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ElectricitygridevolutioninIndia

Ascopingstudyonthetechnicalandplanning
needstosupporttheNationalActionPlan

September2011

Preparedfor:
RegulatoryAssistanceProject

Contributingauthors:PriyaSreedharan,PhD,PE,RebeccaGhanadan,PhD,LakshmiAlagappan,
SnullerPrice,ArneOlson,RanjitBharvirkar(ItronConsultingandAnalysis)

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ElectricitygridevolutioninIndia

Ascopingstudyonthetechnicalandplanning
needstosupporttheNationalActionPlan

September2011











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2011 EnergyandEnvironmentalEconomics,Inc iiPage
Acknowledgements

This work was supported by funding from the Regulatory Assistance Project (RAP). The
authors especially thank Bob Lieberman, of RAP, for his guidance and suggestions
throughouttheproject.WealsothankthefollowingmembersoftheClimateWorksPower
Best Practice Network: Deepak Gupta and Chinmaya Acharya of the Shakti Sustainable
Energy Foundation, Gavin Purchas of Climate Works Foundation, Cathie Murray of RAP,
AmolPhadkeandJayantSathayeofLawrenceBerkeleyNationalLaboratory.
Wethankthefollowingindividualsforhelpfulfeedbackprovidedduringthepresentationof
draft results of this work in February 2011: K. Venugopal of the Tamil Nadu Electricity
Regulatory Commission; Ranjit Deshmukh, Ashwin Gambhir, and Vijay Singh of Prayas
EnergyGroup;SubhaRaghavanandRahulTongiaofCenterforStudyofScience,Technology
and Policy (CSTEP); V. Sreenivasan and Dr. Sameer Kulkarni of Tata Consulting Engineers;
HariNatarajanofSELCO;SudhirChellaRajanofIndianInstituteofTechnology,Madras.We
also thank Chris Greacen of Palang Thai for offgrid perspectives. Particular thanks goes to
Ranjit Deshmukh of Prayas Energy Group and Mahesh Patankar for detailed comments on
anearlierdraftofthisreport.
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2011 EnergyandEnvironmentalEconomics,Inc iiiPage iii
Executivesummary
Thepolicycontext
The Indian government has announced aggressive demandside management (DSM) and
renewableenergygoalsinthecontextofitsNationalActionPlanonClimateChange.Under
the National Action Plan, comprised of eight missions, the energy goals include a National
Solar Mission (NSM) to provide 20,000 MW of solar installations by 2022 and a National
MissiononEnhancedEnergyEfficiencytoreduce10,000MWofenergyuseby2020.Indias
power sector goals also include addressing supply shortages, affordability, electrification
andaccess,andeconomicefficiency.
The question of how the power grid should develop to support such aggressive renewable
goalsisnotclear.ThereareanumberofquestionstobeansweredifIndiaspowergridisto
evolve in a costeffective and reliable way to support renewables. What are the needs for
large scale infrastructure vs. modern grid technologies (so called smart grid technologies)?
How should grid operations evolve to support increasing quantities of variable and
nondispatchable renewable resources? Is central renewables development more cost
effective than distributed generation? What fraction of cost does transmission comprise?
Whatdodifferentrenewabledevelopmentoptionsrankwhenbarrierstotransmissionand
environmental externalities considered? Do economics and environmental criteria favour
gridextensionoverminigrids?
Focusing on solar energy, this paper conceptualizes renewable development options along
the lines of central, distributed gridconnected and offgrid hybrid/renewable minigrids.
Each grid development option (Figure ES1) entails a unique set of costs, barriers, and
infrastructureneeds.
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2011 EnergyandEnvironmentalEconomics,Inc ivPage iv
FigureES1.GriddevelopmentoptionsforsolarenergyintheIndiancontext

Although the NSM lays out a strategy in terms of quantities along these development
options,itdoesnotspecifyindetailthesechallenges.
Theneedforplanning
Evaluatingpolicieswithmetrics
This paper argues that as India strives to reach the aggressive goals in the National Action
Plan for Climate Change, while achieving broad power sector goals of reliability,
affordability, and access, a systematic approach that evaluates resource needs supply,
demand and infrastructure needs in an integrated fashion is essential. Ideally, policy
makersshoulddeterminethemetricsofinterestbeforesettingoranalyzingtheimpactsof
policies. The metrics become the measurement instrument against which policy goals are
evaluated.Metricshelpfocusthebasicgoalofthepolicyandprovideaquantitativebasisby
whichtoevaluatedifferentpolicies.
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2011 EnergyandEnvironmentalEconomics,Inc vPage v
Most policy goals and metrics relevant to the power sector can be placed in economic,
reliability and environmental categories. Metrics provide an objective basis for evaluating
success at achieving goals. Example metrics include jobs creation (economic), greenhouse
gas(GHG)emissionsreductions(environmental),anddemandmet(reliability).
The use of metrics and planning to guide policy setting can prevent poor policy outcomes.
There are many examples of poor planning throughout the world, such as with the
WashingtonPublicPowerSupplySystem(WPPSS)nuclearenergydevelopmentinthePacific
Northwest of the United States. In this case, four of the five commenced nuclear plants
wereabandonedduetosubstantialloadlosscausedbyshiftsintheregionseconomicbase
awayfromenergyintensiveresourceindustriesaswellasthescalingupofenergyefficiency
programs. The WPPSS bond default remains the largest municipal bond default in US
historyandconsumersarestillpayingforthestrandedcosts.Abetterplanningprocessmay
have mitigated these costly outcomes. In another example from the west, a cumbersome
transmission planning process has resulted in California being behind schedule in making
progress towards its aggressive renewable energy targets. Coordination between
generationandtransmissionplanningisalessontobelearnedfromthisexample.
Generalplanningframework
Figure ES2 illustrates a general planning framework. This framework can be used to
addressavarietyofquestionsoverarangeofscales.Theframeworkbeginswithaforecast
ofdemand.DSMactstoreducethisdemand,resultinginnetelectricitygenerationneeds
1
.
Existing generation and transmission are evaluated against future total generation needs.
Grid operations are represented in generation dispatch, transmission and distribution
losses,andcongestion.Thisframeworkisintegrativeandcanbeexpandedinanyonearea

1
Thereremainssignificantopportunitytodoenergyefficiency&cleanenergypolicymakingevenatthecurrent
(unrationalized)pricinglevels.Indiahasbeguntomakesignificanteffortsinthisarea,suchaspromotingDSMata
nationalscale(throughperformancebasedenergyefficiencystandards)andthroughstatepilotsnamelyin
Maharashtra.

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2011 EnergyandEnvironmentalEconomics,Inc viPage vi
toanswerseveralpolicyquestions,suchastheneedoflongtermtransmissioninvestments
based on their ability to support future electricity demand, renewable development,
congestion, and balancing. The impact of a proposed policy is evaluated against an
appropriatesetofmetrics,suchastheimpactonratesandGHGemissions.
FigureES2.Overallgridplanningframework

Planning frameworks helps reveals gaps and needs: are the biggest barriers integration,
transmission, or price? Are common assumptions accurate? Is intermittency a major
problem? Will grid parity drive adoption, or will other barriers need to be addressed? Is
transmissionthemajorcostcomponent?
This paper describes a grid planning framework that can help answer these questions. The
frameworkrequirespolicymakerstodeterminewhichsetofgoalsarebeingprioritizedand
themetricsthatwillbeusedtoevaluatethem.
There are numerous policy options to choose from and these need to be optimized over
boththeshortandlongtermandmustsatisfycriteriasuchassocialequity.Policymakers
needtoconsiderthebarrierstodevelopment,whichmaybeeconomicandnoneconomic,
andsetappropriatepoliciesthataddressthesebarriers.
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2011 EnergyandEnvironmentalEconomics,Inc viiPage vii
Planningforrenewables
Renewable energy development faces a more complex landscape than conventional
development because of the geographic and temporal constraints imposed by renewables
(i.e.,naturedictateswhenandwheretheREresourceisavailable).Developinganoptimal
renewableenergysystemalongthelinesofwhereresourcesarelocatedandhowtheyare
integratedintothegridmustbedonesystematicallytoensuretheiroptimaluse.
Geographic constraints on RE can make planning across multiple jurisdictions (e.g., across
agencies, political boundaries) far more challenging as compared with conventional
generation. Citing of transmission lines and renewable resources and land use issues,
optimizing grid operations regionally, addressing environmental regulations and barriers,
addressing central, state and local regulations require a more integrated form of
governance. Figure ES 3 illustrates the complexity of governance in the Indian power
sector. There are many central level entities with related and overlapping interests.
Planning frameworks and a planning process can serve to create a vehicle for interagency
interactionincaseswherethereisnoprecedence(ashasbeenthecaseincitingrenewables
andtransmissionlinesinCalifornia)byrevealinginstitutionalbarriers.
FigureES3.PoliticaleconomyoftheIndianpowersector

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2011 EnergyandEnvironmentalEconomics,Inc viiiPage viii
An integrated and systemwide planning framework that considers state and central
governanceinteractions,utilitypolicy,environmentalregulations,andsocialjusticeissuesis
essential if India is to develop renewables in ways that reach strong reliability, economic
andenvironmentalcriteria.
Illustrativeexample
The analytical framework is illustrated by examining the impacts of the National Solar
Mission. We illustrate how the economic, reliability, and environmental impacts for grid
connected and offgrid solar options can be determined. Figure ES4 describes the
frameworkasappliedtotheillustrativeexample.
FigureES4.AFrameworkforevaluatingrenewableenergypolicyplanning

TheanalyticalcomponentoftheframeworktheNetImpactCalculatordeterminesthe
incremental impact (environmental, reliability, and economic) relative to different
baselines. For example, what are the GHG emissions from solar power relative to a
conventionalenergyoption?WhataretheeconomicimpactsofsolarPVifsupplyshortages
would be encountered without the solar PV? The comparison case represents what would
have happened without solar PV and is termed a baseline scenario. This approach of
evaluatingtheincrementalimpactsofapolicyhasbenefits.
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2011 EnergyandEnvironmentalEconomics,Inc ixPage ix
It allows for the comparison among different renewable energy policy options in a
systematicfashione.g.,thecostsofcentralizedsolarPVvs.distributedsolarPV
Itevaluatesconventionalandrenewableenergyonacommonplatform,addressing
the common criticism that the benefits of renewables should be weighed against
negativeeffectsofconventionalenergy.Theframeworkcanbeappliedtoevaluate
many impacts, such as net emissions of particulate matter (PM) or net water
consumptionbetweensolarPVandconventionalfuel.
Each grid development option is evaluated against three representative baseline cases.
These baseline scenarios represent a sensitivity analysis and consider factors such as the
conventional fuel that the solar displaces. Each renewable option is developed in terms of
generation, infrastructure and integration needs. Figure ES5 illustrates the type of results
that evolve from the analytical portion of the framework analysis: the incremental
economiccostofcomparinggridconnectedsolarwithoffgridsolar.Similarfigurescanbe
developed for reliability and environmental impacts. While these examples are relevant to
the Indian context, the assumptions are highly variable and will be specific to regional and
local conditions. However, the illustrative analysis motivates useful discussion. We also
emphasize that direct comparison of offgrid with grid connected cases should be viewed
differentlyintermsofthepolicyinterpretations.Accesstoelectricityisasocialjusticeand
economic development issue that should be addressed regardless of the economics of
providingelectricity.
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FigureES5.Illustrativecalculation:Incrementalcostofsolardevelopmentoption

Figure ES5 compares the incremental costs of developing solar PV in a gridconnected


context with an offgrid context. In this example, the costs of solar PV in the offgrid
context,assumingadieselhybridminigrid(ratherthanasolarlightingsystem)suggestcost
competitivenesswithagridconnectedoptionifconventionalfuelisdisplaced.
The analysis can be expanded along multiple dimensions, for example, how does
distributed/ decentralized grid connected solar compare with centralized gridconnected
solar?FigureES6comparestheincrementalcostsofthesetwocases.
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FigureES6.Illustrativecalculation:costcomparisonbetweendistributedandcentralizedsolar

