SUMMER INTERNSHIP REPORT

POWER TRADING SCENARIO, LOAD FORECASTING & DSM

FOR NPCL

Under the Guidance of:

Ms. Rachna Vats, Fellow (Environment),CAMPS,NPTI

&
Mr. Rajiv Goyal,Head (Projects and Power Trading),NPCL

At

NOIDA POWER COMPANY LIMITED

Submitted by
SAVYASACHI KISHORE MISHRA
Roll No. MBA/12/79
MBA (Power Management)
(2012-14)

(Under the Ministry of Power, Govt. of India)

Affiliated to

MAHARSHI DAYANAND UNIVERSITY,ROHTAK

AUGUST 2013
ACKNOWLEDGEMENT

First and foremost I would like to express my sincere thanks and gratitude to NOIDA
POWER COMPANY LIMITED for giving me the opportunity to undergo this project. I
wish to express my sincere and grateful thanks to the people who helped and extended
their support in this endeavour.

I would like to thank Mr.Rajiv Goyal,for his support from time to time and for providing
the necessary resources for the timely completion of the project.

I am also thankful to Mr. J.S.S.Rao Principal Director(CP&M) , Mr. S.K.Choudhary

Principal Director (CAMPS), Mrs. Manju Mam, Deputy Director (CAMPS), Mrs. Indu
Maheshwari ,Deputy Director (CAMPS), Mr. Rohit Verma ,Deputy Director (CAMPS),
and for giving valuable suggestions towards the project.

Finally, I am highly obliged to Director (CAMPS), NPTI, who gave me the opportunity to
do summer internship in a pioneer organization like NPCL, GREATER NOIDA.

I take the opportunity to express my sincere thanks to Mr. Sanket Srivastava And
Mr. Akash Yadav for his scholarly guidance through the course of the project and
without whose efforts, this project would not have been possible.

THANK YOU
SAVYASACHI KISHORE MISHRA
MBA (Power Management)

i
 DECLARATION

I, Savyasachi Kishore Mishra, Roll No MBA/12/79 student of MBA (POWER

MANAGEMENT) at National Power Training Institute, Faridabad hereby declare that the
Summer Training Report entitled -

“Power Trading Scenario, Load Forecasting & DSM For NPCL” 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 __________________________

and the suggestions as approved by the faculty were duly incorporated.

Presentation In charge Signature of the Candidate

(Faculty)

Countersigned

Director/Principal of the Institute

ii
 ACKNOWLEDGEMENT
Words could never be enough to express my true regards to all those who in some or the other
way helped me in completing this project. I can’t in full measure, reciprocate the kindness shown
and contribution made by various persons on this endeavour of mine. I shall always remember
them with gratitude and sincerity. I take this opportunity to thank all those who have been
instrumental in completion of my training.

I acknowledge with gratitude and humanity my in-debtness to my Summer Training Project

guide Sh. Rajeev Goyal, DGM (Project & Power Trading) and Mr. Sanket Srivastava, Executive
(Power Trading), Noida Power Company Limted. for providing me excellent guidance, material
and motivation under whom I completed my summer internship at Noida Power Company
Limited. I have a deep sense of gratitude and respect for the entire staff of Noida Power
Company Limited for sharing their knowledge and for assisting me.

I would like to thank my Project In-charge, Mr. S K CHOUDHARY (Principal

Director,CAMPS), NPTI,Faridabad for his support and guidance throughout the project duration.

I am grateful to my family and friends who gave me the moral support in my times of
difficulties.

SAVYASACHI KISHORE MISHRA

iii
 DECLARATION
I, Savyasachi Kishore Mishra, Roll No. MBA/12/79, Class MBA (Power Management) 2012-14
batch of the National Power Training Institue, Faridabad hereby declare that the summer training
report entitled “POWER TRADING SCENARIO, LOAD FORECASTING & DSM FOR
NPCL” is an original work and the same has not been submitted to any institute for the
award of any other degree.

A Seminar presentation of the Training Report was made on ________________________

and the suggestions as approved by the faculty were duly incorporated.

(Presentation Incharge) (Signature of the Candidate)

Countersigned:

(Director/Principal of the Institute)

iv
 EXECUTIVE SUMMARY
The electricity consumer has long been served by vertically integrated state electricity boards
which had inefficiency and inefficacy to an exuberant level. The reforms adopted by various
states led to separation of generation, transmission and distribution and their corporatization.
However, the desired result of the reform, that is low prices, reliable supply, fairly predictable
bills and the opportunity to benefit from the value added services can only be accrued in long
term through a competitive and efficient market. But the inherent properties that make electricity
different from other commodity makes it difficult to develop a efficient market that facilities all
the above mentioned benefits to the consumer.

For India, having in place a efficient and developed power market is especially important
because India is on a fast track growth path and history has shown that power sector
development has always been one of the basic requirement for the development of a nation as a
whole. However, it must be kept in mind that market development and introducing competition
are only the means and efficiency and consumer choice is the ultimate goal.

India is already on its way to establishing a power market. This requires considerable and
continuous effort starting from continued strengthening of inter-regional power transmission
links, open access to transmission and later to distribution links, releasing the underutilized
captive capacities, to the designing of an effective market mechanism suited to India's needs. The
institutional set-up of the Market could make a significant difference to the final market price. In
the short term, market rules should promote economic efficiency, so that customer loads are
served and reliability is maintained at the lowest possible cost.

In addition, the market rules should be such as to encourage broad participation and ensure
fairness. Such a process will reduce the need for government oversight because it will be to a
large extent self-policing and it will be difficult for individual participants to manipulate results
in their favour. Of the two market mechanisms evaluated, Pool day-ahead market, may produce
lower prices than the bilateral model. However, in the case of a power exchange with a small
number of buyers and sellers, often there may be not enough bids to provide an assurance that
the price is competitive, thus creating the need for more market participants.

The short term power market is continuing its expansion and has reached the 11% mark. The
percentage of short term transactions of electricity to total electricity generation was 10.90% for

v
the FY 2012-13. This augurs well for the implementation of open access and organized power
market in the country. The rest of the power is transacted through long term PPAs while the
share of medium term contracts is still insignificant. The share of PX based day ahead
transaction has crossed 3% (3.56% of total power generated in India). More than 600 direct
consumers are buying from the power exchanges on a regular basis. Of all the short term
transactions of electricity, 43.74% transacted through bilateral followed by 38.86% through UI
and 17.40% through power exchanges.

This growth is expected to continue over the year and the biggest opportunity in short term
market is presented by the uneven distribution of natural resources. This makes few states like
Chhattisgarh, Odisha and Himachal Pradesh surplus in power over the next five years and states
like Maharashtra, Tamil Nadu, Andhra Pradesh and Uttar Pradesh will continue to struggle with
a deficit situation. Moreover, an analysis of the load curves of different states shows that the
peak for the different states come at different times and this create surplus and deficit situation
for states at different times. This presents an opportunity for arbitrage and can only be profitable
if a efficient short term market is in place. However, transmission remains a big concern, in
percentage terms around 3.93% of electricity in IEX and 15.45% in PXIL could not be cleared
due to congestion in state transmission grid. This congestion problem also present us a unique
opportunity opening the transmission sector for private players and coming out of the notion of
transmission being a natural monopoly.

As the market matures the risk hedging instrument can be introduced into the market. Things
may start rolling with the trading of transmission rights. It will hedge players from the issue of
transmission congestion as even if they cannot wheel their power on the line due to congestion,
still they will be earning something as the owner of transmission rights. They will be paid
charges by whoever is using the transmission line at that point of time. Subsequently a capacity
market can also be developing to hedge the risk of uncertainty in demand.

As the supply demand deficit ebbs, various derivative can be introduce that can be used to hedge
risk more appropriately and this will help increase liquidity in the market. With increasing
liquidity and competition, prices will come down. And the benefits of all these will be reaped by
the ultimate consumers.

vi
 1. LIST OF FIGURES
Figure 1.1 All India generating installed capacity (Mw) till (30-6-13)

Figure 1.2 Emerging Power Industry Structure

Figure 2.1 NPCL consumer profile

Figure 3.1 Attributes of Short Term Market

Figure 3.2 Development process of Indian Power Market

Figure 3.3 Structure of Indian power sector

Figure 3.4 STOA volume in BU in comparison to total generattion FY 2102-13

Figure 3.5 Percentage share of Electricity traded by Trading Licensees in MAY 2013

Figure 3.6 Price of short term transactions of electricity for month of MAY 2013

Figure 4.1 Factors for load forecasting study

Figure 4.2 Diagrammatic representation of Hybrid Model.

Figure 4.3 Steps for demand forecasting in short term

Figure 4.4 Methodology for building up hybrid models

Figure 4.5 Annual load curves for FY 2013-14 & 2014-15

Figure 5.1 Power market policies and Plan

Figure 5.2 Sectors governing open access as per EA-2003

Figure 5.3 Open Access Application

Figure 6.1 Sector wise electrical saving targets for 12th year plan (BU)

Figure 6.2 Load shape curve objectives associated with DSM

Figure 6.3 Scheme plot of chilling system & off-peak on-peak curve
vii
 2. LIST OF TABLES

Table-1 Total Volume of Short-term Transactions w. r.t. Total Electricity Generation

Table-2 NPCL Power Schedule With Traders and Bilateral

Table-3 KEY PLAYERS and Market Share 2012-13

Table-4 Price of Short-Term Transactions of electricity

Table-5 Assumption Under Hybrid Model

Table-6 Unscheduled Interchange (UI) Charges

Table-7 Energy Consumption & Saving Projection in 7 Industrial Sectors (DCs)

Table-8 Energy Consumption & Saving Projection in Energy Intensive SMEs

Table-9 List of Equipments & Appliances Under S&L During 12th Plan

Table10 Sales & Energy Saving Targets for Refrigerator Air-Conditioners

Table11 Sales & Energy Saving Targets for SEEP Appliances

Table12 Energy Saving Targets for 12th Five Year Plan

Table13 Region Wise Actual Power Supply Position Year 2012-2013

Table14 State Wise Actual Power Supply Position Year 2012-2013

Table15 Month Wise Power Supply Position in Uttar Pradesh

Table16 Steps for developing a TOU rate

Table17 Energy Savings Potential in India by Sector

Table18 Cash Flow Analysis: Lilavati Hospital

Table19 Details of T5 FTL projects by TPC-D & R-infra

Table20 Details of program of 5-star fans by TPC-D & R-infra

Table21 Details of program of 5-star rated ACs R-infra

Table22 5 star refrigerator program by R-Infra

viii
 3. ABBREVIATIONS

ABT Availability Based Tariff

APM Administered Price Mechanism

ARIMA Auto Regressive Integrated Moving Averages

BU Billion Units

CBG Competitive Bidding Guidelines

CDM Clean Development Mechanism

CERC Central Electricity Regulatory Commission

CEA Central Electricity Authority

CGS Central Generating Stations

CPP Captive Power Plants

CTU Central Transmission Utility

DAM Day Ahead Market

DSM Demand Side Management

DSM CC Demand Side Management Consultation Committee

EA Electricity Act

EE R&M Energy Efficient Renovation and Modernization

EM&V Evaluating Monitoring and Verification

EPC Engineering ,Procurement and Construction

FSI Floor to Space Index

ix
HEMS Home Energy Management System

IEX India Energy Exchange

IPP Independent Power Producers

ISDA International Swaps And Derivatives Association

IPMVP International Performance Monitoring & Verification Protocol

LoI Letter Of Intent

MERC Maharashtra Electricity Regulatory Commission

MPP Merchant Power Plant

MU Million Unit

NDC National Development Council

OTC Over The Counter

PAT Perform Achieve and Trade

PLF Plant Load Factor

PoP Population

PPA Power Purchase Agreement

PTC Power trading Corporation

PXIL Power Exchange India Limited

RFP Request For Proposal

RFQ Request For Quotation

RLDC Regional Load Despatch Centre

SEB State Electricity Boards

SLDC State Load Despatch Centre

x
TAM Term Ahead Market

TPC-D Tata Power Corporation-Distribution

TOU Time Of Use

TOD Time Of Day

UI Unscheduled Interchange

UNFCCC United Nations Framework Convention on Climate Change

WPI Wholesale Price Index

xi
 TABLE OF CONTENTS

ACKNOWLEDGEMENT………………………………………………………………………………………………………………………………………………….ii
DECLARATION……………………………………………………………………………………………………………………………………………………………….…iii
EXECUTIVE SUMMARY......................................................................................................................................................iv
LIST OF FIGURES……………………………………………………………………………………………………………………………………………………………..vi
LIST OF TABLES…………………………………………………………………………………………………………………………………………………………….….vii
ABBREVIATION…………………………………………………………………………………………………………………………………………………………….….viii

1 INTRODUCTION..........................................................................................................................................................1
1.1 OVERVIEW POWER TRADING..................................................................................................................................3
1.2 POWER TRADING IN INDIA………………………………………………………………………………………………………………………………….4
1.3 OPEN ACCESS AND TRADING……………………………………………………………………………………………………………………………..5
1.4 OBJECTIVE OF THE PROJECT……………………………………………………………………………………………………………………………….6
1.5 SCOPE OF THE PROJECT………………………………………………………………………………………………………………………………………..7
1.6 SIGNIFICANCE OF THE PROJECT…………………………………………………………………………………………………………………….….7
1.7 ABOUT THE ORGANISATION……………………………………………………………………………………………………………………………….7
 ORGANISATION PROFILE………………………………………………………………………………………………..7
 OPERATIONS………………………………………………………………………………………………………………………..8
 FINANCIAL VIABILITY OF THE COMPANY………………………………………………………………...9
 SERVICES………………………………………………………………………………………………………………………………..9

2 LITERATURE REVIEW………………………………………………………………………………………………………………………………………………….11
2.1 RESEARCH METHODOLOGY……………………………………………………………………………………………………………………………….15

3 SHORT TERM POWER MARKET STRUCTURE IN INDIA……………………………………………………………………………. 16

3.1 NEED FOR SHORT TERM POWER MARKET IN INDIA................................................................................ 17
3.1.1 DEVELOPMENT OF SHORT TERM MARKET IN INDIA …………………………………………………………. 17
3.1.2 ELECTRICITY ACT 2003 AND ENABLING PROVISIONS ON POWER MARKET………….... 20
3.1.3 NATIONAL ELECTRICITY POLICY ON POWER MARKET……………………………………………………..... 21
3.2 POWER TRADING SCENARIO IN INDIA………………………………............................................................................ 21
3.2.1. KEY PLAYERS MARKET SHARE 2011-12………………………………………………………………… …………………. 24
3.2.2 BENEFITS OF TRADING………………………………………………………………………………………………………………………. 26
3.2.3 CURRENT STATUS OF POWER MARKET………………………………………………………………………………..…… 28
3.2.4 POWER EXCHANGE : TREND AND CHALLENGES…………………………………………………………………….. 29

4 LOAD FORECASTING STUDY OF NPCL……………….………………….............................................................................. 30

4.1 OBJECTIVE………………..……………………….............................................................................................................. 30
4.2 NEED AND METHODS USED FOR DEMAND FORECASTING……………….................................................. 31
4.2.1 NEED FOR DEMAND FORECASTING………………………………………………………………………………………….... 31
4.2.2 WIDELY USED FORECASTING METHODS………………………………………………………………………………….. 32
4.2.2.1 TREND METHOD……………………..…………………………………………………….……..………………………….… 32
4.2.2.2 ECONOMETRIC METHOD…………………………………………………………………………………………….….. 32
I) UNIVARIATE TECHNIQUES…………………………………………………………………………………………..…….33

xii
 II) MULTIVARIATE TECHNIQUES…………………………………….......................................................33
4.2.2.3 TIME SERIES METHODS……………………………………………………………………………………………………...33
4.2.2.4 LAND USAGE METHOD……………………………………………………………………………………………………….34
4.2.2.5 CURVE FITTING TECHNIQUES/LAB FIT…………………………………………………………………………36
4.2.2.6 TEST FOR GOODNESS OF FIT……………………………………………………………………………………………37
4.2.3 OVERALL APPROACH FOR LOAD FORECASTING………………………………………………………………………..38
4.2.4 DEMAND FORECASTING METHODS USED FOR THIS STUDY………………………………………………..39
4.2.5 DETAILED STEP WISE METHODOLOGY…………………………………………………………………………………………..41

5 REGULATORY AFFAIRS...................................................................................................................................................48
5.1 EA 2003-INTRODUCTION……………………………………………………………………………………………………………………..48
5.2 POWER MARKETS…………………………………………………………………………………………………………………………………...50
5.3 OPEN ACCESS…………………………………………………………………………………………………………………………………………….52
5.4 UNSCHEDULED INTERCHANGE…………………………………………………………………………..................................54
5.5 POWER MARKET REGULATIONS…………………………………………………………….………………………………………...62

6. DEMAND SIDE MANAGEMENT …..………………………………………………………………………………………………………………….. 64

6.1 DSM IN INDIA...........................……………………………………………………………………………………………………………….65
6.1.1 ENERGY CONSERVATION STRATEGY IN THE 12TH PLAN ……………………………………..66
6.1.2 STRENGTHENING STATE DESIGNATED AGENCIES..…………………………………………..66
6.1.3 INDUSTRIAL SECTOR …………………………………………………………………………………………………67
6.1.4 EQUIPMENT & APPLIANCES ……………………………………………………………………..……………70
6.1.5 COMMERCIAL SECTOR ……………………………………………………………………………….……………74
6.1.6 RESIDENTIAL SECTOR ……………………………………………………………………………………..……….74
6.1.7 AGRICULTURE SECTOR ………………………………………………………………………………….………..75
6.2 INDIAN POWER SCENARIO …………………………………………….………………………………………………………………..77
6.3 POWER SCENARIO IN GREATER NOIDA …………………….………..........................................................79
6.4 DSM TECHNIQUES ..…………………………………………………………………………………………………………………..80
6.5 EVOLUTION OF DSM ………………………………………………………………………………………………………………. 82
6.5.1 U.S EXPERIENCE WITH DSM……………………………………………………………………………………84
6.6 DSM PROGRAMMES………………………………..……........................................................................................85
6.6.1 PRICE RESPONSIVE DSM PROGRAM……………………………………………………………………..86
6.6.2 LOAD CURTAILMENT PROGRAM ………………………….…………………………………………..…..87
6.6.3 DYNAMIC PRICING PROGRAM…………………………………………………………………………..……87
6.6.4 TIME OF USE PRICING (TOU)…………………………………………………………………..……………..88
6.7 UTILITY RESPONSE TO DSM………………………………………………….………………………………………………………..89
6.8 DSM IMPLEMENTATION FRAMEWORK……………………………………………………….……………………..91
6.9 NPCL APPROACH TOWARDS DSM………………………………………………………………………………………100
6.10 DSM THROUGH ENERGY SERVICE COMPANIES (ESCO) ………………………………………………..101
6.11 ON GOING PILOT PROJECTS IN MAHARASHTRA…………………………………………………………………106
6.12 INTERNATIONAL CASE STUDIES……………………………………………………………………………………………...110
7. CONCLUSIONS & RECOMMENDATION …………………..………………………………………………………………………115
8. REFERENCES…………………………………………………………………………………………………….……..117
9. BIBLIOGRAPHY............................................................................................................................................118

xiii
CHAPTER-1

1. Introduction

In India, there has been continuous failure in achieving the target capacity addition and
that has led to continuous deficit situation. This has paved the way for short term power
trading. But power trading in India is at an evolving stage and volume of exchange is not
huge. Ultimately consumers of electricity are largely served by their respective state
electricity board or their succeeding entity. Each central generating station, state
generating station has their capacity tied up. In other words, supplier don’t have much say
about whom to sell power and buyer have no choice about whom to purchase power
from.

Total Short-term Transactions of Electricity with respect to Total Electricity Generation:

Total volume of short-term transactions of electricity increased from 65.90 billion kWh (BU) in
2009-10 to 98.94 BU in 2012-13. The annual growth in volume was 24% from 2009-10 to 2010-
11 and 16% from 2010-11 to 2011-12 and 5% from 2011-12 to 2012-13. Total volume of short-
term transactions of electricity as percentage of total electricity generation has increased from
9% in 2009-10 to 10.9% in 2012-13(Table-1).
Table-1: Total Volume of Short-term Transactions of Electricity with respect to Total
Electricity Generation
Year Total Volume of Short- Total Electricity Total volume of Short-term
term Transactions of Generation (BU) Transactions of Electricity as %
Electricity (BU) of Total Electricity Generation
2009-10 65.90 764.03 9%
2010-11 81.56 809.45 10%

2011-12 94.51 874.17 11%

2012-13 98.94 907.49 10.9%

NOTE: Percentage share in total volume traded by licensees in 2012-13 computed based on the volume
which includes the volume traded by interstate trading licensees through bilateral and power exchanges.
The volume excludes cross border trading volume and intra-state trading volume.
SOURCE: Information submitted by Trading Licensees.

Table 1 Total Volume of Short-term Transactions w. r.t. Total Electricity Generation

1
Figure 1.1 All India generating installed capacity (Mw) till (30-6-13)
2
1.1 OVERVIEW (POWER TRADING)

Power trading inherently means a transaction where the price of power is negotiable and options
exist about whom to trade with and for what quantum. In India, power trading is in an evolving
stage and the volumes of exchange are not huge. All ultimate consumers of electricity are largely
served by their respective State Electricity Boards or their successor entities, Power
Departments, private licenses etc. and their relationship is primarily that of captive customers
versus monopoly suppliers. In India, the generators of electricity like Central Generating Stations
(CGSs), Independent Power Producers (IPPs) and State Electricity Boards (SEBs) have all their
capacities tied up. Each SEB has an allocated share in central sector/ jointly owned projects and
is expected to draw its share without much say about the price. In other words, the suppliers of
electricity have little choice about whom to sell the power and the buyers have no choice about
whom to purchase their power from.

The pricing has primarily been fixed/controlled by the Central and State Governments. However,
this is now being done by the Regulatory Commissions at the Centre and also in the States
wherever they are already functional. Power generation/ transmission is highly capital intensive
and the Fixed Charge component makes up a major part of tariff. India being a predominantly
agrarian economy, power demand is seasonal, weather sensitive and there exists substantial
difference in demand of power during different hours of the day with variations during peak
hours and off peak hours. Further, the geographical spread of India is very large and different
parts of the country face different types of climate and different types of loads.

Power demand during the rainy seasons is low in the States of Karnataka and Andhra Pradesh
and high in Delhi and Punjab. Whereas many of the States face high demand during evening
peak hours, cities like Mumbai face high demand during office hours. The Eastern Region has a
significant surplus round the clock, and even normally power deficit states with very low
agricultural loads like Delhi have surpluses at night. This situation indicates enough
opportunities for trading of power. This would improve utilization of existing capacities and
reduce the average cost of power to power utilities and consumers. In view of high fixed charges,
average tariff becomes sensitive to PLF. Trading of power from surplus State Utilities to deficit
ones, through marginal investment in removing grid constraints, could help in deferring or
reducing investment for additional generation capacity, in increasing PLF and reducing average

3
cost of energy. Over and above this, the Scheduled exchange of power will increase and un-
scheduled exchange will reduce bringing in grid discipline, a familiar problem.

STATE
CGS GENCO IPP

TRADER DISCOM

CONSUMER

1.2 POWER TRADING IN INDIA:

In India, while there is a huge section of consumers, who are power deprived, there are a lot of
Captive Power Plants (CPP’s) that are under-utilized and a lot of merchant capacity also
expected to be added in the near future, there is a need to encourage the peaking power plants
and bring the surplus captive power generation in the grid.

The Electricity Act, 2003, mandated development of power markets by appropriate

commissions through enabling regulations. This paved the way for the new trends to emerge
like Open Access and the one in February, 2007, when the Central Electricity Regulatory
Commission (CERC) issued guidelines for grant of permission for setting up operation of
power exchanges within an overall regulatory framework. The emerging trends will help
in proper flow of power from surplus regions to deficit regions and thus try to bring about a
balance in the power sector.

The National Electricity Policy, pronounced in February 2005, stipulated that enabling
regulations for inter-and-intra-state trading, and also regulations on power exchange, shall

4
be notified by the appropriate Commissions within six months. On 6 February 2007, the
Central electricity Regulatory Commission (CERC) issued the guide lines for grant of
permission for setting up and operation of power exchanges within an overall regulatory
frame work. Private entrepreneurship is allowed to play its role. Promoters are required to
develop their model power exchange and seek permission from CERC before start of
operation.

