Case Study: Powering India
band or floor and forbearance price. The physical power can still be injected into the local grid by the generator and the REC generated for every unit of power produced can be financially traded through the REC mechanism.
Challenges in Power Markets Fuel Source – Out of total expected capacity additions by
2012, approximately 70% is thermal coal based. This coal based generation is either domestic (pithead stations) or imported coal based (port based plant). As the reliance on imported coal increases the energy security issue becomes critical. The price of coal in international markets will induce significant risk for new generators and its availability through long-term contracts and cost of development of coal handling infrastructure at port for imported coal will need to be considered. This could become a concern for generators and could affect supply to market.
Open Access Implementation – As far as open access to
existing transmission lines in states is concerned, the role of states is important in providing generators and large consumers access to market through non-discriminatory open access to transmission and distribution of the state. State governments have influenced State Load Despatch Centres (SLDC) to deny open access under technical grounds, such as reliability or unavailability of corridor due to congestion. Hence, independence of the SLDC (the system operator) from state government is needed. In certain cases, State Governments have used Section 11 of the new Electricity Act 2003 (to direct generating companies in extraordinary circumstances to supply power) to deny open access. However, Section 11 of the Act does not mention open access at all. This defeats the spirit of open access which is one of the cornerstones of the new act to foster competition.
Financial Health of Discoms – Although large quantities of
new capacity additions are under construction, the purchasing power of the discoms is in question; especially considering their poor financial condition. In a situation where discoms fail to pay their dues there is a possibility of stranded generation assets. The situation has improved with the availability of short- term markets. Still, gencos will need sufficient risk mitigation in the PPA with the discoms against payment defaults.
Lack of Capacity Addition at State level – Electricity provision
being a major issue (both for state and central government), measures at state level are required to add generation capacity. That has not yet picked up momentum and very few states have called for competitive bids for generation. There is also
130
Rahul Banerjee is Senior Advisor, Central Electricity Regulatory Commission, New Delhi, India.
The views expressed here are the personal views of the author and do not necessarily reflect the views of the Commission.
worldPower 2010
hesitation by the states in signing long-term contracts with the IPPs under construction.
Competition: Open Access at Distribution Level – Consumer’s drive competition, if allowed to. Providing choice to the consumer to choose their electricity supplier/distribution company will go a long way in driving competition along the value chain of the electricity sector. Presently, such a market structure is far from a reality in India. Competition needs to be progressively brought forward in the distribution sector. For the first time, in Mumbai (India’s financial capital) the state regulator has allowed competition among distribution companies. Reliance Infrastructure and Tata Power are competing for the same set of customers in Mumbai. Tata Power owns generation assets but limited distribution lines, whereas Reliance Infra owns the distribution lines but has limited generation assets. Tata Power is asking for distribution assets in certain areas to be handed over to them (which they claim will lead to reduction in customer tariffs) whilst Reliance Infra is staking claim on generation assets of Tata Power which they claim have been built by funding from Mumbai’s consumers.
Develop Other Types of Markets – The spot power markets
have not yet matured and liquidity has to increase for other markets such as ancillary services markets, real-time balancing markets and derivatives markets to develop. This will also depend on the supply/demand balance as opening up all the markets too fast is fraught with danger of abrupt price rises.
What Next? From a regulatory perspective, while the Indian power markets
open up and liquidity increases, it is important for the regulator to monitor the market, to establish if sufficient competition exists, to determine if participants are exercising excessive market power, and to make sure participants are not ‘gaming’ the market. The regulator needs to facilitate the creation of a large and liquid marketplace to foster competition and instil discipline to the participants. Strong reporting and disclosures by participants to regulators is also of critical importance. It can be expected that the role of the commission develops further with more focus on the creation of competition in the market for new assets over and above the tariff determination responsibility for the older assets in years to come. ■
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96 |
Page 97 |
Page 98 |
Page 99 |
Page 100 |
Page 101 |
Page 102 |
Page 103 |
Page 104 |
Page 105 |
Page 106 |
Page 107 |
Page 108 |
Page 109 |
Page 110 |
Page 111 |
Page 112 |
Page 113 |
Page 114 |
Page 115 |
Page 116 |
Page 117 |
Page 118 |
Page 119 |
Page 120 |
Page 121 |
Page 122 |
Page 123 |
Page 124 |
Page 125 |
Page 126 |
Page 127 |
Page 128 |
Page 129 |
Page 130 |
Page 131 |
Page 132 |
Page 133 |
Page 134 |
Page 135 |
Page 136 |
Page 137 |
Page 138 |
Page 139 |
Page 140 |
Page 141 |
Page 142 |
Page 143 |
Page 144 |
Page 145 |
Page 146 |
Page 147 |
Page 148