In this example, the distributed generation option is generally more expensive than the
central option. There are tradeoffs between both options, for example, distributed
generation will require less transmission investment and fewer technical line losses,
however, centralized renewable development will benefit from economies of scale. In this
example,thecostsavingsfromreducedtransmissionareoutweighedbyincreasingsolarPV
installationcostsduetosmallersysteminstallations.
Given the uncertainty and variability of each of the assumptions, the analysis should be
viewedasillustrativeforinitiatingdiscussionalongthefollowinglines.
Are centralized renewable grid development more costeffective than distributed
developmentoptions?
What fraction of the total cost does infrastructure, such as transmission, storage,
distributionlinesconstitute?
Dotheeconomicsfavourgridextensionoveroffgridsolutions?
Whatarethenonsolar,costeffectiveoptions?
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What are the rankings if noneconomic factors, such as barriers to transmission
sitingandenvironmentalexternalitiesareconsidered?
Akeyaspectoftheframeworkapproachisthegovernanceelement.Thedevelopmentofan
objective comparison of policy options can motivate a productive discussion among
appropriate governmental and public stakeholders. The use of objective, transparent and
publicly available analytical tools to motivate stakeholder processes in renewable and
demandsideenergyresourceshasbeenimplementedinCalifornia,forexample.
Evolvingtheframework
Theframeworkandillustrativeanalysisarepreliminaryandcanbeenhancedandexpanded
inseveraldirectionstobemademorerelevanttowardsinformingIndianpolicy.
Regional and state level specific analysis, based on regional environmental,
economic,andresourceavailabilityconditions
Evaluate additional renewables, not just solar; expand the tool to include demand
sideresources,andevaluationbetweenthem
Tool inversion to identify optimal policy scenarios. Currently, the tool is structured
to evaluate the impacts of policies, rather than determine policies that achieve
specifiedimpacts.Anexamplewouldbetosetagoalofrenewablespenetrationand
determinethemostcosteffectiveresourcemixanddevelopmentoptions
Uncertaintyanalysistoexploresensitivitiesofkeydrivers
The framework can be tailored to address resource planning on a variety of time and
geographic scales. We summarize three types of studies that could evolve from the grid
planningframework,eachrepresentingauniquesetofpolicyobjectivesandstakeholder.
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Regional/localizedstudyofcleanenergyopportunities
A natural extension of the grid planning framework and illustrative example is to explore
opportunitiesonaregionalscale,suchasatthestate,orlocallevel.Suchananalysiscould
exploreanumberoffacetssuchas:
The optimal mix of renewables, along with transmission and load balancing needs,
tomeetastatelevelRPSgoal.
The value of demand side technologies in meeting demand, offsetting supply side
investments,andintegratingrenewables.
An analysis of the value of various smart grid technologies across generation,
transmission and distribution and behind the meter. This type of study would
provide a framework and tools for commissions and utilities to select from among
themanysmartgridtechnologies.
Exploringoffgridopportunities
The governmental/policy needs, infrastructure and net impacts specific to offgrid
developmentcanbeexploredbybuildingonthebasicanalyticalframeworkproposed.
Identification of costeffective renewables options for rural areas grid extension
vs. minigrid vs. standalone household options. The type of outcome could be the
developmentofoptimalgeographicarrangementofthesethreeoptions.
Studies to facilitate development of policy measures, such as guidelines for tariff
settingandstandards,designedtoincreaseaccesstoelectricityandprovideastable
investmentenvironmentinisolatedareasinthefaceofanexpandingnationalgrid.
One key issue is addressing clearly how minigrids can be accommodated into the
nationalgridwhenitarrives.
The likely stakeholders for this analysis are rural development authorities and nonprofits.
The purpose would be to help inform highlevel policy and technology design strategies,
fromwhichprojectleveldesigncouldbeconducted.
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2011 EnergyandEnvironmentalEconomics,Inc xivPage xiv
LongtermGHGemissionsmitigationopportunitiesforIndia
The Government of India (GoI) has identified environmental security, including climate
change, as important considerationsfor power sector development. An integrated analysis
of GHG emissions reduction opportunities in the power sector and other sectors would
provide the GoI with an objective, analytical basis for making longterm investments and
policy choices. This analysis would also consider nonGHG goals, such as addressing theft,
affordability, economic efficiency, and rural electrification. This analysis will situate
strategies to reduce GHG emissions relative to other electricity goals, identifying possible
synergies, and the timelines to achieve these goals. Such studies have been conducted for
California,China,andEurope.
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TableofContents

Executivesummary.......................................................................................................................iii
Thepolicycontext.............................................................................................................................iii
Theneedforplanning.......................................................................................................................iv
Illustrativeexample..........................................................................................................................viii
Evolvingtheframework....................................................................................................................xii
1. Introduction...........................................................................................................................1
1.1. Indianpolicycontext..............................................................................................................1
1.2. Planningapproaches&frameworks......................................................................................2
1.3. Planningforrenewableenergyintegration...........................................................................4
2. TheIndiangrid.......................................................................................................................6
2.1. Basicsofapowergrid.............................................................................................................6
2.1.1. Defininggeneration,transmission,distribution............................................................6
2.1.2. Schedulingandoperations.............................................................................................8
2.1.3. Smartgridandgridmodernization..............................................................................10
2.2. Governanceofthepowersector..........................................................................................12
2.3. GridplanningactivitiesinIndia............................................................................................19
2.4. Resourcemixandrenewables..............................................................................................25
3. Policyintoplanningframeworks..........................................................................................29
3.1. Theneedforplanning..........................................................................................................29
3.1.1. Usingmetricsinenergyplanning.................................................................................30
3.1.2. Proposedframework...................................................................................................32
3.1.3. Dataneeds:loadandresourcetables..........................................................................33
3.1.4. Cautionarynote:costlymistakesinNorthAmerica....................................................34
3.1.5. Anintegratedframeworkapproach............................................................................36
3.1.6. Indiasgoalsandobjective...........................................................................................37
3.1.7. EvaluatingIndianpolicygoals......................................................................................39
3.2. Sampleprojectsusingframeworktools...............................................................................40
4. Largescalerenewableenergydevelopment.........................................................................44
4.1. Illustrativeexample:evaluatingsolardevelopmentoptions...............................................44
4.1.1. Netimpactcalculator...................................................................................................47
4.1.2. Exampleresults............................................................................................................52
4.1.3. Infrastructure&politicaleconomyassessment..........................................................58
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4.2. Discussionofkeyrenewablesissues....................................................................................60
4.2.1. Transmissioncostsmustbeputinperspective..........................................................61
4.2.2. Intermittencyisnottheprincipleissue.......................................................................61
4.2.3. Priceparityisnottheonlybarriertorenewablesadoption........................................64
4.2.4. Crossscaleinstitutionalinteractionwillbeessential..................................................65
4.2.5. Renewablesrevealpoliticalchoices&tradeoffs........................................................65
4.2.6. Frameworktoolscaninitiatecrossinstitutionalefforts..............................................66
4.2.7. Smartgridinperspective.............................................................................................66
5. Discussion&futuredirections..............................................................................................69
5.1. Keyinsights...........................................................................................................................69
5.2. Futuredirections..................................................................................................................70
5.2.1. Developingthegridplanningframework....................................................................70
5.2.2. Directionsforfutureprojects......................................................................................71
Bibliography.................................................................................................................................75
AppendixA.IndiasNationalSolarMission..................................................................................78
AppendixB.Illustrativeexamplesupplementaldetails................................................................79
Assumptions.....................................................................................................................................79
Baselinedescriptions........................................................................................................................80
Results..............................................................................................................................................81
AppendixC.E3projectsummaries...............................................................................................84
ChinaGHGandEnergyEfficiencyCalculators..................................................................................84
OptimalresourceportfoliosforCalifornias33%RPS......................................................................85
MeetingCaliforniasLongtermGreenhouseGasReductionGoals,A2050PerspectiveintheEnergy
Sector................................................................................................................................................86
NonWiresAlternativeStudyforBonnevillePowerAdministration................................................88
PermanentLoadShiftingstudyinCalifornia....................................................................................89
CAISORevisedTransmissionPlanningProcess.................................................................................92
CPUCLongTermProcurementPlanning..........................................................................................93
WesternElectricityIndustryLeaders(WEIL)analysis.......................................................................94
Phasormeasurementunitanalysis..................................................................................................95
WesternElectricityCoordinatingCouncil(WECC)energyimbalancemarketbenefitstudy...........96
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Glossaryoforganizationsandregulations



AT AvailabilityTariff
CEA CentralElectricityAuthority
CEC CaliforniaEnergyCommission
CERC CentralElectricityRegulatoryCommission
CPUC CaliforniaPublicUtilityCommission
CTU CentralTransmissionUtility
DERC DelhiElectricityRegulatoryCommission
GoI GovernmentofIndia
IEGC IndianElectricityGridCode
IEPR IntegratedEnergyPolicyReport(2006)
MNRE MinistryofNewandRenewableEnergy
MOP MinistryofPower
NREP NationalRuralElectrificationPolicy(2006)
RLDC Regionalloaddespatchcenters
SLDC Stateloaddespatchcenters
STU Statetransmissionutility
TheAct ElectricityPolicyActof2003
TP2006 NationalTariffPolicyof2006
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Glossaryoftechnicalterms



AMI AdvancedMeteringInfrastructure
CE Costeffectiveness
CF Capacityfactor
CT Combustionturbine
DR DemandResponse
DSM Demandsidemanagement
EE Energyefficiency
HVDC Highvoltagedirectcurrent
FIT Feedintariff
LDC Loaddurationcurve
PLS Permanentloadshifting
PMU PhasorMeasurementUnits
RE Renewableenergy
REC Renewableenergycredit
RPS Renewableportfoliostandard
RPO Renewablepurchaseobligation
TES Thermalenergystorage
TOU Timeofuse
TRC Totalresourcecosttest
UI UnscheduledInterchange



2011 EnergyandEnvironmentalEconomics,Inc 1Page
1. Introduction
1.1. Indianpolicycontext
TheGovernmentofIndia(GoI)continuesitseffortstoeliminatetheexistingcripplingpower
shortages across the country and ensure that all citizens have access to reliable power.
Simultaneously, the Indian government has announced aggressive demandside
management (DSM) and renewable energy goals in the context of its National Action Plan
on Climate Change. Under the National Action Plan, comprised of eight missions, the
energy goals include a National Solar Mission (NSM) to provide 20,000 MW of solar
installations by 2020 and a National Mission on Enhanced Energy Efficiency to reduce
10,000MWofenergyuseby2020
An important component that is relevant to achieving both the energy efficiency (EE) and
renewableenergy(RE)goalsisthepowergrid.Theevolutionofthegridwilldependonhow
these goals are implemented. Centralized renewable generation will require different
infrastructureandpolicyeffortsascomparedwithdistributedgenerationdevelopment.The
integration of largescale renewable energy may pose unique challenges for ensuring
reliable and efficient operation of the grid. A variety of technological and economic levers
may improve overall grid operations and facilitate the integration of increasing levels of
variablerenewableenergy.
There is limited knowledge about the potentially critical role of the grid in achieving and
going beyond the DSM and RE targets announced by the Indian government in the most
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optimal(orcosteffective)manner.Policymakershavelimitedunderstandingofgridrelated
technologies and their costs and benefits. In many cases, even basic definitions of various
technical terms are under dispute. Policy makers can benefit from frameworks that can to
helptoformallyanalyzedifferentpolicymeasures.
1.2. Planningapproaches&frameworks
Thereareveryfewsystematicandsufficientlysophisticatedplanningframeworksthatallow
policymakerstoevaluatedifferentgriddevelopmentscenariosforachievingtheannounced
targets. This paper proposes an overall electric system planning framework that can be
used to answer a range of questions relevant to Indian policymakers, such as how much
renewable energy to promote, what mix of renewables is most costeffective, and what
transmission investments are needed for power delivery under a variety of electric
generationscenarios.
Figure 1 illustrates an integrated grid planning framework. This framework can be used to
addressavarietyofquestionsoverarangeofscales.Byconvention,gridplanningrefersto
theprocessoftransmissionandgenerationplanning;however,theframeworkcanbeused,
also, to evaluate the role of demandside management (DSM) policies in an energy policy
plan.
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Figure1.Overallgridplanningframework

The framework begins with a forecast of demand. DSM acts to reduce this demand,
resulting in net electricity generation needs
2
. Existing generation and transmission are
evaluated against future total generation needs. Grid operations are represented in
generationdispatch,transmissionanddistributionlosses,andcongestion.
Thisframeworkisintegrativeandcanbeexpandedinanyoneareatoanswerseveralpolicy
questions.Considerthequestionoflongtermtransmissioninvestments.TheIndianpower
grid (both transmission and distribution) is in the process of undergoing both a massive

2
Thereremainssignificantopportunitytodoenergyefficiency&cleanenergypolicymakingevenatthecurrent
(unrationalized)pricinglevels.Indiahasbeguntomakesignificanteffortsinthisarea,suchaspromotingDSMata
nationalscale(throughperformancebasedenergyefficiencystandards)andthroughstatepilotsnamelyin
Maharashtra.