FIGURE 1.2 EMERGING INDUSTRY STRUCTURE

1.3 OPEN ACCESS AND TRADING:

The Electricity Act, 2003 which has come into force from 10th June, 2003 repeals the Indian
Electricity Act, 1910; Electricity (Supply) Act, 1948; and Electricity Regulatory Commissions
Act, 1998. In view of a variety of factors, financial performance of the state Electricity Boards
has deteriorated. The cross subsidies have reached unsustainable levels. A few States in the
country have gone in for reforms which involve unbundling into separate Generation,

5
Transmission and Distribution Companies. To address the ills of the sector, the new Act provides
for, amongst others, newer concepts like Power Trading and Open Access.

Open Access on Transmission and Distribution on payment of charges to the Utility will
enable number of players utilizing these capacities and transmit power from generation
to the load centre. This will mean utilization of existing infrastructure and easing of
power shortage. Trading, now a licensed activity and regulated will also help in
innovative pricing which will lead to competition resulting in lowering of tariffs.

DEFINITION OF “OPEN ACCESS” IN THE ELECTRICITY ACT, 2003:

“The non-discriminatory provision for the use of transmission lines or distribution system or a
associated facilities with such lines or system by any licensee or consumer or a person engaged

in generation in accordance with the regulations specified by the Appropriate Commission”.

ISSUES:
a) Freedom to buy/sell, and access to market
b) Adequacy of intervening transmission
c) Transmission/wheeling charges
d) Treatment of transmission losses
e) Energy accounting, scheduling, metering and UI Settlement.
The present level of inter-regional electricity exchange is still quite limited and the constraints
for enhancing the same are the relative lack of commercial awareness with SEBs, lack of proper
market mechanism (absence of tariff structure to promote merit-order operation and encourage
trading of power), inadequate transmission capacity, lack of statutory provisions for direct sale
by IPPs/CPPs/ Licenses outside the State, grid indiscipline and financial viability of State
Utilities, among others.

1.4 Objective of the project :-

The main objectives of the projects are

 To identify the need and importance of an efficient short term power market.

 To analyses the feasibility of open short term power market development in India.

 To trace the market development path in Indian power sector for the critical examination
of the prevailing conditions and their impact on various stakeholders.
6
  To reduce the demand and supply gap mismatch through DSM

 To encourage the competition in the market.

 To promote energy efficiency, having better load management.

 To understand the various risk associated with Short term power market for various
stakeholders

 To understand the DSM implementation framework and its importance for DISCOMS

 To analyse the various DSM opportunities in greater Noida and pilot projects started by
the utilities.

1.5 Scope of the project

The scope of the project, on a broad basis, would include participating entities in short term
market and current CERC regulation for the same. The participating entities in short term market
are the various regulatory authorities, power exchanges, trading licensee, merchant generators
and states discoms. State discoms that have been considered are the top 10 market participates in
terms of sales and purchase of power through short term transaction.

1.6 Significance of the project

Indian power sector has always been marred with various problems such as high deficit, low
quality power and inconsistence in supply. Through this study an attempt has been made to
understand the functioning of various developed power markets as well as the uniqueness of
Indian power sector .As per CERC Market Monitoring Cell, there is a huge difference between
generation and demand. So for meeting this criteria, short term power trading is been introduced.

Through this understanding inferences have been drawn as put some light what sort of paradigm
shift is required for improving the prevailing conditions and for countering the expected
problems that might crop up. As the long term Power purchase Agreement are not able to cater
the demand in a particular area and also their utilities which has got power in excess, then
problems occurs in both the cases:

First case is a Deficit zone case and Second case is the surplus zone case. In order to match these
deficit and surpluses, the short term power market is been evolved and to reduce peak demand
through DSM and energy efficiency.
7
1.7 ABOUT THE ORGANIZATION:

 ORGANIZATIONAL PROFILE
Noida Power Company Limited (NPCL) is a joint venture between Greater Noida Industrial
Development Authority (GNIDA) and CESC Limited, a company of RP-SG Group. The
Company was granted a supply license on 30th August 1993 by the State Government, under
section 3(1) of the Indian Electricity Act, 1910, which authorized it to supply electricity in the
licensed area.

At present, NPCL reaches out to a population of about 4.5lacs and is spread across villages,
hamlets and new township, spanning over an area of 335 sq.kms. It started with its operations
with a consumer base on approximately 4500 inn 1993 which has increased by more than 55000
in 2011 indicating a steady growth. The load profile in a region is dominated by large and heavy
industries that constitutes more than 60% of energy sale and contribute as much as 70% of
the revenues. The rural population consumes about 10% of the energy demand and has
agriculture as the main source of income. Urban, institutional and smaller industrial consumers
accounts for the balance revenue base for NPCL.

 Operations :
The Company executed an Agreement with the erstwhile U.P. State Electricity Board (now U.P.
Power Corporation Limited) in November 1993 for transfer of the supply arrangements and
sourcing of bulk power. Currently, the peak load served is 180 MVA as against 18 MVA in
1994-95, reflecting a steady increase in consumer demand. The company has taken power
45MW from UPPCL to meet it‘s base load .

The customer base has expanded from 4677 in 1993 to 54795 in March 2012. The rural
population provided with subsidized electricity consumes 12% of the energy demand and has
agriculture as the main source of income. otherwise the load profile is dominated by heavy
industries that constitutes 63% of energy sale and contribute as much as 70% of the companies
income. Urban , institutional and smaller industrial consumers account for the balance business.

8
Figure 2.1 NPCL consumer profile

 The customer profile is as follows:

Category of Consumers No. of Connections as on

15.12.93 31.03.2012

Large & Heavy Industry 38 425

Small & Medium Industry 201 1410

Domestic Light, Fan & Power Supply 3224 48031

Institutions - 365

Private Tubewell Connections 1188 1191

Commercial Establishments - 1828

State Tube well Connections 25 1

Public Lighting 1 3

Public Water Works - 160

Temporary Supplies - 1381

Total 4677 54795

Financial viability of the company :

Last sales turn over for FY 2011-12 is Rs 501 cr Last, having moved up from Rs.19 cr. in 1994-
95. Year-on-year, the revenue growth in 2011-12 is around 5%. Accompanied by a volume surge
of 11% . Currently, for FY 2012-13 sales turn-over is Rs 581.08 cr.

Employee costs account for less than 1.5% of revenue. In terms of productivity rates, the number
of consumers serviced per employee stands at 358 as of FY 2010-11 and the revenue per
employee at Rs.3.28 cr.

9
Services:

The principal role of Noida Power is that of a service provider to support economic and lifestyle
activity. Building an efficient and reliable delivery system thus assumes top priority to provide
supply dependability. That Greater Noida is witness to the setting up of world-class
manufacturing by multinationals like Honda Cars, Yamaha Motors, New Holland Tractors, LG
Electronics, ST Microelectronics, India Exposition Mart, GSC Toughened Glass etc., and is also
home to an upwardly mobile residential population, underscores this point further.

The Company maintains and operates round-the-clock emergency services to deal with supply-
related complaints and undertake rectification works. The facilities have been reinforced by
establishing a Call Centre that provides 24-hour messaging services to consumers and improves
trouble call monitoring. Complaint management is computerised, enabling call tracking from
start to finish and generation of ‗exception‘ reports.

Streamlined administrative procedures, on-time delivery of new supply and billing consistency
are the other facets of service that define the Company's inter-relationships with customers.
Organisational processes and hierarchical responsibilities are designed to meet the demand for
service in every aspect, including settlement of customer claims.

In addition to internal measurements, the Company relies on independent surveys as an annual

feature to assess the customers‘ feedback on their perception of service quality. Based on the
findings, process and systemic deficiencies are addressed to bridge the gap between expected and
actual performance levels.

10
CHAPTER-2

2. LITERATURE REVIEW
Bajpai, P (2006), in the paper titled “An electric power trading model for Indian electricity
market” In electric industry restructuring process, the main issue is to run the system in free and
fair manner ensuring the desired quality of power to the consumers at most economical price
through safe, secure and reliable operation of the power system. Although a number of market
models are prevalent in the International arena, the same could not be directly adopted for Indian
markets. Rather, a careful study of the existing models is to be carried out to evolve a model
suitable to Indian conditions, which is easy to adopt, sustain and to take care of existing
participants. With the enactment of Electricity Act 2003, along with other recent initiatives,
Government of India has outlined the counters of a suitable enabling framework for the overall
development of wholesale electricity market by introducing competition at various sectors. A
restructured power trading model for Indian scenario within the boundary of legal framework is
proposed in this research work. The proposed model is developed after in-depth discussions with
major power traders in Indian electricity market to overcome most of the major issues currently
faced by them

Fukui,H (2010), in the paper titled “Optimal comprehensive tendering models for project
procurement” In this paper, he consider a multi-attribute tender for project procurement, where
the contractor is selected on the basis of price and quality. He analyze the tendering behavior of
potential contractors in multi-attribute tenders and show that social surplus is maximized through
competitive bidding with consumer-surplus-based quasi-linear scoring rules. He consider the
case in which the aim of the government is to achieve socially efficient levels of quality that
maximize social surplus and simultaneously improve the expected utility for the government. In
order to achieve this aim, the introduction of the optimal lower limit of the bidding score is
important. In addition, He analyze a price-only tender and describe the optimal ceiling price in a
price-only tender as a special case of a multi-attribute tender.

Sachdeva, S. (2008), In the paper titled “Load Forecasting using Fuzzy Methods”, the author
demonstrates how the need of developed and developing countries to consume electricity more
efficiently. Though developed countries do not want to waste electricity and developing
countries cannot waste electricity. Hence, the wise use of electricity is the need of hour. This
leads to the concept - load forecasting. This paper is written for the shor
tterm load forecasting on daily basis. Though this can be extended to hourly or half-hourly or

11
real time load forecasting. But as we move from daily to hourly basis of load forecasting the
error of load forecasting increases. This paper is written on the practical analysis of previous
year's load data records of an Engineering College in India using the concept of fuzzy methods.
The analysis has been done on Mamdani type membership functions. In order to reduce the error
of load forecasting on daily basis fuzzy method has been used with artificial network (ANN)
with some iteration processes. The error has been reduced to a considerable level in the range of
2-3%. Further studies are going on with fuzzy regression methods to reduce the error more.

Eugene A. Feinberg et al (2009),in the paper entitled “LOAD FORECASTING” explains that Load
forecasting is vitally important for the electric industry in the deregulated economy. It has many
applications including energy purchasing and generation, load switching, contract evaluation,
and infrastructure development. A large variety of mathematical methods have been developed
for load forecasting. In this chapter he discusses the various approaches to load forecasting. And
finally he concluded thatAccurate load forecasting is very important for electric utilities in a
competitive environment created by the electric industry deregulation. In this paper we review
some statistical and artificial intelligence techniques that are used for electric load forecasting.
We also discussed factors that affect the accuracy of the forecasts such as weather data, time
factors, customer classes, as well as economic and end use factors. Load forecasting methods use
advanced mathematical modeling. Additional progress in load forecasting and its use in
industrial applications can be achieved by providing short-term load forecasts in the form of
probability distributions rather than the forecasted numbers; for example the so-called ensemble
approach can be used. We believe that the progress in load forecasting will be achieved in two
directions: (i) basic research in statistics and artificial intelligence and (ii) better understanding of
the load dynamics and its statistical properties to implement appropriate models.

Policies for Promoting Industrial Energy Efficiency in Developing Countries and Transition
Economies – Aimee McKane, Lynn Price, Stephane de la Rue du Can, Lawrence Berkeley
National Laboratory, prepared for UNIDO, [2007]

As one of the most energy intensive sectors in the global economy, the industrial sector is
surprisingly often overlooked by policy-makers when assessing options for improving energy
efficiency. Particularly in developing countries, an energy-intensive industrial sector can create
tension between continued economic development and a constrained or ineffective energy
supply. Common perceptions hold that public policy is insufficient in dealing with such a
complex issue as industrial energy efficiency, and that market pressures alone are sufficient to
ensure improvements. This paper provides a portfolio of coherent, proven policy options under
the international Industrial Standards Framework, in an effort to introduce a standardized
methodology for the design of industrial energy efficiency programs. Under this framework, it is
12
proposed thatcost-effective energy reductions in industry of 18-20% are entirely feasible. The
paper begins with an overview of industrial sector trends in energy consumption, covering
economic development and manufacturing productivity, as well as energy consumption. A
comparison of these trends in developing and developed countries is made also. The
opportunities for, and barriers to, improving industrial energy efficiency are then discussed,
followed by a comprehensive description of the model industrial standards framework,
encompassing energy management standards, capacity-building, financing and fiscal policies,
and more. The paper concludes with a set of recommendations for policy- makers in
implementing the standardized framework.

Energy Efficiency Labels and Standards: A Guidebook for Appliances, Equipment and
Lighting – Stephen Wiel, James E. McMahon, Collaborative Labelling and Appliance Standards
Program (CLASP), USA, [2005]

One of the first steps taken in the creation of energy efficiency programs is often the
establishment of standards & labelling programs for consumer products. This guidebook seeks to
act as the primary reference for policy-makers, government officials, and other interested parties
in their efforts to implement such programs, and contains a complete overview of the issues
surrounding standards & labelling activities. The benefits and problems with energy efficiency
labels and standards are discussed, as well as the human and institutional resources necessary for
ensuring the development and maintenance of such programs. A comprehensive breakdown on
the design, development, implementation, monitoring and evaluation of standards & labelling
programs is also provided.

Realizing the Potential of Energy Efficiency: Targets, Policies and Measures for G8 Countries –
Expert Group on Energy Efficiency, United Nations Foundation, USA, [2007] Energy efficiency
improvements are widely seen as the cheapest and surest means of creating energy savings,
sustaining economic growth and curbing carbon emissions. This report proposes that the G8+5
countries undertake ambitious, but achievable, programs to double the historical rate of energy
efficiency improvement, avoiding the need for up to US$3 trillion in new generation capacity in
the period 2012-2030. In addition, to achieve this goal, a set of proven policy options is
provided, covering a variety of sectors, to help policy- makers create effective national strategies.
Finally, a framework for co-operation between G8+5 nations is suggested, including proposals
for annual summits, and internationally- comparable data collection for energy efficiency. The
report begins with a brief summary of the technical and economic benefits of energy efficiency,
before recommending international and national strategies for realising energy efficiency
potential, including cross-sectoral measures, and incentives for public- and private-
sector investment. The report then goes on to highlight a number of individual policies for the
building, transportation, industrial and energy supply sectors, as well as assessing the overall
potential for energy efficiency in each sector. Finally, the report briefly explains how the
proposed measures could be applied in developing and transition economies.

13
Subbaraj,P (2007), in the paper titled “Short Term Hourly Load Forecasting Using Combined
Artificial Neural Networks” which presents a new approach for short term
hourly load forecasting (STLF) using combined artificial neural network (CANN) module. The
CANN module is developed for STLF using two different algorithms - evolutionary
programming (EP) and particle swarm optimization (PSO). In this paper, a set of neural networks
has been trained with different architecture and training parameters. The artificial neural
networks (ANNs) are trained and tested for the actual load data of Chennai city (India). EP and
PSO based optimal linear combinations are applied to combine selected networks and to obtain
CANN module, to produce better results, rather than using a single best trained ANN. The
obtained test results indicate that the proposed approach improves the accuracy of the
load forecasting.

A Description of Current Regulatory Practices for the Promotion of Energy Efficiency –The
International Confederation of Energy Regulators, [June 2010].

The challenges facing the growth in energy efficiency globally are numerous, from an
unaddressed need for systematic information gathering and under-researching of the field, to a
lack of comparative analysis of different approaches to promote energy efficiency. This report
provides information on regulatory practices in the world's energy markets designed to foster
energy efficiency. A wide range of approaches are identified in this report, from legal and
regulatory obligations, to consumer information campaigns, instituted by a variety of bodies,
from government departments to national energy regulators. In addition, a number of energy
efficiency indicators, such as primary energy intensity and primary energy consumption.

14
2.1 RESEARCH METHODOLOGY:

1. Research is been conducted through various study of Power trading Journals, Articles and
data been collected from the various websites too.
2. An attempt has been made to understand the functioning of various developed power
markets as well as the uniqueness of Indian Power sector.
3. The approach is to carried out all the consequences that a Distribution company faces
during the electricity traded for selling and buying power.
4. Through this understanding inferences, it has been drawn some light sort of paradigm
shift which is required for improving the prevailing conditions and for countering the
expected problems that might crop up.
5. In the project, the methodology for various zones like Deficit zone and Surplus zone is
considered in order to reduce the mismatch among those zones. So, for matching these
deficit and surpluses, the short term power market is been evolved.
6. The study determines the Load forecasting which helps to developed the optimal power
procurement plans for short term and long term horizons which can ensure sourcing of
power at optimum costs and also supplying unrestricted power to all consumers in future.
7. The various methods been used to forecast the energy requirement is done in the short
term forecasting.
8. A Eight steps methodology is been adopted for forecasting demand in Short term till FY
2012-17 using hybrid models.
9. The demand analysis is carried over three geographic dimensions-rural, urban & total
area as a whole, and across one time horizons-5 years (Short term).
10. The analysis of rural & urban areas was carried out separately for the single time
horizons (5 years) to understand their load patterns.

15
CHAPTER-3

3. SHORT TERM POWER MARKET STRUCUTRE IN INDIA

Short term transactions of electricity in India are the contracts of less than one year period for
electricity transacted through Inter-state trading licensees and directly by the distribution
licensees, power exchanges (Indian Energy exchange (IEX) and Power Exchange India Ltd
(PXIL), and unscheduled Interchange (UI).

Interstate trading licensees have been carrying out trading since 2004, when open access
provision was implemented. Power exchanges are in operation since 2008. The IEX and PXIL
became operational in June 2008 and October 2008 respectively. As of June 2011, there were 51
trading licensee and two power exchanges.

Since the starting of interstate trading, the volume of electricity traded has been continuously
increasing. In 2010, the total volume traded in short term market was almost 6% of total
electricity generated, excluding UI based drawls. It has increased from a mere 3% when the
power exchanges started their operation. More than 50% of the short term transaction has been
through bilateral trading for various reasons. The relatively high impact of transmission
congestion and volatility of prices in power exchanges are the main reason

Through Trading
ZZZZ Licensee Capacity
Premium to Generator.
Direct Bilateral Higher Return.
transaction By Flexibility to buyers. Through Power
generators and Exchanges Transparent
distribution licensee pricing Transmission
through mutual congestion Issues
understanding

Short term
market

FIGURE 3.1 : ATTRIBUTES OF SHORT TERM MARKET

16
3.1 NEED FOR SHORT TERM POWER MARKET IN INDIA

Seasonal demand due to agrarian economy

Demand in India, being an agrarian economy, is driven by various factors such as weather,
temperature and agriculture operations. Although these demands are cyclic in nature, the
quantum of demand is still determined by factors such as rainfall and temperature. So it will
always be difficult to predict these demands. In the year 2009, the electricity prices had a hit a
level of Rs. 17 per unit in the month of August due to below normal rain. The situation went to
such drastic level mainly due to high demand and inadequate supply. Such situation can be
deterred in future by having a more liquid and efficient short term market.

It acts as good price signal for investment

High prices in short term market signal the increasing demand situation. As such a free market
can give price signals for more investment. By analyzing the demand scenario, it can be
concluded weather the situation is more conducive of independent power plant (IPP) or merchant
power plant (MPP). However, they do have some risk associated with them. The high prices in
the market may just be a temporary phenomenon arising out of abnormal conditions such as
abnormally high temperature or lack of rainfall.

3.1.1 Development of Short term market in India

India’s electricity has undergone the reform process and is still evolving. Although there were
many agenda for reform, one of the priorities was to facilitate nationwide electricity trading at a
whole sale level and to develop an efficient wholesale electricity market in India. The initial step
in this direction was to encourage wholesale trading between states. To facilitate this, in 1999,
Power Trading Corporation (PTC) was established in India on the government initiatives. PTC
acted as a broker helping market participants find counterparts. So electricity trading in India
started in the form of bilateral trading.
However, trading volume of PTC was small relatively to the huge demand. Also POWERGRID
which was responsible for system operation at national level was loosely coordinating the
RLDCs. It meant that each state had to carry out dispatching from its own generating plant. And
as such the situation of one state being power deficit and
another power surplus during different times persisted. The deficit state resorted to load shedding
in order to match supply and demand.

17
In order to streamline the system of scheduling and dispatching, Availability based tariff was
implemented. It would panelise generator and loads for unscheduled interchanges. It also created
incentive for a central dispatch schedule and trading of surplus power, if any. It had a positive
effect on generators which started operating more efficiently. But ABT in itself does not balance
supply and demand in real time and does not ensure a least cost dispatching. Utilities started
overdrawing power from grid to meet their demand even at high UI charges. It not only led to
high pooled power cost but also put the grid security at stake.

To take care of this, in Electricity Act 2003, electricity trading as a distinct activity was
permitted on the basis of licenses. Central electricity regulatory commission (CERC) was made
responsible for granting license, which would be valid for 25 years. The Act also provided
guidelines for provision for open access which made it convenient to procure power from short
term market. This gave some freedom for new players to engage in electricity trading through
bilateral contracts.
It has been recognized in India as well as in developed power market; electricity trading through
bilateral contract is promoted based on voluntary agreement of market participants. Reliance on
voluntary agreement among the market participants, however, does not necessarily guarantee the
evolution of an efficient power market. Transaction costs associated with the bilateral contracts
stops relatively smaller player to participate in the market limiting competition. Also it
results in lack of transparency in price discovery. So the need for an organized power market to
determine the electricity prices in transparent manner, thereby facilitating efficient trading
among the player was felt.
In July 2006, CERC took a giant leap forward in developing the electricity market in the country
and floated a discussion paper on “Developing a Common Platform for Electricity Trading”. In
this paper learning from different foreign markets such as Nord Pool, PJM, UK power market etc
was considered and attempt was made to visualize them in Indian conditions.
The benefits envisaged by the formation of power exchanges where:
Trading is done in an efficient, transparent and equitable manner.
Existing resources are optimally utilized and availability of power supply increases.
Standardization of electricity as a tradable product can be achieved.
Easy access to new entrants is possible.
Electricity is valued in terms of time of the day/season.
There are clear signals for adding capacity.
Business confidence in power sector grows.

18
On 27th June 2008, India’s first ever power exchange came into existence as the Indian Energy
Exchange Ltd. (IEX). This development process can be shown in figure below

FIGURE 3.2 Development process of Indian Power Market

Most of the capacity of various central generating unit, state generating unit and SEBs are tied up
in long term PPA which is normally there for time period of 20-25 years. For seasonal demand
power is procured through medium term bilateral agreement which can be directly between two
utilities or through trader. And the gaps that still exist in demand, which cannot be predicted, are
fulfilled through short term market. Short term power procurement can be done through bilateral
agreement, power exchanges or by real time balancing through UI mechanism. Bilateral
agreement can be directly between utilities or through trader and currently more than half of
short term power procurement is done through this.

19
The current structure of Indian power sector can be visualized by figure:

FIGURE 3.3 : STRUCTURE OF INDIAN POWER SECTOR

Indian Power Market

Long Term Medium Term Short Term

PPA’s
Bilateral Bilateral Exchange UI

Direct Trader Direct/Trader Day Ahead Real Time

3.1.2 EA 2003 and enabling provisions on Power Market

Electricity Act 2003

i) The intent and object of the EA 2003 is to develop power market through
increased competition, more players and protect consumer interests

ii) Development of Power Market – EA 2003, Section 66, “The Appropriate Commission shall
endeavor to promote the development of power market…”, guided by the National
Electricity Policy

iii) Suitable safeguards to prevent adverse effect on competition

iv) Recognized Trading as a distinct activity

v) Definition under section (2) (47): “Purchase of electricity for resale thereof”

vi) Adequate and progressive provisions governing open access both :

• to transmission networks (inter-state and intra-state) and

• to distribution networks

20
3.1.3 National Electricity Policy on Power Market

National Electricity Policy 2005 –

“To promote market development, 15% of the new generating capacities, be sold outside
long term PPAs”.

As the power markets develop, it would be feasible to finance projects with competitive
generation costs outside the long term PPA.So, this will increase the depth of power
market and in long run would lead to reduction in tariff”

3.2 Power Trading Scenario In India:

Short term open access and total generation of power in million units is shown in figure
below for FY 2012-13.

