Energy Sector Structure Policies And Regulations Engineering Essay

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The term Availability Tariff, particularly in the Indian context, stands for a rational tariff structure for power supply from generating stations, on a contracted basis. The power plants have fixed and variable costs. The fixed cost elements are interest on loan, return on equity, depreciation, O&M expenses, insurance, taxes and interest on working capital .The fixed and variable cost is treated separately: Variable cost including fuel cost the payment &Fixed cost to the generating company is linked to availability of the plant, that is, its capability to deliver MWs on a day-by-day basis the ABT mechanism divided in to two parts.

1. Capacity charge: The payment schedule to the generation plan or power producer company .depends upon the average generating capability of the plant in MW over a year In case the average actually achieved over the year is higher than the specified norm for plant availability, the generating company gets a higher payment. In case the average availability achieved is lower, the Payment is also lower. Hence the name 'Availability Tariff'. This is the first Component of Availability Tariff, and is termed 'capacity charge'.

2. Energy charge: It comprises of the variable cost (i.e., fuel cost) of the power plant for generating

Energy as per the given schedule for the day. It may specifically be noted that Energy charge (at the specified plant-specific rate) is not based on actual generation and power plant output, but on scheduled generation. Ex If the power plant schedule to deliver 500 MW and it generates 600 MW the energy i.e. 100 MW extra charge should still be for 500 MW and rest of excess generation cost is determined by RLDC as per grid requirements if the surplus power is there in Grid frequency shoots above 50 HZ at that point of time the energy charge automatically goes down .

3.Unscheduled Interchange: In this there is provision already made for Adjustments for supply / consumption deviations means deviation between actual drawl and injected & scheduled drawl / injection Linked to frequency.

Power scenario in 1963:In 1963 Power supply responsibilities to number of federal and state electricity Boards (SEBs) and SEBs - A vertically integrated monopoly Utility responsible for power generation, transmission & Distribution and a few private licensees were present in system and Energy resources for power generation are unevenly distributed among the political divisions. and utilities struggling with the financial constrains. Predominantly increasing demand supply gap and & heavy politicized subsidies to retail tariff led to requirement of new mechanism.

Integration of State power Systems-1963 : till 1963 all zones and SEBs used to work separately and synchronization and co ordination was absent but in 1963 infrastructure policy initiative by GOI came in to exist and all the zones started integrating in one system .

Objective of integration was clear to develop one country one GRID concept which took years to achieve some of the reasons like Promoting and Managing the interconnected operation of the State power Systems through RLDCs, SLDCs, Lead role by Central Government in power generation and transmission, Flow of Power from surplus States to deficient States, Sharing of Central sector Power by regional Constituents,

Source: Google Maps

The regions formed accordingly and their existing connectivity for operation of LDC's the country is divided in to five regions for operations reforms. 1.Northern Region - Haryana , Himachal Pradesh ,J & K , Punjab , Rajasthan , Uttar Pradesh , Chandigarh (UT) ,Delhi (UT) 2.Western Region - Gujarat, Madhya Pradesh, Maharashtra, Goa, Daman- Diu (UT) ,Dadra-Nagar Haveli (UT) 3.South Region - Andhra Pradesh, Karnataka, Kerala, Tamil Nadu, Pondicherry (UT) 4.Eastern Region - Bihar, Orissa, Sikkim, & West Bengal. 5. North Eastern Region - Arunachal Pradesh, Assam Manipur, Meghalaya, Mizoram, Nagaland, Tripura.

Post integration state power systems: Some of the observations are taken in to consideration after operation reforms like Five isolated grids came in to exist in India where Concentrated Load centers in Western & Northern India ,90 % of Coal reserves concentrated in WR & ER, hydropower predominately exist in NR & NER i.e 23000 MW and 53000 MW ,coastal generation dominated in SR,Nuclear generations at load Stations, and major observation is Diversity in Time, Long haulage of Power, Weather, Seasons.

Some problems observed in the system like Severe power shortage in WR,NR and SR ,Large Fluctuations in Frequency due to mismatch in demand supply gap and absentee of free speed governor some operations oriented issues like bulk load shedding of load at regional level ,steep is of demand during peak hours .though the strong intra regional grids were present but only few regions connected to each other ,from commerce point of view one tariff mechanism was present in system which was major hurdle for completion .

To overcome above issue Central taken initiatives during year 1990 which was major decision in the Indian power sector (Committee Constituted by Department of Power (DOP) in June 1990) in coordination with Asian development bank (ADB) in cooperation with The world bank led to several changes in all aspects of operations including tariff mechanism and operations of current mechanism. Some of the salient features of this initiave were introduction of two part tariff, annual fixed cost calculations, variable costs including Cost of Primary Fuel, Cost of Secondary Fuel

Objective of the initiative was Understand the strengths and weakness of generation and transmission of India Understanding the regulatory structure as it affects the electricity business Make such recommendations as necessary to improve the economy and quality of generation and transmission

Study also conducted on each region and team of reforms got some facts sheet including geographical data Area: 2,973,190 Population: 1027 m (urban 72%, rural 28%) Per capita consumption: 600 kWh Two asynchronous grids Installed Capacity 150 GW (24% hydro 63%coal: 10% CCGT+3% nuclear) Peak Demand ~108GW (Peaking shortage: 20%, energy shortage: 17%)

Indian Regional Demand:


Peak Demand (MW)

Peak Met (MW)

Surplus (MW)

Deficient (%)

Northern Region





Western Region





Southern Region





Eastern Region





North-Eastern Region





All India





Indian Generation scenario (Updated) As per Region: Grand Total Installed Capacity (as on 30-09-2010) is 164,835.80 MW Current installed capacity of Thermal Power (as of 30-09-2010) is 106,517.98 MW which is 64.6% of total installed capacity. The installed capacity as of 30-9-2010 was approximately 37,328.40 MW The public sector has a predominant share of 97% in this sector. Currently, seventeen nuclear power reactors produce 4,560 MW (2.9% of total installed base). Current installed base of Renewable energy is 16,492.42 MW which is 7.7% of total installed.

