India's power crisis: The devil lies more in the cost than in the crunch

New far-off plants are costlier and start supplying power much after the older ones have been run at peak. This summer, despite the call to phase out plants over 25 years, they've proved their worth

By Monday, May 9 evening, power engineers at India’s National Load Despatch Centre (NLDC) in New Delhi ought to have been worried. Demand for power had shot up by 10 Gw in just 24 hours. For comparison, the scale of rise meant India’s power demand had added two Sri Lankas in one day.

However, the evening turned out to be uneventful. For the women and men managing India’s power management business, this summer has been a time of adroit lessons in power management. And it is not just those in NLDC. Coal India managers and railway freight operations have all learned to respond fast. For consumers, this should have meant more stable electricity supply in April and May this year, but for the market upsetting moves by the regulators.  

Despite the constraints, the Indian power grid is handling power fluctuations of over 10,000 Mw in a 24-hour span, with few disruptions. On Monday in the evening peak hours, the maximum shortage was only 754 Mw, comparable to the cuts in normal times, just like it was a few months earlier in January and February this year when demand was much less.

“We are not alarmed by the scale of the rise, but the often suddenness of the jump,” said a Power System Operation Corporation Limited (Posoco) officer summing up the day’s operations.

Slack in the system:

That the grid has held up with only coal power, which takes time to ramp up production once it has been shut down or even “boxed up”, compared to gas or hydro power stations, is remarkable. There are few alternatives. On any day this summer, the median gas based electricity output was only two per cent of the total generation, hydro just eight per cent. Renewables like solar or wind, contributed another 12 per cent to the power generation mix. It is therefore a massive 73 per cent share for coal based power plants.

Environment considerations apart, the size of the demand should not be a problem. India’s total generation capacity is close to 400 Gw and the highest demand was 207 Gw on April 29. There is plenty of slack in the system.

The problem is in terms of cost of generation. The state discoms, perennially cash-starved, are most reluctant to buy the additional power at market rates, to keep the bulbs and fans running at homes or run the electric connected machines in factories. In their power projections to the state level despatch centres and then the regional level ones, the discoms never factor in the market rates.

Instead, in order to keep costs low, they source power only from the plants that have signed long-term power purchase agreements with them. Not surprisingly, despite the possible shortage, the volume of power sold at the Indian Energy Exchange dipped 1.7 per cent compared with April last year. The IEX press release itself provides the answer why: “high clearing prices across all the market segments”. If the discoms buy from the market they have to pay cash upfront. One way the Central Electricity Regulatory Commission helped them was a dubious decision to impose a Rs 12-per-unit cap on the prices charged in the market. As expected, more discoms did not appear as buyers but the sellers (generating companies) disappeared from the market, hence volumes dipped.

In normal circumstances, NLDC should be able to read the excess demand from data for previous years, demand estimates made by discoms and data from markets. Incidentally IEX has a lively 11 day forwards market too.

But in the effort to keep the state distribution companies solvent, the last set of data is given a miss. What follows next is order matching. All power generation companies provide the state or regional load despatch centres their schedule of the availability of their plants to produce. Pan India companies like NTPC usually deals with NLDC. The schedule is based on the power plant heat rate and the cost of the fuel.

The latter matches those with the estimated demand made by the discoms, breaking the production plan into batches of 15 minutes each for the 24 hour cycle, starting from midnight.

“The load despatch centres will always give precedence to the cheapest power to come to the grid,” said Anil Kumar Jha, former director (technical) at NTPC. It requisitions more costly power only as the demand expands.

Once the NLDC decides on the demand projections, the power plants are fired. For instance, there could be a big load in a city with an IPL match, which will be guzzling power till late night, when shops are open around the venue, but as the fans drive back home and the city sleeps off, the demand drops towards the morning.

“The order matching done by Posoco might give the impression that it sets the price, but it is only a platform”, said Girish Chandra Tripathi,  deputy director general, NTPC School of Business. 

For generation companies searching for profit, this translates into more use of older plants and those nearer to the coal mines. They offer the cheapest rates but come with a higher environmental footprint. The same logic applies whether for a company like NTPC, which accounts for 20 per cent of the installed power capacity in the country, or for the smaller generation companies.

Because these plants are all coal-fired, they need about 12 hours at the minimum to begin production, unlike gas- or hydro-based plants. The reasons for this difference is easy to visualise for anyone who has seen a rustic coal-fired stove come to life. The coal in the stove needs time to begin to burn at the necessary level of heat for water to boil and produce steam to drive the turbines. A gas-fired stove in urban homes reaches the necessary heat rate faster. (The reason why an expert like V K Saraswat, member Niti Aayog, suggests that a switchover from coal to RE is difficult, without making a pitstop at gas).