90000

80000

70000

60000

50000

40000 STOA
TOTAL GEN
30000

20000

10000

Figure 3.4 STOA volume in BU in comparison to total generation FY 2102-13

21
98.94 billion units out of total generated 907.49 billion units is traded through short term
open access in FY 2012-13.

STOA by VOLUME(BU)

STOA
TOTAL GEN

To fulfill the needs NPCL also buy around 75% power to supply in its licensee area on short
term open access. NPCL having single long term bilateral contract with UPPCL for 45Mw,
of 25 years and rest through STOA.

There are many traders through which NPCL buy power and also some bilateral contracts
with generators, the list of such traders is given below with schedule chart for one day power
supply in licensee area.

22
Table 2-NPCL POWER SCHEDULE WITH TRADERS AND BILATERAL

23
3.2.1 KEY PLAYERS AND MARKET SHARE 2012-13
Table 3 : PERCENTAGE SHARE OF ELECTRICITY TRANSACTED BY TRADING
LICENSEES in 2012-13
Sr.No. Name of the trading Licensees % Share of Electricity traded by
Licensees in 2012-13
1 PTC India Ltd 33.05%

2 NTPC Vidyut Vyapar Nigam Ltd 17.44%

3 Tata Power Trading Company(P) Ltd. 10.57%

4 National Energy Trading Services 9.96%

Ltd.
5 Reliance Energy Trading (P) Ltd 7.47%

6 Adani Enterprises Ltd. 4.58%

7 Knowledge Infrastructure Systems (P) 4.34%

Ltd
8 JSW Power Trading Company Ltd. 3.21%

9 Instinct Infra and Power Ltd. 2.53%

10 Shree Cement Ltd. 2.51%

11 GMR Energy Trading Ltd. 1.86%

12 Jaiprakash Associate Ltd. 1.16%

13 Global Energy(P) Ltd. 0.62%

14 Mittal Processors (P) Ltd. 0.32%

15 RPG Power Trading Company Ltd. 0.26%

16 Jindal Power Trading Company Ltd. 0.08%

17 Essar Electric Power Development 0.03%

Corp.Ltd
Total Volume 100%
Top 5 Trading Licensees 78.49%

NOTE: Percentage Share in Total volume Traded by Licensees in 2012-13 computed based on
the volume which includes the voume traded by inter-state trading licensees through bilateral and
power exchanges. The volume excludes cross border trading volume and inter-state trading
volume
Source: Information Submitted by Trading Licensees.

24
The Percentage share of electricity transacted by major trading licensee in the total
volume of electricity transacted by all the licensees is shown in Figure below:

Figure3.5: Percentage Share of Electricity Traded by trading Licensees in MAY 2013

Volume of various kinds of electricity transactions in total electricity generation for month of
may 2013 is shown below

25
 3.2 .2 Benefits of Trading

1) Increasing realization among utilities of power as a source for revenue earning.

 Improved PLF, particularly of State Power Utilities
An example: DVC - a rise of 5% in PLF

 No backing down
 Reduction in load shedding
 Trading results in optimization of resource utilization

2) The short term market has created “value” for power. There is a distinct shift towards higher
revenue realization.

Table 4 - PRICE OF SHORT-TERM TRANSACTIONS OF ELECTRICTY

Year Price of Electricity transacted Price of Electricity Price of UI
through Trading transacted through (‘/kWh)
Licensees(‘/kWh) Power exchanges
( DAM + TAM)
(‘/kWh)
2006-07 4.51 - 4.51

2007-08 4.52 - 4.52

2008-09 7.29 7.49 6.70

2009-10 5.26 4.96 4.62
2010-11 4.79 3.47 3.91
2011-12 4.18 3.57 4.09

26
 Figure 3.6 Price of short term transactions of electricity for month of MAY 2013 is
shown below:-

3) Encouraged IPPs to invest in generating assets- spurt in investment based on competitive tariff
due to widening demand –supply gap.

 Market-based returns
 No sovereign/government guarantee
 Large merchant capacity is being funded

Power Market: Salient Features

1) The wholesale market for electricity in India is completely voluntary by design - that
none of the market participants are obliged to operate through a restricted and
compulsory market.

2) This is because the buyer is free to choose from any of the following options:

a) Long term PPA based mechanisms

b) Medium Term
c) Short term bilateral trades
27
 d) Trading through the power exchange
e) Real time mechanisms (UI)

4) Even the real time arrangements are completely voluntary, since the UI mechanism
permits frequency to float within a range, providing tremendous flexibility to market
participants.

5) Further, the rules regarding standards of supply are more liberal, permitting greater
flexibility to utilities on demand side response.

3.2.3 Current Status of Power Market

A fledgling, nascent market
Limited growth of volumes of short term traded market due to
Overall deficit scenario
Limited number of active players and resultant liquidity crunch
Transmission constraints/congestion
Rising cost of traded power: (The average cost Rs. 3.57/kWh in 2011-12)
Due to overall shortage situation (widening demand-supply gap)
Lack of capacity additions
Linkage with UI rates and
Rising fuel prices
3.2.4 Power Exchange: Some Interesting Trends
IEX commenced operation with effect from 28th June, 2008

The data up to 20th August, 2008 reflects that the average purchase bids received (in
MUs) are about four times the average sale bids received (in MUs)

Even more interesting is that whatever is on offer by the sellers at perceived high prices
are not being accepted by the buyers and less than 50% sales bid has actually been
cleared by the market at market clearing price.

This data, interalia, establishes without doubt that the buyers are exercising their choice
to procure prudently, keeping in mind “affordability” and “prudence-checks” to
voluntarily not off-take power from sellers what they perceive as high cost.

Integrated Energy Policy:

28
Key Challenges

Market depth to be increased – more players, regional participation

Open Access Implementation
New Segment of prospective participants

 Industry

SEZs

 HT consumers

Group Captives

Merchant generators
Sufficient transmission capacities required for a vibrant power market
Government to initially support through ‘viability gap funding’

29
CHAPTER-4

4. “LOAD FORECASTING STUDY OF NOIDA POWER COMPANY

LIMITED”

4.1 Objective of study

Load forecasting is an essential exercise for every distribution utility as it helps developing
optimal power procurement plans for short and long term horizons which can ensure sourcing of
power at optimum costs and also supplying unrestricted power to all consumers in future.

In the last decade, Greater Noida has seen rapid infrastructure development owing to the setting
up of a no. of residential societies, institutions and industries. This has correspondingly resulted
in a significant increase in the demand for energy. The magnitude of the historical growth in
electricity demand can be gauged by the fact that NPCL catered to a maximum demand for
18MVA in 1994 which has now grown to approximately 180 MVA, with compounded annual
growth rate of more than 15%. However, this growth of electricity demand has also been
accompanied with continuous power shortage scenarios since FY 2005-06 which has been
addressed mainly by load curtailment.

Moving forward, this area expects further growth in electricity demand as GNIDA has taken up
the infrastructural development activities on a large scale to meet its objectives that has been set
as per Master Plan 2021 .

The extent of infrastructural development in greater Noida region in past can be gauged by the
fact that the decadal growth (from 2001 to 2011) of land usage is a whopping 165% approx. as
per GNIDA’s Master Plan 2021.This has been reflected in a substantial growth in the industrial
sector. Along with industrial growth ,there has also been a significant rise in the population
growth rate.The present population, as per GNIDA estimates, is approximately 7lacs.It has

grown with a growth rate of more than 130% over a population estimate of 3lacs in 2001.

In order to ensure an uninterrupted and reliable supply of power to the consumers in future, it is
therefore, important to accurately forecast the electricity demand, so that an optimal power
procurement plan can be developed. This study would also be useful for NPCL to plan and
augment its network capacity to meet this expected load growth.

30
4.2 NEED AND METHODS USED FOR DEMAND FORECASTING

4.2.1 Need for Demand forecasting

The need and relevance of forecasting demand for any utility has become very important in the
recent past as the demand for power has seen to be growing at a very high rate, often exceeding
the expectations of the utility with which they enter into the long term power procurement
agreements. This trend has, thus, resulted in either creating a situation of acute power shortage in
the distribution networks or have eroded the financial health of the utility through huge power
purchase cost that is contracted for the short term (to meet this unforeseen growth in energy
demand).This has led to the development of various new tools and methods for forecasting the
electricity demand. In the past, Straight line extrapolations of historical energy consumptions
trends served well.However, in an inflation hit-economy and rapidly rising energy prices
,coupled with the emergence of alternative fuels and technologies and changing lifestyles of
people etc,it has become imperative to use modelling techniques for forecasting which capture
the effect of factors such as prices, income, population, technology and other economic,
demographic, policy and technological variables.

In the light of above, precision in load forecasting has become the need of the hour. In the past,
the energy demands, across India, have been observed to be usually overestimated,
notwithstanding the capacities falling short of the actual demands on a year-to-year basis.
However, eventually with a predictability of regulation and a favourable public image, all made
the process of forecasting demand underestimation could lead to under capacity poor quality
service including localized brownouts and blackouts, an overestimate could lead to the
authorization of a plant that may not be needed for several years.

Moreover, in view of the on going reform process, with associated unbundling of electricity
supply services, tariff reforms and rising role of the private sector, are realistic assessment of
demand assumes ever greater importance. These are required not merely for ensuring optimal
phasing-in of investments (a long term consideration),but also rationalizing pricing structures
and designing demand side management programs(short or medium term consideration’s).

The fact remains that the gestation period for power plants, which are set up to meet consumer
demand typically varies between 7to 12 years in the case of thermal and hydro plants and 3 to 5
years for gas-based plants. As a result, utilities must forecast demand for the long run(10 to 20
years ),make plans to construct facilities and plan their development process accordingly.

31
Short-term demand forecasting also plays a role in the process of regulation. A precise estimate
of demand is important for the purpose of setting tariffs. A detailed consumer category-wise
consumption forecast helps in the determination of a just and reasonable tariff structure wherein
no consumer pays less than the cost incurred by the utility for supplying the power .Also, the
utility can then plan the power purchase requirements so as to meet the demand while
minimizing their purchase from the short-term power market, while offer relatively more
expensive power.

To deal with all of the above, various forecasting techniques have been developed, ranging from
very simple extrapolation methods to more complex time series techniques, extensive area-
specific subjective approaches and optimization methods, or even hybrid models that use a
combination of these for purpose of prediction.

4.2.2 Widely used forecasting methods

There is an array of methods that are available today for forecasting demand .An appropriate
method is chosen based on the nature of the data available and the desired nature and level of
detail of the forecasts .An approach often used is to employ more than one method and then to
compare the forecasts to arrive at a more accurate forecasts. Methods commonly referred to in
literature on energy forecasting that could be used for both long- and short-term forecasting are
as follows:

4.2.2.1 Trend Method

This method falls under the category of the non-casual models of demand forecasting that do nt
explain how the values of other variable affected the variable to be predicted. Here, the variable
is expressed to be purely a function of time, rather than b relating it to other economic
,demographic, policy and technological variables. This function of time is obtained as the
function that best explains the available data, and is observed to be most suitable for short-term
projections, as it captures the recent time trend inherent in the data.

4.2.2.2 Econometric methods

I) Univariate Techniques

Univariate techniques, by definition, only considers past data of the variable that needs to be
projected. Two of the most commonly used univariate techniques for forecasting are:

32
 i) Exponential smoothing
ii) Auto Regressive Integrated Moving Averages (ARIMA)
i) Exponential smoothing

Exponential smoothing is a technique that is usually applied to time series data, either to
produce smoothed data for presentation, or to make forecasts.

In our study we used the following exponential smoothing techniques:

a) Simple exponential smoothing

b) Brown’s double exponential smoothing
c) Holt’s no seasonal trend smoothing
d) Holts-Winter’s multiplicative and additive exponential smoothing.

ii) Auto Regressive Integrated Moving Averages (ARIMA) Method

An Auto Regressive Integrated Moving Averages (ARIMA) model is a generalisation of an auto

regressive moving averages (ARIMA) model. These models are fitted into a time series to better
understand the data or to predict future point in the series. The model is generally referred to as
an ARIMA(p,d,q) model where the p,d,q are integers greater than or equal to zero and refer to
the order of the auto regressive, integrated and moving average parts of the model respectively.
This technique uses the historic values and the forecasts errors to predict the future values of a
time series data.

II) Multivariate Techniques

This technique is classified under multivariate techniques because it considers the causal
relationships that might exists between other variables,economic,weather-related etc. and the
variable that needs to be projected. This approach combines economic theory with statistical
methods to produce a system of equations for forecasting energy demand. Taking time series or
cross-sectional pooled/data, causal relationships could be established between electricity demand
and other economic variables. The dependent variables, in our case, demand for electricity, could
be expressed as a function of various economic factors. For illustration, these variables could be
population, income per capita and weather related data etc. Thus one could have:

ED=f(Y, W, POP)

Where ED=electricity demand

33
Y=per capita income

W=Weather related parameter

POP=population

Several functional forms and combination of these and other variables may have to be tried till
the basic assumptions of the model are met and the relationships is found statistically significant.

Inserting forecasts of the independent variables into the equations would yield the projections of
electricity demand. The sign and coefficients of each variable, thus estimated, would indicate the
direction and strength of each of the right-hand-side variable in explaining the demand in a
sector.

4.2.2.3 Time Series Method

A time series is defined to be an ordered set of data values of a certain variables. Time
series models are, essentially, econometric models where the explanatory variables used
are lagged values of the variables to be explained and predicted. The intuition underlying
time series processes is that the future behaviour of variables is related to its past values,
both actual and predicted, with some adaptation/adjustment built-in to take care of how
past realizations deviated from those expected. Thus, the essential prerequisite for a time
series forecasting technique is data for the last 20 to 30 time periods. The difference
between econometric models based on time series data and time series models lies in the
explanatory variables used. It is worthwhile to highlight here that in an econometric
model, the explanatory variables(such as incomes,prices,population,etc.) are used as
causal factors while in the case of time series models only lagged(previous) values of the
same variable are used in the prediction.
4.2.2.4 Land-Usage Method

The land-usage approach attempts to capture the impact of energy usage patterns of various
zones identified in the NPCL license area.

The land-usage model for electricity demand focuses on usage of land in terms of Residential,
Commercial, Institutional, and Industrial. The approach takes into account the building by-laws
and land usage norms, load per area norms and the level/stage of urbanization/development of
these zones.

34
For example, the load in a zone (identified by the dominant consumer category) can be
determined

By considering the factors like the total area of that zone, Percentage occupancy (stage of
settlement),the space coverage norm, and the Floor to Space Index (FSI) to arrive at the effective
usable area for that zone. It is further multiplied with utilization factor to estimate the effective
load on the zone.

The following relation defines the land usage methodology being applied for a zone:

Lz =A x O x S x F x LA x UF

Lz= Utilized Load of a zone(MW)

A=Area of the zone (sq.kms)

O = % of the area occupied based on the level of urbanization/development

S=Space Coverage Norms/By laws specified for each consumer category

F=Floor to space Index specified for each consumer category(The index represents how much
height of a building can be allowed on a given size of area)

LA=Load per area (MW per sq.km)

UF= Utilization factor for each consumer category.

This, when summed over different zones in the NPCL license area, gives the aggregate energy
demand for the system asa a whole. This method takes into account the varying levels of
urbanization/development (current and planned), the dominant consumer category of each zone
so that the network augmentation plan is designed accordingly.

4.2.2.5 CURVE FITTING TECHNIQUES/LAB FIT

Curve fitting is the process of constructing a curve, or mathematical function that has the best fit
to a series of data points, possibly subject to constraints. Curve fitting can involve either
interpolation, where an exact fit to the data is required, or smoothing, in which a “smooth’
function is constructed that approximately fits the data or extrapolation which uses a fitted curve
beyond the range of the observed data, especially, for forecasting purposes. Fitted curves can be
used as an aid for data visualization, to infer values of a function where no data are available, and
to summarize the relationships among two or more variables.
35
Lab-fit is one of the most popular software used for this Curve Fitting Analysis.

Combining econometric and time series models

It is the model to use a combination of econometric and time series models to achieve greater
precision in the forecasts. This has the advantage of establishing causal relationships asz in an
econometric model along with the dependency relationship. Various functional forms such as
linear, quadratic, log-linear, translog, etc. are used to capture the possible trends that may be
evident in the data. The functional form of the model is arrived at after a trial and error process.
A model is built using the available data, truncating the last few observations. The procedure for
testing the model entails making predictions for the alst few time periods for which the actual
data are available and were truncated. The functional form where the forecasts have least
deviations from the data available is chosen.

4.2.2.6 Test for Goodness of Fit

The Goodness of fit of a statistical model describes how well it fits a set of observations. This is
often measured by a Pearson’s chi-square test.

Pearson’s chi-squared test uses a measure of goodness of fit which is the sum of differences
between observed and expected outcome frequencies, each squared and divided by the
expectation. The test statistic being:

Where:

Oi= an observed frequency(i.e. count) for bin i

Ei= an expected (theoretical) frequency for bin i,asserted by the null hypothesis

The expected frequency is calculated by:

Ei= (F (Yu)-F (Yl)) N

Where:

F=the cumulative Distribution function for the distribution being tested.

Yu=the upper limit for class i,

36
Yi=the lower limit for class i, and

N=the sample size

The resulting value can be compared to the chi-squared distribution to determine the goodness of
fit.

The test for goodness of Fit has been run for all the approaches in case of every consumer
category and finally, the model which yields the best fit has been adopted.

4) Approach for load forecasting study

4.1 Factors affecting demand

For developing the specific approach for this study, we have concentrated on various parameters
that have impacted the load growth in the past and also on parameters that are expected to play a
major role in future’s load growth.

It is very important to analyse, in detail, the Infrastructure development plans of the region, the
present and proposed land usages(as per GNIDA’s master plan for 2021) to envisage their impact
on load growth and also for making individual long-term forecasts for every consumer category.

For making short term projections, analysis is done in detail where the historical load growth
patterns on a seasonal basis, assuming the seasonality and trend factors to continue over the
different season, across the various consumer categories in the near future.Further,special
attention has been paid to the short-term plans of development in terms of new
residentisl,industrial and institutional blocks envisaged and their impact on the load growth.
Apart from above mentioned factors, weather related factors such as temperature, rainfall and
humidity were also considered to estimate their impact on the load growth in the short run.

Further, economic parameters such as per capita income, the Gross Domestic Product (primary,
secondary and tertiary, population of the region etc. have also been considered for estimation of
load and consumption of the next 10 years.
Economic activities, inflation, land usage patterns, building by-laws, penetration of technology,
energy efficiency, have been looked at while making long-term as well as short-term projections
for load growth.

37
NPCL caters to both urban and rural areas, thus it was considered important to analyse the
demand factors for rural and urban areas separately for envisaging their impact on demand
growth.

Further it also very important to consider and analyse the load growth at zonal level which will
facilitate, abetter network augmentation planning at the zonal level. Thus along with econometric
projections, land usage method is also used for estimating the expected loading patterns at zones.

The important factors that have been considered for load forecasting study are shown in the
figure below:

Rural-Urban area growth patterns

Urban area growth patterns

Economic growth
Population
Number of consumers
Rural metering plans
Land usage patterns
Historical load curtailment
Technology Penetration
Industrial growth patterns
Weather related factors
Expected significant load

FIGURE 4.1 Factors for load forecasting study

4.2.3 Overall approach for load forecasting
For conducting this study, a consumer category specific approach has been adopted to forecast
the future consumption of each category for NPCL license area for better estimation and
understanding the behaviour of all categories in future.

38
The approach was adjusted suitably as per the availability of historical data. A number of
methods were used for estimating load growth, including univariate and multivariate
econometric methods, time series, trend analysis and land usage methods.

In order to arrive at most appropriate estimate of demand, a hybrid model was applied for every
consumer category in the short and long term to derive the load growth and then, the best-fit
results have been considered for final projections. In addition, relevant plants and vision
documents have also been taken into account for building up the assumptions for demand
forecasts.

4.2.4 Demand forecasting methods used for this study:

In this study, we have used hybrid approach based models where we had used &compare various
methods, and then selected the best method. Selection of the best method was dependent upon
various factors like availability of required data set, practical feasibility of the results obtained
from different methods, and evaluation of the results obtained through goodness of curve fit,etc.

A six hybrid model is been built; three hybrid scenario models have been built for forecasting
results in short term horizon for the period of five years(upto FY 2016-17) and another three
hybrid scenario models have been built for forecasting results in long term horizon for the period
of ten years(upto FY 2021-22).

For developing the hybrid models, we chose our primary method as econometric method(with
both univariate & multivariate techniques) for forecasting the results taking into account the
economic, demographic policy and technology variables. Apart from econometric methods, we
also used other methods like trend analysis, time series, lab-fit, etc. on each &every consumer
category in short and long term to derive the load growth. The best fit results in hybrid model
were then considered for final projections.

Further to conduct the analysis at zonal level, we also used land usage method as discussed
above to derive the probable loading patterns on zones.

39
 Land Usage
Method

Trend Analysis
HYBRID Econometric
MODEL

Time Serties

FIGURE 4.2: Diagrammatic representation of Hybrid Mode

Methodology and Draft Overview:The following figure represents the the 8 step summary that
has been adopted for the forecasting demand in Short term till FY 2012-17 using hybrid models

FIGURE 4.3 : Steps for demand forecasting in short term

1. Identification of 3. Forecasting
2. Significant
independent significant
independent
variables used in independent
variable
short term variables

6. Forecasting load
5. Analysis for
4. Development of for unmetered
significant load
hybrid models categories as per
expected
metering plan

7. Development of
case based 8.Estimating future
scenarios for hybrid loss trajectory
models

40
 A hybrid approach for each and every consumer category is used to forecasts results in short
term. Every consumer category was analysed in detail in short term to analyse their load growth
and behavioural patterns. The same approach was even used for each major HT industrial
consumer.

The demand analysis is carried over three geographic dimensions-rural, urban & total area as a
whole, and across one time horizons-5 years(Short term).The analysis on rural &urban areas was
carried out separately for the single time horizons(5 years) to understand their load patterns.

4.2.5 Detailed Step wise methodology:

Step 1: Identification of independent variables:

As discussed, there are a number of variables in short term which impact the demand for electricity. For
this study, the independent variables considered (on the basis of data availability) for the purpose of
projecting consumption estimates in short term for various categories are provided as below:

Independent Variables - Short Term

Mean Maximum Temperature

Mean Minimum Temperature
Relative Humidity
Rainfall
Wholesale Price Index (WPI)
Rate of Inflation
Number of Consumers

Step 2: Identification of significant independent variables

The Regression equations were developed with the significant variables and initial functional
form to derive the final coefficients. All the variables have been subjected to the same round of
testing of significance for various consumer categories.

Based on the regression analysis for all the consumer categories with selected variables, we
found the following factors to be most significant:

41
Categories Minimum Maximum Relative Rainfall WPI Number of Inflation
Temperature Temperature Humidity consumers Rate
(%)

LMV-1 √ √

LMV-2 √ √

LMV-3 √

LMV-4 √

Step-3: Forecasting of Significant independent variables

Hybrid approach: Independent variables have been assumed suitably for the forecasting
horizon using various methods, as shown below. Finally, values derived from the best-fit hybrid
models have been used

Forecast ing of
independent variables

Econometric
Curve Fitting Compounded
Trend analysis Univariate
Model growth rates
Approach

Step-4: Development of Hybrid Models and identification of best method

• Hybrid approach based model chosen

• Selection of the best method was dependent upon

o availability of required data set,

o practical feasibility of the results obtained from different methods, and

o Evaluation of the results obtained through goodness of curve fit, etc.

42
 • For developing the hybrid model,

o primary method as econometric method (with both univariate & multivariate

techniques)

o methods like trend analysis, time series, lab-fit, etc. on each & every consumer
category in short and long term to derive the load growth

 Application of best fit approach

The figure below describes the methodology for building up hybrid models

Three
Geographical
Domains

Eleven
Consumer Hybrid Two Time
Categories &
Major Models Horizons
Industries

Seven
Forecasting
Methods

FIGURE 4.4: Methodology for building up hybrid models

Step-5: Analysis for significant load expected:

This approach particularly looks into the year-wise growt envisaged by GNIDA’s development
plan majorly in terms of expected increase in the number of residential societies,institutions and
industries in the short run.

The following table lists the significant residential, institutional and industrial load that is
expected to come on NPCL system in near future till FY 2015-16. The same load growth has
also been used for estimating the expecting significant load beyond FY 2015-16.This load has
been apportioned for estimating short term forecasts.

