Energy and Utility MDSO861

Power Generation

January to May 2018

 Contents
• Introduction

• Types of Generation

• Types of Power Plants

• Current Status of Generation in India

• Thermal Power

• Thermal Power In India

• Use of Coal and its disadvantages

• Use of Liquid Fuel and its disadvantages

• Use of Gaseous Fuel and its disadvantages

 Introduction
. Energy is an important input in all sectors of any country’s
economy

. Electricity Generation is the process of generating electrical

energy from other sources of primary energy

. Process of electricity generation involves conversion of

mechanical energy into electrical energy

. Use of renewable energy sources is being encouraged so as

to reduce dependency on fossil fuels

. Electricity generation is one area where innovation and use of

technology has been abundant
 Types of Generation
• Hydro Power Generation • Thermal Power Generation

• Nuclear Power Generation • RE Generation

 Types of Power Plants
. Hydro Power Plants
. Storage Hydro Power Plants
. Small Hydro Power Plants

. Thermal Power Plants

. Coal Fired
. Gaseous Fuel Fired
. Liquid Fuel Fired
. MSW/ Bagasse Fired

. RE Generating Plants
. Solar Power Plants
. Wind Power Plants
. Geothermal Power Plants
 Current Status of Generation in India

Particulars Details* (MW)

Total Installed Capacity 3,33,549.82

Thermal Installed Capacity 2,18,959.51

Hydro Installed Capacity 44,963.42

Nuclear Installed Capacity 6,780.00

RES Installed Capacity 62,846.90

*As on 31st December 2017
Source: CEA
 Thermal Power Generation

• Most common method used for generation of power

• Heat is the most important component

• Heat can be generated by burning primary or secondary

sources of energy

• Thermal Power Plant can be setup for generation of any

quantum of power

• Most widely used fuels for thermal power are Coal and
Gas
 Thermal Power in India

• India has huge deposits of Coal and therefore coal is the primary
fuel for power generation in India

• National Thermal Power Corporation (NTPC) is the Indian agency

entrusted with setup, running and maintainence of Thermal Power
Plants in India

• Currently NTPC is setting up/operating 24 Coal based and 7 Gas

based power plants in India

• Largest coal based power plant is Vindyachal Thermal Power

Station with installed capacity of 4760 MW

• Largest Gas based power plant is Dabhol Power Station with

installed capacity of 1967 MW
 Contd..

• In addition to NTPC various private companies have also entered

the power generation arena

• Adani Power, Tata Power, Reliance Power, Vedanta Group, Jindal

Group are some of the major private players in the field of power
generation

• In addition to the big players, there are various small players

operating power plants as well

• Large industries have installed Captive Power Plants to cater to their

own power requirements

• Cement, Sugar and Metal Smelters are the major industries

employing CPPs
 Use of COAL

• Coal is the most commonly used fuel for power generation in India

• Vindhyachal TPS, Singrauli TPS, Dadri TPS I & II, Badarpur TPS,
Sasan TPS are some examples of Coal based thermal power
stations in India

• India has huge deposits of coal in the Jharkhand/ Chhattisgarh belt

• However, Indian coal is not considered to be good for power

generation due to low heat rate and high ash content

• To overcome this problem, Indian coal is blended with imported coal

for use in generating stations
 Disadvantages of using Coal

• Fossil Fuel: Deposits are fast depleting

• Emissions are high

• Ash content

• High transportation cost

• Blending of coal increases cost

• Quality of coal falls if it is stored for too long

 Use of LIQUID FUELS (LF)

• Liquid fuels comprise of Gasoline, Diesel, Naphtha, Fuel Oils and

Paraffins

• Liquid fuels can be used for generating small quantum of power

• They have high calorific value, need less storage space and are
clean fuels

• Need less labor to operate as they are used for generating small
quantum of power

• Most common example is the commercial / domestic DG Set

 Disadvantages of using LF

• Fossil Fuel: Deposits are fast depleting

• High Cost of Generation

• Cannot be used for Generating large quantum

• High transportation cost

• Operational Hazards
 Use of GASEOUS FUELS (GF)

• Gaseous Fuels can be broadly divided into two parts

– Natural Gas
– Manufactured Gas

• Manufactured gases include Coal gas, Producer Gas etc

• Manufactured gases are gasses that are released during various

manufacturing processes like metal smelting etc.

