Forecasting and scheduling of renewable energy in India

Karnataka Electricity Regulatory Commission (KERC) has mandated Forecasting and Scheduling (F&S) for wind and solar assets in the state with penalties for deviation from the 1st of this month. The current regulations are applicable to all wind generators with a cumulative capacity of 10MW and above and all solar generators with an installed capacity of 5MW and above.

F&S2015

Why need F&S?

The concern raised by the lobby of wind developers might seem justified against penalties for deviations which add to the cost of energy, but a stringent F&S mechanism will only enable the grid to accept more Renewable Energy (RE).

F&S could reduce RE curtailment

Increasing RE will lead to local and system level congestion in the existing Indian grid and it will be essential to curtail wind and solar during those periods. Curtailment generally is attributed to the grid’s inability to absorb RE generation but what goes unnoticed is the surplus generation from RE that is beyond what is forecast and scheduled leading to a shortage of grid transfer capability. A significant part of RE curtailment is in fact considered economic in that case.

Adding flexibility to the system in the long run

  • Accurate F&S will lead to creating an economic system where utilities could offer tariff incentives to increase consumption during peak wind/solar generation periods.
  • It could also lead to efficient use of traditional power assets.
  • A better inter-state coordination in managing power demand and delivering other grid ancillary services will become a possibility. Regional co-ordination has been a key to the success of RE integration in US.

Regulatory dimension

The regulator’s objective of delivering energy at the lowest possible cost shall always remain. At times, the intermittent nature of RE has caused the thermal power plants to provide flexibility by operating at a lower PLF thereby adding to the cost of energy and not to mention associated emissions (which is against the climate commitments). The F&S regulation will enable to enforce a better grid discipline by managing congestion which will provide value to the generators in the long run.  The next step for the regulators at state level would be to narrow the deviations by reducing the band and increasing the penalties. There is also a need for synchronisation of intrastate and interstate F&S regulations for better accounting and settlement.

The F&S regulations are not new for RE in India, Indian Electricity Grid Code made provisions in 2010. The current regulations based on the proposal from CERC in 2015 have been under draft across a few states. Rajasthan, Gujarat and Tamil Nadu have even implemented F&S on a voluntary basis. Karnataka has once again led the way in official implementing a timely regulation (with penalties) although it is likely to lose again on the market to other states that come up with a better regulation like Tamil Nadu’s proposal of a narrow band of ±10% for wind and ±5% for solar. One thing for sure can be guaranteed, a better grid discipline.

Is solar power development sustainable?

RE20173I got an opportunity to speak at the Times Renewable Energy Expo, a Renewable Energy (RE) conference in Pune this past week. I was privileged to be part of the panel featuring Dr Chetan Singh Solanki, Prof. IIT Bombay who has pioneered the adoption of solar power in rural communities. The theme of the panel was ‘Pace of RE scale-up in India’.

I represented India Energy Storage Alliance (IESA) and spoke about integration of energy storage with RE. The intent was to emphasise the need for energy storage in providing flexibility to the grid under increasing penetration of renewable energy. Being intermittent and seasonal, wind and solar energy do have its drawbacks. In spite of being a clean source of energy, the intermittent nature stresses the traditional fossil fuel plants and forces them to operate below optimal efficiency thereby increasing the operating cost and associated emissions. The message was well received by the audience comprising of project developers, researchers, policy makers and RE enthusiasts. But, the burning topic throughout the conference was ‘Are the record low solar tariffs realistic?’

The drop in solar prices

The recent bids in Bhadla that resulted in record low tariffs of ₹ 2.62/kWh and ₹ 2.44/kWh in a span of 2 days was a major discussion point. The drop from ₹ 3.15/kWh to ₹ 2.44/kWh (23%) in a month was never expected. (Read more about why there are no more outliers in solar)

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Module costs

The drop in solar prices is attributed to the decline in module prices which is true but it hides the bigger picture. In a recent publication by Bloomberg, an Altman Z score analysis(see below) of the module manufacturers reveals a gloomy picture. Only one company lies above the mark with three others in ‘just safe’ zone while the rest have all indications to go burst. Incidentally Solar World just announced the beginning of its end. (Also, interestingly Bloomberg lists most of these companies under Tier 1 suppliers).

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Is the development sustainable?

Wind recently witnessed an intense debut reverse bidding and if the indications are right, it could well follow the solar route albeit at a lower rate. So the big question then turns out to be, ‘Is RE development sustainable?’ ‘Can companies and the stakeholders sustain this in the long run?’ I have due respect to all the experts in the big corporations who are winning projects at this price, I wouldn’t challenge their acumen. At a personal level, I just have a few points to say why I believe this development is not sustainable in the overall gambit of things.