Indian Generation scenario (as per findings)










Northern Region


13 %


2 %


0 %


16 %


1 %


9 %


1 %

Western Region


17 %


5 %


0 %


22 %


1 %


5 %


2 %

Southern Region


12 %


3 %


1 %


15 %


1 %


7 %


4 %

Eastern Region


11 %


0 %


0 %


11 %


0 %


3 %


0 %

North-Eastern Region


0 %


1 %


0 %


0 %


0 %


1 %


0 %

All India


53 %


10 %


1 %


64 %


3 %


25 %


8 %

Why was Availability Tariff necessary?

Prior to the introduction of ABT, the regional grids had been operating in a much undisciplined manner. There were large deviations in frequency from the rated frequency of 50 (Hz).Low frequency results when total generation available is less than total load on the system.(these can be tackled by reducing consumer load or increasing generation.vis a vise High frequency is a result addition of extra generation in the system when the total consumer load has fallen during off-peak hours. The earlier tariff mechanisms did not provide any incentive for either backing down generation during off-peak hours or for reducing consumer load enhancing generation during peak-load hours. In fact, it was profitable to go on generating at a high level even when the consumer demand had come down.


How does the mechanism work?

The process starts with declaration of central generating units declaring their expected generation output 24 hours before next day to the RLDCs The RLDC divides this and tabulates these output capability declarations as per the beneficiaries' plant-wise shares and conveys their messages to State Load Dispatch Centers (SLDCs). Later they carry out exercise how to meet consumers demand, from their own generating stations, along with their entitlement in the Central stations. that they propose in their respective areas. The SLDCs also conveys RLDC of their drawl schedule from central generating units (limited to one day planning) .the RLDCs aggregates and sanctions this requirements and requisition determines the dispatch schedules for the Central generating stations and the drawl schedules for the beneficiaries duly incorporating any bilateral agreements and adjusting for transmission losses. These schedules are then issued by the RLDC to all.

Concerned and become the operational as well as commercial point of view. However, in case of contingencies, CGS can revise the output capability declaration, beneficiaries such as States and SLDCs can prospectively revise requisitions, and the schedules are correspondingly revised by RLDC. While the schedules so finalized become the operational starting point, and regional entities will follow the same and shed their load accordingly and revised their schedule as per orders of RLDCs schedules and revisions, deviations are allowed as long as they do not endanger the system security. The schedules are also used for determination of the amounts payable as energy charges, as described earlier. Deviations are determined by dividing the schedule in 15 min time span and these deviations are priced depending on frequency. As long as the actual generation/drawl is equal to the given schedule, payment on account of the third component of Availability Tariff is zero. In case of under-drawl, a Beneficiary state or SLDC is paid back to that extent according to the frequency dependent rate specified for deviations from schedule.

Daily Schedule of ABT and contractual Framework:

Ex. Suppose a 1000 MW Central coal-fired power station at Chandrapur (Maharashtra) has three beneficiaries (States - Maharashtra, MP & AP) with allocated shares of 40, 30 and 30% respectively. Suppose the station foresees a capability to deliver 900 MW (ex-bus) on the next day, and advises the same to the RLDC by 9 AM. The RLDC would break it up, and advise the three SLDCs by 10 AM that their entitlements in the Central station are 270, 270 and 360 MW respectively, for the next day. Entitlements in the other Central stations would also be advised by RLDC to the SLDCs similarly. Simultaneously, the SLDCs would receive availability status from their intra - State stations as well. They would then carry out a detailed exercise as to how best to meet the expected consumer demand in their respective States over the 24 hours. For this, they would compare the variable costs of various intra - State power stations


System benefits for everyone:

Commercial benefits: The ABT mechanism has dramatically streamlined the regional grids in India and synchronized them as per planning and about to complete the one country one Grid mission. Initially through the system and procedure in place, Being a part of a whole 'schedules get determined as per their shares in Central stations, and they clearly know the implications of deviating from these schedules. Any constituent which helps others by under drawl in deficient situation of power , gets compensated at a good price for the quantum of energy under-drawn.

Technically: the technical parameters of grids, like frequency and voltage, have improved, and equipment damages and maintenance of the same has reduced. During peak load hours, the frequency can be improved only by reducing drawls, and necessary incentives are provided in the mechanism for the same.

Economically: because of the clear separation of fixed and variable charges explained in introduction, generation according to merit-order is encouraged and pithead power stations do not have to back down generation normally. And hence overall generation cost comes down accordingly.

Rewarding plant availability enables more consumer load to be catered at any point of time.