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2011 EnergyandEnvironmentalEconomics,Inc 4Page 4
extension and a substantial upgrade with investments worth many $US billions see for
example the National Transmission Corridor investments planned by POWERGRID. Policy
makers can use the framework to determine how these investments support an efficient
grid. Using the framework, transmission investments could support multiple grid
management objectives: Are these investments needed for meeting future electricity
demand? Will they support future renewable and nonrenewable energy developments?
Using the framework, one could evaluate the transmission lines against how they support
multiple objectives; do they support the delivery of new generation assets? Do they
alleviate congestion? Are they required to reduce technical losses, or simply for basic
maintenance (hence to support reliable operations)? Do they facilitate more efficient
operationbyinterconnectingdifferentbalancingareas?
1.3. Planningforrenewableenergyintegration
The planning framework can be applied towards evaluating pathways for meeting
renewable energy development goals. To be effective, Indias solar policy needs to be
situatedinapolicydecisionmakingframeworkwhereindividualrenewableenergyoptions
can be evaluated alongside other options. Weighing tradeoffs among specific goals, such
as CO2 abatement, system reliability, energy independence / domestic production, cost
minimization,andaccessinenergyplanningchoicescanbemademoreaccessiblethrough
the modelingplanning framework we presented in Figure 1, which integrates supply and
demand,andconsidersmultipleoptionsandtheircosts.
Increased levels of renewable generation may pose new planning and operational
challenges. One can argue for increased control & planning if additional nondispatchable
generation is added to the resource mix. However, the Indian grid, as all grids, is already
dealingwithvariabilityindemand,whichresultsinanetloadvariability.Renewableenergy
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2011 EnergyandEnvironmentalEconomics,Inc 5Page 5
canincreasetheoverallvariabilitythatthebalancingagenciesmustcontendwith.Towhat
extent do markets need to be modified to address this incremental variability? Recent
changes to the Indian grid code, introduction of threepart availability tariff and
unscheduled interchange mechanism, and establishment of state, regional and national
balancing authorities provide a solid foundation for working towards managing increased
operationalcomplexity.
A key message of this paper is that an integrated analysis is necessary for evaluating and
making sound power sector policy decisions. This is especially true for the Indian power
sector,whichisuniquelycomplex.
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2. TheIndiangrid
2.1. Basicsofapowergrid
ThischapterlaysoutbasicaspectsoftheIndianpowergridfromatechnicalandeconomic
perspective. Electricity has been a key driver of economic development. By removing the
need for combustion sources at the site for providing basic services (lighting, air
conditioning),electricityprovidesenormousenvironmentalandhealthbenefits.Powergrids
offer the advantage of bringing economies of scale and flexibility in the planning and
operationofgridassets.
2.1.1. Defininggeneration,transmission,distribution
Theelectricgridismadeupofthreecomponents:generation,transmissionanddistribution
facilities. Generators produce electricity, transmission facilities step up the power to high
voltage to be carried by transmission lines to load centers, and distribution facilities step
downthevoltageoftheelectricitytosafelydistributetocustomerstouse.Figure2outlines
thesethreecomponents.
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Figure2.KeyComponentsoftheelectricpowergrid(U.S.Canadapowersystemoutagetask
force,2004).

Generation facilities, which comprise conventional power plants (e.g., natural gas, coal, oil
etc.) and renewable power plants (e.g., wind, solar, geothermal), produce electricity to
serve loads. Indias generation mix is currently thermal dominated with almost 65% of
electricity produced from coal, gas and oilfired facilities. The remaining electricity is
produced from hydro facilities (25%), nuclear facilities (3%) and renewable resource
facilities(7%).
Transmission facilities, which are comprised of substations and highvoltage lines, carry
electricity from generation facilities to load centers. Substations step up thevoltage of the
electricity generated at power plants so it can be transmitted over long distances with
minimal losses. Highvoltage transmission lines carry the electricity to load centers. Indias
largest transmission owner, POWERGRID, owns 79,556 circuit kilometers of transmission
lineand132substationswhicharefoundinoneofthecountrysfivetransmissionregions:
Northernregion,NorthEasternregion,Easternregion,WesternregionandSouthernregion
(POWERGRID). Each of these regions houses a Regional Load Despatch [sic: dispatch]
Center (RLDC) that coordinates the use of the transmission system within a region. Each
state houses a State Load Despatch Center (SLDC) that coordinates transmission usage
within the state and reports this data to its overseeing RLDC. This means multiple SLDCs
report to a single RLDC (Pandey, 2007). Four of the five regions, excluding the southern
ElectricitygridevolutioninIndia

2011 EnergyandEnvironmentalEconomics,Inc 8Page 8
region, operate in a synchronous mode, which implies that power can flow seamlessly
across these regions to maintain load and generation balance. The southern region is
asynchronouslyinterconnectedwiththerestoftheIndiagrid.
Figure3.FiveregionalgridsinIndia(Pandey,2007)

Distribution facilities in India serve close to 144 million customers. These facilities include
step down substations and lines to carry the electricity at lower voltage to electricity
consumers.
2.1.2. Schedulingandoperations
To schedule usage of transmission facilities, generators typically sign longterm (12+ year),
mediumterm(3monthsto3years)orshortterm(monthlybasiswitha4monthmaximum)
open access contracts. The long term open access contracts provide the generator firm
access to the transmission capacity requested as long as the grid is running reliably. Short
termopenaccesscontractsarebasedonhowmuchtransmissioncapacityisleftoverafter
longterm contracts and mediumterm contracts are accounted for. Shortterm contracts
are the first to be curtailed in the event of transmission congestion, followed by medium
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term, then longterm open access contracts. Accordingly, longterm open access contracts
pay higher rates for transmission usage, followed by mediumterm and then shortterm
openaccessusers(Kumar,2009).
Once open access contracts are obtained, scheduling of transmission capacity occurs on a
dayaheadbasisandiscoordinatedbytheSLDCs.Eachdayisbrokeninto96timeblocksof
15 minutes and the actual energy interchanges for every 15 minute block are recorded to
calculate the injection of generation and offtakes by state utilities (Pandey, 2007). The
actualvaluesarethencomparedtothescheduledvaluestodeterminethedeviations.Real
timedeviationsarepricedattheUnscheduledInterchangerate(UIrate)whichisdescribed
elsewhere.
TheSLDCsandRLDCsalsooperatethetransmissiongrid;thismeanstheirgridoperatorsare
monitoring the transmission system in realtime and respond to system contingencies
throughvariousoperatingprotocols.Thegridisoperatedatafrequencyof50.0Hz,withthe
aimofmaintainingfrequencybetween49.0and50.5Hz,anddeliveryvoltageof220240V.
This operating frequency and voltage is consistent with most regions, except for North
America, which operates at a frequency of 60 Hz and 100120 V. The Indian grid achieves
maintenance of frequency within this range, in part, through generation and power draw
tariffs. When the system conditions deviate outside of this range, generators and
beneficiaries (entities extracting power from the grid) are financially incented to change
theiroutputorextractiontopromotefrequencyrestoration.Thebalancingstructureinthe
Indiangrid,whichevolvedfromtheElectricityActof2003(describedlater),ismodeledafter
the U.K. system, in which the National Grid, a high voltage transmission network that
connectsgeneratorsandsubstationstoprovidepowerthroughouttheregion.
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2.1.3. Smartgridandgridmodernization
Indian policy makers and utilities alike are interested in the potential advantages that so
called smart grid technologies bring to the power sector. Smart grid technologies are best
thought of as collection of devices (sensors, meters), communications infrastructure, and
the data management systems that support the information. Collectively, these facilitate
twoway communications and control across the power grid, from generation to
consumption and vice versa. Improved monitoring, automation and control in the power
grid may bring improved reliability and operations at the distribution and transmission
levels, and potentiallyenable greaterpenetrations of renewable energy. Improved energy
information to end use customers could enhance energy efficiency programs. The smart
grid infrastructure itself does not cause clean energy, but if used in a targeted way, could
facilitatedeploymentofcleanenergy.
There is a range of smart grid technologies across the power grid, as documented
extensivelyinaCaliforniaEnergyCommissionreport(CEC,2008).Thesuiteoftechnologies
isvast,rangingfromsmartmetersattheconsumerlevel,tooutagemanagementsystemsat
thedistributionsubstations,tophasormeasurementunits(PMUs)intransmission.Figure4
illustrates different smart grid technologies across the grid. As the benefits and value of
each are unique, it is hard to talk about smart grid as a single concept. Smart meters
couldhelpwithautomatedbillingandfacilitatedynamicortimeofusepricing.IntheIndian
context, smart meters could potentially help to monitor losses (for example, by detecting
abnormalities in usage patterns). Outage management systems, which involve automated
fault detection and diagnostics at substations, could help to prevent outages by rerouting
power. PMUs monitor power flows in the transmission system and could be used to
improvepowerdelivery.
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Figure4.Smartgridtechnologiesacrossthegrid(CEC,2008)

Recent funding of smart grid projects in the U.S., through the American Recovery and
ReinvestmentAct(ARRA),werelargelyfocusedonsmartmeterdeployments.Roughly90%
ofthefundingwenttowardssmartmeterdeployments,eitherthemetersthemselvesorthe
communicationsystemstosupportthemeters.Inmanycases,thesedeploymentswerenot
coupled with inhome energy displays or other peripherals that could help to actualize
energy savings (Friedman and Sreedharan, 2010). In some cases, smart grid investments
upstream of the consumer may be more costeffective, because of reliability benefits,
compared to smart meter investments. According to an E3 analysis of the value of PMUs,
the reliability benefits render a payback of less than 3 years. (Appendix C, phasor
measurementunitproject.)
ThereisagrowinginterestandinvestmentinsmartgridtechnologiesinIndiaasevidenced
by a Ministry of Power commissioned study (Center for Study of Science, Technology and
Policy,CSTEP,andInfosys,2008),andtheestablishmentofanIndianinterministerialSmart
Grid Taskforce and a U.S.India government bilateral working group on smart grid. Indian
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utilities have taken interest. The North Delhi Power Limited (NDPL), for example, has
invested in Outage Management Systems, Automated Meter Infrastructure, and provides
online billing to customers. The Bangalore Electricity Supply Company (BESCOM) has plans
to reduce the average customer outage rate of 86 hours/year with large intervals by
80% and to no longer than 3 minute durations. The state of Tamil Nadu has implemented
metering at the distribution substation level to help identify losses of both technical and
commercial nature (Sreenivasan, V. and Kulkarni, S., 2011). Its possible that smart grid
investments in outage management systems could reduce the duration and frequency of
outages(Balijelpallietal.,2010).
Regardless of the type of smart grid technology being investigated, the value of that
investmenttotheoveralloperationsandbenefitofthepowergridcouldbeevaluatedusing
the grid management and planning framework we propose. This approach could help to
determine where and how smart grid investments bring grid benefits and to what extent
theyshouldbeprioritizedbypolicymakers.
2.2. Governanceofthepowersector
ItisimportanttounderstandthepoliticaleconomythataffectstheIndianpowersector,for
general development of the grid and even more so for the development of large scale
renewables. The political economy of the Indian power sector is characterized by several
stateandcentrallevelentitieswithrelatedandoverlappingjurisdictions.Becausethereare
multiple agencies that influence the licensing, financing, operation and construction of
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resources, the planning process is complex. Effective coordination among agencies is even
moreimportantinthecaseofcleanenergydevelopment.
We describe governance of the Indian power sector in more detail.
3
The Electricity Act of
2003 influences governance in the power sector with several implications for grid
development, management, and operations. The responsibilities of setting standards and
tariffsforinterstategenerationandtransmissionareatthecentrallevel(CentralElectricity
Regulatory Commission), while instate generation and transmission are set at the state
level (state electricity regulatory commissions). Centraland stategovernment owned
corporations own most of the grid assets. Planning of generation and transmission occur
bothatthecentralandstatelevel.Distributionisregulatedatthestatelevel.Ownershipof
generation and transmission assets are split across the central level (i.e., interstate
transmission, generation by centrally owned corporations) and state level (i.e., instate
transmission, state and private owned generation), with some private ownership and
private/publicpartnerships.
Figure 5 lists the key actors with regulatory, ownership or operational authority across
generation,transmissionanddistribution.