43
Societies Total Load envisaged Year

Gautam Budh University and Hospital 6 MVA FY 2012-13 & FY 2013-14

Knowledge Park-5 3 MVA FY 2013-14 & FY 2014-15

Knowledge Park-4 1 MVA FY 2013-14 & FY 2014-15

Ecotech 1 Extension. 4 MVA FY 2012-13 & FY 2013-14

Ecotech 12 2 MVA FY 2012-13 & FY 2013-14

Udyog Vihar 3 MVA FY 2012-13 & FY 2013-14

Techzone Area 4 6 MVA FY 2012-13 & FY 2013-14

Honda Extended load 2 MVA FY 2012-13 & FY 2013-14

Ecotech 1 Extension 1 4 MVA FY 2012-13 & FY 2013-14

Step -6: Forecasting Load for Unmetered Categories:

 Load for unmetered categories have been forecasted as per metering plan provided by
NPCL
• Forecasted consumption of any category has been forecasted using effective number of
unmetered consumers in that year and specific consumption of unmetered category
consumers

• Consumption of consumers who have been metered in that same year has also been
estimated using the specific consumption of metered category consumers

• Same has been added to the total metered consumption of that particular category

Step-7:Development of case based scenarios for Hybrid Models:

Three scenarios have been developed namely pessimistic, realistic and optimistic to
capture three situations with different growth rates for the various factors.

44
 Table 5: Assumptions taken for projecting under the three scenario

Variables Pessimistic Realistic Optimistic

Growth factors:

For Results as obtained through 0% 5% 15%

Statistical Models w.r.t. results
for realistic (base case)
scenario

For Results as obtained through 0% 5% 15%

Trend analysis w.r.t. results for
realistic (base case) scenario

For GDP Components w.r.t. -3% 0% 5%

assumed growth for realistic
(base case) scenario

For Consumers w.r.t. assumed -3% 0% 5%

growth for realistic (base case)
scenario

Metering Plan/year considered 200 300 400

for LMV-1 Category
(Domestic Consumers)

Significant Load expected in -10% to -20% 0% +5% to +8%

future

Step 8: Estimating future loss trajectory:

The future loss trajectory has been estimated considering the probable consumption patterns at
various voltage levels (at LT,11 kV and 33kV).voltage wise allocation factors have been
considered as per the relevant historical studies conducted on NPCL system. As per the historical
study conducted in FY 2009-10,the voltage wise loss allocation of aggregate losses(approx..8%)
under technical and commercial categories is provided as under:

45
Table 5.1: Voltage wise allocation of losses-

Loss allocation factors Losses% Commercial%

Technical%

33kV 2.12% 0.18% 1.94%

11kV 1.88% 0.06% 1.82%

LT 3.99% 1.79% 2.20%

TOTAL 7.99% 2.02% 5.97%

Considering the proportion of voltage wise losses to actual energy consumption in FY 2009-10
and probable energy consumption at various voltage levels for future years ,an estimated loss
trajectory(%) on NPCL system is provided as under:

FY12 FY13 FY14 FY15 FY16 FY17

8.03% 8.17% 8.20% 8.24% 8.32% 8.43%

FIGURE 4.5: Annual Load curves FY 2013-14

46
FIGURE 4.5.1: Annual Load curves FY 2014-15

350

300

250

200
Base Demand
150 Average Demand
System Peak
100

50

Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar-
14 14 14 14 14 14 14 14 14 15 15 15
Base
Demand 171 185 193 200 191 195 178 166 173 165 176 173
Average
Demand 192 210 222 229 220 227 204 192 197 192 211 202
System Peak 252 277 292 292 294 282 282 267 261 240 274 266

As above line graph shows load forecasting for FY 2014-15 which show huge increase in
demand for power in greater Noida. Demand for power goes to 294 mw in peak hours.

47
CHAPTER-5

5. REGULATORY AFFAIRS:

5.1 Electricity Act 2003

Section 86 (1) : The State Commission shall discharge the following functions(e): promote
cogeneration and generation of electricity from renewable sources of energy by providing
suitable measures for connectivity with the grid. and sale of electricity to any person, and also
specify, for purchase of electricity from such sources, a percentage of the total consumption of

electricity in the area of a distribution licensee.

Electricity Act-2003 with amendments in case of trading-

The Act provides a comprehensive mechanism for development of electricity market in India by
clearly defining the scope of electricity trading, stipulating the duties of different agencies
involved in electricity trading business and formulating an overall platform for bilateral and
collective transactions.
The different sections related with electricity market development are elaborated below:

According to Section 2(Definitions), clause 71 of the act:

"Trading" means purchase of electricity for resale thereof and the expression "trade" shall be
construed accordingly;

According to Section 2(Definitions), clause 47 of the act:

“Open access” means the non-discriminatory provision for the use of transmission lines or
distribution system or associated facilities with such lines or system by any licensee or consumer
or a person engaged in generation in accordance with the regulations specified by the
Appropriate Commission.

Section 12. (Authorized persons to transmit, supply, etc., electricity) of the Act
stipulates that:
No person shall
(a) Transmit electricity; or
(b) Distribute electricity; or
(c) Undertake trading in electricity,

48
unless he is authorized to do so by a license issued under section 14, or is exempt under section
13.

Section 14. (Grant of license) of the Act stipulates that:

The Appropriate Commission may, on an application made to it under section 15, grant a license
to any person -
(a) to transmit electricity as a transmission licensee; or
(b) to distribute electricity as a distribution licensee; or

(c) to undertake trading in electricity as an electricity trader, in any area as may be specified

in the license.
In this regard, CERC has given license to 43 no of entities till date for trading in electricity.

Section 26. (National Load Dispatch Centre) of the Act stipulates that: ---
(1) The Central Government may establish a centre at the national level, to be known as the
National Load Dispatch Centre for optimum scheduling and dispatch of electricity among the
Regional Load Dispatch Centers.
(2) The constitution and functions of the National Load Dispatch Centre shall be such as may be
prescribed by the Central Government.

Provided that the National Load Dispatch Centre shall not engage in the business of
trading in electricity.
Section 27. (Constitution of Regional Load Dispatch Centre) of the Act stipulates that:
(1) The Central Government shall establish a centre for each region to be known as the Regional
Load Dispatch Centre having territorial jurisdiction as determined by the Central Government in
accordance with section 25 for the purposes of exercising the powers and discharging the
functions under this Part.
(2) The Regional Load Dispatch Centre shall be operated by a Government company or any
authority or corporation established or constituted by or under any Central Act, as may be
notified by the Central Government. Provided that until a Government company or authority or
corporation referred to in this sub-section is notified by the Central Government, the Central
Transmission Utility shall operate the Regional Load Dispatch Centre.
Provided further that no Regional Load Dispatch Centre shall engage in the business of
generation of electricity or trading in electricity.

49
5.2 POWER MARKETS:

The Indian power market has gone through many changes in the recent decade. The structure of
this market has been tilted towards the government in the past with the power sector utilities,
vertically integrated being owned by it. But this structure did not provide any great help in
satisfying the increasing needs of the Indian economy. The state electricity boards (SEBs) for a
major part of their life functioned as loss making entities. Post liberalization it was felt that if
these SEBs were to work in concurrence with the private sector, the power sector shall be able to
achieve its target of growth. The failure of the projects being developed by private sector
organizations made the government rethink its policy and the power sector underwent serious
restructuring in the last decade. The main step in this restructuring was the introduction of the
Electricity Act, 2003. The Act was passed with the objective of leading the Indian power markets
to the path of development through competition but with some amount of regulatory control on
the same. It delicensed generation, recognized trading as a separate licensed activity and
introduced open access in transmission and distribution. Now, when we try to define a power
market, we may say that a Power market is a system for effecting purchases, through bids to buy;
sales, through offers to sell; and short-term trades, generally in the form of financial or obligation
swaps. Bids and offers use supply and demand principles to set the price. A functional diagram
showing the structure and the consecutive working of the power market has been shown below.
Through the figure we would try to explain what a power market in the current Indian scenario
looks like and the way it functions. We would try to highlight its overall working and simplify its
mechanism. The various symbols and the terms used have been
explained accordingly.

Power Markets in India and Recent Developments in the Market

When we look at the Indian power market, we notice that the demand for power has continually
outstripped supply. India currently faces an energy deficit of 9-10%. India is divided into 5 main
regions and the level of variation between inter regional demand is very high. Traditionally long
term PPAs have been the main mode of buying and selling power. To meet short-term demand
the states resorted to trading of power through bilateral trading agreements on the basis of
mutually negotiated prices. The situation in terms of trading of power was changed with the
introduction of the EA in 2003. It formalized the concept of trading of power by making it a
separate licensed activity and also introduced open access in transmission and distribution.
Power is mostly traded between power surplus packets in Eastern Region (ER) and North-eastern
Region (NER) on one-hand and deficit areas in Northern Region (NR) and Western Region
50
(WR) on the other. To further develop the market power exchanges were also introduced. These
have now emerged as a market based institution for providing price-discovery and price risk
management to the generators, distribution licensees, traders and consumers. The Indian
economy as a whole is still widely governed by regulations and the same applies to the power
sector. The Indian power markets are at a nascent stage of development when put in a
comparative picture with markets across the world. Regulatory support had been the backbone of
their functioning. In the initial years the development of the power sector was centered on the
vertically integrated utilities and so were the regulations, policies, guidelines, etc. but as the
power sector reeled under the loss making entities it was felt that there was a need to gradually
move towards a holistic development of the sector and the CERC was formed keeping this in
mind. One of its objectives was to promote competition, efficiency and economy in the activities
of the electricity industry. This helped in identifying the need to develop a competitive power
market in India. Electricity Act, 2003 was set up with the motto of competition with regulatory
oversight and suggested the development of power markets, governed by appropriate regulations.
CERC in 2004 came out with guidelines for interstate trading in the backdrop of EA, 2003
distinguishing trading as a separate licensed activity. These guidelines specified the procedure
for obtaining a trading license. The National Electricity Policy, 2005 was prepared keeping in
mind the development of power markets. It envisages that in the coming years, a significant
portion of the installed capacity of new generating stations could participate in competitive

power markets. This will increase the depth of the power markets and provide alternatives for

both generators and licensees/consumers and in long run would lead to reduction in tariff.

CERC issued the Guidelines for setting up and operation of the power exchange in February
2007. The general approach of CERC was to allow operational freedom to the exchange within
an overall regulatory framework and deliberately kept a distance from its governance. The
participation in the power exchanges was voluntary and no existing Power Purchase Agreements
and bilateral contracts were to be disturbed. Issues like allocation of Transmission Capacity for
power exchange and application of Open Access charges & trading margin are to be decided by
CERC.

51
FIGURE 5.1: Power Market policies and Plan

5.3 OPEN ACCESS:

Definition: Open Access, as per EA 2003, is defined under Section 2 (47) as follows:

“Open access” means the non-discriminatory provision for the use of transmission lines or
distribution system or associated facilities with such lines or system by any licensee or consumer
or a person engaged in generation in accordance with the regulations specified by the
Appropriate Commission.

To interpret it in a more understandable way the above can be put as follows:

Enabling of non-discriminatory sale/ purchase of electric power/energy between
two parties utilizing the system of an in- between (third party), and not blocking it
on unreasonable grounds.

Meaning of Non-discriminatory Open Access :

• Entitlement of the users to use transmission & distribution network of the licensees.

• Licensees maintaining these networks cannot refuse such usage merely because such system
belongs to him.

52
• Universal service obligation

• Differential treatment of unequals is not discrimination if such unequals are clearly identifiable
as a separate class and there are justifiable reasons for separating them.

• Use of the transmission system can be classified and conditions of the open access can be
structured differently.

• Thus, classification can be made between the existing and new users and, long term, medium
term and short term users, continuous and seasonal users, peak and non-peak hour users and
distribution licensees

FIGURE 5.2: Sections governing open access as per EA-2003

Open access regulations may be called the Central Electricity Regulatory

Commission(Open Access in inter state Transmission) (Amendment) Regulations,2009.

These regulations shall apply to the application for grant of short-term open access received by
nodal agency.

According to the Amendment of the principal regulations shall be substituted as under:

i) Bilateral Transaction:
It defines as a transaction for exchange of energy (MWh) between a specified buyer and a
specified seller, directly or through a trading licensee or discovered at power exchange through

53
anonymous bidding, from a specified point of injection to a specified point of drawl for a fixed
or varying quantum of power (MW) for any time period during a month; “

Categorization of Open Access consumer which is major change is done in 2011 Regulation.

(i) Long term open access:

The consumer intending to avail access to Distribution system for a period exceeding 12 years
but not exceeding 25 years shall be termed as Long term open access users. Provided the exact
source of supply or destination of off-take, shall have to be notified to the Distribution Licensee
agency at least 3 years prior to the intending date of availing Long term open access.

On expiry of the period of Long term open access, the same shall stand extended on a written
request by the consumer, to the Distribution Licensee, submitted at least six months prior to such
expiry, mentioning the period for which extension is required. Provided that in case no written
request is received from the consumer within the timeline specified above, the said Long term
open access shall stand terminated on the date upto which it was initially granted.

(ii) Medium term open access:

The consumer intending to avail access to Distribution system for a period exceeding 03 months
but not exceeding 03 years shall be termed as Medium term open access users.

The application for the grant of open access shall not be made earlier than five months and not
later than one year from the last day of the month in which application has been made; which
shall contain the date of commencement and end of Medium term open access, the point of
injection of power in the grid, the details of distribution network, the bank guarantee required to
be given by the applicant.

On expiry of the period of Medium term open access, the medium term consumers shall not be
entitled to any overriding preference for renewal of the term.

(iii) Short term open access:

The person availing or intending to avail access to Distribution system for a period not exceeding
(thirty) 30 days shall be termed as Short term open access users.

54
Application seeking Short term open access may be submitted to the Distribution Licensee upto
the second month, considering the month in which an application is made being the first month
up to 10th day of the preceding month.
Separate application to be made for each month and for each transaction in a month.

(iv) Day-Ahead open access:

Day-Ahead open access shall be permitted, in case there is availability of surplus capacity in the
Distribution Licensee’s system, which has been expressly surrendered whole or part thereof, or
not in use for more than 03 days in the past.
The application will be received by the Distribution Licensee within 02 days prior to the date of
scheduling but not later than 1300Hrs of the day immediately preceding the day of scheduling
for day-ahead transaction.

Scheduling as in 2011 Regulation

Inter-State Open Access transactions shall be specified by Central Electricity Regulatory

Commission.
Intra-State Open Access transactions in respect of consumers of load 5 MW and above and all
Generating Stations irrespective of the capacity shall be scheduled by SLDC in accordance with
the provisions of the State Grid Code.
There shall be no scheduling required in respect of open access consumers having load of less
than 5MW and of Captive power plants.

55
FIGURE 5.3 Open access Application

APPLICANT

STOA APPLICANT

Format-I Format-II

Seller SLDC & Cancelled

No
Buyer SLDC

Yes

Consent

RLDC

56
5.4 Unscheduled Interchange Charges:
DEFINITION:
The charges for the Unscheduled Interchanges for all the time-blocks shall be payable for over
drawal by the buyer or the beneficiary and under-injection by the generating station or the seller
and receivable for under-drawal by the buyer or the beneficiary and over-injection by the
generating station or the seller and shall be worked out on the average frequency of a time-block
at the rates specified in the Schedule 'A' of these regulations as per the methodology specified in
clause (2) of the regulation,

Provided further that the Charges for the Unscheduled Interchange for the injection by a
generating station other than the hydro generating station in excess of 105% of the Declared
Capacity of the station in a time block or in excess of 101% of the average Declared Capacity
57
over a day shall not exceed the Cap Rate as specified in the Schedule 'A' of these regulations:
Provided also that the charges for the Unscheduled Interchange for the underdrawls by the buyer
or the beneficiaries in a time block in excess of 10% of the schedule or 250 MW whichever is
less, shall not exceed the Cap Rate as specified in the Schedule 'A' of these regulations as per the
methodology specified in clause (4) of this regulation:

Provided also that the charges for the Unscheduled Interchange for the injection by the seller in
excess of 120% of the schedule subject to a limit of ex-bus generation corresponding to 105% of
the Installed Capacity of the station in a time block or 101% of the Installed Capacity over a day
shall not exceed the Cap Rate as specified in the Schedule 'A' of these regulations as per the
methodology specified in clause (5) of this regulation:

(2) The Charge for Unscheduled Interchange shall be determined in accordance with the
following methodology:
(a) The Charge for Unscheduled Interchange shall be zero at grid frequency of 50.2 Hz and
above.
(b) The Charge for Unscheduled Interchange corresponding to grid frequency interval of ‘below
50.02 Hz and not below 50.0 Hz shall be based on the median value of the average energy charge
of coal/lignite based generating stations for the six months period of August 2010 to January
2011 and suitably adjusted upward to decide on the UI price vector.

(c) The UI Price Vector shall accordingly, be in steps for a frequency interval of 0.02 Hz
between 50.2 Hz and ‘below 50.02 Hz and not below 50.0 Hz’.

(d) The Charge for Unscheduled Interchange in grid frequency interval of ‘below 49.82 Hz and
not below 49.80 Hz’shall be such that it provides sufficient incentive to the generating station
based on coal including imported coal to support the grid after
meeting fixed and energy charge.

(e) The UI Price Vector shall accordingly, be in steps for a frequency interval of 0.02 Hz
between grid frequency interval of ‘below 50.02 Hz and not below 50.0 Hz’ and ‘below 49.82
Hz and not below 49.80 Hz’.

58
(f) The Charge for Unscheduled Interchange at grid frequency "below 49.50 Hz" shall be based
on the highest of the average energy charges of generating stations for the six months period of
August 2010 to January 2011 and suitably adjusted upward to decide on the UI price vector.

(g) The UI Price Vector shall accordingly, be in steps for a frequency interval of 0.02 Hz
between grid frequency interval of ‘below 49.82 Hz and not below 49.80 Hz’ and ‘below 49.5
Hz’.

(h) The UI Price Vector shall be in steps for a frequency interval of 0.02 Hz between 50.2 Hz to
49.70 Hz corresponding to the Charge for Unscheduled Interchange in grid frequency intervals
of ‘not below 50.2 Hz’, ‘below 50.02 Hz and not below 50.0 Hz’, ‘below 49.82 Hz and not
below 49.80 Hz’ and “below 49.50 Hz”.

(3) The Cap rate for the charges for the Unscheduled Interchange for the generating stations
using coal or lignite or gas supplied under Administered Price Mechanism (APM) as the fuel
shall be as specified in Schedule “A” of these Regulations.

(4) The Cap Rate for the Unscheduled Interchange for the under drawls by the buyer or the
beneficiaries in excess of 10% of the schedule or 250 MW, whichever is less, shall be the same
as the charges for the Unscheduled Interchange corresponding to grid frequency interval of
‘below 49.82 Hz and not below 49.80 Hz’ as specified in Schedule “A” of these Regulations.

(5) The Cap Rate for the Unscheduled Interchange for the injection by the seller in excess of
120% of the schedule subject to a limit of ex-bus generation corresponding to 105% of the
Installed Capacity of the station in a time block or 101% of the Installed Capacity over a day
shall be the same as the charges for the Unscheduled Interchange corresponding to grid
frequency interval of ‘below 49.82 Hz and not below 49.80 Hz’ as specified in Schedule “A” of
these Regulations.

(6) The Charge for Unscheduled Interchange may be reviewed and re-notified every six months
by the Commission and Schedule “A” of these regulations shall be re-notified accordingly.

59
7) Limits on UI volume and consequences of crossing the
limits.-
The over-drawal of electricity by any beneficiary or a buyer during a time block shall not exceed
12% of its scheduled drawal or 150 MW, whichever is lower, when frequency is ‘below 49.80’
Hz and 3% on a daily aggregate basis for all the time blocks when the frequency is ‘below 49.80
Hz’.

Unscheduled Interchange (UI) Charges:

The charges for Unscheduled Interchanges for all the time-blocks payable for over-drawal by the
buyer or the beneficiary and under-injection by the generating station or the seller and receivable
for under-drawal by the buyer or the beneficiary and over-injection by the generating station or
the seller shall be worked out on the average frequency of the time-block at the rates given here
under :
Table 6: Charges for the Unscheduled Interchanges

Average Frequency of the time block(Hz) UI Rate

Below Not Below (Paise per KWh)

50.20 0.00
50.20 50.18 16.50
50.18 50.16 33.00
50.16 50.14 49.50
50.14 50.12 66.00
50.12 50.10 82.50
50.10 50.08 99.00
50.08 50.06 115.50
50.06 50.04 132.00
50.04 50.02 148.50
50.02 50.00 165.00
50.00 49.98 193.50
49.98 49.96 222.00
49.96 49.94 250.50
49.94 49.92 279.00
49.92 49.90 307.50
49.90 49.88 336.00

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49.88 49.86 364.50
49.86 49.84 393.00
49.84 49.82 421.50
49.82 49.80 450.00
49.80 49.78 478.13
49.78 49.76 506.25
49.76 49.74 534.38
49.74 49.72 562.50
49.72 49.70 590.63
49.70 49.68 618.75
49.68 49.66 646.88
49.66 49.64 675.00
49.64 49.62 703.13
49.62 49.60 731.25
49.60 49.58 759.38
49.58 49.56 787.50
49.56 49.54 815.63
49.54 49.52 843.75
49.52 49.50 871.88
49.50 900.00
(Each 0.02 Hz step is equivalent to 16.50 Paise/kWh in the 50.2-50.00 Hz frequency
range, 28.50 Paise/kWh in 50 Hz to 49.8 Hz and 28.12 Paise/kwh in frequency in the
below 49.8 Hz to 49.5 Hz range.)

Additional Unscheduled Interchange Charges:

The Additional Unscheduled Interchange Charge for over-drawal of electricity for each time-
block when grid frequency is "below 49.7 Hz" and up to "Not below 49.5 Hz" shall be equivalent
to 20% of the Unscheduled Interchange Charge corresponding to grid frequency of "below 49.5
Hz". The Additional Unscheduled Interchange Charge for under-injection of electricity for each
time-block when grid frequency is "below 49.7 Hz" and up to "Not below 49.5 Hz" shall be
equivalent to 20% of the Unscheduled Interchange Charge of the corresponding grid frequency
of "below 49.5 Hz":

61
5.5 Central Electricity Regulatory Commission (Procedure, Terms and
Conditions for Grant of Trading Licence and other related matters) (First
Amendment) Regulations, 2010 dated 02-06-2010.

The Commission vide notification dated 02-06-2010 notified CERC (Procedure, Terms and
Conditions for Grant of Trading Licence and other related matters) (First Amendment)
Regulations, 2010 to introduce new category of inter-state trading licence i.e. Category IV and to
re-align the networth requirement and trading volumes amongst different categories of licence in
view of power market scenario emerged especially after introduction of Power Market
Regulations 2010. The Commission is of the view that markets function efficiently when there
are a large number of market players leading to competition and price discovery. One analysis
indicated that only five Category-I licensees control 85 % of market share in bilateral trading. As
only one licence has been granted during 2009-10, it appeared that the minimum net-worth
requirement of `5 crore for Category-III was acting as a high entry barrier for new players to
enter the trading. The Commission, therefore, decided to add a new Category-IV with net-worth
of `1 crore which could handle trade turnover up to 100 MUs.

With the notification of Central Electricity Regulatory Commission (Power Market) Regulations,
2010, it was noted that the members of Power Exchange could undertake financial risk on behalf
of their clients only as a trading licensees. These members acted as catalysts and have been
instrumental in bringing small open access customers and captive power plants in the short term
market. It was expected that members of power exchange would be able to take advantage of the
newly created category and join the mainstream by becoming trading licensee.

The Commission was also of the view that net-worth requirement of `25 crore and `5 crore and
annual turnover of 500 MUs and 100 MUs for Category- II and III licensees respectively had
become an unviable business proposition for these licensees. That was corroborated by the fact
that three licences were surrendered in category III and one licence in Category-II. The
Commission, therefore, decided to reduce the net-worth requirement for Category-II from `25
crore to `15 crore In order to make all the categories of trading licensees commercially viable,
the net-worth requirement and trading volume limits have been re-aligned. The Commission also
noted that the overall market size has been increasing and observed that significant new
capacities would be installed by the Independent Power Producers and Merchant Power Plants in

62
the next few years. Considering the imminent capacity addition, a large pool of trading licensees
to cater to the growing market in electricity would be needed. The Commission decided to
increase volume of electricity to be traded in a year by a Category II licensee from 500 MUs to
1500 MUs and in respect of Category III from 100 MUs to 500 MUs.

