As envisaged by the Power Ministry 15000 MW of Generation capacity is expected to be added to the grid through the Merchant Power Plant route. This is a bold new concept to channelise private investment in to the sector.
The Indian Power sector needs lots of reforms and each step has its own detractors. 40 to 50 % of the Power injected in to the system is not billed in some states and hence substantial costs are not recovered In a such a scenario, the utilities obviously manage load peaks by severe load shedding, which is accepted as a norm. The industries are therefore forced to have their own stand by generators which are in some cases operated as base stations. This brings a very high cost to the industries. So over the years major power consumers have been forced to invest in Captive Power plants that is base stations planned on coal instead of relying on grid power.
Under these circumstances, one can definitely expect good response to the scheme for setting up of Merchant Power Plants. A lot remains to be done to make this a success. As the author has correctly pointed out Transmission network needs to be strengthened and more private or public investment made in this segment. Existing large Private Power utilities like Tata Power and Reliance Energy will definitely utilise this opportunity as the tariff of the power generated through the Merchant Plant route is not regulated. Both the pit head plant with the Coal Block allocated to it and the plant with the coal linkages will be keenly contested as the industry today is generating cash surpluses to have its power requirements met through its own investment.
3 comments:
OPEN ACCESS TO TRANSMISSION SYSTEM
Admittedly, Private Sector will have large role in capacity addition. But there are many risks that they encounter, the foremost of them being evacuation of the generation.
Electricity Act 2003 mandates that the CTU shall provide non-discriminatory open access to its transmission system for use by any licensee or generating company on payment of the transmission charges.
At present the Power Grid Corporation of India has been designated by the concerned authorities (under the Act) as the Central Transmission Unit (CTU)
When Private Power Generators approach the CTU for providing them with Open Access to the transmission system for evacuation of power from their proposed power plants, the former is asking the generator to identify the Licensee and the point of drawal.
For the Private Generator obtaining commitment of open access of transmission facility is a pre-requisite for Financial Closure. This is a requirement that forms the corner stone and forms an activity the kick starts the project schedule. Identification of power purchasers as also the points of drawal of power cannot be finalised at that stage for the reasons given below:
The Government of India had issued on 6th Jan., 2006 Tariff Policy that states "All future requirement of power should be procured competitively by distribution licensees"
This Order "forbids" the distribution licensees from even considering entertaining any proposal from private generators about extending a commitment to purchase power from such generators.
This has become a "Catch 22" type situation.
The Authorities who are keen to see that Private Generators to come forward to supplement the efforts of the Government agencies to add to the installed generating capacity during the Eleventh Plan (2007-2012) should look into this anomaly and correct the same.
PGCIL is a commercial entity and is concerned on the financial viability of their investments and would not be able to take risks while investing.
It should be the responsibility of the Planning Commission of India to provide for necessary and adequate funds as part of the Plan funding to cater to the augmentation of transmission elements to meet the Power Evacuation requirements of the Private Generators. The entire funding can be routed through Central Electricity Authority and the implementation agency could be PGCIL.
MPPs will definitely boost the power infrastructure in India. As far as long term PPA goes, we cant help it but then looking at the demand supply mismatch and the price of power in short term, it would be viable if the developer wants to build their project as MPPs.Though uncertainty and risks are always there, someone with fat pockets must come forward at least to tap the power exchange where the power is traded at a premium.
No doubt we are moving towards a market based platform for power sector where in the tariff will be determined by the market forces and not by the regulator.It may help for the MPP developers.
The big question is govt's support to such initiative,Should MPP be allowed to have mega power status and enjoy the tax benefits and holidays??
What is the developers and the investors perspective to such an idea?? How the fuel linkage to be awarded?? and overall transmission issues such as open access.
We have to at this instant just wait and watch how the scenario develops.
Currently, there is a huge demand supply mismatch, which can be utilized by generators for profit making through MPP.
Merchant power although a provide a premium, but still business risk is still associated without forming a long term PPA that is to say peaking power and energy trading is still at a concept level.
As lot of SEB's are going for load shedding instead of purchasing power at premium and sometimes even underdrawing to utilize the UI benefit.
If it is made compulsory for SEB's to purchase power if available (maybe with a cap price), then it will create a whole new dimension for investments in the power sector
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