3
Thebackgroundmaterialinthissectionaredrawnfromacombinationofgovernmentalwebsites,personal
communicationwiththeRAPBestPracticesNetworkcolleagues
3
,andpublishedmaterials.
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Figure5.KeyregulatoryandoperationalentitiesinIndianPowerSector

TheMinistryofPower(MOP)andCentralElectricityRegulatoryCommission(CERC)arethe
mostrelevantcentralauthorities.Tariffs,licenses,andoperatingconditionsaresetbythe
CERC. The CERC regulates central generators and interstate transmission. The MOP has
administrativeauthorityoverallnonnuclearcentrallyownedgenerationandPOWERGRID,
the government corporation that owns interstate transmission. POWERGRID conducts
interstatetransmissionplanning,andownstheregionaldispatchcenters,whichcoordinate
generationschedulingwiththeirstatecounterparts.
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Figure 6 provides a more detailed view of all federal agencies that influence energy
activities. Several governmental agencies influence generation, although POWERGRID
mainly influences transmission planning and operations. Every 5 years the government
appointed Planning Commission authors a comprehensive plan for raising living standards
across the country. Energy is addressed within these plans. This process is the closest
activity to a nationwide electricity planning process. The upcoming plan, the 12
th
5year
Plan, is likely to address energy efficiency within a low carbon goals framework (personal
communication,RAPBestPracticesNetwork).
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Figure6.KeycentralgovernmentalentitiesinfluencingdecisionsintheIndianpowersector
1

1Widthofbarindicateswhichamonggeneration,transmissionanddistributionthattheentityinfluences
As indicated by Figures 5 and 6, there is a mix of Indian organizations with overlapping
interests and roles that span central and state governmental levels. Crossagency
coordination and understanding of roles is important to power sector planning in general,
and especially important for development of clean energy resources. As has been
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2011 EnergyandEnvironmentalEconomics,Inc 17Page 17
experiencedintheU.S.,developmentoflargescalerenewablesdevelopmentrequiresnew
modelsofgovernance(forexample,toworkthroughtransmissionlinesiting).
Theplanninganddevelopmentofcleanenergyresourceshouldconsidergovernanceissues.
ConsiderIndiasNationalSolarMission.TheNSMissetbythecentralgovernment,yetstate
policiessuchasstateRenewablePurchaseObligations(RPOs)andFITsdirectlyinfluencethe
progress that can be made towards the NSM. Not all states have set FITs. To encourage
progress towards achieving the NSM goal of 20,000 MW of solar by 2022, the central
government has created a mechanism under which the National Thermal Power
Corporation bundles cheaper coal with expensive solar to mask the high price of solar as
seenbytheutilitiesandencouragethemtopurchasesolar.UndertheNSM,theMinistryof
NewandRenewableEnergyisresponsiblefordeterminingtheguidelinesforgridconnected
solarpowergeneration.(Incontrast,forstatepolicies,theSERCandpossiblyanodalagency
of the MNRE will set guidelines.) The development of offgrid renewables is pursued by
MNRE as well as by the MOP, through rural electrification initiatives (i.e., Rajiv Gandhi
GrameenVidyutikaranYojana).
Table1organizestheagenciesbytask.
Table1.Regulatorystructurebyfunction

Category Function Responsible Body Central/ State/ Crown
Corp
Generation Review power purchase
agreements
CERC or SERC Independent authorities at
central & state levels
Evaluate prudency of
utility investments
CERC or SERC Independent authorities at
central & state levels
Set non-RE tariffs CERC or SERC Independent authorities at
central & state levels
Set REC regulations CERC Independent central
authority
Set FIT for Solar Under NSM, CERC;
SERC
Independent central
authority
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2011 EnergyandEnvironmentalEconomics,Inc 18Page 18
Category Function Responsible Body Central/ State/ Crown
Corp
Set power supply
standards
CERC Independent central
authority
Enforce operating
standards
CERC Independent central
authority
Government Financing IREDA (RE), RECL
(rural), PFC
Centrally owned corps
Issue RPOs SERCs (not all states) Independent state
authority
Implement RPOs Distribution Companies,
open access consumer,
captive power plants
Private or state owned
Transmission Review transmission
expansion plans
POWERGRID Centrally owned corp
Manage interregional
power exchange
National Power System
Desk (current); National
Load Despatch Center
(future)
Central
Schedule dispatch from
central-owned
generators
RLDCs Owned by POWERGRID
Schedule dispatch from
state-owned generators
SLDCs Generally owned by State
Transmission Corporation
(if one exists) or State
Electricity Board
Approve interconnection SERC Independent authority
Sets grid operating
standards
CERC Independent authority
Grid connectivity
standards
CEA Advisor to MOP
Financing RECL (rural projects),
PFC
Centrally owned corps
Distribution Approve tariffs SERC Independent authority
Approve investments SERC Independent authority
Financing RECL (rural projects),
PFC, IREDA (EE)
Centrally owned corps
By statute, a majority of the decisions are made by the SERCs, CERC or POWERGRID. The
SERCsandCERCcollectivelyapprovetariffsacrossgeneration,transmissionanddistribution,
and investments in the grid, with the key distinction that the CERC oversees interstate
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2011 EnergyandEnvironmentalEconomics,Inc 19Page 19
transmissionandcentrallyownedgeneration.TheElectricityActof2003providesthelegal
framework for civic participation, while the SERCs provide the vehicle for consumer
engagementontariffsandutilityinvestments.
2.3. GridplanningactivitiesinIndia
Recent policy efforts through codes and tariffs are moving the Indian power sector in a
direction that promotes balanced grid operations and discipline. For example, the
availability based tariff (ABT) allows generators to recover variable costs separately from
fixed costs. When actual supply deviates from the scheduled supply, generators are
compensated based on grid conditions. The ABT has been credited with improving power
qualityandloadbalancing.
Several recent national level efforts, beginning with the Electricity Act of 2003, through to
therecentlyadoptedNationalActionPlanonClimateChange,willimpactallactivitiesinthe
powersector,includingthegrowthofcleanenergyandpowergrids.Table2listskeyfederal
legislationsinthepowersector.Wesummarizenationallevelactivities.
Table2.Relevantnationallegislation

Legislation Year Key components and significance
Energy Conservation
Act
2001 (full force
2002)
Mandate to set up the Bureau of Energy Efficiency
evolved from this Act; BEE has authority to set energy
efficiency standards
Electricity Act 2003 Called a Watershed in power sector reforms (Prayas,
2010). Provisions for ensuring transparent policies
regarding subsidies, rationalization of electricity tariff;
called for establishment of national, regional and state
dispatch centers for operating grid; specifies composition
& authority of CERC and SERCs. Promotes
environmental policies, such as requiring SERCs to set
RPOs.
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2011 EnergyandEnvironmentalEconomics,Inc 20Page 20
Legislation Year Key components and significance
Energy Conservation
Building Code
2006, 2007,
2009
Implemented by BEE, through support by USAID
sponsored ECO-III project. Sets building codes for
buildings with more than 500 kW load.
Indian Electricity Grid
Code
2006 (updated
2009, 2010)
Specifies responsibilities of RLDCs, NLDC, SLDCs;
operating code for regional grid; connection conditions for
generators; payment for reactive power exchange;
scheduling and dispatch code and procedure;
Per 2010 update, grid frequency requirement is narrowed
to 49.5 to 50.2 Hz; wind power plants are required to
submit day-ahead forecasts; forecast requirement has
been delayed from J an 2011 by one year.
Availability Based
Tariff
2000 Rational tariff structure for power supply from generating
stations on contracting basis. Allows for fixed and variable
costs to be treated separately. Fixed cost payment is
linked to average declared capacity in MW; second
component is based on scheduled generation. Deviations
from schedule are adjusted through payments/penalties
correlated with the system frequency conditions (MOP;
Bhushan, 2005 and 2009)
Unscheduled
Interchange (UI)
Mechanism.
2000 A component of the ABT. Refers to the deviations from
scheduled dispatch of the generators connected to
regional grids and draw by the states. The frequency-
linked-deviation payments (or penalties) are determined
by CERC. (Bhushan, 2005)
National Electricity
Policy
2005 Outcome of Electricity Act, prepared by Indian
Government (Ministry of Power). Sets national level goals
for electricity, which are used to inform the 5-Year
National Electricity Plan. Objectives such as access to all
households in 5 years, demand to be fully met by 2012
are set.
National Tariff Policy 2006 (2009
update)
Provides uniform guidelines to SERCs on fixation of
tariffs. Policy requires SERCs to specify minimum
percentages of RE [this was not an enforceable
regulation; consequently, not all states have RPSs].
Tariff Policy addresses cross-subsidies and encourages
direct subsidies to needy consumers, rather than cross-
subsidies. Transmission pricing has been described as
vague. (CRISiNFAC, 2006)
Nation Action Plan on
Climate Change
2008 National level strategy on mitigation and adaptation to
climate change, issued by the Indian Government.
Consists of eight different missions, including two
missions on energy efficiency and solar energy. According
to the plan, Indias per capita emissions will not exceed
developed country levels, even as India develops.
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2011 EnergyandEnvironmentalEconomics,Inc 21Page 21
Legislation Year Key components and significance
J awaharlal Nehru
National Solar
Mission
2009 Multiple targets, including deploying 22,000 MW of solar
power by 2022 (20,000 MW grid connected, 2000 MW off-
grid), ramp up grid-connected solar to 1100 MW by 2013
(1000 MW of MW scale, 100 MW of rooptop); promote off-
grid solar: 4000 MW by 2017 and 2000 MW by 2022; 20
million rural solar lighting systems by 2022
National Mission on
Enhanced Energy
Efficiency
2009 Multi-pronged approach to reducing energy intensity by
10,000 MW by 2020.
CERC Regulations on
Renewable Energy
Tariff (called
Preferential Tariff)
2010 Sets terms and conditions for receiving feed-in-tariff from
grid connected renewable energy.
Rajiv Gandhi
Grameen
Vidyutikaran Yojana
(RGGVY)
2005 Aims to electrify all villages and habitations; aims to
provide access to electricity to all rural households; aims
to provide electricity connection to Below Poverty Line
(BPL) free of charge.
CERC Regulations on
Renewable Energy
Certificates
2010 Sets terms and conditions for renewable energy
certificates; public comments incorporated into rules.
Generators must choose either the REC or FiT option.
However, generator can end FiT contract and move to
REC if done through mutual agreement, following a 3 year
break. To date, utilities cannot sell RECs if they exceed
their RPO target.