The Commission vide notification dated 07-06- 2010 has also issued Central Electricity
Regulatory Commission (Payment of Fees) (Amendment) Regulations, 2010 for trading licence
fees. The Central Commission while considering the applications by various project developers
for grant of transmission licence have observed that while the useful life of the transmission asset
is normally considered as 35 years, transmission licences are issued for a period of 25 years
under the provisions of Section 15 (8) of the Electricity Act, 2003. In other words, the
transmission assets will be in service even after the initial licence period of 25 years. As there is
no provision of “transfer” in the agreement, there is every likelihood that the existing licensee
may continue to operate even after the initial period of 25 years.

Thus the question arises as to what should be the tariff of the transmission asset after initial
licence period of 25 years if the licence is not renewed or the licensee does not apply for
renewal. The Commission after detailed deliberation has decided to make appropriate regulations
for tariff determination in such cases. Accordingly, statutory advice to Government of India
under Section 79(2) of the Act was sent to modify the Standard Bid Document (SBD) for
development of transmission lines through competitive bidding and to consider tariff period upto
35 years while bidding for the new transmission projects. At the same time Regulation 13 of the
“Central Electricity Regulatory Commission (Procedure, Terms and Conditions for grant of
Transmission Licence and other related matters) Regulations, 2009 has been amended after
following the proper procedure vide notification dated 25-05-2010.

63
CHAPTER-6

6. Demand side management:-

DSM is believed to be a possible answer to the quest for quality power at cheap prices.
Demand Side Management (DSM) entails actions that influence the quantity or patterns of
use of energy consumed by end users, such as actions targeting reduction of peak demand
during periods when energy-supply systems are constrained. Peak demand management does
not necessarily decrease total energy consumption but aims at altering the end-use of
electricity. In other words, DSM is the implementation of those measures that help the
consumers to use electricity more efficiently and in doing so reduce the utility costs. This, in
turn, will help the electricity consumers to cut costs.

DSM is a concept in which a power utility, such as an vertically integrated SEB or an unbundled
distribution utility, manages the demand for power among some or all its customers to meet its
current or future needs. DSM is either implemented directly through utility sponsored programs
or through market intermediaries like ESCOs. In India, DSM can be achieved through energy
efficiency, which is the reduction of kilowatt hours (kWh) of energy consumption or demand
load management, which is the reduction of kilowatts (kW) of power demand or the
displacement of demand to off-peak times. In the former category are programs such as
awareness generation programs, customer or vendor rebates for efficient equipment, etc., while
the latter includes time-of-use tariffs, interruptible tariffs, direct load control, etc. Specific type
of programs depend on the utility objective: peak clipping, load shifting, strategic conservation
or strategic load growth.

Reductions in energy demand and consumption at the end user’s premises can free up electricity
generation, transmission and distribution capacity at a fraction of the costs required to provide
new capacity. The cost of saved energy has been estimated to be as low as 10% of the cost of
added capacity for some DSM measures. In addition to avoided and deferred capacity costs,
support for energy efficiency at its customers’ installations brings a utility into closer contact
with its clients, often resulting in better service, and allowing a more efficient future planning
process.

In the regime of tariff rationalization following upon the establishment of state regulatory
agencies end-use efficiency improvements through DSM at the customer end could mitigate
the adverse impact of increased rates on residential, commercial and agricultural customers.
At the same time, DSM helps industries to be placed more competitively in increasingly open
markets in the age of globalization.

Improving the efficiency with which energy is used to provide economic services meets the dual
objectives of promoting sustainable development and of making the economy competitive.
Energy Efficiency & Conservation has also assumed enhanced importance with a view to
conserve depleting energy resources.

64
Over the past one decade energy efficiency in India has been increasing at a good trot, and
energy intensity declined by about 20-25%. Yet there are places where energy efficiency
opportunities continue to exist largely because of a range of market failures, information, risks
and split incentives. This has led the Government of India through the Energy Conservation Act
and the Bureau of Energy Efficiency to launch several programs.

The Energy Conservation Act (2001) is the most important multi-sectoral legislation in India and
is intended to promote efficient use of energy in India. The Act specifies energy consumption
standards for equipment and appliances, establishes and prescribes energy consumption norms
and standards for designated consumers, prescribes energy conservation building code for
efficient use of energy in commercial buildings, and establishes a compliance mechanism for
energy consumption norms and standards .Large scale energy savings can be realized through
strengthening of the existing policies, schemes as well as expanding and reaching out to new
areas in the 12th Five Year Plan.

The Regulatory Commission like DERC and MERC issued sets of Regulations to facilitate DSM
Implementation in a cost-effective manner:

The DSM Implementation Framework provides the Demand Side Management implementation
framework to be followed by distribution licensees and for matters in connection therewith and
incidental and ancillary thereto.

The study reviews some international experiences in the field of DSM implementation and their
success.

6.1 DSM in India

The historic problems of the Indian power sector can be traced to three root issues –
unacceptably high T&D losses, large commercial losses due to poor billing, metering, collection
and energy theft, and, low end-use efficiency of energy use specifically in agriculture. There is
now widespread agreement that restoration of the financial health of the sector can be only
enabled by demand side initiatives. To be specific, the electricity distribution area is where the
historic problems converge. This convergence is most felt in the agricultural sector where the
water-energy nexus is a major root cause for the precarious financial condition of the power
sector in India today. Water withdrawal is an energy intensive operation throughout the
agricultural sector, with the result that 30-40% of India’s power consumption is used for
irrigation. The irrigation pumping electricity use is at the heart of the subsidy issue and along
with electricity theft and T&D losses, comprise the root cause for the sector’s financial dilemma.

The reasons a power utility in India may undertake DSM include: a) demand outstripping the
capability to provide supply, particularly peak supply, b) improve the cash flow revenues of the
utility, c) improve the quality and reliability of power supply, and d) mitigate the impact of rising
tariffs to the subsidised customers. For agricultural sector particularly, utility DSM is highly
beneficial because of the subsidized prices and high costs of supply resulting from technical and
commercial losses.

65
6.1.1 ENERGY CONSERVATION STRATEGY IN THE 12TH PLAN

The strategies adopted during the 11th Five Year Plan have started showing encouraging
outcomes. It is necessary to carry forward the existing schemes as well as further strengthen the
activities to accelerate the process of implementation of energy efficiency measures to achieve
the desired energy savings.
Further, large scale energy savings can be realized through strengthening of the schemes in
industrial, commercial, residential and agriculture sectors as well as expanding and reaching out
to new areas. Projected electrical energy saving potential at the end of 12th Five Year Plan i.e
during the year 2016-17 is 44.85 BU on the demand side (equivalent to 60.17 BU at Bus bar) and
an additional energy saving equivalent of 21.3 mtoe in the industrial sector (including Thermal
Power Stations (TPS) and Small and Medium Enterprises), Transport Sector and Energy
Conservation (EC) award scheme. The share of target energy saving (Electrical & Thermal) for
various proposed schemes under 12th Plan is given below:

Figure 6.1 Sector wise electrical saving targets for 12th year plan(BU)

6.1.2 Strengthening State Designated Agencies

State designated agencies (SDAs) in different states need to play a very important role in terms
of carrying forward various energy efficiency initiatives at the state level. The thrust of the SDA
program during the 12th Plan will be on strengthening the 32 SDAs which would enable them to
implement various programs and activities initiated by BEE or SDAs themselves.

In the 11th Plan, BEE supported State designated agencies (SDAs) in preparation of action plan,
building institutional capacity of SDAs, to perform their regulatory, developmental and
promotional functions in their respective states, by way of technical assistance, guidance and
funding etc. Each SDA has been supported to develop a five year Energy Conservation Action
Plan, customized to local needs aiming at and delivery of the EC act mandates.

66
The proposed activities for the 12th Plan include sector specific interventions in areas like
municipality (drinking water and sewage treatment), agriculture sector (pumping), street lighting,
commercial buildings, government buildings and waste heat recovery in SMEs including
demonstration projects. Following initiatives of SDA are proposed to be supported that would
help in strengthening the capacities of SDAs and undertaking of various projects and
programmes to promote energy efficiency in their respective states:

 Support for implementing state-wise sector specific energy saving plan by the SDAs
 Continued engagement of SDAs with energy efficiency professionals like energy
auditors, energy managers and ESCOs
 Implement various EE demonstration projects in the states to showcase the effectiveness
of the most advanced energy efficient technology and pursue state governments to
replicate the project in other parts of the state.
 LED village campaign in the villages and pursue state governments to replicate the
project in other parts of the state.
 Publicity /awareness on EE in the states
 Workshops/ training programmes for all the stakeholders
 Capacity building programmes for the SDAs

The total funds requirement for the above proposed activities is Rs. 140 crore.

The State Energy Conservation Funds (SECF) as mandated under the Energy Conservation Act,
2001, have already been constituted in 22 states and funds have been released to 21 states during
the 11th Plan to operationalize the SECF for various energy efficiency initiatives. The state
governments of Andhra Pradesh, Rajasthan, Chhattisgarh, Karnataka, Haryana, Gujarat and
Mizoram have also contributed a matching grant to the SECF.
In the 12th Plan, it is proposed to set up the SECF in all the states and
 Pursue with SDAs for constitution of SECF in the states and matching contribution by the
state governments to the SECF.
 Coordinate with SDAs to implement various energy conservation activities and
utilization of fund under SECF.
Contribution of Rs. 70 crore to state energy conservation fund is proposed under the 12th Plan.
Total fund required for strengthening of SDAs and SECF is Rs. 210 crore.

6.1.3 Industrial Sector

The total commercial energy consumed by the industries and SMEs together stands at about 40-
50% of the total commercial energy consumption in the country. In view of continuing growth of
industry sector, the proportion of commercial energy consumed by industry is envisaged to be
around 40-45% in the next five-year plan also.

(a) Large Industries (Designated Consumers):-

The projected energy saving potential in the 12th Plan is 11.43 mtoe which consists of a saving
of 6.2 mtoe from the seven energy intensive industries (DCs) and 5.23 mtoe from thermal power
stations sector. The total energy saving per year during 2011-12 to2016-17 for 7 DC sectors is
calculated on the basis of 1.2% p.a. of the total energy consumed and at 1% p.a. of the total
energy consumed for the Thermal Power Plant sector during the 12th Plan period.

With the above assumptions, the extrapolation is also made further to see the expected energy
saving in 2019-20 in 7 Industrial Sectors. The projected energy savings stand at 10.03 mtoe and
67
11.53 BU in thermal and electrical energy respectively in 2019-20.

The tabular and graphical representation of projected energy consumption trend (electrical and
thermal) and saving targets in 7 industrial sectors (Designated Consumers) is given in below.
The details of projected energy consumption trend (electrical and thermal) and saving targets in 7
industrial sectors (Designated Consumers) are given in below.

Table-7 Energy Consumption & Saving Projection in 7 Industrial Sectors (DCs)

The instruments to achieve the projected savings in 12th Plan in DCs and other industries are:

Continuation of on-going Schemes/Programs by Bureau of Energy Efficiency and Ministry of

Power :-

National Energy Conservation Award - Many industries have taken up a number of energy
saving initiatives through voluntary energy audits. In the national EC awards, it has been
observed that energy saving to the tune of 1 % per annum has been achieved by participating
units during the last 4 years. The scheme is proposed to be continued in the 12th Plan and its
base will be widened. The anticipated savings in the year 2016-17 of the 12th Plan (for non PAT
sector) are 3.42 BU and 5 mtoe as electricity and thermal energy respectively.

Notification of Energy Intensive Sectors as Designated Consumers (DC)- After the

notification of Designated Consumers (DC) among selected industrial sectors, more
concerted efforts have been put forward in achieving energy savings through adoption of
exclusive energy management policies, creation of a separate EC cell and improvement in
energy monitoring and accounting system. All the sectors covered in the Schedule to EC Act
are proposed to be covered as Designated Consumers.

Enhanced Capacity Building of Energy Management Professionals (National Certification

Examination for EA/EM) - Enrolment & success in National certification examination for
Energy Managers / Auditors from industries has been growing at a healthy rate. BEE has
taken a pro-active role in establishing a proper energy management system in the country. In
this context, BEE has successfully conducted 11 National Certification Examinations across
the country till 2010-11. After 11th Examination, 8525 persons have qualified as energy
managers out of which 6091 have also qualified as energy auditors. The National
Certification of EA & EM will continue in the 12th Plan and refresher training courses for
qualified candidates will be taken up to further strengthen their knowledge base.

Implementation of Perform, Achieve & Trade (PAT) Scheme - As per the EC act, 2001,
the central government in consultation with BEE has identified a list of energy intensive

68
industries and other establishments. The Perform, Achieve & Trade (PAT) mechanism is a
market based mechanism to enhance cost effectiveness of improvements in energy
efficiency in 8 energy intensive industries (including TPS) through certification of energy
saving which can be traded. The scheme is expecting an energy saving of 3.5 million tons of
oil equivalent (mtoe) in seven selective industrial sectors and 3.1 million tons of oil
equivalents in Thermal Power Stations by 2014-15.

The following points describe the vision for PAT scheme during 2012-2017:-
Implementation of 1st Cycle of PAT to achieve the set target of 6.6 mtoe by 2014-15
Widening and Deepening the Scope of PAT during the 2nd Cycle of PAT by including other
energy intensive sectors like Refineries, Chemicals, Petrochemicals, Automobile manufacturing,
Sugar, Glass etc. in the scheme and reducing the threshold energy consumption limit of existing
sectors to bring in additional industries.
Accelerate the Implementation of ISO 50001 to promote benchmarking of Energy
Management system in Industries and facilities

Implementation of Frame work for Energy Efficient Economic Development - Fiscal

instruments like Partial Risk Guarantee Fund (PRGF) and Venture Capital Fund for Energy
Efficiency (VCFEE) have already been proposed in NMEEE for successful implementation of
PAT scheme.
Getting support from National Clean Energy Fund (NCEF) - In order to achieve the target
in PAT scheme, the industry has to look for newer technology, Renovation & Modernization
(R&M),adoption of clean energy and efficient energy management systems. BEE proposes a 3%
interest subsidy scheme for adoption of energy efficient technologies by Designated Consumers
in 7 sectors under PAT scheme.
Facilitation for Need for R&D in NMEEE / PAT Scheme - Major R&D program may be
initiated in selective areas and selective sectors for developing new customized energy efficient
technology through indigenous development of applications of already available energy efficient
technologies/concepts. It is proposed that a need based framework for research in industrial
energy efficiency may be undertaken, centres of excellence may be established and improving
the industry-institute-interaction at state level.

The total projected saving in the year 2016-17 i.e end of 12th Five Year Plan is of the tune of
11.43 mtoe in which 10.41 mtoe is contributed by thermal energy. The rest, which is equivalent
to 11.96 BU of electricity saving is estimated at bus-bar in 2016-17. The fund requirement is Rs.
190 crore to support the proposed PAT schemes.
The total funds requirement for Industrial Sector (excluding SMEs) under the 12th Five year plan
is Rs.3767 Crore.

(b) Small & Medium Enterprises:-

The SME sector is an important constituent of the Indian economy, contributing significantly in
GDP,manufacturing output and export. Similarly this sector also plays a significant role in
energy consumption which is about 25% of the total energy consumption by industrial sector. In
the 12th Five Year Plan, BEE would target the SME sector for reduction in energy consumption
by 5.75% of the energy used in the energy intensive manufacturing SMEs which is equivalent to
1.75 mtoe. The targeted goal is proposed to be achieved by introducing innovative business
models and financial instruments (like Venture Capital Fund/Revolving Fund, Partial Risk
Guarantee Fund). The proposed schemes/activities to be undertaken in 12th Plan are as
mentioned below:

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 Sector specific approach for energy efficiency and technology up-gradation through
facilitation of implementation of DPRs
Energy mapping of the targeted SME Sector on all India basis
Undertaking of Innovative Financial Schemes for adoption of EE Technologies in the SMEs
Technical assistance and capacity building
SMEs Product Labelling Promotion Scheme
The approach would be based on the replication of results and findings from the 11th Plan. This
would include implementation of DPRs on energy efficient technologies and development of
Local/technologies Service Providers for SMEs, capacity building of stakeholders including
bankers /FIs and strategic approach for dissemination of results. The strategy will be to move
from cluster based approach to sector based approach to enable large degree implementation in
the sectors selected under the 11th Five Year Plan. The details of projected energy consumption
trend (electrical and thermal) and saving targets in energy intensive SMEs are given in below.

Table-8 Energy Consumption & Saving Projection in Energy Intensive SMEs

The projected saving in the year 2016-7 of 12th Five Year Plan is 1.75 mtoe in which 1.59 mtoe
is thermal energy and rest is equivalent to the 1.83 BU of electricity with the financial budget
requirement of Rs. 55 crore. In addition to this, Rs. 400 crore is also proposed for setting-up of
Revolving fund and partial risk guarantee fund.
The total funds requirement for SMEs under the 12th plan is Rs. 455 Crore.

6.1.4 Equipment and Appliances

(a) Standard & Labeling (S&L) Programme

During the 11th Plan, under this scheme, a large number of appliances were covered initially
under the voluntary labeling categories, out of which four appliances/equipment are under the
mandatory labeling program. The S&L Program was quite successful during the 11th Plan period
and has contributed to the savings in avoided capacity addition of 4,898 MW upto 31st March
2011. It is anticipated that by the end of the 11th plan, total savings in avoided capacity addition
would be 7,315 MW.
The 11th Plan has already envisaged completion of 21 appliances under S&L programme and the
12th Plan also envisage similar numbers. However, data on some of the appliances/equipments
such as chillers, pumps, data centres, furnaces, boilers, desert coolers, laptop chargers, deep
freezers etc. is not available and is planned to be collected through baseline survey.
The proposed activities in 12th Five Year Plan under S&L for equipments and appliances
include:
 Inclusion of at least 5 selected new equipment and appliances (selection is to be made
from the list provided in the table given below). Standby power loss reduction in few of
the electrical appliances will also be focussed in the 12th Plan.
 Awareness creation among all the stakeholders,

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  Undertaking of check testing, label verification, market impact assessment for
appliances/equipments covered under S&L scheme and
 Up-gradation of energy performance standards for equipment/ appliances covered during
11th Plan.

The equipments/appliances which are to be undertaken for up-gradation of energy performance

standards covered during 11th Plan and inclusion of selected new appliances in 12th Five Year
Plan is given in table below:-

Table 9 List of Equipments & Appliances Under S&L During 12th Plan

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The energy saving projection in 12th Five Year Plan for the refrigerator and room air conditioner
which dominate the electricity consumption in the domestic and commercial sectors is
represented in the table and figure that follow:

Table 10 Sales & Energy Saving Targets for Refrigerator Air-Conditioners

(b) Super Efficient Equipment Program (SEEP)

SEEP is a part of Market Transformation for Energy Efficiency (MTEE) initiative, one of the
four initiatives of the National Mission on Enhanced Energy Efficiency (NMEEE). The primary
objective of MTEE is to accelerate the shift to energy efficient appliances through innovative
measures to make the products more affordable. NMEEE seeks to achieve annual savings of
19,598 MW of power and 23 million tonnes of fuel and greenhouse gas emissions reduction of
98.55 million tonnes. The mission is one of the eight mission under the Prime Minister's National
Action Plan on Climate Change (NAPCC). BEE is the mission implementing agency for
NMEEE.
This programme proposes to deal directly with the manufacturers of select key appliances.
Usually, only a handful of manufacturers account for 70 to 90% of the market share of these
appliances. SEEP would compensate the manufacturers for a major part of the incremental cost
of producing Super Efficient Appliances (SEAs), and encourage them to not just produce but
also sell SEAs at an affordable price to common consumers. The need for incentive is expected
to reduce very fast as volumes pick up.
In this manner, the programme would help to introduce appliances that are far more efficient
than the ones currently available in India thus, narrowing the massive gap between the efficiency
of the average purchase and that of the most efficient technology available internationally.
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Super efficient appliances (SEA) may consume 30 to 50 percentages less energy than the five
star rated equipments of BEE. SEAs will have their high first cost which can be decreased by
large scale production facilities, but due to uncertainty of market demand, manufacturers feel
reluctant to make the initial investment to change production lines for super efficient appliances.
This barrier needs to be removed by innovative policy interventions.
BEE has already announced the SEEP for ceiling fans, and has initiated a dialogue with
manufacturers on setting the technical specification, monitoring process etc. SEEP would also be
extended to LED Tube lights & LED bulbs. Financial incentives of Rs 244 crore per year would
be required (depending on the market situation and technical preparation).

The ceiling fan market will undergo a significant transformation because of the SEEP
intervention. It is expected that 26.86 million SEA ceiling fans will be sold in 12th Plan which
will provide savings of 2.2 billion units in the year 2016-17 of 12th five year Plan.
Estimated market of Tube Fluorescent Lamp (TFL) in terms of lighting points shall be about 270
million in 2016-17. With an incentive pattern under SEEP, it is assumed that about 33.96 million
lighting points would get converted from conventional lighting to LEDs lighting points giving a
saving of around 10 -12 Watt per lighting point. The savings the year 2016-17 of 12th five year
Plan from sales of 33.96 million LED TL would be around 0.91 billion units.

Further, currently both in the S&L and SEEP programme, no intervention in the bulb market was
envisaged, although, BLY scheme considers the replacement of inefficient incandescent lamps
(bulb) by CFL. The new emergent technology under SEEP through LEDs bulb (replacement of
60 W incandescent bulbs with 8-12 Watt LED bulb) would give large savings about 70-80%.
The saving in the year 2016-17 of 12th five year Plan from sales of 33.96 million LED bulbs
would be around 3.42 billion units.
The details of sales (total sales of appliances and sales of SEAs) and energy saving is given in
the table that follows (base year 2012-13):

Table 11 Sales & Energy Saving Targets for SEEP Appliances

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6.1.5 Commercial Sector

Energy Conservation Building Code & Energy Efficiency in Existing Buildings:-

To set the minimum energy performance standards for new commercial buildings, having
connected load of 100 kW and above, as well as to promote energy efficiency in the existing
buildings through retrofitting, Energy Conservation Building Code (ECBC) was launched during
the 11th Plan. Rajasthan and Orissa have notified ECBC and three other states (, Kerala and
Uttrakhand) are in the process of notification. Star labelling programme (Voluntary) for day use
office buildings, BPOs and Shopping complexes have been developed and 123 buildings have
been awarded energy star ratings label.
The draft report on “Low Carbon Strategies for Inclusive Growth” indicates that by mandating
ECBC for new commercial complexes and energy audits in existing buildings, 75 % of new
commercial buildings constructed during the 12th Plan would be compliant to the ECBC.
Similarly, 20% of existing buildings would reduce their present energy consumption by 20%
through energy audits & retrofits.
Consequently, the estimated savings in energy use in new and existing buildings over the
Business As Usual (BAU) scenario is likely to be 5.07 BU. BEE would assist both central and
state government agencies in undertaking energy audits and promoting implementation of energy
efficient measures. For the performance contracting route, BEE would assist in the development
of standard documents for performance contracting and monitoring & verification protocols for
carrying out retrofits through ESCO mode.
The projected energy saving at the end of the 12th Five Year Plan i.e. 2016-17 is 5.07 BU with
thefinancial budget requirements of Rs. 65 crore.

6.1.6 Residential Sector

Bachat Lamp Yojana:-
The residential sector accounts for 25.87 percent of the electricity demand in the country. The
lighting load comprises of 28% of this electricity demand in the residential sector and contributes
almost fully to the peak load as well. To promote the penetration of energy saving CFLs in the
residential sector, BEE has developed the “Bachat Lamp Yojana” (BLY) Scheme. Under the
BLY scheme, a maximum of 4 nos. long-life, quality CFL would be distributed by the CFL
supplier to the grid-connected residential households in exchange of equivalent no. of
incandescent lamp (ICL) and Rs. 15 per CFL. The savings in electricity that would mitigate
GHG emissions will be leveraged in the international market by the CFL supplier under the
Clean Development Mechanism (CDM) of the Kyoto Protocol.
Three types of ICL lamp wattages commonly in use viz. 40 W, 60 W and 100 W are likely for
replacement under the BLY scheme. This Bachat lamp Yojana Scheme is registered as
Programme of Activities (PoA) with the CDM executive board to reduce the transaction cost
associated with CDM.
The project brings together the three key players, namely BEE, the Electricity Distribution
Companies (DISCOMs) and investors to supply the households with CFLs. To bridge the cost
differential between the market price of the CFLs and the price at which they are distributed to
households, the Clean Development Mechanism (CDM) is harnessed. The CFL supplier
(Investor) would cover the project cost through the sale of greenhouse gas (GHG) emission
reductions achieved in their respective project areas.
BEE, the Coordinating and Managing Entity (CME) will have to keep a functionary to handle the
various documentation and protocols required by the UNFCCC (United Nations framework
Convention for Climate Change) and the PoA. Further to facilitate the implementation of BLY
projects and CFL distribution, this functionary will have to continuously engage with the State
Electricity Distribution Companies and CFL suppliers. The database management of the BLY
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projects and Capacity building of State Electricity Distribution Companies and CFL suppliers
along with BEE functionary will be the key focus areas in 12th Plan.
In 12th Five Year Plan, activities proposed to be undertaken are: strengthen the on-going BLY
scheme by continued engagement with the state electricity distribution companies and
streamlining and sustaining operations-mainly database management, data security, BLY system
audit, PoA updation & re-validation, and CDM Project Activities (CPA).
The projected electricity saving at the end of 12th Plan is i.e. 2016-17 about 4.4 BU with the
financial budget requirement of Rs. 6 crore.

