh, Roll No 111/Semester 3rd/Class of 2012-2014 of MBA (Power Management) of National Power Training Institute, Faridabad hereby declare that the summer training report entitled POWER PROCUREMENT, SALES & ALIGNED BUSINESS OPPORTUNITIES : DISCOM’s & DEVLOPERS PERSPECTIVE is an original work and the same has not been submitted to any other institute for the award of any other degree.
A seminar presentation of the training report was made on Sep 2013 and the suggestions are approved by faculty duly incorporated.
Presentation In Charge Signature of Candidate
(Faculty)
Countersigned
Director/Principal of the Institute
Acknowledgement
“It is not possible to prepare a project report without the assistance & encouragement of other people. This one is certainly no exception.”
On the very outset of this report, I would like to extend my sincere & heartfelt obligation towards all the personages who have helped me in this endeavor. Without their active guidance, help, cooperation & encouragement, I would not have made headway in the project.
I am ineffably indebted to Mr. Ravi Shekhar for conscientious guidance and encouragement to accomplish this assignment.
I am extremely thankful and pay my gratitude to my faculty Miss karishma Verma for his valuable guidance and support on completion of this project in its presently.
I extend my gratitude to SNP Infra Solution for giving me this opportunity.
I would also like to thank Rachita Jolly and Nikita Sharma for guiding me at every step and helping me to make the work easier.
I also acknowledge with a deep sense of reverence, my gratitude towards my parents and member of my family, who has always supported me morally as well as economically.
At last but not least gratitude goes to all of my friends who directly or indirectly helped me to complete this project report.
Thanking You
Shashank Kumar Singh
EXECUTIVE SUMMARY
This report consists of Introduction about Power Procurement, dynamics involved in Power procurement, analysis of how tariff affects power procurement and Analysis of power sales by developers. State identification study has been done on Parametric Analysis based on Peak demand, Energy requirement, AT&C Losses, Consumer Category Mix and State economy of individual state to analyse for Distribution utilities Power Procurement. Opportunities in 12th plan capacity addition and growth under different scenario, EPC Opportunities in 12th plan. Power Sale Opportunities for developers and Merits & Demerits of sale through various routes. State Attractiveness Index (Based on Techno-Commercial Parameters) and Ranking of identified states. Opportunities for Power Distribution in Power Procurement, Tariff Analysis of Thermal power plants with different fuel and effect of tariff under Case 1 & Case 2 Bidding, Short term transaction analysis based on past data, Power distribution to end consumers and opportunities for revenue generation by Industrial consumer having highest share of 45%, Trends in Surplus Power sale by Discoms and issues related to it, Private participation in Electricity Distribution. Power Procurement Opportunities from Private Players within State by discoms of identified States in 12th Plan and Categorisation of Private developers in High, Medium & Low (Based on Past Operational experience and Installed capacity). Power Procurement Attractiveness analysis of discoms from UMPP, CSGS, State Gencos and IPPs with benefits, preferred orders of generators for discoms to sign PPA in line with their demand. Cost reduction opportunity analysis in Power Procurement by Discoms: By Source of Generation, By Category of Consumer Served. Power Sale Attractiveness analysis by discoms: Share of different segments and Price Analysis of power sale via Exchange and Traders. Aligned business opportunities for Developers and Discoms.