• Manufactured gases is expensive and therefore only natural gas is

considered fit for power generation

• Natural Gas is a colorless, odorless, non-poisonous gas with a high

calorific value

• Natural Gas is a clean fuel and the emissions are very low
 Disadvantages of using GF

• Fossil Fuel: Deposits are fast depleting

• Cost of Transportation

• Maintaining a steady supply is difficult

 Efficiency of Power Plants in India

• Plant Load Factor is the measure for average capacity

utilization of a power plant

• Average capacity utilization directly shows the efficiency

of the power plant

• Approximate output of various generation sources are as

under:
– Solar: 15% to 30%
– Wind: Approx 50%
– Thermal: 40% to 60%
– Hydro: Around 50%
 Factors affecting the Efficiency

• Age of the Power Plant

• Fuel (availability and quality)

• Rising AT&C losses of the discoms

• Inefficient management and control of discoms

• Poor financial health od Discoms

• Installation of substandard plant and machinery

 Indian Scenario

Target Actual
Capacity Capacity Target PLF Actual PLF
Year
Addition Addition (%) (%)
(MW) (MW)
2013-14 975 967.150 69.60 65.60
2014-15 1023 1048.673 65.52 64.46
2015-16
849.913 829.849 66.49 61.65
(Upto Dec’15)

Source: Ministry of Power

This shows that even though there has been a significant

rise in the Generation Capacity addition, the overall
efficiency of the plants is going down
 Steps taken for improving the Efficiency

• Availability of quality fuel

• Phasing out and replacement of old and depreciated

plant and machinery

• Providing financial support to distribution companies

• Upward revision of consumer tariff

• Awards and Recognition

 Generation from Renewable Sources

• Total Installed Capacity:

Type of RE Generation Quantum (MW)

Small Hydro Power 4,418.15

Wind Power 32,848.46

Biomass/Cogeneration 8,413.80

Waste to Energy 114.08

Solar Power 17,052.41

Total 62,846.90

As on 31st December 2017

Source: Central Electricity Authority
Sources of Power for a Refinery
 Characteristics and Sources

• A refinery needs uninterrupted power supply for 24 hours (Round the Clock)

• The sources of such power should be reliable. As any interruption in the

power supply could lead to financial losses and could be hazardous

• Tariff of such power should be low as the refinery will ultimately load the
cost of power to the final cost of the product being produced

• Following are the sources of Power:

– Distribution Company

– Purchase of Power through Bilateral Trading

– Purchase of Power from Power Exchange

– Own Captive Power Plant

– Group owned Power Generation (Group Captive)

 contd..

• Power sourcing for a refinery needs to be a blend of

different sources to ensure reliability of supply

• For example:
– A refinery has a total power requirement of 500MW. Following is
the breakup of power being sourced:
• State Discom: 200MW
• Bilateral Trading: 100MW
• Power Exchange: 100MW
• Own Captive: 100MW

– An ideal mix is to source maximum power from reliable sources

– Therefore, the refinery needs to reduce reliability on the state
discom and increase the power purchase from Bilateral Trading
or Power Exchange
– It can also think of increasing its own captive generation
Power Transmission
 Introduction
. Transmission is the movement of energy from its place of
generation to a location where it is applied to perform useful work

. Electrical Power Transmission is the bulk transfer of electrical

energy from generating stations to substations located near
demand centers

. Transmission network is referred to as a shared asset as it would

not be economically feasible to setup a dedicated transmission
network for different utilities

. An Inter State Transmission System is:

. System for conveyance of electricity from the territory of one state to
another
. System for conveyance of electricity within a state using a system built
by the CTU
 Need for Transmission Networks
. Transmission Networks are needed to bridge the gap
between Point of Generation and Point of Consumption

. All five regions of the country are not equally rich in

generation sources. However, demand for power remains

. In India, western region is the richest region in terms of

generation

. Out of the total installed capacity of the country, WR has

109142.40 MW i.e. 35%

. On the other hand, NER has the lowest 3,580.52 which is just
over 1% of the total installed capacity
 Capacity of Regional Transmission Lines

Transmission Line Capacity (MW)