So if the coal fired plants have been “boxed off”, in other words, had their heat lowered in the morning hours, it takes additional dose of firing of coal and time to bring them back to full heat again, in the evening. It costs more coal and wear and tear on the machines to repeat this process daily, raising the tariff for power, Jha said.

There are other problems too. “Sometimes due to pollution and cloud over there is a drop in the production from RE plants even in the day, when the coal fired capacity is low,” said an engineer employed in a research institution in the sector. Even if the coal plant is operational, kept on stand by as a “warm start”, the grid has to turn around to take in the feed. The gap is often close to ten minutes massively disrupting critical care machines in hospitals to continuous process operations in factories.

Posoco has to also buy auxiliary power to ensure the frequency in the grid does not drop, adds Tripathi. 

At all stages as companies like NTPC and JSPL turn to super critical coal fired power plants, the risks rise. These plants differ from the older plants because the water running through them works as a supercritical fluid, neither a liquid nor a gas. The former director (technical) said since these plants need more time to reach their designated levels of efficiencies, the difference in start up time is usually more than an hour from the older plants, on an average.

From the point of view of both, costs and time, the cash starved power generation system promotes the older plants instead of the newer plants. 

Pithead plants, for more than one reason:

This is also the reason, why the plants located near the coal mines are sought after. For the system, the combination of older plants, with lower efficiencies but quicker turnaround time and lower cost of coal, is irresistible.

An additional factor in their favour is that their fixed costs are already accounted for, averaged out over the large number of years in operation. These plants offer the cheapest source of power that the discoms lap up.  These plants never need to step down their production. 

For the coal ministry it is also a relief since supplies to them can be arranged at a very short notice. Data shows these 19 power plants strewn across the country next door to coal mines, with an aggregate capacity of 39.2 GW ran at an average of 85 per cent plant load factor in March this year. Compare this with the 1,820 Mw Dadri plant, located close to Delhi but absurdly far away from the coal fields and which, thus, falls in the critical zone of short supplies.

To keep up with the demand pattern from the NLDC, the coal companies try to anticipate the need for power from the plants. Since the newest plants would have the highest cost of power, it is easy for CIL and SCCL to allocate more supplies to the older plants. The demand from these plants are consistently higher.

The same estimates are made by the railway ministry too. Every month, the chairmen of NTPC, CIL and the member (freight) at the Railway Board meet to chalk out these plans. Despite all of them being government employees, tempers do not often remain happy in the rooms. There are often accusing fingers. In 2018, NTPC threatened to drag CIL to arbitration over issues of payment for allegedly poor quality of coal.

While the crisis in railway wagon availability for coal loading is nothing new, a new feature introduced this time is to monitorthe entire cycle as it does for passenger trains. It claims that this has cut down the transit time for rakes to reach the long distance power stations by a range of 12-36 per cent.

But the best way the power crisis is being managed is still on costs. The far-off plants are also the more costly newer plants. They join the queue to supply power much after the older ones have been run at their peak. In this summer, despite the general calls to phase out the above 25 year plants, they have proved their worth. 

Mode of Transport	Thermal Power Station	Capacity (Mw)	PLF % (Mar, 2022)	% of Actual Stock vis-à-vis Normative  Stock
Pithead	Anpara TPS	2,630	87.	3 55%
Pithead	Korba-West TPS	1,340	73.0	66%
Pithead	Amarkantak Ext TPS	210	81.0	99%
Pithead	Kakatiya TPS	1,100	90.6	61%
Pithead	Ramagundem-B TPS	62.5	66.3	62%
Pithead	IB Valley TPS	1,740	79.3	60%
Pithead	Rihand STPS	3,000	95.5	182%
Pithead	Singrauli STPS	2,000	93.8	115%
Pithead	Korba STPS	2,600	85.4	91%
Pithead	Sipat STPS	2,980	74.2	84%
Pithead	Vindhyachal STPS	4,760	82.7	140%
Pithead	Ramagundem STPS	2,600	84.5	36%
Pithead	Kahalgaon TPS	2,340	73.0	32%
Pithead	Darlipali STPS	1,600	99.2	91%
Pithead	Talcher STPS	3,000	97.0	96%
Pithead	Farakka STPS	2,100	83.2	18%
Pithead	Anpara C TPS	1,200	87.7	26%
Pithead	Sasan UMTPP	3,960	98.2	31%

Source: Central Electricity Authority