ElectricityActof2003andAvailabilityBasedTariff
Among the policies listed in Table 2, two are foundational to reform in the Indian power
sector: the Electricity Act of 2003 (The Act) and the Availability Based Tariff (ABT). These
policies directly influence the planning and operation of electricity resources. The Act
consolidatespreviousnationallegislationregardingpowersectorreformsintooneframing
documentformovingforward.TheActalsocallsfortheestablishmentofnational,regional
and state balancing authorities/ dispatch centers. These elements, along with the ABT and
IndianGridCodegreatlyimpacttheregionalandstatecoordinationofgridoperations.
The ABT, in brief, is a market mechanism that allows generators to get compensated
separately for fixed and variable costs. These payments are based on average day to day
ElectricitygridevolutioninIndia

2011 EnergyandEnvironmentalEconomics,Inc 22Page 22
declaredavailability(fixed)anddailyscheduledavailability(variable).Athirdcomponentof
theABTistheUnscheduledInterchangeMechanism(UI).TheABTalsoincludesaprovision
to allow generators to receive additional payments for dispatch that exceeds their daily
schedule(andnegativepaymentsforthereverse).TheUIisappliedsimilarlytobeneficiaries
ofelectricity.Forexample,whenastatewithdrawsmorepowerfromtheregionaldispatch
center, compared to its scheduled draw, it must pay more (and vice versa). The payments
through the UI, which are sometimes referred to as the third component of the ABT, are
linkedtothefrequencyofthegrid(Figure7).
Figure7.FrequencylinkedpaymentthroughUnscheduledInterchange
4

TheActalsorequiresthatstatessetRPOgoals,whichislaterrepeatedintheTariffPolicyof
2006. The Act does not specify actual target, but the Tariff Policy recently specified RPO

4
BasedonUnscheduledInterchangerratesinCERCNoticeMarch30,2009.No.L1(1)/2009CERC.
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2011 EnergyandEnvironmentalEconomics,Inc 23Page 23
targets for solar. To date, most of the states have set RPO targets. However, the National
Action Plan for Climate Change targets are not binding on the SERCs, hence making it
challenging to reach a national level targetA grid planning framework can help identify
pathways,infrastructureneeds,institutionalneeds,andgapstoachievinggoalssuchasthe
RPOorNSM.Suchaframeworkcanhelpidentifydisparitiesamongcleanenergypolicies.
For transmission, the planned expansion of the central transmission grid, by POWERGRID,
and forthcoming power exchange among the 5 regional power grids may have important
consequences for providing interconnection to renewable generation, as well as providing
morepowerbalancingflexibility.
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Figure8.IndiasPlannedTransmissionPlans

Figure 8 shows existing and planning expansion of Indias transmission system. From a
planning context, the existing and planned transmission expansions should be linked with
existing and planned supply resources and load centers to meet resource needs in a way
thatmeetssocietalneedsandpolicygoals(suchasprotectingsensitivespaces).
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2.4. Resourcemixandrenewables
Core elements to grid planning include understanding the resource needs, availability and
costs. This section summarizes existing information on electricity use characteristics and
trends,andrenewableenergyavailabilityandcosts.
5

Raoetal.(2009)providesanexcellentsummaryofIndianenergytrendswithafocusonlow
carbon growth opportunities and trends. The Indian power sector, which faces basic
problems such as chronic power shortages and electricity board insolvency, has taken
strides to tackle these problems. This is indicated by Figure 9 that shows historical
improvementinplantutilization.
Figure9.Powerplantutilizationimprovements
(Raoetal.,2009;originalsource:CentralElectricityAuthority)

Indias current generation mix is roughly half coal, 25% hydro, and the remainder roughly
equallysplitbetweenrenewableelectricityandgas.Nuclearmakesasmallportion(2%)of
electricitygeneration(Figure10).TotalgenerationcapacityinIndiais~150GW.

5
ThissectiondrawsfromrecentreportsbytheNationalRenewableEnergyLaboratory(NREL,2010),Rao(2009)and
Prayas(2010);theoriginalsourcesarealsocited(forexample,Ministrywebsites).
ElectricitygridevolutioninIndia

2011 EnergyandEnvironmentalEconomics,Inc 26Page 26
Currentelectricityconsumptionisroughly600BkWhor600,000GWh.
Figure10.CurrentIndianelectricitygenerationmix
(IQuest,2010;originalsource:MinistryofPower)

Load shapes will also evolve with time, particularly with increased economic development
and air conditioning loads. As peak loads increase, the Indian power sector mix will
transitionfromonethatislargelydominatedbybaseloadthermalpower.Gridplanningand
operationwillbecomeincreasinglycomplex.
Figure11.Generationadditionsinlastdecade(Raoetal.,2009;originalsource:Ministryof
NewandRenewableEnergy,CentralElectricityAuthority)

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Capacity additions in the last decade (Figure 11) roughly follow this mix with coal
constituting roughly 40% of additions, followed by large hydro, then renewables. Large
hydroandrenewablesmakeup~50%ofnewadditions.
India has one of the highest shares of installed renewable energy, with nonhydro
renewablesconstituting~10%ofcapacity,roughlyequivalenttotheinstalledREcapacityin
EuropeandChina.Combininglargehydroandrenewables,theycollectivelymakeup~35%
of installed capacity in India, which is amongst the highest combined hydro/renewable
capacityinanyothercountry(Raoetal,2009).
NREL (2010) summarizes renewable energy installation and potentials across the country.
India has the potential to generate roughly 50 GW across nine states (Table 3), which are
largelyconcentratedinthewesternandsouthernstates;currentinstallation(asof2009)is
10 GW, half of which was installed post 2006. Tamil Nadu alone leads the country with 4
GWofinstalledcapacity,roughlyequivalentto11%ofitscapacity(Prayas,2010).
Table3.Windpowerpotentialbystate(NREL,2010;originalsource:CWET)
State Wind Potential
(GW)
1

Andhra Pradesh 9
Gujarat 11
Karnataka 12
Kerala 1
Madhya Pradesh 1
Maharashtra 5
Orissa 25
Rajasthan 5
Tamil Nadu 6
Total 50
India has large solar energy potential with over 300 days per year with average hourly
radiation of 200 MW/km
2
. As of June 2010, Indias installed solar capacity was 15 MW, all
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solar PV, of which 20% was for offgrid applications (equating to 12 MW gridconnected).
India is a long way away from the NSM 2022 goal (less than 0.1% of the 20,000 MW 2022
goaland3%ofthe500MWgoalby2013).However,350MWofCSPhavebeenapproved
inGujaratand30MWinRajasthan;currentlytherearenoCSPplantsinIndia.
Indiaalsohassmallhydropotentialof15,000MW;muchofthispotentialisinthenorthern
mountainousstates.
While India has great renewable resource potential, the overall costs and benefits, both in
theshorttermandlongterm,andexternaleffects(suchasonwateruse)remainuncertain.
Withaggressiverenewabletargets,especiallyonsolar,itisimportanttounderstandthefull
impactsofthesepolicies.
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3. Policyintoplanningframeworks
3.1. Theneedforplanning
Thereisastrongneedforintegratedplanningintheelectricitysector.Planningisessential
because:a)theoperationandmanagementoftheelectricitysectorinvolvesmanyvantage
pointsandscalesofoperations,b)thesectormustmakeinvestmentsthatanticipateneeds
over long time horizons, c) resources must be selected and optimized across supply and
demandoptions,andd)pursuingpolicygoalsmaymeanselectingfromamongmanyand
in cases competing, priorities when moving to implementation. According to the Expert
CommitteeIntegratedEnergyPolicyReport(2006),Indianpowersectorgoalsinclude:
Reliability
Affordability
Energyefficiency
Electrification&access
Renewableenergytargets
Greenhousegas(GHG)emissionstargets
Thus,Indianpolicymakersmustchoosefromamongmanyprioritiesandgoals.Framework
tools can provide guidance in weighing the options and alternatives for achieving these
goals,particularlyatthelevelofimplementation.
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There are popular beliefs regarding the key challenges of renewable energy integration.
Onebeliefforsolaristhatgridparity,a$/kWhthatmakessolaronpareconomicallywith
other resources, will solve the challenge of scaled RE development. There is also the
assumption that transmission is the largest cost to the electricity system and will be the
largestfinancialbarriertorenewables.Finally,thereistheassumption(largelyderivedfrom
European and North American experiences), that intermittency (e.g., from solar) and
variability(e.g.,fromwind)arethemaintechnicalchallenges.Aperspectiveoftherelative
importanceoftheseissuesisneeded.
An integrated planning perspective reveals where the greatest needs and gaps actually lie.
Grid parity may have different meanings and is not static. Coordination and regulatory
changes will be central hurdles at any prices. Shifts toward better management of diverse
resources are essential to weighing any policy goal. Generation is also the largest system
cost (not transmission), pointing to the importance of demand management. A planning
framework can provide a starting platform for evaluating the greatest needs and weighing
alternativesforpursingvariousgoals.
3.1.1. Usingmetricsinenergyplanning
Ideally, policy makers should determine the metrics of interest before setting or analyzing
theimpactsofpolicies.Metricsareusefulfortwokeyreasons:
(1)theyhelpfocusthebasicgoalofpolicy,and
(2) they provide a quantitative basis by which to evaluate different policies. Table 4 lists
policyobjectivesandmetricsrelevanttotheIndiancontext.
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Table4.Usingmetricsforevaluatingpolicies

Policy Objective Sample Metric
Increase reliability in power operations % demand met, SAIFI, SAIDI
Maintain per capita greenhouse gas
emissions
Net CO2 emissions/year
Reduce technical losses Generation divided by recorded
retail sales
Reduce power theft Generation divided by recorded
retail sales
Improve access to electricity in rural
areas
% of grid-connected households
Reduce the costs of electricity Average rate (Rupees/kWh)
Minimize impacts to inhabitants based
on location of new power plants
Number of individuals willing to
relocate
Increase energy efficiency Energy savings achieved through
EE programs (in GWh)
Meet state RPS goals % of total load supplied by
renewables
Meet National Solar Mission target % of total load supplied by solar

Most metrics relevant to the power sector can be placed in three categories: economic,
reliability and environmental impacts. These may include, for example, jobs creation
(economic impact), CO2 reductions (environmental impacts), or impact on percent of
demandmet(reliability).Intheindiancontext,inparticular,resettlementandrehabilitation
issues linked to new plants must be addressed. Indian policy makers must assess the
impactsoncitizensresidingnearbytoproposedpowerplants.
Policy makers are likely to have several overlapping and possibly contradicting goals. For
example, the most costeffective and economic generation that can meet demand needs
may not be the most environmental (such as coal). The tradeoffs among competing goals
canbeclearlyillustratedthroughtheproposedframework,oncethemetricsaredefined.In
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this way, metrics also provide afoundation for moreeffective stakeholder involvement, as
metricsrevealthesechoicesandtradeoffs.
3.1.2. Proposedframework
Anintegratedframeworkbeginswithunderstandingbaselineelectricityneeds.Thisbaseline
is adjusted against demand side (or behindthemeter) policies such energy efficiency,
demandresponse,distributedgeneration.Theadjustedbaselinereflectsthefinalelectricity
demand that the supplyside must provide. Starting from the supply side, additional
generation and transmission needs are evaluated against existing generation and
transmissionresources.Strategiessuchasgenerationsideenergyefficiencycanbeapplied
to increase generation capacity; fault detection and diagnostics on power plants, for
example, can improve reduce maintenance costs and increase reliability, while also
improvingenergyefficiency.Thesupplyanddemandsidecometogetherthroughdispatch.
Policies around dispatch can improve the overall operations, such as the ABT. Finally, the
dispatched generation, minus the transmission and distribution losses, must equate to the
DSMadjusteddemand.
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Figure12.Overallgridplanningandmanagementframework

Note: blue boxes represent different dimensions of electricity sector planning, and black boxes contain
potentialpolicyleverswithineachdimension
3.1.3. Dataneeds:loadandresourcetables
Thedatathatpopulatetheanalysisareloadandresourcetables.Thesearesystemwideor
regional state data on the basic parameters of the electricity system. They provide an
overviewofsystemneeds,operations,andpriorities,andgenerallyincludeparameterssuch
as a breakdown of demand (energy and peak), composition of supply (plant, supply type,
availability),regionalimportandexports,andtransmission.KeydataareshowninTable5.
Anassessmentofloadandresourcetablesprovidesasystemsperspectiveonevaluatingthe
biggestneedsintheelectricitysystem.Demandanalysisandforecastingincludeevaluating
historical, current, and potential trends for the growth and composition of electricity use
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among different end users. Generation analysis provides an evaluation of the different
kinds of generation technologies and plants, as well as their capacity, operating
characteristics, costs, and lifetimes. Transmission analysis evaluates existing transmission
linesaswellasproposedprojectsforthefuture.Theprocessofcompletingtheseloadand
resourcetablesprovidesstructuretoimplementingtheoverallframework.
Table5.Keyaxesofloadandresourceplanning

Demand
Peak demand (MW)
Summer/winter peak demand (MW)
Net energy for load (GWh)
Load factor (%)
Historic & forecast
Planning & load management
Interruptible load (MW)
Load management (MW)
Net firm peak demand (MW)
Demand breakdown & customers analysis
Energy use by customer class, total (GWh)
Energy use by customer class, average per customer (GWh/customer)
Losses & own use (GWh)
Existing capacity
Net capability, by plant, by utility, (MW)
Summer/winter net capability (MW)
Non-utility generation facilities (MW)
Regional resources
Regional imports (MW)
Regional exports (MW)
Reserve margin (%)
Transmission
Existing transmission lines
Proposed transmission lines (Capacity, voltage, in-service year)