ER-NR 15,830
ER-WR 12,790

ER-SR 3,630
ER-NER 2,860
WR-NR 12,920
WR-SR 7,920
NR-NER 1,500
132 kV Inter Regional Link 600

Total 57,450

*As on January 2016

Source: CEA
 Utilities involved in Transmission
• Generator: Generator is the first party in a typical transmission
transaction

• Inter State Transmission System (ISTS): ISTS comprises of

Central Transmission utility, State Transmission Utility and
Private Transmission Companies
• The CTU, STU and PTCs ensure that a network is available
for transfer of this power
• In context of India:
– CTU: Power Grid Corporation of India Limited
– STU: State transmission utilities eg PTCUL, APTRANSCO,
TNTRANSCO
– PTCs: Tata Power Transmission, Reliance Power Transmission
• In stand alone cases, the CTU may enter into a JV with a PTC
to ensure development of special or better transmission
corridors
 Contd..
• National/Regional/State Load Dispatch Centers:
NLDC/RLDC/SLDC act as supervising authority and ensures
that the entire transaction is carried out in a smooth manner
• They also ensure that the generator and the consumer pay
the necessary charges applicable and the same are paid to
the transmission licensee

• Consumer: Beneficiary of a transmission network

ISTS Pricing
 Power Transmission (Pre 2010)
• Prior to 2010, Postal Transmission Pricing System was
applicable

• As per this system, there is no difference in transactions

with regard to power flow path, supply or delivery points

• This system involved payment of transmission charges

and applicability for each and every intervening region

• It is considered to be the simplest method of

transmission pricing

• However, this system results in pancaking of

transmission charges and losses and increased the cost
of power
 Power Transmission (Post 2010)
• After 2010, Point of Connection Transmission Pricing
System was applicable

• This system recognized the Injection and Withdrawal

Points

• Each injection or withdrawal point had a separate value

of Transmission Losses and Charges which was
applicable to that Point of connection only

• However, this system provided a solution to the

pancaking problem and reduced the cost of power
drastically
 contd..
Example:
Case I – Postal Stamp Method
100 MW power is to be supplied to Uttar Pradesh from a
generator located in Karnataka

Case II – Point of Connection Method

100 MW power is to be supplied to Punjab from a
generator located in Karnataka
 Key Changes in ISTS Pricing
. Quantum based transmission charges introduced

. Charges for Long Term Open Access and Short Term Open
Access defined

. Bidding for Transmission Capacity started

. Congestion charges introduced for UI Transactions

. Mechanism for sharing of Inter regional links rationalized

 Impact of Cost of Transmission
. Cost of Transmission will increase the total cost of Power

. It is often seen that in a competitive bidding process, Cost

of Transmission becomes the deciding factor in the
winning and loosing bid

. Under normal conditions, the cost of power may be

escalated by upto Rs. 2.00/kWh when the cost of
transmission is added to the tariff
 Provisions of EA 2003
. Inter-state, Regional and Inter- Regional Transmission

. Constitution and Functions of National Load Despatch Centre

. Constitution and Functions of Regional Load Despatch Centres
. Constitution and Functions of State Load Despatch Centres
. Grid Standards

. Intervening Transmission facilities

. Constitution and Functions of Central Transmission Utility

. Constitution and Functions of State Transmission Utilities

. Duties of Transmission Licensees

. Other business of Transmission Licensees
 National Electricity Policy
. National Electricity Policy was published on 12th February
2005

. The overall aim of the policy is to provide cheap reliable

power to the people

. The policy enlists the various guidelines for Generating,

Transmission and Distribution Utilities

. The policy also focuses on the promotion of Renewable

Energy and guides the utilities on ways to develop the same

. In a nutshell, it can be said that NEP defines the procedure by

which provisions of the EA 2003 shall be implemented
 Open Access
• Open access is a mechanism that allows generators to sell
power to the highest bidders while consumers can source
their needs from the most economic seller