6.1.7 Agriculture Sector

Agriculture DSM (Ag DSM)
Electricity consumption in agriculture sector has been increasing mainly due to the subsidized
electricity rates and meeting the growing irrigation need of agricultural land. To tap the energy
saving potential in the agriculture sector, which is estimated to be 20.75% (2007-08) of the total
energy consumption, the activities planned to be undertaken in the 12th Plan would focus on
development of innovative financial mechanisms like Venture Capital Fund (VCF) and Partial
Risk Guarantee Fund (PRGF) for the large-scale implementation of AgDSM projects on Public
Private Partnership (PPP) mode, in the states for which DPRs have been prepared in the 11th
Five Year Plan.
The major impacts of the Ag DSM scheme during the 11th Five Year Plan includes 97 MU of
annual energy saving potential assessed across eight different states covering about 20,885 pump
sets. Based on the results achieved during the 11th Plan, the targeted reduction in electricity
consumption at the end of 12th Plan is 0.7 billion units (BU) which would be about 0.57% of the
electricity consumption in the agriculture pumping system. The following instruments are
proposed to meet the proposed target:
 Financing mechanism for promoting investments in Ag DSM projects (Target – 0.25
million pumpsets, 0.7 BU of energy savings, Total Budgetary Provision: Rs. 352 crore).
 Placement of partial risk guarantee fund for risk mitigation of
Manufacturer/Implementer/ESCOs/FIs.
 Placement of capital subsidy fund/venture capital fund for providing incentive to
Manufacturer/Implementer/ESCOs.
 Monitoring and verification protocol under the AgDSM scheme (Total Budgetary
Provision: 25 crore)
 Integrated water and energy conservation scheme – 100 Joint Demo projects
implementation(Total Budgetary Provision: Rs. 10 crore)
 Technical assistance & capacity development of all stakeholders (Total Budgetary
provision – Rs.6 crores)

At the end of the 12th Five Year Plan, it is forecasted that through market transformation of
agriculture pump sets, major manufacturer of agriculture pumps in the organized SME sector
would transform into manufacturing of energy efficient star labelled pumps through the various
initiatives of BEE schemes/programmes.
Wider involvement of stakeholders like DISCOMs, state regulatory commissions, State
Designated Agencies, State Governments, pump manufacturers, energy saving companies,
farmers/ consumers etc. is one of the key initiatives under the scheme. The projected electricity
saving at the end of 12th Plan i.e. 2016-17 is about 0.7 BU with the financial budget requirement
of Rs. 393 crore.
The details of target of energy saving during 12th Plan as well as corresponding fund
requirement for various programmes initiated by BEE are summarized in following table.

75
Table 12 Energy Saving Targets for 12th Five Year Plan

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6.2 Indian Power Scenario-
In the recent past, the demand for power in India has increase significantly with the robust
economic growth. At end–June 2013, the country’s generation capacity stood at 225 GW. Instead
of capacity addition the problem of peak load management by the utilities still persists.

During the year 2012-13, though the total ex-bus energy availability increased by
6.2% over the previous year and the peak met increased by 6.1%, the shortage
conditions prevailed in the Country both in terms of energy and peaking availability
as given below:

Energy (MU) Peak (MW)

Requirement 998,114 135,453
Availability 911,209 123,294
Shortage 86,905 12,159
(%) 8.7 9.0

The energy requirement registered a growth of 6.5% during the year against the
projected growth of 5.1% and Peak demand registered a growth of 4.2% against the
projected growth of 7.7%.

Region-wise Power Supply Position

All the Regions in the Country namely Northern, Western, Southern, Eastern and
North-Eastern Regions continued to experience energy as well as peak power
shortage of varying magnitude on an overall basis, although there were short-term
surpluses depending on the season or time of day. The surplus power was sold to
deficit states or consumers either through bilateral contracts, Power Exchanges or
traders. The energy shortage varied from 3.3% in the Western Region to 15.5% in the
Southern Region. Region-wise picture in regard to actual power supply position
in the country during the year 2012-13 in energy and peak terms is given below:

Table 13 Region Wise Actual Power Supply Position Year 2012-2013

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Table 14 State Wise Actual Power Supply Position Year 2012-2013

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 Table 15 Month Wise Power Supply Position in Uttar Pradesh

6.3 Power Scenario in greater noida-

Power schedule of NPCL ON 18TH JULY 2013 is shown in below figure

250

200

150
RC GREEN (MW)
SURAJPUR (MW)
100 GRAND TOTAL(MW)

50

0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

In NPCL distribution licensee area there are two feeders RC GREEN & SURAJPUR . The
schedule for power from different traders through STOA is done by NPCL. On 18th july 2013 the
laod pattern curve is shown above in which the maximum power goes to 203 mw and minimum

79
was 126 mw which shows a huge difference in off-peak and on-peak hours .Through DSM
techniques and program we can manage the peak hour power to reduce it.

As we can see from the previous tables fulfilling peak demand and reducing peak shortage to
maximum extent is the need of day. To achieve this target of peak shortage reduction DSM can
be touted as 5th fuel. There are various ways in which DSM can help in peak shortage reduction:

 Shifting the consumption to off peak periods.

 Energy efficient appliances are to be promoted.
 Emphasize energy conservation by incentives and awareness programs.
 Improving agricultural usage pattern.

6.4 DSM TECHNIQUES:-

Demand-side management (DSM) refers to cooperative activities between the utility and its
customers (sometimes with the assistance of third parties such as energy services companies and
various trade allies) to implement options for increasing the efficiency of energy utilization, with
resulting benefits to the customer, utility, and society as a whole.

Acc. to DERC “Demand Side Management” means the actions of a Distribution Licensee,
beyond the customer’s meter, with the objective of altering the end-use of electricity – whether it
is to increase demand, decrease it, shift it between high and low peak periods, or manage it when
there are intermittent load demands in the overall interests of reducing Distribution Licensee
costs.

Such programs have multitude of objectives. Some important of them are:

 “Peak lopping” to reduce energy consumption during daily system peak. This is done by
using technologically more advanced and efficient consumer end equipment on services
like heating cooling etc.
 “Valley filling” to build up off peak loads to flatten load curves improve system load
factor and consequently more revenue.
 “Load Shifting” which can be alone by Thermal Storage
 Energy conservation at the consumer end by use of energy efficient equipment.
Energy efficiency programs are to be considered along with the cost of achieving the energy
conserved in comparison with the cost of procuring the quantum of energy that may have to be
purchased i.e. cost in Rs. per KWh of conserved/ saved with that of energy procured/purchased.

There are 3 main categories of utility DSM programs viz (i) Energy Conservation (ii) Load
Management and (iii) Strategic Load Growth.

Energy Conservation Program: - This is intended to be achieved by using equipment with

improved efficiency, building and industrial processes.

Load management Programs:- This is achieved by redistributing energy demand to spread it

more evenly i.e. load shifting program offering time of use tariff and interruptible power tariff
rates etc.
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Strategic Load growth program: - Programs that uncover cost effective electrical technologies
that operate primarily during periods of low electricity demand.

Figure 6.2 Load shape curve objectives associated with DSM

 Peak clipping, valley filling and load shifting are classified as load management
objectives.
 Energy efficiency involves a reduction in overall energy use and is sometimes referred to
as energy conservation. Technic ally speaking, the two are different since the level of
energy service (e.g., the level of lighting in a room) is preserved under energy efficiency
but declines under energy conservation.
 Electrification involves load building over all hours and is often associated with customer
retention program from the respective of the utility. It can also involve the development
of new markets and customers.
 Flexible load shape involves making the load shape responsive to reliability conditions.
In the aftermath of the Enron debacle in the US, and California’s disastrous attempt at
deregulating the power industry, policy makers in developing countries have become wary of
restructuring.
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Governments should begin their liberalization program by focusing on pricing reform. As a
general rule, prices should convey to consumers the cost of the resources that are used to make a
product, and convey to investors the returns they can expect to get by making the product.

Supposing an acceptance of the underlying assumption that electricity should be viewed as a

“commodity” instead of a “public good,” the principle stated above is equally applicable to
electricity. When consumers do not see the real cost of electricity in their power bills, they over
consume energy, and that misdirects excessive capital and fuel resources to the power sector.

This is especially true during peak periods, when the cost of producing electricity is much higher
than during the off-peak periods, largely because electricity cannot be stored in large quantities
economically due to technological reasons.

Example: U.S. utility DSM programs can be divided into seven categories:
(1) General information to increase customer awareness of energy use and of opportunities to
save energy.

(2)Technical information, including energy audits, which identify specific recommendations or

improvements in energy use;

(3)Financial assistance in the form of loans or direct payments to lower the first cost of energy-
efficient technologies

(4) Direct or free installation of energy-efficient technologies.

(5) Performance contracting, in which a third party contracts with both the utility and a customer
and guarantees energy performance.

(6)Load control and load shifting, in which the utility offers financial payments or bill reductions
in return for controlling a customer’s use of certain energy-using devices (such as electric water
heaters and air conditioners) or in return for customer adoption of technologies that alter the
timing of demands on the electric system (such as thermal storage).

(7)Innovative tariffs, such as time-of-day and real-time prices, price signals that can enhance the
effectiveness of other DSM programs

6.5 Evolution of DSM

U.S. utility DSM programs began modestly in the 1970s in response to growing concerns about
dependence on foreign sources of oil and environmental consequences of electricity generation,
especially nuclear power. Utility DSM programs grew rapidly during the late 1980s as state
regulators provided incentives for utilities to pursue least-cost or integrated resource planning
principles. Electric utility DSM programs reached their largest size in 1993. We expect DSM
programs to continue on two parallel paths reflecting the changing business interests of electric
utilities in a restructured industry as well as continuing public interest in the environmental
consequences of electricity generation.
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Over the past three decades, DSM activity in the U.S. (and to a large extent in Canada) has been
characterized by five waves of programs. In many ways, this evolution of activity in the North
America parallels developments around the globe. To provide a frame of reference on how DSM
needs to evolve to changing utility structures in the developing world, these five waves that
characterize the North American DSM experience are briefly described below.

First Wave: 1970s

The first wave took place from the mid to late 1970s and was triggered by the Arab Oil Embargo
of 1973 and the Iranian Revolution in 1979. Both events served to raise the cost of energy and
created a rationale for conserving energy. Thus, the focus of this wave of DSM activity was on
designing and implementing energy conservation and load management (C&LM) programs.

It was generally recognized that electricity prices did not reflect the new marginal costs and since
prices were to be taken as a given for political reason, other ways had to be found to give
customers an incentive for reducing usage. Programs were initiated to reduce loads on the
presumption that it was less expensive to reduce loads through DSM than build new power
plants. Because of the crisis mind set, this crop of programs was designed to achieve quick
results. Not much time and budget went into monitoring and evaluating program impacts. There
was a heavy reliance on “soft” measures such as information and audits. On the pricing
front, time-varying rates were instituted for large commercial and industrial customers. And 16
experiments were conducted in the U.S. by utilities, in concert with the U.S. Federal Energy
Administration (a precursor to the U.S. Department of Energy) with time-of-use(TOU) pricing
for residential customers.

Second Wave: 1980s

The second wave took place during the 1980s. During the first part of the decade, there was a
focus on achieving a comprehensive set of load shape objectives, including energy conservation,
load management and strategic electrification, where the latter means expanding the uses of
electricity to achieve other objectives such as economic development. It was expected that DSM
programs would be regarded as playing a key role in utility resource planning. This led to the
concepts of least-cost planning and integrated resource planning. In the second half of the
decade, concerns surfaced that large DSM expenditures on energy efficiency and conservation
programs were resulting in revenue losses to the utilities. These concerns were justified, since
DSM spending was lowering sales but the utilities had to cover their fixed costs regardless of the
amount of electricity that was sold. Several “decoupling mechanisms” were devised to make the
utilities whole by ensuring that they would recover their revenue requirement regardless of the
amount of power sold. In other words, recognizing that utilities had large fixed costs, the
mechanisms would ensure that sufficient revenues would be collected to cover these fixed costs,
even if sales went down. This was achieved by raising electric rates by a small amount to cover
the revenue deficiency created by lowered sales volumes. A series of cost-effectiveness tests
were developed to ensure that programs would reflect the often-conflicting perspectives of the
utility, its customers and society. Some experiments were carried out with real-time pricing
(RTP).
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Third Wave: Early 1990s

The third wave came in the early 1990s. It was brought on by new regulatory mechanisms for
implementing DSM programs, comprised of the decoupling mechanism mentioned above,
provisions for cost recovery and incentives to shareholders for investing in energy efficiency
programs. The shareholder incentives involved raising the allowed rate of return to the utility in
response to its performance on its DSM programs. DSM activity expanded rapidly in some
states, but there was resistance in several others. There was a new focus on measuring the
environmental benefits of DSM programs. The year 1993 was the high water mark for DSM
spending in the US. Annual DSM spending reached $3.2 billion and represented 1.7 percent of
utility revenues. DSM programs were in place in 447 utilities. In the mid-1990s,competition
from independent power producers, using natural gas-fired, modular combustion turbines,
became a serious threat to the viability of vertically integrated utilities. They began to institute a
wide range of cost-cutting measures and any programs that were placing an upward pressure on
rates were eliminated or reduced in size. Many DSM programs, especially the ones that
emphasized energy efficiency measures, fell in this category. Thus, DSM expenditures dropped
dramatically as utilities geared up for competition.

Fourth Wave: Late 1990s

The fourth wave came in the late 1990s. Regulators were concerned that DSM expenditures were
on the decline. They instituted a “public goods charge” to cover DSM expenditures. These were
imposed as a charge on the sale of electricity by distribution utilities and had to be paid
regardless of who was the ultimate power provider. DSM programs were administered by
distribution utilities and often implemented by third-party energy service companies (ESCOs).
From 1989-99, utilities had spent a total of $14.7 billion on energy efficiency programs.

Fifth Wave: 2000 Onwards

The fifth wave began in the year 2000, and was triggered by price spikes in wholesale power
markets. It got a boost in the year 2001, as California experienced a serious power crisis that
spread quickly to cover all Western states. In this phase, there was widespread interest in
implementing pricing reform rather than relying on traditional DSM programs. In particular,
there was interest in dynamic pricing. This is a form of time-varying pricing that goes beyond
static TOU pricing. Dynamic pricing is a form of pricing in which either the price for a period is
unknown ahead of time, or the time when a known price will be called is unknown. It has been
available to large customers for years, as real-time pricing (RTP). The digital revolution has now
brought it to mass-market customers.

6.5.2. U.S. Experience with DSM

DSM energy efficiency programs evolved in the United States during the 1980s primarily as
utility demand-side resource investments. Regulators considered efficiency investments an
integral part of a utility’s overall resource portfolio, and required these investments when they
lowered costs as compared to utility supply-side resources, a process known as integrated
resource planning, or IRP. Utilities designed and implemented energy efficiency

84
programs for their customers, while regulators determined how to measure cost effectiveness,
approved budgets, verified results, and, in many jurisdictions, provided regulatory incentives
designed to align utility financial motives with ratepayer interest in achieving cost-
effective efficiency investment, thus avoiding more expensive supply-side alternatives
(Harrington and Murray 2003).

In the United States, more than 500 utilities implemented DSM programs from 1985- 1995,
saving more than 29 GW of peak load. The average upfront cost of implementing this energy
savings was only 2 to 3 cents per kilowatt-hour, far below the average tariff. The Rand
Corporation issued a report in 2000 that quantified the benefits of California’s utility energy
efficiency programs, finding that DSM programs operated since 1977 have provided benefits to
the state economy of U.S. $875 to 1,300 per capita (1998) and reduced air pollution emissions
from stationary sources by approximately 40% (Nadel 2000).

DSM programs in the United States, as in many countries, faltered in the wake of electric utility
restructuring and the belief that market forces would be sufficient to provide energy efficiency.
In the United States, investment in ratepayer-funded energy efficiency, not including load
management expenditures, declined dramatically from $1.6 billion in 1993 to $900 million in
1997. Much of this decline can be attributed to the elimination of regulatory requirements for
utilities to conduct IRP and DSM programs (York and Kushler 2003). More recently, however,
many jurisdictions have come to realize that comprehensive DSM programs are essential, even
after power sector reform, to fill in the gaps left by the market in providing energy efficiency.
Total U.S. spending on utility DSM has risen steadily to $1.10 billion in 2000. Even more
important, a wide variety of states and utilities have realized the benefits of DSM in
providing long-term solutions to electricity system reliability concerns (Kushler and Witte 2003).

6.6 DSM program:-

6.6.1 Price responsive DSM program

This emphasize price responsiveness, and are aimed at introducing a negative slope in the
demand curve in order to let demand and supply balance out at a reasonable price of electricity
during tight market conditions.

Programs involving demand response to price signals are not widely available in developing and
transition economies at this time.

This program basically consists of two categories:

 Load curtailment programs that pay the customer for reducing peak load during critical
times.
 Dynamic pricing programs that give customers an incentive to lower peak loads in order
to reduce their electricity bills.
Both types of programs are largely designed to relieve peak capacity constraints but they could
also be used to retain customers in a restructured market context.

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6.6.2 Load curtailment program
Load curtailment programs include traditional programs that are based on an up-front incentive
payment and new market-based programs that involve a pay-for-performance incentive payment.
The former include direct load control of residential air conditioners and water heaters, and
curtail-able and interruptible rates for commercial and industrial customers.

The latter include programs that pay a certain amount of money for each MWh of electric load
that is curtailed during critical time periods. These are sometimes also called demand bidding or
buyback programs as well.

These programs introduce price responsiveness in restructured power markets and were
developed in the aftermath of the California crisis. There are two types of market-
based programs, one that deals with emergency situations by improving system reliability, and
another one that deals with economic situations by mitigating the rise in wholesale prices.

Internationally these programs are implemented by the Independent System Operator (ISO,
which is sometimes called the Independent Market Operator). The utilities can help in creating
customer awareness. Energy service companies can act as aggregators that bid demand
reductions during critical times.

Large commercial and industrial customers are often the main participants in such programs.
Sometimes, program can include large multi-family dwellings. Program participants benefit if
they have the flexibility in their business or technological processes to curtail peak loads during a
few hours of the year.

Incentive payments are made to customers to induce them to reduce peak loads. In some
variants, there is also a penalty for non-compliance. A pre-requisite for these programs is an
agreed upon methodology for measuring customer base load (CBL), against which the curtailed
amounts can be measured.

In another variant of the program design, customers may bid “negawatts” of load reductions at
pre-specified prices. But its not very popular among consumers because of their inability to think
systematically think about the financially opportunity created by bidding, since management
focus is often diverted by higher priority issues dealing with running the business.

The largest component of program cost is the incentive payment. Other elements of program cost
include administrative costs associated with program management, some program evaluation
cost and some marketing cost.

Experience with such programs indicates that it can be difficult to recruit customers into such
programs even when the economic benefits are clear. Utilities should explain in lay terms what
the customer has to do in order to save money and what the risks are of not seeing those savings.
If the savings look small in relation to day-to-day expenses and life priorities, it is hard to get the
customer involved in the “distraction.”

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One cannot expect customers to get “smarter.” The ISOs and utilities have to position themselves
as being the customer’s partner in helping balance electricity demand with electricity supply in
order to manage electricity costs.

Benefits to utility:
 It is non-polluting (when curtailment used).
 It has the advantage of being fully distributed across the service area.
 It’s available more quickly than the traditional thermal plant.
 It incurs no T & D line losses.
 It responds faster than a traditional plant; and can be used when bilateral scheduling and
exchange closes.
 It helps utility to better manage the grid and available supply by utilizing voluntary
instead of involuntary load shedding.
 It costs less to create and run than a traditional plant or short term power purchase.
 It creates additional revenue for large power cucstomers which greatly increases the
satisfaction with the utility.
 It complies regulatory requirements, and helps meet indian government objectives of
climate change mitigation.
Benefits to Participating Consumers:
 Focus on longer-term efficiency / become part of solution.
 Contribute to an overall more stable supply from the Grid (which will eventually improve
their own situation)
 Benefits to environment and everyone:
 It incentivized the reduction in power wastage by consumers.
 It helps to achieve better overall energy efficiency
 It greatly reduces emissions.

6.6.3 Dynamic pricing programs

Dynamic pricing programs are designed to lower system costs for utilities and bring down
customer bills by raising prices during expensive hours and lowering them during inexpensive
hours, as discussed further below. Their load shape objective is to reduce peak loads and/or shift
load from peak to off-peak periods.

Such programs can be implemented at any stage of power sector reform. There are successful
examples of power sectors that have not been deregulated and are served by vertically integrated
electric utilities, and successful examples where the sector has been fully deregulated.

The electric utility is most often the primary party responsible for program design,
implementation, and evaluation and monitoring. Since these programs involve the
implementation of new metering and billing systems, they are often conducted in close

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coordination with providers of such systems. In some cases, the programs involve the installation
ofend-use controlling equipment, such as smart, price-sensitive thermostats. Thus, they may
involve the installers and manufacturers of such equipment.

Such programs can be targeted at any class of customer, ranging from the residential class to the
commercial class to the industrial class. Most often, they begin with the industrial class of
customers, and within a particular class they begin by targeting the largest customers.

The market implementation mechanism is the rate design itself. This is often accompanied by an
educational campaign to inform customers about the benefits of dynamic pricing. In some cases,
technical assistance may be provided to assist customers in benefiting from the incentives that
are implicit in the rate design.

6.6.4 Time-of-Use Pricing (TOU)

This rate design features prices that vary by time period, being higher in peak periods and lower
inoff-peak period.

The simplest rate involves just two pricing periods, a peak period and an off-peak period. More
complex rates also have one or more shoulder periods.

Developing a TOU rate

It is fairly straightforward to develop a TOU rate design. The following table shows the steps
involved in developing a revenue-neutral TOU rate.

Such a rate would leave the average customer’s bill unchanged if that customer chose to make no
adjustments in their pattern of usage.

Of course, a customer who uses less power in the peak period than the average customer would
be made better off by the rate even without responding to the rate and a customer who uses
proportionately more power in the peak period than the average customer would be made worse
off by the rate if he or she did not respond to the rate.

Existing Flat Rate

Per-Customer Class Revenue Requirement Rs 100

Monthly Usage 1000 kWh

Average Price Rs 0.10 / kWh

Revenue Neutral TOU Rate

Estimated Peak Usage 200 kWh

Estimated Off-Peak Usage 800 kWh

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Set Peak Price = Peak Marginal Cost Rs 0.2 /kWh

Set Off-Peak Price = Off-Peak Marginal Cost Rs 0.075 kWh

Given Class Revenue Requirement Rs 100

Given Monthly Usage 1000 kWh

TOU Rate with Load Shifting

Estimated Price Elasticity -0.2

Estimated New Peak Usage 160 kWh*

Estimated New Off-Peak Usage 840 kWh*

Estimated New Monthly Usage 1000 kWh

Estimated New Monthly Bill Rs 95

Estimate Bill Savings = Revenue Loss Rs 100 – 95 = Rs 5

Table 17 : Steps for developing a TOU rate

6.7 Utility Response to the DSM

For the purpose of analysis, it will be assumed that the decision maker in the utility (Discoms) is
rational and is not biased towards supply. Given the existing policies and pricing structure how
should the utility react to DSM ?

In formulating the utility response, the following characteristics of the utility should be
considered:

(a)The utility is a monopoly.