3.1.4. Cautionarynote:costlymistakesinNorthAmerica
There are many examples of poor planning or lack of planning in the power sector across
theworld.Thisisaproblemnotrestrictedtothedevelopingcountry(orIndian)contextbut
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is a problem, equally, in developed countries. We summarize salient points of two very
differentexamplesinNorthAmericawithacommonthreadthatasystemsbasedplanning
approachcouldhaveavoidedormitigatedthedamagingconsequences.
TheWashingtonPublicPowerSupplySystem(WPPSS)Nuclearpowerplantsin
thePacificNorthwest
Story: In the late 1970s, the Washington Public Power Supply System (WPPSS), a
consortium of municipal utilities and public utility districts in Washington State in
the U.S. commenced development of five nuclear power plants. Four of these
plants were later abandoned due to substantial load loss caused by shifts in the
regions economic base away from energyintensive resource industries as well as
thescalingupofenergyefficiencyprograms.TheWPPSSbonddefaultremainsthe
largestmunicipalbonddefaultinUShistory.
Consequences: Consumers are still paying for the stranded costs of the
partiallybuiltnuclearpowerplant.
Lesson: Planning should consider the impact of demand side programs on
generation needs can avoid unnecessary (and costly) generation side investments.
Fundamentally, a risk analysis that considers the impacts of different demand and
generationscenariosmayhaveforecastedtheoutcome.
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Figure 13. Never completed Satsop WPPSS nuclear power plant


Californiatransmissionplanningasthebottlenecktorenewables
Story: California began a set of assertive Renewable Portfolio Standards (RPS, later
Renewable Energy Standards, RES) to promote renewables, beginning with 20% by
2020, and later expanded to 33% of generation by 2020. However, the state has
been impeded in achieving its goals by cumbersome transmission planning, which
has hindered the speed of renewables development in Imperial Valley, Tehachapi,
andMohave,despitesignificantresources.
Consequences:CaliforniaisbehindscheduleinmeetingtheRESgoals.
Lesson: Coordination between generation and transmission planning is essential to
achievingrenewableenergypolicygoals;andalackofclarityonwhopaysandhow
procurement and transmission planning activities can be streamlined can have a
hugecostandtimepenaltyondevelopment.
3.1.5. Anintegratedframeworkapproach
In each of the examples above, a more integrated planning approach that includes
transparencywouldhavebeenhelpfultoevaluatingresourcegaps,andthepossibleoptions
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foraddressingthem.Aplanningframeworkmakesitpossibletoevaluatebothapolicyand
the range of alternatives for meeting its specific goal. In this case, technologies should be
incorporatedintopoliciestotheextenttheyservetomeetapredefinedobjective,suchas
improvingreliabilityorreducingGHGemissions.Figure14showspolicyandplanningterms
derivedfromexaminingtheinteractionsbetweendifferentpartsofthesector.
Figure14.EvaluatingPolicyChoiceswithinSupply,Demand,andInfrastructureNeeds


3.1.6. Indiasgoalsandobjective
The NSM is a strong national level policy. It brings with it fiscal resources for a strong a
green premium in the form of a national feedin tariff (FiTs) and renewable energy credits
(RECs).TheIndiangovernmentisalsodoingmuchinleadingthesectortowardinstitutional
and regulatory reforms, as set forth through the Electricity Act of 2003, and in grid
operations,suchasthroughtheAvailabilityBasedTariff.
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Howeverrenewableenergyintegrationrequiresdifferentplanningapproachesthanhistoric
fossil and hydrodevelopment, in part, because of the locational aspect of renewables and
the variable and nondispatchable nature of renewables. Siting renewables and
transmissionlines,andmakingnecessarychangestotheoperationofthegridinthecontext
ofincreasedamountsofrenewablesareissuesthatmustbeaddressedtomakeaggressive
renewablepolicygoalsimplementableandwillrequireintegratedplanningframeworks.
The traditional planning approach in India has been built around the national 5year
planning process. Under the 5year plans, the Central Electricity Authority (CEA) develops
forecasts used in the energy analysis, which is then incorporated by the Indian Planning
Commission.Themostrecent11
th
5yearplanincludesextensivegoalsforenergy,including
(GoI, 2007). The Ministry of Power determines the budget outlays for the national power
companies(NTPCandNHPC)andforgovernmentownedtransmissionandgeneration.
With the Electricity Act of 2003 (The Act) and its influence on power sector reforms, the
SERCs could increasingly play a role in load forecasting and power planning. However,
currently, very few do their own demand forecasts and plans. Typically, utilities submit
these as a part of their tariff filings, and regulators approve them, and regulatory tariff
filingsandregulatorsresponsesarethekeyindicatorsofhowregulatorsareimplementing
TheActandthinkingaboutfutureresourcerequirements.
InIndia,someconsumeradvocategroupshavearguedforanIntegratedResourcePlanning
(IRP) process. Recent national level policy documents and reports speak to the goals of
integrated planning. In 2004, the CEA developed a comprehensive plan pursuant of the
NationalElectricityPolicy(GoI,2004).AnIntegratedEnergyPolicyPlanwasalsocreatedby
an expert group commissioned by the Planning Commission following The Act (GoI, 2006).
It emphasizes the importance of integrated various resources including: fossil fuels, hydro
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resources, renewables, and nuclear. It also emphasizes energy efficiency and energy
conservation,aswellasR&Dandreform.
However,manyoftheexistingcentralgovernmentplanningdocumentsarenotwelllinked
toimplementationissues.Theinfluencefromthecentralgovernmenthasbeenfocusedon
market reforms and market entry barriers, rather than grid planning. Many aspects of
existingpoliticaleconomydonotallowfordesigndrivenapproachestoresourceadditions.
Sowhilethereisastronggoalandagreenpremium,theserenewablespoliciesarenotfully
partofanIRPprocess.
3.1.7. EvaluatingIndianpolicygoals
IftheNSMisviewedfromaplanningcontext,specifically,bydevelopingloadandresource
analysis, planning gaps will be revealed. Rather than a technology objective, the analysis
becomes an assessment of the operational goals it serves. The NSM would be evaluated
alongside potential changes in Indian electricity demand (type, time of day, peak, overall,
seasonal) now to 2020
6
and specifically towards how the NSM helps to meet demand and
generation needs, as well as what additional resources (such as load shaping resources,
transmission, land and water) are needed. Solar would be evaluated as one form of
generationamongothersupplyoptions.
Effective procurement policies are needed for the targets in NSM to be reached. Meeting
renewable energy policy obligations, Procedural changes that incorporate a planning
framework may be needed within institutions. Renewable energy procurement is not
isolatedfromtransmissionplanningandavailability.Historically,themodeloftransmission

6
Forexample,peakvs.baseloadisnotamainstreamidea.
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planning has been built on a form of firstcome, firstserved plantbyplant transmission
development
7
. However, such a reactive approach is not conducive for renewables, as
distances may be large, and individual projects must overcome the financing and project
developmentbarrierthattransmissionmaynotbeavailablewhentheprojectisreadytogo
live.Transmissionplanningbecomesessentialtofinancing.
Inthenextchapter,weexamineasetofillustrativecalculationstogiveaclearerpictureofa
framework analysis and how it might be useful for examining Indias policy questions.
However,thislastsectionofthischaptergivesanoverviewofanumberofprojectsE3has
already carried out in North American contexts, and how a framework analysis can be
customizedtoaspecificpolicyquestion.Theseexamplesshowtherangeofapplicability.
3.2. Sampleprojectsusingframeworktools
This section illustrates a number of specific studies that have been carried out by E3 in
North American contexts which use a framework analysis. They have been developed for
government agencies, utilities, and stakeholders. The sample projects explained here are
selected for their general relevance to Indias goals of improving grid economic efficiency,
reliability,reducingGHGsandintegratingmorerenewables.Detailsoftheactualstudiesare
foundinAppendixCB.

7
Theapproachreflectedtheplanningcontextofconventionalgeneration,wherelarge(oftenfossilfuel)powerplants
werebuiltclosetoloadcenters(withtheexceptionofhydro)andthecostsofconnectionwereallocatedto
developersbecauseconnectiondistanceswererelativeshortandtheircostswerenotsignificantbarrierstofinancing.
Thishasbeenthedominantinternationalmodelsincethe1950s.
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IntegratedcosteffectivenessframeworksforGHGMitigation
Sound policy decision making in clean energy can benefit from quantitative analysis. Such
analysiscanrevealthetradeoffsamongasetofgreenhousegas(GHG)emissionsreduction
strategies, such as energy efficiency, renewables, electrification. As has been shown in
different GHG analysis, energy efficiency often provides the most cost effective set of
mitigation options. A costeffectiveness framework allows one to evaluate the benefit of
energy efficiency to the grid in the form of capacity and energy benefits. The process of
developing analytical tools is as useful as the tools themselves, specifically in terms of
revealing how institutional processes need to evolve to support effective public
participation.
Identifyingoptimalrenewablesresourceportfolios
To develop different renewable resource development trajectories for meeting Californias
33% RPS, a framework was built that allowed potential renewable resources to be ranked
and selected based on a variety of criteria. Portfolios were constructed from proposed
projectsandidentifiedresourcestoreflectconsiderationssuchasthecommerciallikelihood
of projects given their current stage of development and potential transmission needs,
costs, and environmental impacts. These portfolios were then used to inform utility
resourceplanningandprocurement.Theprocessallowedstakeholderstoevaluatethe33%
RPS itself in terms of cost and feasibility, as well as allowed for resource and project
comparisons.
Renewablestransmissionplanning
Anotherapproachcouldbetodevelopapproachesforstudyingandevaluatinghighpriority
transmissionprojectsinlightofRPS,NSMandGHGgoals.Theanalysiswouldestimatethe
costofprocuringenergyfromlocalsourcesandthenestimatedthechangeinprocurement
costs by adding longline transmission. This framework was carried out for different load,
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RPS and GHG cases. The study found that policies that favored renewable resources could
increase the cost effectiveness of many longline transmission proposals and that new
multistate lines could help highload states meet policy goals more effectively.
Stakeholders helped develop scenarios and inputs for the modeling exercise and also
providedfeedbackthroughouttheanalysisperiod.
Shiftingloadforrenewablesintegrationandcosteffectiveness
Oneimportantmechanismforcosteffectivesystemplanningistominimizethepeakload,
whichisoneofthemostcostlypartsofthesystem.Inadditiontopeakshaving,loadshifting
is another way to managing demand at peak times. Load shifting is also a potential
mechanismtointegraterenewablesintothesystembecauserenewablessuchaswindtend
to provide maximum generation in offpeak hours. Increasing loads in offpeak periods
would reduce net variability in system loads. A study of permanent load shifting would
involve selecting a region in India in which the avoided costs could be characterized. The
value of shifting load can be evaluated on a theoretical basis that is, what are the
economics of moving load, when considering the constraints of capacity. Ideally, a region
withcapacityconstraints,arenewableenergystandard,andincreasingpeakloadwouldbe
selected,asthesearetheconditionsunderwhichthevalueofloadshiftingwillbegreatest.
Transmissioninvestment&evaluatingnonwiresalternatives
One important mechanism for costeffective system planning is to explore how energy
efficiency as a resource can help defer or eliminate the need for new transmission. In this
study, it would be possible to explore the load reductions that could be achieved through
demand side resources (energy efficiency, demand response, distributed generation) to
determineiftransmissionlinescouldbeavoided.Insomejurisdictions,utilitiesarerequired
to conduct studies to evaluate the feasibility of nonwires solutions to transmission and
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distribution investments. Such nonwires studies could be integrated as part of
EnvironmentalImpactsAssessmentinnewtransmissionstudies.
Phasormeasurementunitsforgridreliability
Phasormeasurementunits(PMUs;alsocalledsynchrophasors)installedonthetransmission
system could improve reliability, operating efficiency and asset utilization, and help with
overallsystemplanning.Byimprovingoverallgridoperations,PMUsindirectlyhelpwiththe
integration of variable renewable energy. The benefits calculation for reliability
conservativelyassumesthatanoutageaffecting500,000customersoccurseveryotheryear
intheWECC,andthatSPPdeploymentwouldreducethefrequencyofsuchmajoroutages
by 10%. Thus, over 40 years, SPP would be conservatively expected to prevent two major
outages. E3 estimates the benefit of avoiding two outages affecting 500,000 customers
eachtorangefrom$1.2billionto$3.5billionover40years,dependingonwhattimewithin
the40yearperiodtheavoidedoutagesoccur.
WesternElectricityCoordinatingCouncil(WECC)Energyimbalancemarket
benefitstudy
Thebenefitsofregionalizeddispatchcanbeexploredthroughthegridplanningframework.
E3isworkingwiththeWesternElectricityCoordinatingCouncil(WECC)andalargegroupof
stakeholders to estimate the potential benefits of adopting a centralized 5minute energy
imbalance market throughout North Americas Western Interconnection to improve the
efficiencyandcoordinationofgeneratordispatchdecisions.TheE3analysiscalculatesthese
benefits by comparing the generation cost created using a production simulation model
(ABBs Gridview) in (a) a benchmark scenario that approximates current operational
arrangements to (b) a scenario with improved centralized coordination and reduced
impedimentstotransactionsbetweenbalancingauthoritieswithinWECC.
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4. Largescalerenewableenergy
development
4.1. Illustrativeexample:evaluatingsolar
developmentoptions
Indias National Solar Mission (NSM) comprises grid connected solar, offgrid distributed
solar development, and offgrid lighting systems (Appendix A). From a grid perspective,
renewableenergycanfollowthreegridtypologies(Figure15):
(1) centralized RE development, including wind, solar (thermal & PV), geothermal,
and other resources connected to the grid at the transmission level andon the
supplyside;
(2) distributed RE systems connected at the distribution level and typically behind
the meter (i.e., on the customer side), such as rooftop PV systems, and co
generationfacilities;and
(3) offgrid renewable energy systems that would principally include REdiesel
hybridminigridsystemsasalternativestogridextension.Wedonotanalyzethe
developmentofsolarlightingsystems
8
.