• Under Open Access, a process is defined for obtaining

necessary approvals for transfer of power from generator
to consumer

• This process involves multiple agencies like SLDCs,

RLDCs. The NLDC is the governing body to the whole
transaction

• Its an intimation sent to various agencies informing them

about a particular transaction. The concerned authority
then proceeds to accept or reject the application based on
the available transmission capacity
 contd..
• Following is an order of preference followed by the
transmission utility for approving Open Access
Transactions
– Long Term Open Access Customers: Open Access applications for
flow of power from 3 years to 25 years
– Medium Term Open Access Customers: Open Access applications
for flow of power from 1 year to 3 years
– Power Exchange Transactions: Day Ahead applications for
purchase of power through power exchange
– Short Term Open Access Customers: Open Access applications
for flow of power for less than 1 year
 Smart Grids
. Smart Grid is an evolved grid system that manages electricity
demand in a sustainable, reliable and economic manner

. Smart Grid is an effective integration of reliable and economic

generation, transmission and distribution

. Smart Grids are aimed to provide more electricity to meet

rising demand, increase reliability and quality of power
supplies, increase energy efficiency, be able to integrate low
carbon energy sources into power networks

. Smart grids possess demand response capacity to help

balance electrical consumption with supply, as well as the
potential to integrate new technologies
Smart Grids
 Constituents of Smart Grid
• Generation
– Till date, our power requirements are fulfilled primarily by fossil
fuels and hydel
– Smart Grids will effectively employ use of renewable energy
sources
– Use of electricity sourced from renewable sources will be
encouraged and rewarded
– Reliability on conventional energy sources will be discouraged

• Transmission
– In order to facilitate transfer of RE power from the RE rich potential
States to other States as well as absorption of RE power within the
RE rich states (host state), transmission system strengthening both
at intra state and inter state level have been identified.
– Major RE rich states are Rajasthan for Solar Power, Tamil Nadu
and Andhra Pradesh for Wind, Himachal Pradesh and Uttarakhand
for Small Hydro
 contd..

• Distribution
– Demand Forecasting
– Smart Metering
– Use of Smart and Energy Efficient appliances
– Encouragement and reward for installation and use of renewable
energy sources

• In addition to the specific constituents, advanced

technology will be used in generation, transmission and
distribution so as to ensure that all the three sectors
remain interlinked with each other and energy losses
could be minimized
 Role of Transmission in Smart Grids

• Giving priority to Renewable Generation Sources

• Setting up new transmission lines for evacuation of power

from RE rich states to other states

• Improving strength of the Grid

• Making additional capacity available for RE Sources

• For RE Sources with capacity in excess of 250 MW,

dedicated line upto point of connection will be taken care
of by CTU
 Energy and Utility MDSO861

Power Distribution
 Power Distribution
. Power Distribution is the final stage in delivery of power

. It is process of delivering power from the transmission system

to final consumers

. Power available from Transmission id stepped down and the

supplied to individual consumers

. Depending on the geographical location, distribution system

can comprise of Overhead or Underground Cables

. Power Discoms source power from various power plants

located across the country
 Power Distribution
. A Discom can have a power plant of its own as well. E.g.
Dahanu Thermal Power Station is owned and operated by
Reliance Infrastructure – Mumbai DIscom

. For a power discom, there are two types of Loads:

. Base Load: This is the quantum of Power that the discom needs to
provide basic electricity to the consumers
. Peak Load: This is the quantum needed to meet seasonal surge of
power

. As a standard practice, Discoms meet their base load

requirements out of the power that is allocated to them from
various power plants in the country

. Peak load requirement is fullfilled by purchasing power from

open market
 contd..
. The Electricity Act 2003 declared power trading as a legal
activity

. Till 2008, power purchase by discoms was done by

negotiation route

. In 2008, CERC made tendering process mandatory for

discoms purchasing power
 Power Distribution in India
. Power has always been an essential commodity in India

. In India, major share of Power Distribution is held by

Government sector

. The main private companies in power distribution are Tata

Power, Reliance Energy, Torrent Power, Noida Power
Company Ltd., Calcutta Electricity Supply Co.

