Transcript Slide 1

Slow Capacity Addition – Challenges and Way Forward
Anil Rawal, Reliance Infrastructure Ltd
Contents
• Capacity Addition – Generation
• Capacity Addition – Transmission
• Capacity Additoin - Distribution
• Power Dream gone wrong ??
• Way Forward
 Generation
Capacity Addition
 Capacity addition of 54,962 MW in XI Plan,
Jump of 51% in one plan Period, Private
sector with a share of 42%
 Currently at 232 GW
 12th plan targets more than 88000 MW, more
than 50% to be contributed by private sector.
 Low interest level of investor, lenders and
other stakeholders
Issues
Generation in GWs
200
132
105
9th
10th
11th
 Performance of Current Investments
Power shortages coexisting with stranded power assets
Coal based generation capacities rising, PLFs are falling
Growth in peak demand is 27% in last 4 years compared to growth in gen by 55%
 Fuel Shortage, domestic coal can not support the targets, import- uncertainties
 Inadequate transmission capacity, not matching the generation capacities and load
requirements.
 long term PPA is a precondition for signing FSA
 Regulatory risk of cancellations/de-allocations of the some of the blocks allocated to
private sector looming large
 Approvals, clearances and Licenses
 44ooo MWs of power plants stuck due to fuel or financial problems (BL 17th Dec ‘12).
 More than 15000 MW of plants stuck due to insufficient gas supply
 Financial health of Discoms, lenders not enthused
Is 88000 MW addition target rightly placed sustainable?
Capacity Addition
 Transmission
 Capacity addition of 53000 Ckt Kms in XI
Plan, Jump of 27% in last plan Period,
 Currently at 243,000 Ckt Kms
 12th plan targets more than 109000 Ckt Kms
line length and 2,70,000 MVA transformation
capacity
 Layout of about $ 35 Billion, about 45% from
private sector
Issues
Capacity in '000 Ckt Kms
243
190
146
9th
10th
11th
 Private interest dying down, bidders fallen from 20s to 3 or 4.
 SBDs not reflecting the changed realities after PoC mechanism - uncertainities
 Assets not coming up with desired speed
 Despite more than 230 GW installed power, peak demand of 141 Gw, peak
deficit exists of about 9%, impacting 0.4% of GDP
 In 2012-13, domestic power exchanges failed to execute deals of about worth
Rs.1,350 Crores, amounting to 15% of total traded volume of power, due to
transmission constraints. (Financial Express)
 Under long term PPAs, lost 1.93 billion units of generation due to
transmission capacity bottlenecks (Financial Express)
 In resource rich states like Chattisgarh, Jindal and Sterlite plants could not
despatch about 3000 MW (ET)
 Transmission Constraint because of a Pocket of High Demand – SR, N2, N3
 Transmission Constraint because of a Pocket of High Generation – W3, NER
Transmission is the real bottleneck?
Capacity Addition
Per Capita Consumption (KwH)
 Distribution
 Per Capita consumption has risen steadly
over last many years.
 Despite problem in sector, rise in per
capita is sustained in recent past due to
subsidies
 An addition of 1.73 million circuit km of
new lines at 33 kV, 11 kV and low voltage
levels targeted in 12th plan.
Issues
917
631
2006
671
2007
717
733
2008
2009
778
2010
818
2011
2012
 Inner ring is not sustainable, ISTS capacities unutilized due to lack of
downstream evacuation
 Thumb rule - for every rupee invested in power generation, a rupee should be
invested in the Transmission and Distribution (T&D) sector.
 Paying capacities and financial health vulnerable – politics vs economics
 Funding by lenders not forthcoming
 4 states have responded well to FRP, but many not coming forth due to terms
of conditions which enforce discipline
 AT & C losses still in range of 26%
 More than 20% payments delayed more than 90 days
 Power cuts and backup gensets galore, 40,000 MW of such backup sets exist
across India, eating into diesel subsidy of more than 5000 Crs - Ethiopia
Devil is in Distribution?
Power Dream Gone Wrong!!
Lack of Holistic
Thinking
Different cylinders firing nonsynchronous
• Reforms in Generation , Transmission
and Distribution
• Approach of Center and State
• Different segments of government not
working coherently
• Clearances and approvals by ministries
• Slow Decision making process
Skewed Risk Sharing and
Flawed Documents
Operational, technological and
Construction risk to borne by Private
party
Legal, regulatory and demand risk to be
borne by government
Documents being corrected
Trust Deficit and
Scepticism
No level playing field
Private versus Public sector
Approach and Attitude
Over-enthusiasm by
players and turn of events
Way Forward
Address the complete power supply chain, Competition and opening up left to
generation only leaving out the other parts of supply chain.
Regulatory and Statutory framework
 Bring in the Coal Regulator to reign in the monopoly and introduce reforms
 Effective implementation of open access in transmission




multiple charges
non-transparency regarding Available Transmission Capacity (ATC)
Mis- use of Sec 11 orders by States
Procedural complications
 State level operations regulator to be made independent in line with POSOCO to make
open access meaningful
 State Utilities in problem due to poor managerial and operational practices
compounded by irrational tariffs fixed by regulators, regulator to be independent.
 Amendments in Electricity Act – address the changing needs
Clearances & redressal mechanism





Delay in approvals / clearances as a ground for force majeure & relief
Grant of an authorization under section 164
Central Projects Status to all ISTS and ISGS for Forest Clearance
Redressal mechanism for unforeseen events
Key clearances & authorizations to be in place before financial bid
Level Playing Field between private developers and state owned entities
 Award of clearances like forest and environmental clearances
Preferential Access to Confidential Information and ability to influence bidding decisions
Unfair Commercial Advantages for PSUs
All projects through competitive bidding
Way Forward
Competitive bidding framework
 Amend SBDs to reflect the leanings – Transmission an example
 Benchmarking costs and tariffs while accepting bids
 Distribution Franchise model is emerging as a preferred model for PPP
Generation - Manage Current Capacities-
 Thousands of MWs of generation, More than 100 transmission projects stuck -- Restore
confidence
 Work on congestion management and implementation of OA in letter and spirit
 Manage the counter-party credit risks pertaining to state-owned distribution utilities
continue to remain significantly high
 Need restructuring of loans for power sector projects
 Simplified exit norms to allow for asset churning
Transmission
National Power beltway for transmission to enable nation wide plug and play of
evacuation system
Integrating the states with the National Transmission System
Distribution
Bring maximum states to financial discipline
 Build regulatory capacity
 Open Access in Distribution for 1 MW and above to be implemented
Separate Carriage and Content
 Regulator be guided by Cost and less by political considerations on tariff increase and
loss reduction targets.
 Monitoring of FRP conditions to be tightened
Every body has to see the problem to resolve it
References and Acknowledgements
• Subgroup on Power Transmission - APP
• India Infrastructure Outlook 2011 by Fitch Ratings
• Power T&D Sector–The catch up game begins… CARE Ratings
• Power Transmission – the real bottleneck – FICCI
• The future of power analytics – presentation by IEE
• Executive Summary for the Month of November 2013 by CEA
• ICRA report on Power Sector – Sep 2012
• Ensuring electricity to All - Report by MS. BHAWNA GULATI, RESEARCH
ASSOCIATE, JINDAL GLOBAL LAW SCHOOL
Certainly ! Thanks a lot
[email protected]