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In February, when seasonal demand for electricity is usually not so high, the power shortage during the peak demand period averaged 2.5 per cent, starkly down from 13.8 per cent in August 2014.
The requirement for power can fall or rise dramatically, underscoring the need for plants that can be pressed specifically into service in times of high deficit. But, even after a year of the ministry of power coming out with a model bidding document for peaking power, there is hardly any plant being planned to meet peak demand or a power procurement plan designed to meet such blips. “All over the world, to maintain the grid, you need to have a certain base load, which comes from coal generation, while some plants are needed to meet the peaking load, which comes from hydro and gas. The challenge in our country is that every power plant is built on the basis of base load because we do not have enough capacity,” said Rajiv Mishra, managing director, CLP India.
Financing of generation plants, bids for power procurement, power purchase agreements and the rate structure fundamentally assume a plant would generate 80 or 90 per cent of the time, said Mishra. Such arrangements do not work for peak load power plants.
Under the model agreement for procurement of peaking power, the Union ministry had in February 2014 laid down that availability of the contracted capacity of a power station be at least 85 per cent during peak hours of each year in the contract period. The peak hours were defined as two hours up to or before 10 am and four hours from or after 5 pm. The power purchasing distribution company (discom) was to specify the time, with a notice of 30 days, to the generator. The buyer was to pay a fixed charge for 85 per cent capacity but in the event of buying more than the contracted capacity, the fixed charge would not be applicable; only variable or energy (fuel) charge would.
The requirement for power can fall or rise dramatically, underscoring the need for plants that can be pressed specifically into service in times of high deficit. But, even after a year of the ministry of power coming out with a model bidding document for peaking power, there is hardly any plant being planned to meet peak demand or a power procurement plan designed to meet such blips. “All over the world, to maintain the grid, you need to have a certain base load, which comes from coal generation, while some plants are needed to meet the peaking load, which comes from hydro and gas. The challenge in our country is that every power plant is built on the basis of base load because we do not have enough capacity,” said Rajiv Mishra, managing director, CLP India.
Financing of generation plants, bids for power procurement, power purchase agreements and the rate structure fundamentally assume a plant would generate 80 or 90 per cent of the time, said Mishra. Such arrangements do not work for peak load power plants.
Under the model agreement for procurement of peaking power, the Union ministry had in February 2014 laid down that availability of the contracted capacity of a power station be at least 85 per cent during peak hours of each year in the contract period. The peak hours were defined as two hours up to or before 10 am and four hours from or after 5 pm. The power purchasing distribution company (discom) was to specify the time, with a notice of 30 days, to the generator. The buyer was to pay a fixed charge for 85 per cent capacity but in the event of buying more than the contracted capacity, the fixed charge would not be applicable; only variable or energy (fuel) charge would.
In such a contractual arrangement, the per unit (kilowatt per hour) cost of a peak load plant is higher as compared to a base load plant and the discoms have to agree to buy power at higher costs to make peak load plants viable. However, since peak load would be a smaller percentage of the total capacity, the total power purchase costs are averaged out, said Salil Garg, director, corporates, India Ratings.
Garg said gas-based and hydro power plants act as peaking power plants on account of quick start and quick shutdown capability and ability of hydro power units to store water. But both hydro and gas-based power generation have their problems, says Manu Srivastava, managing director, MP Power Management Company, the holding company for three distribution companies in Madhya Pradesh.
The state has 14,000 Mw of installed generation capacity, of which 3,300 Mw is hydel. Srivastava said not all states have adequate hydro power projects. “It is difficult to set up new hydro projects because of displacement and rehabilitation issues. In gas-based generation, the power is too expensive,” he said.
The government recently came out with a scheme to bail out gas-based power projects. Here, too, the focus is on getting the plants started, though with no return on equity to the promoter and a 30 per cent plant load factor with a view to ensure peak demand. Srivastava says gas-based power procurement comes last in their merit order of dispatch. The effective rate from a imported gas-based power plant, for instance, was as high as Rs 7.35 a unit compared to only Rs 0.18 for the lowest cost power in the state during December 2014.
Besides hydel and gas-based generation, renewable power is also being designed to cater to peak loads, especially when demand is localised. Srivastava said the challenge was to have a viable system and this would increase with the addition of renewable capacity. “It will create peak demand which otherwise does not exist and when that renewable capacity is not available, there would be a shortfall.”