. In India, power is distributed at the following voltage:

. Primary Distribution: 33kV/22kV/11kV
. Secondary Distribution:
. LT Consumers: 415 V
. Domestic (Three Phase): 415 V
. Domestic (Single Phase): 240 V
 contd..
. In India, consumers are divided into 3 categories:
. Industrial (HT or LT) Consumers
. Domestic Consumers
. Agricultural Consumers

. In Indian context, power distribution is a very important sector

as it has a very strong political impact
 Process of Distribution
. The process of power distribution starts 1 (One) day prior to the
actual date of distribution (X-1) and is a time bound process with
strict timelines
. Power distribution process for 23.02.2017 starts 0n 22.02.2017

. Step1- Ascertaining the demand: The demand for power is

ascertained through a process of forecasting

. Step 2- Calculating available power: Power available to a discom

through Long, Medium and Short Term sources is calculated

. Step 3- Dealing with Shortage/Surplus Power:

. Prior to 2008: Shortage/Surplus of power was dealt by entering into Day Ahead
power contracts directly or through trader
. Post 2008: This function has been largely taken over by Power Exchange
. In either case, a very small quantum of Shortage/Surplus is dealt by drawing or
releasing power as Unscheduled interchange
 contd..
. Step 4: Sending Information: State Load Despatch Centre is the
agency that coordinated the entire activity

. Step 5: Constant Monitoring: Power Distribution system is monitored

round the clock for any sudden change in demand, fault in the
system, fault in Generating/ Transmission System

. Metering: Power meters are installed at the premises of the

consumer. The power meters record the number of units consumed
by the user

. Billing and Payments: Billing for power supplied is done on monthly

or two monthly basis. Payment methodology is different for different
companies

. Recently, the method of prepaid meters has successfully emerged

 Procurement of Power
. A Discom sources power from multiple sources:

. Source 1: Long Term Power Allocation: Whenever a power plant is

erected by the Government or under PPP Model, various discoms
have share in the power generated. Base load requirement is met
through this method
. Example: Dadri Thermal Power Station has a total installed capacity of 840 MW.
Delhi Discoms and Uttar Pradesh have their share in this power

. Source 2: Procurement of Power under Long Term Basis: A discom

can float a tender for power purchase under long term basis. This
type of tendering is known as Case I or Case II tendering. Usually
Base load requirement is met through this method
. Case I Tendering: Under case I bidding, the discom is interested in procuring the
power only. Location of the power plant, fuel used etc is left to the developer
. Case II Tendering: Under this case, the discom invites a developer to setup a
power plant at particular location. The fuel to be used is specified and usually the
discom assists the developer for securing the fuel supply
 contd..
. Source 3: Procurement of Power under ShortTerm Basis: A discom
can float a tender for power purchase under short term basis. Under
this method, power is usually procured for short term periods
starting from a minimum of 15 days and upto 1 year. Peak Load and
Seasonal Load is managed through this method

. Source 4: Procurement of Power under Day Ahead Basis/ Power

Exchange: Discoms purchase power on Day Ahead basis or Power
Exchange to meet their day to day variations in demand

. Source 5: Banking of Power: Under this method, power is

exchanged for power between two discoms under fixed terms and
conditions
 Metering, Billing and Payments
. Metering:
. Discoms charge the consumers on the basis of the number of units used during
a fixed period of time
. Energy Meters are installed at the premises of the consumer
. These meters are sealed and record the units of energy consumed
. At the end of the fixed period, a designated employee of the Discom comes and
records the number of units consumed

. Billing:
. Based on the meter readings, a electricity bill is generated
. The electricity is charges for at fixed tariff declared publically by discoms
. In India, slab wise tariff is popular

. Payments:
. Based on the billing date, a due date is fixed for the consumer to pay the bill
. In certain states, the power supply is subsidized. In such a case, the amount of
subsidy provided is paid directly to the discom
 Tariff Fixation
. Power sector as a whole is one of the most regulated
businesses in India

. Most sections of the sector have been primarily owned and

operated by Government companies

. Very recently, private sector companies have been allowed in

the power sector but the regulatory intervention remains strong

. A Discom is regulated by the State and Central Regulatory

Commission

. For fixation of Distribution tariff, the discom is required to

submit to the Regulatory Commission an Annual Revenue
Requirement
 contd..
. The ARR covers all the revenues and expenditures of the
discom and the tariff at which the discom proposes to distribute
the electricity

. Based on the filed ARR, observations of the commission, etc.

the commission issues a tariff order. This tariff order specifies
the tariff applicable to different groups of consumers

It has to be noted that any subsidy applicable is provided by

the Government and not the commission
 Subsidy and Cross Subsidy
. Subsidy: Subsidy is usually an aid given by the Government to
groups or individuals

. In power distribution business, two types od subsidies are applicable

. Subsidy also known as direct support
. Cross Subsidy

. Subsidy (Direct Support)