8
TheNSMalsoincludesisolatedsolarhomesystemsandlighting,howeverthesearenotprincipallyaddressedhere.
Rather,theywouldbebestevaluatedinanoffgridtechnologybasedapproachwhichwouldincludetheseelements:

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This section examines these three cases through an illustrative example exploring the
developmentofsolarPVincentralized,DG,andoffgridhybridminigridforms.Eachgrid
development option is evaluated for economic, environmental and reliability metrics. The
purposeistoillustratehowaplanningapproachcanaddressfundamentalgriddevelopment
questionssuchas:
What grid investments in large scale infrastructure, modern grid technologies, and
operationsareneededtosupportaggressiverenewableenergygoals?
Whataretheeconomicsofdifferentgriddevelopmentoptions?
o IscentralREdevelopmentmorecosteffectivethandistributed?
o Whatfractionaretransmissioncosts?
o Doeconomicsfavourgridextension?
o Whatarethenonsolar,costeffectiveoptions?
What are the relative rankings of renewable development options given
noneconomicconsiderations,suchasbarrierstotransmissionsitingandenvironmental
externalities?
Whatarethemajorplanningandpolicygapsforfacilitatingimplementationofanygrid
developmentoption?
Howcanexistingplanningapproachesbeimproved?

markettransformationoptions,microfinancing,subsidies,andstandardsfordisseminatingtheproductswidelyand
strengtheningthesupplychainsandprovidersthatdeliverthem.
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Figure15.ThreeMainFormsofRenewableEnergyIntegrationinanIndianPowerContext
`

The grid planning framework is adapted to evaluate the three solar PV examples and
consists of three components: a net impact comparison calculator tool, a set of
infrastructure planning tools, and an integrated evaluation of the governance and
regulatory needs and barriers related to these planning functions (Figure 16). The goal of
the illustrative example is to give a concrete picture of how the planning framework can
yieldimportantinsightsformoreeffectivepolicydesignandimplementation.
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Figure16.AFrameworkforEvaluatingRenewableEnergyPolicyPlanning

4.1.1. Netimpactcalculator
The analytical component of the framework evaluates the incremental impact from solar
power,relativetoabaselinescenariowithoutsolarPV.Forexample,whatarethenetGHG
emissions from solar power relative to a baseline energy option? This approach has
numerousbenefits,including:
(1) Itallowsforthecomparisonamongdifferentrenewableenergypolicyoptionsin
a systematic fashion for example, the costs of centralized solar PV vs.
distributedsolarPV,and
(2) It evaluates conventional and renewable energy on a common platform,
addressing the common criticism that the benefits of renewables should be
weighed against negative effects of conventional energy. For example, the
framework can be applied to evaluate many impacts, such as net emissions of
particulate matter (PM) or net water consumption between solar PV and
conventionalfuel.
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The net impact calculator is analogous to the costeffectiveness frameworks used in the
evaluation of utility energy efficiency and distributed energy resources. In these analyses,
the cost of investing in energy efficiency is compared to the cost of traditional generation.
Costs and benefits are often estimated from multiple perspectives, for example, from the
societal, customer/developer, or utility perspective. Each cost test identifies the value to
that respective agent. See the National (U.S.) Action Plan for Energy Efficiency (2008) for
backgroundoncosteffectivenessframeworks.
Economic,reliabilityandenvironmentalmetrics
We analyze the economic, reliability and environmental impacts of each RE development
option.ThemetricsforeachimpacttypearedescribedinTable6.
Table6.Illustrativeexample:economic,environmentalandreliabilitymetrics

Impact type Metric selected Rationale
Economic Incremental
levelized cost
($/MWh)
Levelizing the economic impacts (e.g., costs for new
generation, value of displaced fuel, etc.) a direct
comparison can be made between different resources
(e.g., RE & coal). The economic impact also includes
when quantifiable the value of environmental and
reliability effects. Additional metrics, such as jobs
created, are also relevant.
Environmental
1
Greenhouse gas
(GHG) emissions
reductions
(MMTCO
2
/y)
GHG emissions are selected because GHG emissions
mitigation is a core motivator for renewable policy. The
framework could be applied to estimate incremental
impacts of other air pollutants, land and water impacts,
if suitable data are available.
Reliability
1
Increase in
delivered energy
(MWh/y)
In a capacity constrained environment, additional
energy improves reliability. More sophisticated metrics
such as SAIFI and SAIDI, which quantify the frequency
and duration of outages, exist, but are less relevant in
capacity constrained scenarios.
1 When possible, the environmental and reliability impacts are quantified in financial terms and
embeddedintheeconomicimpact.
These metrics provide a foundation for beginning to investigate different grid and
resourcedevelopmentoptionsonacommonplatformandprovideasetofcommonmetrics
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toevaluateplanningneedsandtradeoffsundereachcase.Thespecificmetrictypescanbe
selected based on the specific local and regional priorities and goals, such as minimizing
landandwaterimpacts,healthimpactsfromairpollutants,andjobcreation.
Buildingthesolardevelopmentscenarios
Each scenario is developed in terms of the generation, infrastructure components and
integrationneedsintothegrid.
ThegenerationcostsinvolveinputsoftheinstalledcostsofsolarPV,financingfactorsand
capacity factors. These three inputs convert the capacity based cost into a levelized yearly
cost based on energy output of the solar system. Many factors, such as the size of the
systemandlabourcosts,determinetheinstalledcost.Adetailedfinancialproformamodel
would incorporate the effect of taxes, which is not considered in the illustrative example.
Thecapacityfactorwillvarybysolarresourceavailability,whichvariesbyregion.
The infrastructure and grid integration components are not always included in
costcomparisonanalysisbutmustbeconsideredfromagridsystemsplanningperspective.
Weincludethecostsofupgradingthedistributionwiresandasmartinverter.Conventional
gridtied inverters supply a waveform that follows the grid signal. An advanced inverter,in
contrast, allows the solar PV system to continue to supply AC power to the distribution
systemintheeventofapoweroutage.Storageisoftencitedasanecessarytechnologyto
accompany distributed solar PV systems. However, storage is not needed in the scenario
that there is a realtime demand for the power supplied by the solar PV system. For a
capacity constrained power system, storage is potentially needed. The illustrative example
does not include the cost of storage. We note, however, that many customers consider
storagesystemsforthepurposeofprovidingpowerduringblackouts.Whilethereisvaluein
this application, the costs of the storage system in this application should not be added to
thecostofthesolarPV,asitisnotbeinginstalledforthesolarPV.
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The integration costs are based on the principle that the error in the renewable energy
forecastdrivestheneedforoperatingreservesintheeventtherenewableresourcesdonot
generate at scheduled levels. The forecasting error determines the capacity of operating
resources per unit of capacity of solar resource (MW reserve / MW solar). Different
resourcesmaybeavailableformeetingload,suchasnaturalgascombustionturbines(CT),
hydro,orcoal,withsomemoresuitedforloadbalancing(suchasCTsorhydro).
TheNetImpactCalculatorassumesacommonmethodologyforestimatingintegrationcosts
for the central and distributed generation cases. The central balancing resources will be
characterized by higher quality resources, lower costs and lower operations and
maintenance(whichwilldrivedownoverallcosts).Inreality,thesubjectofhowtointegrate
largeamountsofdistributedgenerationresourcesisstillanareaofresearch.
Modelingplatform
The calculator elements are integrated into an Excel based spreadsheet tool. Figure 17
provides a screen shot of the tool portion that develops the cost of the gridconnected
distributedgenerationsolarPVoption.
AppendixBprovidesafulldescriptionofthemodelingassumptionsinthetool.
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Figure17.ScreenshotofNetImpactCalculatorrenewablesystemcostsforgridconnected
distributedgenerationcase

By the term tool we mean a documented analysis framework that calculates the net
impact of each typology of renewable energy integration using transparent and clearly
documentedinputassumptions,andwhilemakingitpossiblefortheusertovarytheinput
variables to explore different questions. The platform is adaptable to analyzing a range of
possible questions and it is transparent in making all of the calculation terms visible for
evaluation and/or sensitivity analysis. The yellow shaded cells indicate inputs. As noted in
the third column, thereare severalfactors that impact the actual value of these inputs for
projectandregionallyspecificanalysis.
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4.1.2. Exampleresults
Wefirstdescribetheeconomicresultsofcomparinggridconnectedsolardevelopmentwith
offgrid solar development. Both development options have three baseline scenarios. The
baselinecomparisonallowsustoevaluatetheimpactofsolarPVrelativetoanalternative
energyoption,therebyisolatingtheimpactofthesolar.Theevaluationofmultiplebaseline
scenarios is important, in principle, since the baseline conditions will vary by region and
locality,suchasbyvaryingpoweravailability,qualityandresourcemix.
Gridconnectedsolarbaselines
Case 1: Solar PV displaces coal fuel. This scenario assumes that the existing power system
can meet electricity demand. Due to Indias chronic shortages, this may be an optimistic
assumptioninthenearandmidterm,butpossiblyaccurateinthelongterm.
Case2:SolarPVdisplacescoalfuelandnewcoalpowerplant.Withouttheadditionofsolar
PV,newfossilfuelgenerationwouldbebuilttomeetthesamedemand.
Case3:SolarPVdisplacesbackupdieselenergy.TheadditionofsolarPVleadstoimproved
reliability and improved service of demand. This scenario assumes the power system
cannotmeetthedemandandabackupdieselgeneratormustbeoperated.
Offgridsolarbaselines
Case 1: Solar PV displaces diesel fuel. This scenario assumes that without the solar PV, the
minigridwillprovidepowerthroughdieselfuel.
Case 2: Solar PV displaces diesel fuel and the cost of a diesel generator. This scenario is
identicaltocase1butassumesthatwithoutthesolarPV,adieselgeneratormustbebuilt.
Case 3: Offgrid solar PVdiesel minigrid displaces grid extension. The offgrid case 3
comparestheimpactsofanewsolarPVdieselminigridwithabasecasewherethegridis
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extended.Thebasecasealsoassumesthatthegriddoesnothaveexistingcapacitytomeet
village demand and that a new conventional fuel power plant would be constructed with
thegridextension.
Inreality,theactualscenariosarelikelytobesomecombinationofthedifferentscenarios
i.e.,solarPVwilldisplacesomecoalandoffsetsomedieselfueluse.Thetoolcanbeused
togenerateanyparticularcombinationofscenarios.
9

Figure 18 shows the incremental cost of solar PV for both the offgrid and gridconnected
case. The Yaxis indicates the net societal cost of the generation option, expressed in
$/MWh of generation procured. The offgrid analysis is shown with a different set of
colours from the gridconnected analysis to emphasize that the two sets of scenarios are
very different in terms of the policy interpretations. Specifically, access to electricity is a
social justice and economic development issue that should be addressed regardless of the
economicsofprovidingelectricity.

