“The problem will be much more complex when the planned 150,000 MW of green energy is added to the grid”, said S Akshaya Kumar, Chairman, Tamil Nadu State Electricity Regulatory Commission.
“Solar availability is dependent on the intensity of sun rays. It starts during the day, attains the peak, declines and becomes zero. If it is said that we get 3000 MW, it means it will be available from 11 am to 3 pm and for the rest of the time we need to look for other sources. This would put a lot of strain on thermal power plants. Such a large quantity of energy cannot be stored at optimal cost. We need to operate the thermal stations in tandem with solar energy ramping up and ramping down capacities in short time, which is difficult. The same is also true of utilising available in spurts wind energy,” said Kumar.
Large wind power capacity...
Today Tamil Nadu has over 7000 MW of wind power and accounts for the largest share of such capacity in India. “Imagine the entire country operates 150,000 MW of green energy all, more or less, at the same time. Management of the grids and inter-transfers will call for much larger efforts,”said Kumar.
Kumar has researched on such management in other countries. He cited the experience of Spain with the total demand at 35,000 MW: “total installed capacity in Spain is 135,000 MW. Wind energy
penetration is close to 20,000 MW. Another 20,000 MW comes from gas-based thermal power, around 12,000 MW from hydel stations and around 3000 MW from pumped storage. The state does have the flexibility to connect wind energy to gas and hydropower generations, which lends for easy start up and slow down. We do not have that comfort,” Kumar pointed out.
In Tamil Nadu, hydel power capacity is low and pumped storage capacity at Kadamparai is just 400 MW.
Course of power development in TN
In an interaction at Economist House, Kumar provided a breezy account of the process of power development in Tamil Nadu which, for long, earned a reputation for its lead in planning and managing large capacity power generation and distribution: “Tamil Nadu used to be the leader in power sector. We used to be No.1 or No.2 in every parameter. Till the 1990s we planned and executed capacity expansion in quick succession. Ennore, Tuticorin, Mettur and North Chennai power plants were launched in a continuous stream. Till 1987, Central plan funding for power sector was sizeable accounting for up to 50 percent of outlays,” said Kumar.
With the Centre experiencing a severe finance crunch, plan expenditure received drastic cuts. There were no more central allocations for power development by the states. Post-1991 the sector was opened for FDI with promised return of 16 per cent on investments. A lot of incentives were provided.
I remember the spate of projects like Enron at Dabhol in Maharashtra, a German consortium interested in a 1500 MW mining cum power project at Neyveli and the Hinduja project at Visakhapatnam. Disappointingly, none of these materialised then. With the simultaneous stoppage of public sector investments, power sector expansion suffered. Kumar pointed to only five out of the 14 MoUs on power materialising.
“These were based on petroleum feedstock and modest capacities. At the time of conception naphtha was priced at Rs 3000 per kl, but shot up to Rs 78,000. The cost of production and hence the purchases rose in tandem. The mismatch was so drastic that at one time the state was facing a deficit of 4500 MW, which was 50 per cent of installed capacity,” said Kumar.
The needed corrections in policies were made to make investments viable. But this took over a decade and precious time was lost. In three successive five-year plans additions to generation capacity were less than half the target set.
An opportunity missed
Kumar felt that it was a mistake to have missed the chance to set up an LNG terminal at Chennai along with a gas grid proposed by the Dakshin Bharat Energy Consortium led by the Birlas. The promoters felt that the project will be viable only if a 1500 MW power plant was a part of it. The project envisaged supply of gas to the power plant and piped gas to the city offered a fixed price of $ 3.75 per 1000 BTU for 25 years. At that point, the price was considered high and the project didn’t take off.
“If only we had clinched it, power could be produced at just Rs 1.50 per KWH. In hindsight it appeared a colossal mistake,” said Kumar.
Kumar pointed to coal prices shooting up when several projects including UMPP, factoring a low cost of generation assuming coal prices to be constant.
Today power prices are determined in two parts – fixed cost on investments made and variable cost on the cost of fuel. Overall costs have been on the rise. But state-run power utilities face the constraint of low tariffs and the difficulty to increase these. Even the three per cent return on investment mandated for electricity boards could not be earned. The Electricity Regulation Act of 1998 and the Electricity Act of 2003 have been trying for corrections like separating generation, transmission and distribution and open access.
Today the law permits the distributor to purchase directly from the generator and for cross-subsidisation. The regulation commission fixes the tariff.
Kumar pointed to the additions to capacity in Tamil Nadu that have taken place in the last couple of years that have substantially improved supplies and averted power cuts. An average daily consumption of around 280 million units had been met through the difficult summer months. Still, with economic development, demand is increasing at the rate of 10 per cent per annum. The impressive plans of addition would help manage the demand-supply situation effectively, felt Kumar.