  • There is intense corporate competition, with no long term visibility and the urge to develop large portfolios in a short time is driving the bids.
  • How can module manufacturers who are financially weak be trusted to produce quality product that performs for 25 years?
  • Supply is just one side, on the other side low tariffs is also driving down installation costs. There is an even bigger pool of ‘installation experts’ who offer manpower services at any price asked for (What about the logic that says your pay increases as you build expertise?).
  • And, the last one, preserve natural resources. I personally feel this is a huge problem, we don’t want to destroy land (and water) resources on projects whose performance is going to decline rapidly every year.

Renewable Energy development that is sustainable is the need of the hour!

Many Sparks but Little Light…

CoverEarlier this year, I happened to pick a book, ‘Many Sparks but Little Light: The Rhetoric and Practice of Electricity Sector Reforms in India’ published by Prayas (Energy Group). The book clearly stated the objective was to examine the electricity sector reforms in India so far and make recommendations in the hope that future acts in the sector have an impact. The sections in the book are split between generation, distribution, renewable energy, hydro, coal, natural gas and alike. There is a recurring theme to the book and I have picked out a few pointers in them.

Privatisation and unbundling

txThe need for generation privatisation and unbundling is well acknowledged but the results reveal a net negative effect of the process in the sector. Reading this part of the story makes one wonder if all the previous reforms were successful we would have never needed a UDAY (Ujwal DISCOM Assurance Yojana).

Generation privatisation was expected to increase the capacity addition and bring down the tariffs but it never happened. The book captures the series of litigation that have come about in this period. In sharp contrast, net thermal power capacity addition has been low while renewable energy adoption particularly wind has seen a rapid rise post the privatisation of generation. The capacity addition by the private sector in renewable energy has been heartening although authors’ argue that competitive bidding instead of a preferential tariff should have been the norm. I agree to this argument considering the recent development in the wind energy sector post the 1GW reverse bidding tender.

Tariff Setting

wind

The tariff setting has been on the back-foot right from the beginning. The authors argue that instead of having a competitive tariff bid for thermal power early on during privatisation, they were offered preferential tariffs on a cost plus basis which has been a failure. In contrast we now have aggressive competitive bidding for renewable energy projects which are bringing the net tariff down but the benefits are not passed down to the consumer because the tariff structure is tilted towards fixed cost recovery rather than being flexible in line with the marginal costs.

As rightly pointed in the chapters, the failed reforms have created a surplus capacity in books, resulting in stranded assets, low utilisation of power plants thereby reducing the net effect of the resources. The irony of having 300GW plus of installed capacity when the peak demand is around half of it and still facing grid reliability issues is the net result of these reforms.

On the retail side of tariffs, it is quite evident that there is major cross subsidising in the sector with the fixed cost recovery being very poor across DISCOMs. Unless the fixed costs and energy costs are completely recovered independently as envisaged in the National Tariff Policy (2016) it will be impossible to reap the benefits of low carbon transition where the energy costs are next to zero.  It looks to be seen how close the DISCOMs adhere to the tariff increase commitments made as part of the commitment to UDAY.

Open Access

The authors’ have a valid reason in being critical about open access, they portray the financial impact of exodus of the cross subsidising industrial and commercial consumers to open access across DISCOMs (Distribution Companies).  However, I feel it goes straight against their argument on competition or lack of in it in the sector particularly in generation post privatisation. It is good to have open access as it pushes the DISCOMs to be innovative and offer better incentives to consumers, an example to cite would be the recent proposal from BESCOM (Bangalore Electricity Supply Company) to reduce energy charges and increase the fixed charges to HT clients. Although the regulator didn’t accept the proposal it has set the other DISCOMs and the regulator thinking radically.

In the end, the lack of reforms or successful reforms in transforming the state of the DISCOM sums up the state of sector. UDAY, which seems to be a revolutionary step isn’t first one; the Financial Restructuring Plan (FRP-2012) offered similar services although UDAY aims to make the DISCOMs more accountable with state participation. It is quite easy to assume the proposed reforms by the current Central govt. are radical steps; the authors set things straight by pointing out a slew of failed previous reforms introduced by previous governments. Overall, the book is an interesting read for anyone looking for a comprehensive summary of the electricity sector post 1990s which vindicates the credibility of the research group behind the book.

More details about the book can be found here.