(b)The utility has a peak shortage and an off-peak surplus.

(c)There are variations in the tariffs to different consumer classes with the industrial and
commercial consumers cross subsidising the and domestic consumers.

(d)There is a limit on the total revenues of the Discoms. A maximum rate of return of 3 % on net
fixed assets is permitted by government policy.

Most of the utilities resort to load shedding to control the peak demand. Utilities also find it
difficult to raise capital for new power plants. In this context they should be willing to examine
DSM as an option. In order to shortlist possible DSM programmes for implementation the utility
would adopt the following criteria:
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(a)Low Transaction Cost For the DSM: Programmes to be viable the transaction cost should be a
small proportion of the total programme cost.

(b)High Potential Saving There should be a significant potential for saving for the DSM
measures selected.

(c)Revenue Considerations DSM programmes should not adversely affect the revenue balance of
the State Electricity Board (Discoms)

(d)Customer Viability The customer should be willing to adopt DSM measures, viz. The
payback periods for the customer should be low.

Recommendation of Integrated Energy Policy for DSM

The following recommendations have been made in the integrated Energy Policy Report of the
Planning Commission Government of India:-

The importance of energy efficiency and DSM has clearly emerged from the various supply
scenarios and is underlined by the rising oil, coal and other fuel prices. Efficiency can be
increased in energy extraction, energy conversion, energy transportation, as well as in energy
consumption. Further, the same level of service can be provided by alternate means requiring
less energy. Thus a “Negawatt” (a negative Megawatt),produced by reducing energy need saves
more than a Megawatt generated

A study for the Asian Development Bank (ADB, 2003) estimated an immediate market potential
of energy savings of 54,500 Million Units and peak saving of 9240 MW. This has an investment
potential of Rs.14,000 crores (3500 Million US Dollars). Though there is some uncertainty in
any aggregate estimates, it is clear that the cost-effective saving potential is at least 10% of the
total generation through Demand Side Management.

In actual practice there are several barriers that constrain the adoption of EE/DSM. These relate
to high transaction cost, lack of incentives to utilities who perceive DSM as loss of market,
inadequate awareness, lack of access to capital, perceived uncertainty concerning savings, high
private discount rate and limited testing infrastructure for ascertaining savings. Policy
interventions are required to address these barriers.

BEE (Bureau of Energy Efficiency) should be made autonomous and independent of the
Ministry of Power. It should be funded by contribution from all energy Ministries or a cess on
fuels and electricity adjusted for cess on fuels used for generating electricity. BEE staffing
should be substantially strengthened.

Implementing Time of Day (TOD) Tariffs: All utilities should introduce TOD tariffs for large
industrial and commercial consumers to flatten the load curve . Utilities should support load
research to understand the nature of different sectoral load profiles and the price elasticity of
these loads between different time periods to correctly assess the impact of differential tariffs
during the day.

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Improving efficiency of Municipal Water pumping:- Institute measures that encourage adoption
of efficient pumping systems and shifting of pumping load to off- peak hours. The public sector
should be mandated to do so. Private sector could be encouraged to do so through time of day
pricing. This will help reduce peak demand and energy demand.

Promoting Variable Speed Drives: All large industries should be required to assess suitability of
variable speed drives for their major pumping and fan loads.

Undertaking efficient Lighting Initiative: Utilities should launch pilot efficient lighting initiatives
in towns/cities (similar to the BESCOM programme in Bangalore). Features should include
warranties by manufacturers, deferred payment through utility bill savings.

Regulatory commissions can allow utilities to factor EE/DSM expenditure into the tariff.

Each energy supply company/utility should set-up a DSM/energy efficiency cell. BEE can
facilitate this process by providing guidelines and necessary training inputs. A large number of
pilot programmes that target the barriers involved and have low transaction costs need to be
designed need to be tried with different institutions, incentives, and implementation strategies.
Innovative programme designs can be rewarded.

6.8 DSM implementation framework

The DSM Implementation Framework is the primary regulatory document facilitating DSM
implementation in the state.It is organised under the following heads:

 Basic Principles on which the DSM Implementation in the state is planned

 Guiding Principles that specifically outline the role of the Distribution Licensee
 DSM Programme Eligibility Criteria
 The detailed outline for the Development and Submission of DSM Portfolio and Plans
 Role of the DSM Consultation Committee (DSM – CC)
 Responsibilities of the Distribution Licensees related to DSM Planning and
Implementation
 DSM Funding
 DSM Programme, Portfolio and Annual Work Plan and its Approval Process
 Evaluation, Measurement and Verification
 Monitoring and Reporting
 End of DSM Programme Completion Report
 Selection Criteria: Methodology for Selection of DSM Programmes to be include in the
DSM Plan
 Selection Criteria for other Programmes to be included in the Plan
 Power to Remove Difficulties
 Issue of Order and Practice Directions
 Power to Amend

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Basic Principles :-

a) Every Distribution Licensee shall make DSM an integral part of their day-to-day operations,
and undertake planning, designing and imple-mentation of appropriate DSM programmes on a
sustained basis.

b) Distribution Licensees may recover all justifiable costs incurred by them in any DSM related
activity, including planning, designing, im-plementing, monitoring and evaluating DSM
programmes, by adding these costs to their Annual Revenue Requirement to enable their fund-
ing through tariff or by implementing programmes at the Consumers’ premises that would attract
appropriate Return on Investment. All such DSM related activity/ programmes undertaken by the
Distribution Licensees ─
(i) will need to be cost effective for the consumers’ of the Distribution Licensees as well as to the
Distribution Licensees themselves;
(ii) shall protect the interest of consumers and be implemented in an equitable manner;
(iii) result in overall tariff reductions for all the consumers of the licen-sees.

c) Distribution Licensees shall be guided by these regulations ─

(i) while planning and submitting long-term power procurement plan to the Commission as part
of their application seeking determination of tariff;
(ii) while submitting to the Commission the measures proposed to be implemented by them as
regards load management, energy conservation and energy efficiency;
(iii) while submitting to the Commission the impact on energy and demand, together with the
cost-benefit analysis.

d) Distribution Licensees shall be guided by the DERC (Demand side Management Measures
and Programme’s Cost Effectiveness Assess-ment) Regulations, 2012 while carrying out cost-
effectiveness.

DSM Guiding Principles:-

The duties of the Distribution Licensees shall be as follows:-

a) Distribution Licensees shall implement quick acting DSM programmes that provide long-term
savings;
b) Distribution Licensees shall propose and implement programmes bringing in energy-
efficiency in the premises used for the following purposes - commercial, public-sector,
residential, municipal, and in-dustrial use;
c) Distribution Licensees shall implement programmes that help reduce peak demand peak
shifting and associated costly power purchase, specifically in the urban centres. Such
programmes shall also include Demand Response initiatives involving consumers agreeing to
modu-late their load shapes through a contract with the licensee.

d) Distribution Licensees formulate DSM programme designs that provide sustainable benefits
(market transformation), and which particularly :-

(i) enhances consumer interest and inclination in adopting load management and energy
efficiency, i.e., not only removes per-ceived barriers but goes beyond and motivates consumers
to adopt energy efficiency;

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(ii) enhances the interest and the willingness of the intermediaries such as the banks to lend for
energy efficiency measures, and
(iii) enhances emergence or development of sustainable energy de-livery entities.

e) Distribution Licensees shall implement programmes that are:

(i) cost effective for total resources;

(ii) do not put undue burden on non-participants (those who do not participate in the DSM
programmes) and participants (those who participate in the DSM programmes);
(iii) directly or indirectly benefit the consumers in all segments from the programmes.

(f) Distribution Licensees shall design, develop and implement DSM pro-grammes that
supplement national level efforts, specifically those promoted by the Bureau of Energy
Efficiency (BEE).

(g) The DSM programme portfolio of Distribution Licensees will be de-signed on the basis of
“market driven” approach to DSM portfolio se-lection.

(h) DSM programme development, design and implementation shall be carried out in
consultation with the stakeholders in the State to ensure pragmatic implementation of
programmes and also to ensure con-sumer awareness and education.
(i) DSM Consultation Committee set up under the Regulations shall be the nodal agency to drive
the programme implementation under these regulations, and shall recommend DSM Programme
to the Commission for approval.

DSM Programmes Eligibility Criteria:-

A DSM programme shall be eligible if in the opinion of the Commission the said programme
meets with the DSM guiding principles specified in Regulation 4 of these Regulations.

Assessment of technical potential for DSM:-

a) The distribution Licensee in the State shall carry out assessment of potential for DSM in the
State one year before the start of every MYT Control Period.

Notwithstanding above provision, the first assessment of technical potential for DSM shall be
carried out within six months of the notifi-cation of these Regulations.

b) Distribution Licensee shall be guided by methodology developed by Bureau while assessing

of technical potential for DSM.

Development and Submission of DSM Portfolio and Plans:-

a) Distribution Licensees shall submit its DSM Plans based on Load Research activities and
submit the findings to the Commission and the resulting propositions to implement DSM
Programmes to be aggregated as “DSM Plans”.
b) Distribution Licensees shall specify DSM targets and submit DSM plan based on multi-year
planning horizon.
c) The term of the DSM plan shall correspond with the Multi-year Tariff term.
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d) Distribution Licensees shall submit Multi-year DSM plans along-with the multi-year tariff
filing.

DSM Targets:-

a) The Commission shall establish DSM targets for each Distribution Licensee in the State.
b) While setting DSM target for the Distribution Licensee, the Com-mission will give due
consideration to factors such as consumer mix, load profile, etc.
c) Examples of DSM targets may include the following:
Percentage reductions in load growth;
Savings in kWh; Savings as a percent of total resources to meet load;

d) While establishing the targets, the Commission shall consider the technical potential in the
State as assessed by the Distribution Li-censee. Provided that till the time the multi-year tariff
filings are made, Distribution Licensees shall submit DSM plans as one-year targets and rec-
oncile those as Multi-year plans when the multi-year tariff filings are made.

e) DSM Plan shall contain prioritization and implementation schedule for each DSM programme
in the Plan, which shall form the basis for deriving aggregated year wise schedules for funds
requirement, and DSM plan achievements in terms of savings or shifting/reduction of peak load.
f) The aggregated year-wise funds requirement and proposed achievements shall be used as
annual DSM budgets and annual targets, respectively.
g) At the beginning of the multi-year planning cycle, the Commission shall accord approval to
the DSM Plan, based on the Cost-effectiveness of the individual programmes and portfolio.

Formulation of DSM Plan:-

a) Distribution Licensee shall formulate and submit to the Commission a perspective DSM Plan
covering period of the control period, within one year of notification of these regulations. The
Plan shall include
(i) An overall goal for DSM Plan
(ii) Description of DSM programmes to form a part of DSM Plan
(iii) Implementation process and schedule of each programme in the plan as a whole
(iv) Plan for Monitoring and Reporting
(v) Indicative cost effectiveness assessment of programmes

Notwithstanding, above, the first DSM Plan shall be prepared within one year of the date of these
Regulations and shall be for the period till the end of ongoing MYT Control Period.

b) The Distribution Licensee shall include all relevant DSM prgrammes (including multi-state
programmes) developed by Bureau in its perspective plan as and when such programmes are
announced by Bureau.

(i) The Distribution Licensee shall submit on rolling basis, an annual plan, not inconsistent with
the perspective plan, for upcoming year, along with the Annual Performance Review.

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c) Selection and prioritisation of various DSM programmes in the DSM Plan shall be guided by
the following factors:

(i) The cost effectiveness guidelines issued by the Commission

(ii) DSM Objectives identified in Regulation 3
(iii) Whether the proposed programmes supplement National level efforts adopted by the Bureau
(iv) Programmes with high visibility and therefore potential for cre-ation of awareness within
consumers

DSM Cell:-
a) Every Distribution Licensee shall, constitute DSM Cell within one month of adoption of these
regulations

b) The DSM Cell so constituted shall be provided with necessary authority and resources so as to
execute the functions assigned to it under these Regulations

c) The DSM Cell shall be responsible for:

(i) Load research and development of baseline data

(ii) Formulation of DSM Plan
(iii) Design and development of DSM projects including cost benefit analysis plans for
implementation, monitoring & reporting and for measurement & verification
(iv) Seeking necessary approvals to DSM Plan and individual pro-grammes
(v) Implementation of DSM programmes
(vi) Any other additional function that may be assigned by the Com-mission from time to time

d) Distribution licensees shall nominate a nodal officer with whom the DSM Consultation
Committee can interact with. The Role, Objective, Functions and Contitution of DSM-CC shall
be as per Annexure-1.
e) Any other activities suggested by the DSM-CC or as directed by the Commission.

DSM Funding:-
Without prejudice to the generality of Regulation 3.2, the following provisions shall apply:-
a) Funding of all the DSM programmes and plans to be implemented by the Distribution
Licensees shall be included in the Annual Revenue Re-quirements (ARR).
b) Distribution Licensees shall be allowed to recover all costs incurred by them in any DSM
related activity, including planning, conducting load research, designing, implementing,
monitoring and evaluating DSM programmes, by adding these costs to their ARR to enable their
fund-ing through tariff structure.
c) Since the DSM costs are being recovered through tariffs, only those DSM activities that
adhere to the Regulations related to Cost Effective-ness Assessment shall be implemented by the
Distribution Licensees.
d) The Commission may direct the Distribution Licensees to adopt other complementing DSM
funding approaches such as creating a pool of funds through collection of public benefits charge
at a later date; if such an approach is found beneficial.

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e) Distribution Licensees shall obtain the prior approval of the Commis-sion for implementing
DSM Programmes at the consumer premises through equity placements. Provided that such
programmes shall be eligible for Return on Investment and would be evaluated during the ARR
approval process.
f) The Commission may provide incentives to Distribution Utilities for achieving or exceeding
DSM Objectives as identified in Section 3 of the Regulations.”

DSM Budget:-
(a) Without prejudice to the generality of Regulation 6, the following pro-visions shall apply:-

(i) Distribution Licensees shall set up a Multi-year DSM plan and DSM programme budgets and
submit the same during the MYT approval and Annual Revenue Requirements (ARR) ap-proval
process.
(ii) The budget shall be spent only after approval of aggregated DSM Plans and/or individual
DSM Programmes by the DSM Consultation Committee.
(iii) DSM implementation plan and associated budgets shall be substantiated with the
prioritization of the possible pro-grammes within the license area.
(iv) The DSM budget to be spent every year shall be substantiated with the kW and kWh savings
targets where such targets shall be developed by carrying out detailed load research activity and
implementing DSM programmes that may be directed by the DSM Consultation Committee
proactively for the benefit of consumers in the State.

(b) Distribution Licensees shall submit year-wise schedule of DSM plan implementation and
corresponding budget allocations relevant to the savings or shifting/reduction of peak load.
(c) The aggregated year wise funds requirement and achievements shall be the annual DSM
budgets and annual DSM targets, respec-tively.
(d) These annual DSM budgets and targets, determined and approved at the beginning of the
planning cycle shall be revisited during the Annual Performance Review.
(e) The DSM Consultation Committee may take special account of measures taken by
Distribution Licensees to develop carbon finance programmes using the Clean Development
Mechanism of the United Nations Framework Convention on Climate Change (UNFCCC) or any
other voluntary carbon financing protocol.

Funding for DSM activities other than DSM plan implementation:-

Distribution licenses shall seek separate budget approval from Com-mission for additional
expenses (beyond the DSM programme and DSM plan implementation) to be incurred for
activities such as carrying out load research, consumer surveys, DSM plan and programme
develop-ment activities, research and analysis, funding of any activities pro-posed by the DSM-
CC, conduct of potential studies, training & devel-opment, etc.

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Allocation of funds for consumer awareness, audits and equity
considerations:-
Distribution Licensees shall be allowed to spend a reasonable amount, pre-approved by the
Commission on recommendations by the DSM-CC to promote programmes of the nature
described below.

DSM Programmes that:

Promote consumer awareness and education about why, how, when and where of load
management/energy efficiency and include activities such as:
(i) Energy audits
(ii) Awareness campaigns
(iii) Energy Efficiency and Load Management demonstration projects
(iv) Training programmes, seminars, workshops, round tables, conferences, business exchange
meets (buyer-seller meets)
(v)Establishment of permanent display/demonstration centres cum model “green”/ ultra energy
efficient buildings (buildings that go beyond ECBC – Energy conservation Building Codes)

DSM Programme, Portfolio and Annual Workplan and its Ap-proval

Process:-
(a) Distribution Licensees shall follow the aforementioned contents for key documents in
Annexure 2 submitted for approval of the Commission.
(b) Approval process shall come in to effect coinciding with the multi-year tariff setting process.
(c) During the interim period, Commission shall accord approvals for all pilot and regular
programmes through the process mentioned in these regulations; based on the recommendations
by the DSM-CC.
(d) DSM plan document
Distribution licensees in the State shall prepare a multi-year DSM plan and submit it for the
approval of the Commission and in this regard shall be guided by the general elements that the
DSM Plan document shall be required to contain and as provided in Annexure 3 to these
Regulations

DSM plan approval process:-

The following elements shall guide in the approval process by the Commission for the DSM
Plan:
(a) The term of the plan shall coincide with the corresponding five year multi-year Tariff term
(b) The DSM Plan shall be submitted to the Commission coincident with the submission of
Capital Expenditure Plans submitted by the distribu-tion licensee.
(c) The distribution licensee shall submit the Plan in both, hard copy ver-sion (Three copies) and
soft copy version.
(d) DSM-CC shall hold meetings for programme review and seek any in-puts required from the
distribution licensee.
(e) Any specific observations and required revisions shall be conveyed to the distribution
licensee. Thereafter the licensee, after addressing all the comments contained in the

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communication of DSM-CC shall re-submit the revised DSM Plan to the DSM-CC within time
stipulated in the DSM-CC communication.
(f) DSM-CC shall drive the process related to approval of pilot pro-grammes and all approvals
sought by the distribution licensee till such time that a multi-year tariff setting process does not
come in to force.

Commission review and approval of DSM Plan:-

a) Distribution Licensee shall submit the DSM Plan approved by the DSM-CC to the
Commission for approval at least six months before the start date of the next MYT period.
b) The Commission may adopt procedures as specified in the Conduct of Business Regulations
for according approval to the DSM Plan.

Evaluation, Measurement & Verification (EM&V):-

a) Distribution Licensees shall be guided by the DERC (Evaluation, Measurement &

Verification) Regulations
b) Notwithstanding the above, till such time that such DERC (Evalua-tion, Measurement &
Verification) Regulations come into force, the DSM programmes implemented by the
Distribution Licensees shall be evaluated based on measurement & verification protocols sub-
mitted in the individual programmes or aggregated plans and vali-dated by the DSM-CC.
c) The Commission may empanel Independent Verification Contrac-tors (IVC) to carry out the
Evaluation, Measurement & Verification plans.
d) The Distribution Licensees shall appoint the empanelled IVCs to carry out the EM&V plans.
e) The Commission may decide to carry out EM&V activity for individ-ual programme(s) or
entire plans by directly appointing empan-elled IVCs.

Monitoring & Reporting:-

a) Distribution Licensees shall submit quarterly and annual DSM monitoring plans to the
Commission.
b) The evaluation methodology shall be governed by the DERC (Evaluation, Measurement &
Verification) Regulations.
c) Notwithstanding the above, till such time that such DERC (Evalua-tion, Measurement &
Verification) Regulations come into force, the distribution licensee shall submit monthly and
quarterly monitoring reports to the Commission for all pilot-phase and large-scale DSM
programmes based on the proposed monitoring plans embedded in the programme/plan designs.

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End of DSM Programme Completion Report:-
a) At the completion of the programme, the Distribution Licensees shall prepare a detailed
programme completion report and submit it to the Commission within one month of the
completion of the programme.
b) The completion report, apart from providing information on the ac-tual amount expended on
the programme, shall also cover, pro-gramme accomplishments in terms of achievement of
results, out-comes and outputs; constraints/difficulties faced, if any; conclu-sions,
recommendations, lessons learnt; regulatory support needed, if any; and future steps envisaged.

Miscellaneous:-
(a) Power to Amend - The Commission may, at any time add, vary, alter, modify or amend any
provisions of these regulations.
(b) Power to Remove Difficulties
If any difficulty arises in giving effect to any of the provisions of these Regulations, the
Commission may by general or special or-der, take suitable action, not being inconsistent with
the Act, which appears to the Commission to be necessary or expedient for the purpose of
removing difficulties.
(c) Issue of Order and Practice Directions
Subject to the provisions of the Act, the Commission may from time to time issue guidelines,
orders, circulars and practice direc-tions in regard to the implementation of these Regulations.
(d) All disputes arising under these regulations shall be decided by
the Commission based on an application made by the person
aggrieved.

Annexure 2: List of DSM Implementation Actions:-

Activities to be carried out by the Commission
 Development and issuance of guidelines and regulations for DSM plan-ning, designning
and its administration
 Activities to be carried out by the Distribution Licensees
 Load research & consumer survey
 Load forecasting at aggregate system level, segment level and end-use level
 Conduct of DSM and Demand Response Potential Studies, also including relationship
with Integrated resource planning (IRP) exercises
 Setting short- and long-term DSM targets (e.g., kWh, MW)
 DSM Programmes, Portfolio and Plans preparation, documentation, rou-tine monitoring
and Regulatory reporting
 Preparation of Annual work-plan for DSM Programmes, Portfolio and Plans
 Preparation of annual DSM Budgets
 DSM programme level dispute resolution
 Development of DSM related centralised information system and database to aid DSM
planning, programme design, cost assumptions, and EM&V
 Inventory of DSM programmes, costs, achievements, lessons learned
 DSM measure wise estimation of deemed savings, costs and timing
 Avoided costs – generation, transmission and distribution
 Research and analysis in support of DSM plans

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6.9 NPCL APPROACH TOWARDS DEMAND SIDE MANAGEMENT:

The gap between demand and supply of electricity is common knowledge. The two obvious
ways to reduce it are:
(i) Increase Supply
(ii) Reduce Demand

Increase in supply suffers from following impediments:

a. Long gestation period that consumes a lot of quality time;
b. Large scale capital investment required for new / expansion of projects;
c. Scarce fossil fuels are consumed;

Therefore it is prudent to contain increasing demand through Demand Side Man-agement (DSM)
measures. The Distribution Licensee needs to make full utilisa-tion of the available resources in
this regard. NPCL should work out strategies with Uttar Pradesh Power Corporation Limited
(UPPCL), the State Designated Agency (SDA) to associate with Bureau of Energy Efficiency
(BEE) which has been implementing many DSM projects.

The Commission appreciates the efforts taken by NPCL towards DSM to reduce demand.
However, to hasten the speed of implementation of these measures, NPCL must create DSM cell
with dedicated staff, resources and budget alloca-tions to plan, develop, monitor and implement
DSM initiatives on a sustainable basis. In this regard, NPCL is expected to take up the following
steps:

 Prepare DSM plans and allocate budget for implementation of the plans.
 Develop & institutionalize bidding mechanism for implementation of DSM projects
aimed at savings in terms of MW of load avoided and / or kWh of energy purchase
avoided in identified places such as distribution transformers, feeders, or large bulk
consumers like airports, shopping malls, commercial complexes, etc.
 Verification of results of DSM programs / projects through third party or ex-pert(s).
 Consideration of the projected feasible savings through Energy Conservation and Energy
Efficiency measures in power procurement plans.
 Capacity building of staff through domestic / international visits to places and exposure
to successful DSM projects that have been implemented.
 Utilities may use pre - Identified sources of funds for financing DSM activities.

However, DSM plans should be backed with systematic load research to provide data in terms of
expected savings in energy and reductions in demand. This shall also endeavour to provide an
insight in to consumer load profile and valuable in-puts on cost of service and profitability
analysis. This in turn would help NPCL in rate design, load forecasting, load control and load
management.

Some of the common measures for DSM that can be taken up are:

 Reduction of Technical & Commercial Losses of Distribution System;

 Energy Efficient Pumps for lifting water;
 Use of CFL / LED lamps in place of Incandescent lamps;
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  Energy Efficient Lighting Controls;
 Widespread use of solar water heating system for which capital and interest subsidies are
also available;
 Replacement of existing Magnetic Ballasts with use of Electronic Ballasts;
 Automatic Power Factor Controllers;
 Energy Efficient Motors / Fans including water pumping;
 Energy efficient Transformers;
 Segregation of Agricultural feeders;
 Energy Audit of large Government / Commercial / Industrial Consumers;

NPCL should also give wide publicity to ‘day to day’ DSM measures for public awareness on
benefits of conservation of electricity. These include:

 Completely switching off AC, TV, Computers and other electrical appliances when not in
use;
 Using white paint for roof tops and walls to enhance reflection for energy saving;
 Defrosting of refrigerators for half an hour during peak load period;
 Encouraging replacement of the conventional electric geysers with energy ef-ficient gas
geysers.