LIST OF ABBREVIATION
PPA Power Purchase Agreement
ARR Aggregate Revenue Requirement
UR Unscheduled Interchange
SLDC State Load Despatch Centre
NLDC National Load Despatch Centre
SERC State Electricity Regulatory Commission
CERC Central Electricity Regulatory Commission
E&C Engineering & Construction
T&D Transmission & Distribution
AT&C Aggregate Technical & Commercial
UMPP Ultra Mega Power Project
EPC Engineering Procurement and Construction
RFQ Request for Qualification
LOI Letter of Intent
ACS Average Cost of Supply
KWH Kilo Watt Hour
CAGR Compound Annual Growth Rate
MU Million Units
PPP Public Private Partnership
PLF Plant Load Factor
IPP Independent Power Producers
CSGS Central Sector Generating Stations
MPP Mega Power Project
CKM Circuit Kilometres
MVA Mega Volt Ampere
Table of Contents
Introduction 6
Power Procurement: 7
Power Sale: 8
State Identification Study 9
State Parametric Analisis 10
Overview of States on Techno Commercial Basis 12
Opportunities for Power Developers in India 13
Original Targets for Capacity Addition in 11th Plan: 14
Slippage in the 11th Five Year Plan: 14
Opportunity in 12th Five Year Plan 14
Expected Scenario in the 12th Five Year Plan: 16
Scenario1: Business as Usual: 16
Scenario 2: Business at High Gas Production 17
Scenario 3: Business at High Gas & High Renewable 18
List of UMPP’s in India: 19
Proposed UMPPS’s: 20
EPC Opportunity in 12th Five Year Plan: 20
List of Companies Involved in EPC: 21
Turnkey Contracts vs Packaged Based Contracts: 21
Opportunities in Power sales: 22
Opportunities in Power Procurement: 22
Opportunities in Power Consulting: 23
Specialisation Wise Opportunity: 23
Power Sale Opportunities for Developers 24
Power Sale Opportunity: 25
Bidding Process: 25
Long Term PPA at a Glance: 26
Medium Term PPA at a Glance: 27
Open Access at a Glance: 27
Through Traders: 27
Industry Cluster: 28
Group, Societies or Association: 28
Merchant Basis: 28
Opportunities for Power Distribution: 29
Opportunities for Power Distribution in India 29
Key Reforms in Distribution Sector: 30
Power Procurement Method: 31
Procurement Priorities: 31
Bidding Mechanism: 33
Bidding Process: 33
Short Term Transaction: 34
Opportunity in Power Distribution: 36
Surplus Power Sale: 36
Minimising Cost of Power Procurement: 37
Long Term Power Procurement: 38
Short-Term Power Procurement: 38
Private Participation in Electricity Distribution: 39
Type of PPP Model: 40
Types of Distribution Franchisee: 41
Opportunities in Power Procurement for DISCOMs 42
Open Access: 43
Through Traders: 43
Through Captive Power Plant: 43
State Overview: 44
Andhra Pradesh: 44
Gujarat: 45
Haryana: 45
Karnataka: 46
Maharashtra: 47
Rajasthan: 47
Tamil Nadu: 48
Uttar Pradesh: 48
Power Procurement on the basis of Companies: 50
Power Procurement Attractiveness Analysis 50
Public Sector Undertakings: 51
B. Private IPPS/Joint ventures: 51
Power Procurement on the basis of Generating Stations: 51
By Ultra Mega Power Projects: 51
By Mega Power Plants: 52
Power Procurement Attractive Analysis: 53
Andhra Pradesh 53
Gujarat 54
Haryana 55
Karnataka 56
Madhya Pradesh 57
Maharashtra 58
Tamil Nadu 59
Uttar Pradesh 60
West Bengal 61
Cost Reduction Opportunity Analysis in Power Procurement by DISCOMs 62
Cost Reduction by Source of Generation: 63
Share of Coal based Capacity Addition 64
Order based on Cost of delivered Energy 64
Aligned Business Opportunities for Developers 66
Project Management Opportunities: 67
Phases of Project Life Cycle: 67
Main Buckets of Power Management: 67
Key Areas of Assistant: 68
Transmission Companies at a Glance: 69
Share in Transmission Network: 69
Transmission Opportunities: 70
Transmission Network in India: 70
Distribution Network in India: 70
Opportunities in Coal Business: 71
Coal Recoverable Reserves by Region 72
Top Coal Producing Countries: 72
Sector Wise Coal Consumption 73
Coal Availability in India 73
Demand Estimates by Expert Committees in 12th Plan 73
Sector Wise Coal Consumption: 74
Whole Sale Price Index: 74
Best Practices in Reducing Technical Losses 76
Distribution Infrastructure Development: 76
Opportunities in Metering: 77
Market Share by Revenue 2012-13 78
Opportunities in Billing and Collection: 79
Opportunity in IT Implementation: 79
Conclusion 80
List of Tables
Table 1: Power Procurement Overview 8
Table 2:Original Targets for Capacity Addition in 11th Plan: 14
Table 3: Slippage in the 11th Five Year Plan 14
Table 4:Opportunity in 12th Five Year Plan 14
Table 5 : Proposed UMPPs 20
Table 6 : Companies Involved in EPC 21
Table 7 : turn Key vs Packaged Based Contracts 21
Table 8 : Private Participation in Distribution 40
Table 9 : Type of PPP Model 41
Table 10 : Types of Distribution Franchisee 41
Table 11 : Transmission Network in India 71
Table 12 : Top Coal Producing Companies 72
Table 13 : Sector by Coal Opportunities 73
Table 14 : Coal Overview in India: 75
List of Figures
Figure 1:Overview of State on Techno Commercial Basis 12