. Usually provided by the Government to General Domestic Consumers
. Main aim is to provide basic electricity to the economically weaker section

. Cross Subsidy:
. Indian economy is an agriculture based economy
. Over the years, it has been seen that the Government has been focusing on
upliftment of the farmers and promote farming almost all parts of the country
. To encourage farming, most of the state Governments have made it mandatory
for the discoms to supply free or very cheap power to agriculture sector
 Subsidy and Cross Subsidy
. To overcome this problem, the discoms engage into cross subsidizing power
. Under cross subsidizing, free or very cheap power is supplied to agriculture
farms by charging high tariff from the industrial sector
. This way, the discom or the Government does not bear the weight of the subsidy
and is passed on to the industrial sector or cross subsidized by the industrial
sector
 AT&C Losses
. Aggregate Technical and Commercial Losses

. Technical Losses: Technical losses are inevitable as they are a

result of power flow in the transmission and distribution system.

. Keeping in view the Indian Distribution system, these losses should

be in the range of 8-10 %

. Commercial Losses: Commercial Losses cover all those losses

where power has been supplied but revenues have not been
recovered

. Commercial Losses comprise of Power Theft, Deficiencies in

metering, Non recovery of bills
 contd..
. In addition to various other parameters, AT&C Losses are one of the
most important performance parameters for a discom

. A discom can improve upon these losses by improving the overall

management and control

. To improve technical losses, the discom can perform preventive

maintenance of the equipment, replacement of faulty equipment,
round the clock monitoring and control, reducing maintenance
downtime, proper training of line staff, etc.

. Commercial Losses can be reduced by installation of smart meters,

replacing of conventional distribution line with insulated line helps in
reduction of loss by theft

. Consumers should be encouraged to pay their electricity bills in

time. In the event of further default, recovery methods should be
employed
 Provisions of EA 2003
. Develop and maintain an efficient, co-ordinated and economical distribution
system in his area of supply and to supply electricity in accordance with the
provisions contained in this Act

. Introduce Open Access in a phased manner

. Allow wheeling of Electricity from a generating station to a consumer

located in the supply area of the discom

. Redressal of grievances of a consumer by appointing a Ombudsman

designated by the state commission

. On submission of a application, the discom should provide an electricity

connection to a consumer within one month after the receipt of such
application

. if the discom fails to supply such electricity it shall be liable to pay a penalty
which may extend upto Rs. 1000 per day of delay
 contd..
. Discom has a power to recover charges in accordance with the charges
fixed from time to time

. Discom may enter into an agreement with any person for supply or
purchase of electricity on such terms and conditions (including tariff) as may
be agreed upon by them

. The State Commission shall specify an electricity supply code to provide for:
. Recovery of Electricity charges
. Intervals for billing of electricity charges
. Disconnection of supply due to non payment
. Preventing distress or damage to electric plant, line or meter

. A distribution licensee may, with prior intimation to the Appropriate

Commission, engage in any other business for optimum utilisation of its
assets
Load Curve (Seasonal Variation)
Load Curve (Daily Peak Load)
 Smart Grid
. Develop and maintain an efficient, co-ordinated and economical distribution
system in his area of supply and to supply electricity in accordance with the
provisions contained in this Act

. Introduce Open Access in a phased manner

. Allow wheeling of Electricity from a generating station to a consumer

located in the supply area of the discom

. Redressal of grievances of a consumer by appointing a Ombudsman

designated by the state commission

. On submission of a application, the discom should provide an electricity

connection to a consumer within one month after the receipt of such
application

. if the discom fails to supply such electricity it shall be liable to pay a penalty
which may extend upto Rs. 1000 per day of delay
Power Trading
 Power Trading
. Power Trading started as a separate business after 2003

. Power trading was declared as a legal activity by the EA 2003

. “Purchase of electricity for sale thereof” – EA 2003

. Discoms rely on power trading to meet their peak load

demand (Seasonal and Daily)

. Two parts of Trading Market are:

. Bilateral Trading
. Exchange Based Trading

. Power may be traded Inter- state or Intra-state

 contd..
. Traders operate for a fixed trading margin

. Trading margins are regulated and closely monitored by the

regulatory commission
 Growth of Power Trading
. Power Trading has had phenomenal growth
. From 1353 MW traded in 2004-05, a total of 11300 MW has
been traded in 2014-15
contd..
 Central Electricity Regulatory Commission
. CERC is the apex body in matters of Power Trading

. CERC was established by the EA 2003 in accordance of

Electricity Regulatory Commissions Act 1998

. As per the act, the central commission shall undertake

functions relating to regulation of tariff, specify grid
codes, fixation of trading margin of the licensee,
reliability of the services etc.