The effect of Demand Side Management should reflect in lesser purchase of cost-ly power due to
effective energy conservation measures. This shall reduce the revenue requirement of the NPCL.
The cost of such DSM projects would be offset by the savings in power purchase cost due to
reduction in demand. This should be represented as a separate cost element which shall be
allowed by the Com-mission as a part of the Annual Revenue Requirement of NPCL.
The benefits of DSM can be summarised as below:

 Reduction in customer energy bills;

 Reduction in peak power prices for electricity.
 Reduction in need for new power plant, transmission & distribution network;
 Reduction in air pollution;
 Reduction in dependency on foreign energy sources;
 Creation of long - term jobs to cater to new innovations and technologies;
 Increasing competitiveness of local enterprises;
 Stimulating economic development;

The Commission directs NPCL to regularly update the Commission on the status of
implementation of the DSM measures being undertaken / intended to be taken up by the utility.
The report must indicate the cost-benefit analysis of the measures being undertaken by NPCL.
Further NPCL may refer to the “REPORT ON DSM & ENERGY EFFICIENCY” of the Forum
of Regulators issued in September, 2008 for detailed information and guidance.

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6.10 DSM through energy service companies (ESCO):-

Against a backdrop of national concern about climate change and rising oil imports, interest
in implementing energy efficiency initiatives has been increasing in India’s government,
business, and investment sectors. Both government policies and efforts by multilateral and
bilateral organizations to conserve energy across a wide range of sectors have contributed to
new domestic and international energy efficiency companies to serve this market. This
expansion over the last half decade has in turn led to investors’ interest in funding the energy
efficiency sector. The potential for energy savings is enormous: an estimated 183.5 billion
kWh per year, based on reports prepared by the Asian Development Bank and the Indian
Bureau of Energy Efficiency (BEE).

One subsector within the energy efficiency industry that can help deliver both energy savings
and financial returns in India is the specialized energy service company (ESCO) industry.
An ESCO is “a company that provides energy efficiency-related and other value-added
services and for which performance contracting is a core part of its energyefficiency
services business.”

In other emerging countries, ESCOs have made significant contributions to energy efficiency
programs and local economies. In Brazil, such companies produce annual industry revenues
of USD 344 million (2008), and in China, USD 121 million (2006). In both countries, the
industry is growing at double-digit rates.

Table 17 Energy Savings Potential in India by Sector

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Analysis of Energy Efficiency Projects:-

In this section we describe three successful energy efficiency projects carried out in India.
Two of them are companies that collaborated with an ESCO to save energy through performance
contracting. The third is an energy efficiency project implemented by a company
without an ESCO. We selected these examples to highlight common trends in the Indian
ESCO industry. Then, in the following section, we discuss the lessons learned from these
case studies.

1. LILAVATI HOSPITAL PROJECT IMPLEMENTED BY SUDNYA

INDUSTRIAL SERVICES:-

Company Details: Lilavati Hospital is one of the largest multispecialty hospitals in India,
with state-of-the-art medical and research facilities. The building houses several energyintensive
activities, like laundry and sterilization. The central air-conditioning system was
the biggest consumer of electricity, accounting for more than 60 percent of the hospital’s
energy usage.

Project Details: The impetus for the project came from the hospital’s senior managers, who
were eager to implement energy-efficient measures to reduce energy costs and optimize
their central air-conditioning and building services. The vice president of operations , Mr.
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Prakash Mhatre, introduced the ESCO, Sudnya Industrial Services, to the management. The
hospital conducted a survey of its utilities and an energy audit of its facilities and then
asked Sudnya to help provide turnkey solutions for energy savings through a pilot project,
linking the remuneration to Sudnya to the savings achieved.

Sudnya analyzed the data from the past three years, including energy consumption, oil
temperature, water pressure, and condensation. It determined that the air-conditioning system
could be upgraded quickly and effectively and provided demonstrable results, thereby making
it suitable for a pilot project. Sudnya held a seminar for the plant operators and engineers
at the hospital, at which they discussed available options and the advantages of the
proposed solution. The ESCO then developed an energy-saving program and solicited and
evaluated proposals for the equipment, remaining involved throughout the implementation
process. The ESCO was able to ease the hospital management’s initial concerns and to
guarantee the savings. Lilavati Hospital financed the entire project, which cost approximately
INR 6 lakhs (USD 12,000) and used this figure to determine the amount of the guarantee.

Action Taken: Because the hospital requires air-conditioning twenty-four hours a day, two
variable-frequency drives were installed on the pumps to ensure continuous operation. The
staff was trained in operating the equipment, and the hospital reports that the pumps are
now more efficient, quieter, and less prone to breakdowns.
Measurement and Verification: Sudnya worked with the staff at Lilavati to establish a baseline
and developed robust measurement and verification (M&V) protocols to avoid any disputes.
The company monitored the pumps every hour for more than three months, establishing
baselines and fine-tuning the operating parameters. After the pumps were installed, the
ESCO rigorously monitored their performance, which met the client’s requirements.

Results: Lilavati Hospital has realized energy savings of 20 to 40 percent and cost savings
of approximately INR 8.5 lakhs (USD 17,000) annually, and over a three-year period, this
resulted in energy savings of 618,210 kWh and cost savings of more than INR 26 lakhs (USD
49,000).58 Table 5 is a cash flow analysis of the project, showing the payback during the
first year and a net cash flow of 1.7 lakhs (USD 3,400) at the end of the first year.
Those factors regarded as crucial to the project’s success were the commitment of the hospital’s
senior management and the strong M&V protocol, which helped avoid disputes.
Lilavati Hospital is extremely satisfied with the ESCO’s performance and is currently in the
second phase of implementing more energy-efficient activities.

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 Table 18 Cash Flow Analysis: Lilavati Hospital

2. NEW DELHI MUNICIPAL COUNCIL IMPLEMENTED BY DSCL

ENERGY SERVICES
(DSCLES):-

Company Details: The New Delhi Municipal Council (NDMC) manages all municipal services,
including electricity, water, and sanitation for the core regions of New Delhi.

Project Details: The NDMC solicited bids for a proposed efficiency study and upgrade and
chose DSCLES to carry it out. PRI Canada, along with DSCLES, conducted a demand-side
management strategy study supported by the Commonwealth Development Council. The
study identified several energy-saving options in the areas of lighting, cooling and air-
conditioning, water pumping, and electrical distribution. DSCLES was selected through
competitive bidding to implement the project under an ESCO performance contract. DSCLES
was responsible for the design, financing, installation, and maintenance of the lighting system
for a four-year period.

Action Taken: The energy-saving project was to replace magnetic ballast T-12 tubes with
electronic ballast T-8 tubes, redesign the installation in some areas, and also improve the
wiring and end connections. The project resulted in total savings of 126kW in lighting power
consumption, a 48 percent energy saving over the baseline.

Measurement and Verification: The close coordination between the NDMC and DSCLES helped
avoid measurement and verification problems. The two organizations was able to do this by
first deciding on a benchmarking methodology and then having DSCLES work with the NDMC
to provide detailed measurements and evaluations after retrofitting the lights.

Results: DSCLES was paid a share of the energy savings in forty-eight installments. DSCLES
received 80 percent of the savings in the first year, 75 percent in the second, 70 percent in
the third, and 60 percent in the fourth. The total investment was approximately INR 300
lakhs (USD 61,000), which was financed internally by DSCLES. The total energy savings was
126 kW in lighting power consumption, an annual savings of INR 200 lakhs (USD 40,000)
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This savings led to a payback period of eighteen months.
The NDMC considers the overall project to have been a success, as it reduced energy usage
and expenditures.
• Investment: INR 30 lakhs (USD 75,000)
• Annual savings: INR 20 lakhs (USD50,000)
• Payback: Eighteen months

6.11On-going Pilot Projects For Entire Consumer Base In Maharashtra

Distribution Licensees in the state of Maharashtra are:

•2 Private Owned DL: TPC-D & R-Infra-D

•1 State Govt. owned DL: MSEDCL (Biggest DL in country)

•1 DL owned by Local Authority i.e. Municipal Corporation BEST

Reliance Infrastructure Limited (R-Infra) and Tata Power are the two major distribution licensees
who have been spearheading the DSM activities in the state of Maharashtra through pilot
programmes and other initiatives.

Common programmes undertaken by both the distribution Licensees:

 T5 FTL Programme
 Programme on 5-Star Fans
 Programme on 5-Star Split AC
 Programmes undertaken by R-Infra:
 Gas – Geyser Programme
 5 – Star Refrigerator Programme
 LT Capacitor Installation Programme for Consumers
 Competence Building

Programmes undertaken by Tata power:

 Gas Water Heater Programme

 T5 FTL programme
T5 FTL is more energy efficient which helps in reducing energy consumption and also system
peak demand. Therefore, the T5 – FTL programme was undertaken, which envisages the
replacement of existing lighting fixtures with T5 – FTL.

The product was offered in two designs:

T5 Putty and

T5 Connect with higher power factor (>0.95) and low THD (<10%)

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 R-INFRA TPC-D

TARGET MARKET All Consumer Categories in Residential, Industrial and

Supply Area Commercial Consumers

860
Replacement of 1,00,000 consumers
Programme Features FTLs registered

140,000 fittings
replaced

Warranty Period offered- 2

years

Warranty Period offered –

Rebate: 2 Years

Residential: Rs 200 Rebate:

Commercial: Rs150 – Residential: Rs 250

Number of T5s allowed: – Commercial: Rs150

– Residential: 2 Number of T5s allowed:

– Commercial: 5 – Residential: 3

– Industrial: 10 – Commercial: 5

Free installation by skilled

electrician – Industrial: 10

Free installation by

Disposal in Eco friendly way skilled electrician

Disposal in Eco friendly

way

Table 19 Details of T5 FTL projects by TPC-D & R-infra

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R-Infra launched the programme in its entire supply area:-
Extensive promotions through the “Change for Mumbai” campaign on Radio, Electricity Bills,
the company websites, SMS, e-Mailer etc. helped make the programme a success.

Programme on 5-star fans

This programme was designed to create awareness on the benefits of using energy efficient
appliances and also to remove barriers on its purchase. It envisaged the replacement of
inefficient ceiling fans by energy efficient 5-star rated fans.

Product Offered: BEE labelled 5 star rated 1200 mm ceiling fan

R – Infra TATA Power

Target Market Residential Consumers with LT – I Residential

monthly consumption less

than 500 kWh

Programme Replacement of 5000 Replacement of 5000 nos.

Features nos. Of fans under the Of fans under the pilot

pilot program program

Warranty period –2 Warranty period – 2 years

years Rebate of Rs535 per fan will

Rebate of Rs535 per fan be given by the utility after

will be given by the the purchase of 5-starrated

utility after the purchase fan

of 5-star rated fan

Table 20 Details of program of 5-star fans by TPC-D & R-infra

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5 – star split ac programme

The pilot program was designed for switching over to 5-star rated split ACs from existing
window units. It helped to reduce energy consumption with decrease in peak demand.

Product Offered: BEE-labelled 5-star split ACs of 1 Ton and 1.5 Tons (labelled after October
2009 and any further revisions)

Table 21 Details of program of 5-star rated ACs R-infra

R – Infra TATA Power

Target Market Non-Government, Commercial LT – Industrial

Consumers having load < 20 kW

with 300 – 500 kWh per month

Consumption

Programme Features Replacement of 200 window Replacement of 250

Acs window Acs

Warranty period – 1 year for Warranty period – 1

machine & 4 years for year for machine & 4

compressor years for compressor

Rebates: Post-paid through Rebates will be post-

electricity bill which will be paid through

Rs5000 for 1 Ton and electricity bill which

Rs7000 for 1.5 Ton 5- star will be Rs5000 for 1

rated split Acs Ton and Rs7000 for

1.5 Ton 5-star rated

split AC

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5 star refrigerator program by R-Infra:

Preface A pilot program for replacing Old inefficient refrigerator by 5

star EE refrigerators.

Reduction in peak load as refrigerator being base load

Target Market Residential Consumers of Reliance Energy.

Product Offered 5 star EE Refrigerator – Single door and Double door

In high capacities 4 star Models if 5 star is not available.

Project Features Warranty period – 1 year for machine & 5 years for

compressor.

Program duration is 6 months.

Table 22 5 star refrigerator program by R-Infra:

6.12 International case studies:-

Case-1: DSM case studies in China

1. Hainan Integrated Resource Planning Prefeasibility Study

In 1992, the International Advisory Council on the Economic Development of Hainan in

Harmony with the Natural Environment worked with the U.S. Oak Ridge National Laboratory to
conduct a prefeasibility study of resource options to be included in an Integrated Resource
Planning (IRP) process. The study recommended that Hainan conduct an IRP process, with a
focus on using electricity pricing as a DSM strategy; developing efficient building codes for new
construction; implementing DSM programs in all sectors and exploring the possibility of large

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scale wind resources. The study found that the DSM programs alone could reduce electricity use
in Hainan by 21 percent in 2000, with savings of US$ 200 million to $400 million. The Hainan
IRP prefeasibility study was the first such analysis conducted in China, soon after DSM and IRP
were first introduced. Relevant decision makers and institutions most likely lacked adequate
capacity, understanding and interest in the IRP process to carry it out.

2. Shanghai DSM Cost/Benefit Analysis

In 1994, with the assistance of the Asian Development Bank, Shanghai conducted a cost/benefit
analysis of a range of potential DSM measures in certain secondary and tertiary industries,
including commercial facilities, catering services, office buildings and public institutions. The
analysis was based on a consideration of Shanghai’s power consumption mix and load curves, as
well as conventional DSM energy efficient technologies. The analysis focused on DSM
opportunities in lighting, air conditioning and cooling, district and industrial heating, fans, pumps
and electric traction. Typical energy efficient technologies assessed include efficient pumps, fans
and electric heating equipment; waste heat recovery generators; ice storage cooling; gas fuelled
air conditioners and electric-heat-cooling triple generation.

the analysis concluded that the DSM technologies mentioned above would save Shanghai 2
terawatt hours (TWh) of electricity and 663 MW of peak levelling capacity in 2000, avoiding the
need for 80 MW of additional installed capacity. These savings would grow to 6.1 TWh of
electricity and 2030 MW of peak levelling capacity in 2010, avoiding 245 MW of new capacity.

The DSM program would also eliminate 880,000 tons of carbon dioxide and 5,900 tons of
sulphur dioxide emissions each year. By the year 2010, these DSM measures would eliminate
1.5 million tons of carbon dioxide emissions and 10,000 tons of sulphur dioxide emissions per
year.

Despite the clear benefits revealed by the cost-benefit analysis, Shanghai never conducted the
DSM project. As with the other pilot projects, lack of financing and utility incentives was likely
culprits.

3. Peak Load Management in Beijing

Beijing began engaging in DSM activities primarily for load management purposes in response
to rapidly escalating peak demand. The peak load grew from 3 GW in 1992 to nearly 4.5 GW in
1996, a yearly average load growth of 10.4 percent. The minimum load had increased slowly,
while the daily max-min had grown quickly, decreasing the annual system load factor by around
86 percent in 1992 to 82 percent in 1996. This made it difficult for Beijing to ensure the safe,
stable and economic operation of the power system. In order to promote the load factor increase,
Beijing’s main goal was to open up the power market in off- peak hours.

The first step was to investigate the consumer power market. Before developing effective
measures for peak load management, Beijing carried out a survey to determine the condition of
customers’ electric equipment and consumption patterns. Models and software programs were
developed, based on the load survey, to analyze the efficiency opportunities available from major
customers in key industries.

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The survey revealed that in 1996, industrial consumption accounted for over 55 percent of the
typical winter daily electricity consumption in Beijing, including 51 percent of the system’s
morning peak and around 50 percent of the evening peak. Even though the industrial load is
the base-load of the Beijing system, there is still a large potential for load shifting through the
rational arrangement of discretionary load.

Based on the above analysis, Beijing decided upon the following measures to improve its system
load factor:

 Further expand the price differential between the peak and valley hour tariffs in order to
encourage load shifting;
 Sign interruptible load agreements with large customers, first on a pilot basis, then on a
more widespread basis;
 Encourage enterprises to rearrange their production schedules so that scheduled
maintenance took place during peak hours;
 Encourage enterprises to establish schedules to upgrade and retrofit high loss electrical
equipment, such as motors and transformers; install reactive power compensators for high
and low voltage equipment; and arrange equipment with higher diversity factors to
operate at peak hours with a minimum operating scheme and at off-peak hours with a
maximum operating scheme;
 Encourage customers to use highly efficient electric devices, retrofit existing production
processes in order to improve productivity, and invest in technologies that shift usage
from peak to valley periods, such as ice storage air conditioning and storage electric
heaters;
 Provide financial assistance based on actual upgrading and retrofitting needs;
The net effect of these measures was a reduction in the peak demand of 50 MW in 1997, an
additional 50 MW in 1998, and an improvement in the load factor because of the 150 GWh
increase in consumption during the valley load period. The investment to produce the peak load
shift was 12.05 million RMB in 1997 and 5.67 million RMB in 1998. The annual benefit based
on the avoided cost of new generation capacity was estimated at 24.8 million RMB. The Beijing
DSM project was successful primarily because it focused on peak load management, which is
generally easier to implement than other DSM programs. In many cases, load management can
be accomplished with properly designed and progressive tariffs, such as time of use and
interruptible tariffs. After successfully completing the load management program, Beijing has
now gained practical experience that should prove useful for the development of DSM programs
that result in long-term reductions in demand through efficient end use technologies. Beijing is
now conducting a detailed study of DSM policy options and incentive mechanisms with the
support of the Energy Foundation.

Thermal storage device:-

For the past 10 to 15 years, the restructuring of the electricity industry has been under way in the
country. In many countries, the electricity market has been deregulated to open up the supply of
electricity to competition. Existing power utilities and new market participants now have to trade
electric power in a deregulated electricity market.

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The utilities can reduce the purchase cost of electricity from the electricity market through load
managements by customers as part of demand-response programs. There are significant benefits
to the utilities if customers shift their load from on-peak to off-peak hours. The Thermal Storage
System is a well-known example of this load shifting. It stores off-peak power as cold water (ice)
or hot water for air-conditioning demand in daytime and is very efficient in shifting peak air-
conditioning demand to off-peak hours.

The campus cooling system consists of a chiller plant (three chillers redundantly configured as
two in series, one backup in parallel), an array of cooling towers, a 7000 m thermal energy
storage tank, a primary distribution system and secondary distribution loops serving each
building of the campus. The two series chillers are operated each night to recharge the storage
tank which meets campus cooling demand the following day. Although the storage tank enables
load shifting to off-peak hours to reduce peak demand, the lack of an optimized operation results
in conservatively overcharging the tank, where heat losses erode efficiency, and in suboptimal
operation of chillers and cooling towers.

Figure 6.3 Scheme plot of chilling system.

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Results of the Thermal Storage System are shown in the following curve:

Fig 6.3.1: Electric demand curves and the storage cycle of the stratified chilled water
storage system

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7.Conclusion & Recommendation

The study suggests that the significance of power trading is load management.
As India faces lots of difficulties during the supply of electricity, there are many regions which
falls under the deficit region.
In order to fill up those deficit gap, which have evolve the short term power market in the
country.
 As per CERC, Market Monitoring Cell ,there is a huge difference between Generation
and Demand. So for that reason short term power market is been introduced.
 As we know that long term PPA are not able to cater the demand in particular area and
Also their utilities which have got power in excess , there is a mismatch in the
distribution sector where the case like there is a Deficit zone case and surplus zone case.
 So, for matching those deficit and surplus case, short term power market has been
evolved.
 Demand and supply Gap mismatch to be reduced
 Enhance competition in the market
 Promotes energy efficiency, having better load management
 Choice to consumer to purchase power from anywhere in the country
 Risk Management i.e. trader mitigation where there is risk for both the seller and buyer
i.e. the all financial transactions is seen by the trader which is a part of short term
 Load forecasting is done to know how much to buy power for selling it.
 With increasing focus on energy prices, Demand Side Management (DSM) is touted as
the 5th fuel.
 DSM programmes was to provide cost- effective energy and capacity resources to help
defer the need for new sources of power.
 Changes occurring in the industry, such as increased government and regulatory focus
towards energy efficiency, carbon emission constraints and greater public awareness has
resulted in utilities relying on DSM.
 Continuous information and education programmes are necessary for the development of
efficient systems.
 DSM is not only good practice for reducing energy consumption; it has also side-
benefits such as improved wellbeing and comfort of end users.
 With sound regulatory framework distribution utilities have huge scope of realizing full
economic and societal value of DSM programmes.

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 Recommendation :-

DSM is still in its nascent stage in Indian electricity sector. There is a need to look way
forward in this area of energy efficiency. There are very few people who know about this
demand side management. As it needs a voluntary participation from consumer side for
successful implementation of DSM, the utilities and regulatory commissions should promote
consumer awareness. Consumers should be made aware of the benefits associated with this.

So I would like to suggest some measures for success of DSM in Indian context:

 There is a need to develop suitable incentive mechanism which will enable to share
benefits between end users and utilities, to attract both of them for active
participation.
 SERCs should make regulations and give due benefits to the participants.
 Residential consumers should also be included in the DSM initiatives along with
commercial consumers.
 Pilot programs should be applicable to larger consumer base and there is a need of
stringent follow-up of these programs.
 Interaction schemes specifically addressing interaction between intermediaries, end
users and other stakeholders should be promoted
 Develop guidelines / methodologies to be adopted for integrating DSM options with
supply side options
 There is a need of better coordination among various agencies of Central and State
Governments for implementation of DSM measures
 State government should financially support the pilot programmes in various sectors
to enable the market transformation

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8.REFERENCES
[1] J. K. Parikh. B. S. Reddy. Rangan Banergy: “Planning For Demand Side Management in
Electricity Sector. ISBN 0.07-46232S-0”

[2]Omkar S. Pawaskar and Prof. Swati. S. More; “Time of day tariff structure”

[3]S. Rahman and O. Hazim: “ Load Forecasting for Multiple Sites Development of an
ExpertSystem-Based Technique Electric Power Systems Research” 39:161–169, 1996.

[4]Yuko Omagari, Non-Member, IEEE, Hideharu Sugihara, Member, IEEE, and Kiichiro
Tsuji, member, IEEE; “ An Economic Impact of Thermal Storage Air-conditioning Systems
in Consideration of Electricity Market Price”.2008

[5]J. C. Hwang; “IEEE TRANSACTIONS ON POWER SYSTEMS, VOL. 16, NO. 4,”
NOVEMBER 2001

[6]2010 IEEE International Conference on Control Applications Part of 2010 IEEE Multi-
Conference on Systems and Control Yokohama, Japan, September 8-10, 2010

[7]Joseph Eto The Past, Present, and Future of U.S. Utility Demand-Side Management
Programs

[8]M.J. Sebzali, P.A. Rubini, Analysis of ice cool thermal storage for a clinic building in
Kuwait publiced inEnergy conservation andManagement,24 December2005

[9]DERC regulations, DSM implementation framework

[10]MERC regulations, DSM measures’ and programme’s cost effectiveness assessment

[11] European Commission (2006). Action Plan for Energy Efficiency Communication from
the Commission. Action Plan for Energy Efficiency.

[12] Rangan Banerjee; “Electricity Pricing, Policy and DSM in India”

[13] Primer on Demand-Side Management, World Bank

[14] International Performance Measurement and Verification Protocol Concepts and

Options for Determining Energy and Water Savings-Volume-1

[15] www.nldc.in

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9.Bibliography

List of Documents:

 Central Electricity Regulatory Commission (Grant of Connectivity, Long-term

Access and Medium-term Open Access in inter-State Transmission and related
matters) Regulations, 2009.
 Central Electricity Regulatory Commission (Open Access in inter-State
Transmission) Regulations, 2008.
 Forum of Regulators’ Model Regulations on Terms and Conditions of intra-
State Open Access.
 CERC. (2009). TermsandConditions of Tariff Regulations_20092014. .
 “LOAD FORECASTING”- a report by Eugene A. Feinberg (State University
of New York, Stony Brook)
 http://www.cerc.gov.in
 http://www.powermin.nic.in/
 http://www.cea.gov.in
 http://www.nrldc.org

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