Figure 2:11th Plan Actual & Target Gap 15
Figure 3:12th Plan Capacity Addition 15
Figure 4:Scenario1 16
Figure 5 : Scenario 2 17
Figure 6 : Scenario 3 18
Figure 7: EPC Opportunity 20
Figure 8: Period of Procurement 25
Figure 9: Procurement Applicability 25
Figure 10 : Bidding Process 26
Figure 11 : Sector Wise Power Consumption 35
Figure 12 : Estimated Power Consumption 36
Figure 13 : Power Sale Statics 37
Figure 14 : Share of Coal based Capacity Addition 64
Figure 15 : Peak Demad in India 65
Figure 16 : Maharashtra Hourly Limit 65
Figure 17 : Share of Different Segments in Transmission 66
Figure 18 : Price of Electricity Through Trading Liscencees and Power Exchanges 66
LIST OF ABBREVIATION
PPA Power Purchase Agreement
ARR Aggregate Revenue Requirement
UR Unscheduled Interchange
SLDC State Load Despatch Centre
NLDC National Load Despatch Centre
SERC State Electricity Regulatory Commission
CERC Central Electricity Regulatory Commission
E&C Engineering & Construction
T&D Transmission & Distribution
AT&C Aggregate Technical & Commercial
UMPP Ultra Mega Power Project
EPC Engineering Procurement and Construction
RFQ Request for Qualification
LOI Letter of Intent
ACS Average Cost of Supply
KWH Kilo Watt Hour
CAGR Compound Annual Growth Rate
MU Million Units
PPP Public Private Partnership
PLF Plant Load Factor
IPP Independent Power Producers
CSGS Central Sector Generating Stations
MPP Mega Power Project
CKM Circuit Kilometres
MVA Mega Volt Ampere
Power Procurement:
Power Purchase cost constitute the largest cost element for Distribution elements, a Distribution utility receives power from CSGS, State Gencos, IPPs through Long term PPAs and Short term Purchases.
Power Purchase cost accounts for about 80% of ARR of distribution licensees and includes cost paid for Procurement of Power, transmission charges, UI charges, SLDC/RLDC charges and is netted off with revenue earned from sale of surplus power.
Cost of Long term power being procured is being fixed by CERC for plant supplying power to more than one state and by SERCs for plants located within the state. The short term purchase is through traders, bilateral contracts, banking and Power exchanges at market determined price.
Power purchase cost is highly dependent upon following factors:
1. Price of fuel (Coal/Gas) which is highly unpredictable.
2. Weather conditions have direct impact on demand and hence price.
3. Demand Supply gap of power within country.
Indian Electricity Act 2003
Sec 62(4): No tariff or any part of tariff may ordinarily be amended more frequently than once in any financial year, except in respect of any changes expressly permitted under the terms of any fuel surcharge formula as may be specified.
National tariff Policy
Clause-5(h-4): Multi Year Tariff
Uncontrollable costs should be recovered speedily to ensure that future consumers are not burdened with past costs.
Uncontrollable costs would include:
1. Fuel costs
2. Costs on account of Inflation.
3. Taxes and cess charges
4. Variation in power purchase unit costs including on account of hydro-thermal mix in case of adverse natural events.
State / Power PurchaseCost Adjustment / Fuel Price Adjustment / Frequency of Adjustment
Kerala / Yes / Yes / Quarterly
Bihar / Yes / Yes / Half Yearly
Chhattisgarh / No / Variable Cost Adjustment / Time to Time
Gujarat / Yes / Yes / Quarterly
Haryana / Yes / Yes / Quarterly
Andhra Pradesh / No / Yes / Quarterly
Madhya Pradesh / Yes / Yes / Half Yearly
West Bengal / Yes / Yes / Yearly
Maharashtra / Yes / Yes / Quarterly
Uttar Pradesh / Yes / Yes / Quarterly
Table 1: Power Procurement Overview
Power Sale:
Increasing manufacturing activities and a growing population are also causing a surge in power usage. India has the 5th largest grid in the world with 135 GW capacities, and the words third largest transmission and distribution network.
Large investments are required to meet the growing demand and provide universal access. An investment of USD167 billion is projected for electricity projects in the 5 year period from FY07-FY12. The massive number and scope of potential projects has attracted a number of new investors, lenders and operators. All new award are through open competitive bidding. A rush is on to develop new assets, harness natural resources, and attract global finance – but an industry focus and strategy is necessary to properly tap into this opportunity.
E&C companies may want to consider involvement in the construction of power stations, and T&D networks, particularly if sustainable building and generation technologies can be leveraged. The Indian Government is also looking to encourage the generation of wind and solar power by providing generation-based incentives to those companies who do not claim accelerated depreciation, so E&C companies with experience in building these types of alternative energy projects may find excellent opportunities.