. Along with this, CERC shall ensure that every state shall
have a separate state electricity regulatory commission
 Power Trader
. Power Trader is an individual or a company who is
performing transactions in the open power market

. A trader is granted a license to trade power in

accordance with the trading market regulations laid down
by the CERC

. CERC has divided the traders into 4 categories

Category Volume (Mus) Net Worth (Rs)
I No Limit 50 Crores
II Upto 1500 15 Crores
III Upto 500 5 Crores
IV Upto 100 1 Crores
 Trading Margin
. Trading Margin is the reward for which the trader
operates in the trading market

. Trading Margin is capped. This means that a trader

cannot earn more than a fixed margin

. Since 2010, trading margins are capped at:

. For sale price upto Rs. 3.00/kWh Rs. 0.04/kWh
. For sale price beyond Rs. 3.00/kWh Rs. 0.07/kWh

. Prior to 2010, the trading margin was fixed at Rs.

0.04/kWh regardless of the tariff
 The Process of Power Trade
. Once a trading license is issued to licensee, it can trade power in
accordance to the power market regulations

. A trader can trade power through bilateral or collective transactions

. THE TRADER DOES NOT TAKE DELIVERY OF THE POWER

. Any entity with a generator connected to the central or state

transmission/distribution network can engage in the process of
trading

. The role of the trader is to purchase power and sell it to a entity who
has the required infrastructure and clearances to off take power

. Over the years, more and more players are entering the power
trading scene
 contd..
. Step 1: A discom issues a Power Purchase Tender. A tender
document contains all the terms and conditions of the power
purchase. Most important ones being:
. Duration of Power Supply
. Quantum of Power
. Delivery Point
. Billing and payment
. Compensation for short supply
. Any other condition
A TRADER CANNOT PARTICIPATE IN A CASE II TENDER

. Step 2: A trader who is interested in the tender will look for a

generator who is willing to supply power on back to back
conditions. The trader will then enter into a conditional/non
conditional power purchase agreement with the supplier. A
tariff will be agreed upon by both the parties (X)
 contd..
. Step 3: After this the trader will bid against the tender as per the
timelines prescribed by the discom. The trader will offer to supply
the power at a tariff of (X+ Trading Margin) i.e. the tariff agreed with
the generator plus trading margin

. Step 4: The discom will then evaluate all the bids received and the
valid offers will be arranged in ascending order of their tariff

. Step 5: Theoratically, the discom should issue the order for

purchase in favor of the bidder willing to supply power at the lowest
tariff. However, the discom has the right to:
. Re negotiate the tariff
. Cancel the tender
. Call for fresh bids
WITHOUT ASSIGNING ANY REASON

. In the event of the discom issuing the order the process will be
followed further
 contd..
. Step 6: The trader then prepares an application for booking of the
supply corridor. Applications will sent to all the concerned Load
Despatch centres and approvals are obtained and shared with the
buyer and seller

. Step 7: Energy and Open Access Bills are raised to the concerned
party and payments are made in accordance with the terms and
conditions of the tender

. Default: In the event of seller or buyer defaulting in supply or offtake

of power, the provisions of compensation clause will be applicable

. Any disputes are referred to the State / Central Regulatory

Commission or the Appellate Tribunal For Electricity (APTEL)
 Emergence of New Markets
. Indian markets compared to world markets
. American, Australian and European Markets
. Pool Concept
. Problems of Indian Markets
. Power Purchasers being discoms
. Low payment capacities
. Led to Bilateral contracts loosing popularity
. Advantages of Power Exchange
. Emergence of IEX and PXIL
. Day Ahead Power Trade replaced by DA Contract of IEX
. Power exchanges entering into Term Ahead Trading
. Transmission and Distribution Open Access
. Trading of Renewable Energy
. Concept of REC
. Trading of REC
Thank You