Capacity Addition Planningin the Power Sector

Shantanu Dixitwww.prayaspune.org

shantanu@prayaspune.org

Prayas2

Interaction plan

Capacity addition plans – e.g Konkan region Climate friendly, economic options for meeting

energy services needs India’s current capacity addition plans Key shortcomings and implications for climate

~7,600 MW of new generation planned in Shahapur Taluka, Dist. Raigadh

~6,600 MW of new generation planned in Ratnagiri district

~19,000 MW of new generation planned in the Konkan strip of Maharashtra

~4000 MW of existing generation in Konkan

Raigadh : 9,558 km² Ratnagiri : 8,208 km²Sindhudurg : 5207 km²

Prayas4

Interaction plan

Capacity addition plans – e.g Konkan region Climate friendly, economic options for

meeting energy services needs India’s current capacity addition plans Key shortcomings and implications for climate

Prayas5

Integrated Resource Planning: Case studies from India

DEFENDUS (Karnataka 1990)– Development Focused End Use oriented Scenario

Amulya Kumar N. Reddy et.al.

Least Cost Plan (Maharashtra 1994)– Prayas Energy Group

Prayas6

Typical Energy Saving Potential (based on Karnataka IRP by Reddy et. Al.)

End use efficiency savings– Industry modernisation–efficient drives etc: 15-25%– CFL for lighting : 14-58%– Solar Water heaters: 28%– LPG instead of electric stoves: 18%– Frictionless foot-valves and HDPE piping for

agirculture pumps: 30%

Prayas7

Conclusions of Integrated Plan for Maharashtra (Prayas 1993)

0

5,000

10,000

15,000

20,000

0% 20% 40% 60% 80% 100%PLFn (at Bus-bar)

Rs/

KW

(B

us-b

ar)

/Yr

Ind.Co-gen

Gasifier

Small hydro

Suger Co-gen

CFL

Loadshift

CL-light

T&D impro.

SWH

IPS

Refri.

HT/LT industry

Prayas8

Typical Benefits of IRP

Typically: efficiency can meet 25-40% and renewable generation can meet 20-25% of incremental needs at lower economic costs.

Maharashtra IRP – while meeting same level of energy services– Financial saving - ~ 33%– Reduction in incremental fossil fuel consumption - ~

55%

Prayas9

Interaction plan

Capacity addition plans – e.g Konkan region Climate friendly, economic options for meeting

energy services needs India’s current capacity addition plans Key shortcomings and implications for climate

Prayas10

Capacity Addition: 11th Plan targets

Projection to add ~ 600 GW in next 25 years 11th Plan (2007-12) - 68869 MW

48010 Coal & Lignite, 15585 Hydro, 3160 Nuclear, 2114 Gas

53% Central, 33% State, 14 Private + 13,500 MW Renewable, Captive … Transmission & Distribution to carry this power

Prayas11

Drivers

Growing economy– GDP growth from ~ 5 - 6% to 8 - 9%

Continuing shortages– Peak shortage - ~ 12% and energy shortage ~ 8%– Only 40-50% of targets met in 8,9,10th plans

Need for greater reliability– Target of 5% spinning reserves

Need to electrify all houses– 44% houses do not have electricity

About 12000 MW of capacity addition

Prayas12

Approach towards meeting energy needs

“We do not enjoy the luxury of an either-or choice: India needs energy from all known and likely sources.” – Prime Minister of India (Speech at Tarapur Automic Station 31st August 2007, - http://www.rediff.com/news/2007/aug/31guest.htm)

Ambitious projections for 10 years– 100,000 MW Thermal– 50,000 MW Hydro – 11,000 MW Nuclear

Expanding fuel supply and sources

Prayas13

Policy changes to meet capacity addition needs

De-licensing of generation projects Merchant plants Captive power plants Ultra mega power plants

Encourage capacity addition through all means

Prayas14

Ultra Mega Power Projects

4000 MW super critical coal thermal plants (5 – 7 plants expected)

Federal government lead – Fiscal incentives, conducting competitive bidding, helped

evolve power purchase agreement and payment security mechanism

Encouraging results for first two projects– Half a dozen bids for each project– Highly competitive tariff

US cents 2.7 / kWh for pithead project and US cents 5 / kWh for imported coal based project (levalised tariff)

– Both projects won by private sector

Prayas15

Ultra Mega Power Projects

Key Features of UMPP Competitive Bidding Process– Transparent process

Well laid out procedures and timetable Anonymous comparison of all bids to be made public All contracts signed with winning bidder (including PPA) will be

public

– No uncertainty and little scope for post bid negotiations All required inputs and clearances to be provided by special

purpose vehicle (govt. owned shell company) Project contract formats finalized before bidding Simple criteria for selection of winner

Prayas16

Interaction plan

Capacity addition plans – e.g Konkan region Climate friendly, economic options for meeting

energy services needs India’s current capacity addition plans Key shortcomings and implications for

climate

Prayas17

Capacity addition planning – Oblivious of key challenges

Significant over projection

Even though capacity addition is 40 – 50% less, shortages have reduced or increased very moderately

Cap. Add. (MW) Peak Shortage (%)5 year planProjected Actual Projected Actual

8 30540 16420 21% 18%9 40250 19015 12% 13%10 41110 19010 12% 14%

Prayas18

Capacity addition planning – Oblivious of key challenges

Economic implications 11th five yr. plan

– Projected investment need – US $ 255 Billion Fixed cost of US cents 15 / unit of incremental

sales!

(v/s current total tariff of around – US cents 8 / unit)

Prayas19

Social and Environmental issues -1

Electricity Policy– Environment

Appropriate advance action through EIA and Environment Action Program Streamline procedures including setting up of Land Bank and Forest Bank Coal washeries, full compliance with environmental norms

– Demand Side Management, Energy Conservation Hydro Policy

– Proper implementation of National Policy on Rehabilitation and Resettlement to ensure that the concerns of project-affected families are addressed adequately.

– Adequate safeguards for environmental protection with suitable mechanism for monitoring of implementation of Environmental Action Plan and R&R Schemes

Prayas20

Environment issues -2

Plans have little details on environment & social impacts – Emphasis on ‘speeding up’ clearance of environmental ‘obstacles’– No analysis on: How much land required? How many people

displaced? Livelihood impact?– No focus on enhancing the effectiveness through democratisation

(participatory R&R mention in Transmission Chapter of11th Plan)

Prayas21

Salient observations

Over projection of demand and poor implementation performance

Shortage psychosis and exaggerated capacity addition plans

Integrated resource planning is avoided Climate friendly options, even though

economical, are ignored

Prayas22

Lesson

To address climate change issues, improvement in national level planning process is critical.

The vicious circle

Prayas24

India’s Capacity Addition Plans

Year Peak Demand GW

Inst.Cap GW

Remarks

2007 104 132 14% peak shortage; Coal (54%),Hydro (26),Gas (11), Nuclear(3), Renewable (6)

2012 158 220

2022 323 425

2032 592 778 ~Coal (50%),Hydro (29),Gas (6), Nuclear(12), Renewable (5)

Source: Integrated Energy Policy, 8% GDP Growth Scenario