9
AppendixBcontainsadditionalbaselinecalculations,forexample,theincrementalcostofsolarPVifthesolarPVis
providingservicewhentherewouldotherwisebeablackout.
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Figure18.Illustrativecalculation:Incrementalcostofsolardevelopmentoption

Comparing the economic impacts of a grid connected development option with offgrid
development option yields a number of interesting results and discussion questions.
Assuming a minigrid is in place, the incremental cost of solar PV is comparable to the
gridconnected solar PV cost. However, the cost of grid extension (including a new coal
powerplant)islessexpensivecomparedtoahybridsolardieselminigrid.
The analysis can be expanded along multiple dimensions, for example, how does
distributed/ decentralized grid connected solar compare with centralized gridconnected
solar?Figure19comparestheincrementalcostsofthesetwocases.
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Figure19.Illustrativecalculation:costcomparisonbetweendistributedandcentralizedsolar

In this example, the distributed generation option is generally more expensive than the
central gridconnected option. There are tradeoffs between both options, for example,
distributed generation will require less transmission investment and fewer technical line
losses,however,centralizedrenewabledevelopmentwillbenefitfromeconomiesofscale.
10

Ananalysisembeddedinanintegratedplanningprocesswouldidentifytheseissues.

10
Ouranalysisassumed~3000kmofnewtransmissionor20,000MW,buttheactualnumberwilldependonhow
welltransmissionandrenewabledevelopmentarecoordinated.ThecentralcaseassumesaninstalledsolarPVcostof
$5000/kW,whilethedistributedcaseassumesaninstalledsolarPVcostof$6000/kW.
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For each development option, the generation costs dominate the overall costs, with the
transmission and distribution wiring costs constituting a small percentage for the central
anddistributedgenerationexamples,respectively.
Given the uncertainty and variability of each of the assumptions, the analysis should be
viewedasillustrativeforinitiatingdiscussionalongthefollowinglines.
Are centralized renewable grid development more costeffective than distributed
developmentoptions?
What fraction of the total cost does infrastructure, such as transmission, storage,
distributionlinesconstitute?
Dotheeconomicsfavourgridextensionoveroffgridsolutions?
Whatarethenonsolar,costeffectiveoptions?
What are the rankings if noneconomic factors, such as barriers to transmission
sitingandenvironmentalexternalitiesareconsidered?
Comparingtheeconomicsofgridconnectedandoffgridinfrastructureintroducesanumber
of complexities that must be addressed. First, taken from an access perspective, cost
minimization is often not the sole or primary driver to investment and additional metrics
and nonmonetized social objectives need to be taken into consideration. Second, rural
energy infrastructure investments may be an incremental step toward eventual grid
interconnection, which can introduce sequencing and stranded cost issues, which make
planningdifficult, as it isnot always a rationalized process. Third, it is difficult to compare
on and offgrid options for their different levels of service provision, different driving
objectives, and nonmonetizable access goals. However, an integrated framework is
essential because it can shed extensive light on the cost comparisons between different
options, and the magnitude of costs involved in prioritizing these different objectives.
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Thesefeaturesmakeitpossibletodevelopmoretransparentaccesspolicyandengagerural
accessinmorerigorousterms,recognizingthedifferentgoalswhichmotivateeacheffort.
TheNetImpactCalculatorisstructuredtoaddressenvironmentalandreliabilityimpacts,in
additiontoeconomicimpacts.Table7showstheillustrativeresultsacrossallthreemetrics,
with CO2 and additional energy delivered as the environmental and reliability metrics,
respectively.Theframeworkcanbeexpandedtoevaluateadditionalenvironmentalimpacts
andreliabilitymetrics.
Table7.Illustrativeexample:economic,environmentalandreliabilityimpactsofsolaroptions

EachoutputisnormalizedtothesolarPVenergyoutput.TheCO2emissionsreductionsare
~0.6tonnes/MWhofsolarforcentralanddistributedgridconnectedoptionswhensolarPV
isdisplacingeithercoalordiesel.ThereisanetincreaseinCO2emissionsifthebasecaseis
no service; this is a result of the CO2 emissions from the resources used to integrate
renewables. (If hydro was assumed as the integrating resource, the net impact would be
CasesEvaluated
Case1:Displacedcoalfuel Case1:Minigridexists;displaceddieselfuel
Case2:Displacedcoalplantandfuel Case2:Displaceddieselfuel+geninstallation
Case3:Displacedbackupdieselfuel Case3:Noexistingservice;solar/dieselmini
gridevaluatedagainstgridextension.
CENTRALGEN DISTRIBUTEDGEN OFFGRIDEXAMPLES
NetCostIncreaseofSolar $/MWhofSolar $/MWhofSolar $/MWhofSolar
Case1 320 $ 370 $ Case1:fuel 270 $
Case2 260 $ 310 $ Case2:fuel+gen 250 $
Case3 110 $ 160 $ Case3:gridext. 440 $
NetCO2SavingsofSolar
tonnesCO2/MWh
Solar
tonnesCO2/MWh
ofSolar
tonnesCO2/MWhof
Solar
Case1 0.6 0.6 Case1:fuel 0.9
Case2 0.6 0.6 Case2:fuel+gen 0.9
Case3 0.6 0.6 Case3:gridext. 0.9
AdditionalEnergyDelivered
MWh
served/MWhSolar
MWhserved
/MWhSolar
MWhserved/MWh
Solar
Case1 unchanged unchanged Case1:fuel unchanged
Case2 unchanged unchanged Case2:fuel+gen unchanged
Case3 1 1 Case3:gridext. unchanged
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zero.) The CO2 emissions reductions are greatest for the offgrid cases because solar PV is
assumed to displace either diesel fuel or coal, and the installation in the offgrid case does
notincludeconventionalfuelCO2emissionsforintegration.
The reliability impacts are indicative of the additional energy provided by the solar PV.
Assuming solar PV displaces rationing, an additional 1 MWh of power per MWh of solar
output is provided; or an absolute basis, the 20,000 MW installation of central solar PV
provides an additional 40,000 GWh of energy delivered per year. If solar PV displaces a
combination of coal and rationing, the additional energy provided would decrease
proportionally. The tool can be manipulated to generate any particular combination of
scenarios,withthebasescenariosgivingthebounds.
Scopeandlimitations
This analysis illustrates a basic planning framework and indicates preliminary insights that
can be derived from system calculations. The analyses are preliminary, and more
systematic analysis would require a base of data outlined in Section 3, a specific planning
question and a stakeholder process to develop and evaluate the scenarios. The details of
the analysis (data, assumptions, modeling) will vary but the framework remains constant
andfundamentallyarguesforametricsbasedapproachtowardsrenewablesdevelopment.
4.1.3. Infrastructure&politicaleconomyassessment
The infrastructure and political economy are key components of the grid planning
framework.Figure20describesthegovernance,infrastructure,andnetimpactelementsof
theframeworkasappliedtothesolarexample.
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Figure20.Overallgridplanningandmanagementframework

Key questions on governance include: Who would be impacted? How are benefits and
tradeoffsmade?Whodecides?Whatprocessesareneededtoputthesepoliciesintoplace?
How do these needs interface with existing institutions and their boundaries and
jurisdictions?Thistypeofiterativeprocessisexperiencedelsewhere,suchasinCalifornia.
The infrastructure assessment requires an integrated analysis of supply, transmission,
distributionanddemandsideresourcesformeetingresourceneedsondifferenttimescales.
The benefits of modern grid technologies such as smart meters, substation outage
managementsystems,loadshifting,shouldideallybeassessedwithinthisintegrateddesign
theme.Forexample,transmissionplanningshouldbecoordinatedwithrenewableresource
planning; temporal characteristics of generation resources should be considered in
assessingtheirabilitytomeetdemand.
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Figure21.Infrastructuretools:linkingtransmissionplanningwithresourceavailability

Optimally, the three aspects of planning are addressed in an integrated fashion, with the
politicaleconomyandinfrastructureconditionsinformingtheNetImpactCalculatoranalysis
and the results of the Net Impact Calculator informing gaps and needs along these
dimensions.
4.2. Discussionofkeyrenewablesissues
We situate the illustrative example of solar development back into the wider governance
and operational planning context to reveal important insights, particularly on the common
perceptionsthatexistonrenewablesdevelopmentchallenges.Wediscusstheinstitutional
dimensions of implementing planning changes. This discussion is equally relevant to non
solardevelopment.
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4.2.1. Transmissioncostsmustbeputinperspective
From a systems planning perspective, generation (not transmission) is the largest system
cost.Intheillustrativeexampleofcentralizedgeneration,thecostoftransmissionislow(~
5%)
11
. Even with a doubling of transmission requirements, transmission costs are ~ 10% of
the total system costs.
12
These insights illustrate why cost competitive generation and
demandreduction(peakshaving,demandmanagement,etc.)areessentialtoeffectivegrid
planning. In many places, it is not the material and construction cost of transmission that
proves to be the barrier, but rather the transmission siting that is the largest barrier to
developingcentralizedrenewablesoptions.
4.2.2. Intermittencyisnottheprincipleissue
Whiletheintermittencyofsolarandwindgenerationisafactorthatmustbeconsideredin
order to maintain reliable grid operations, it is not the most important challenge at the
levelsofrenewableenergybeingproposedandgiventheexistingoperationalcontextofthe
Indian grid. India already operates with extensive grid variability, which makes the
intermittency concern associated with renewables a not entirely new condition.
Introduction of variable renewables at large scale could increase the challenges of
variability;however,thecostofdevelopingnewtechniquesandresourcesformanagingthis
variability appears to be a small fraction of the total cost of new supplyside resources
(whetherrenewableorconventional).

11
TheillustrativeexampleofcentralsolarPVdevelopmentassumes5000kmofnewtransmissionfor20,000MW;
equivalentto50kmperplantat200MWsizedplants.
12
Assumeseach200MWplantrequires100kmofnewtransmission.
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Integratingsupplyside/centralrenewables
In the central generation context, the balancing of supply with demand including
integrating variable renewable energy and maintaining power quality is managed most
traditionally with supply side resources (the collection services to help with maintaining
power quality are collective called ancillary services). Different supply side resources are
used to balance load and maintain frequency on different time intervals for example,
spinning reserves are kept online so they can be dispatched within 10 minutes. In the
U.S.,amajorityofthesebalancingservicesareprovidedwithnaturalgasorhydro.Coaland
nucleararelesssuitableforprovidingbalancingasnotallunitscanmodulatetheiroutput.
In most U.S. electricity markets, renewables are not scheduled in either the dayahead or
hourly markets. Balancing of renewables is mainly achieved within the hour through
regulation services and load following. Regulation services help maintain balance on a
minutebyminute basis; in the U.S. regulation services are procured through the ancillary
servicesmarket.Theprocessofmaintainingbalanceintheinterandintrahourtimescaleis
called load following. Load following is typically not procured separately as an ancillary
servicebutisdeployedusingscheduledgeneration.
Figure22.Illustrationofregulationandloadfollowingrequirements(CaliforniaISO,2010).

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From an operational perspective, both the variability in the wind output and errors in the
forecastofthewindoutputintroducecomplicationsforbalancingsupplywithdemand.As
renewables forecasting improves, the cost to integrate large renewables will decrease. A
recent U.S. study of 35% penetration of wind, solar PV and CSP in the western U.S.
estimated up to a 14% integration cost reduction if stateoftheart forecasting is
incorporated into dayahead scheduling; assuming a perfect forecast, operating costs
would be reduced by ~ 30%. (GE Energy, 2010). Studies on wind energy in the Indian grid
emphasizethebenefitsofbothwindforecastingandappropriatewindturbineselectionfor
addressing variability in wind output and power quality problems, respectively
(Khaparde,2006).
A recent study of integration needs for meeting 20% renewables penetration in California
suggest 4000 MW of balancing resources (load following) in the 1020 minute time scale
maybeneeded(CaliforniaISO,2010).Theresourcesthatmaybeprocuredformeetingthis
need has not yet been determined will combustion turbines meet this need or can
demandside resources, such as demand response, load shifting, or battery storage meet
this need? Incidentally, the California ISO is revising their estimate of balancing needs to
meetthe33%RPS.Recentanalysissuggestsfewerbalancingresourcesmaybeneededthan
isreflectedinthe20%report(CaliforniaISO,2011).
Manystudiesinvestigatingtheintegrationofrenewableenergyconcludethatatmoderate
penetrations of up to ~20%, renewables are not expected to dramatically impact the
reliability or operating costs of the grid (National Academies, 2010). Most integration
studiesprimarilyfocusontheproblemofintegratinglargeamountsofwindenergy.
Integratingdemandsiderenewables
Theeffectsofintegratinglargequantitiesofdistributedgenerationarestillunknownandis
anareaofcurrentresearchinterest(vonMeier,2010).Theeffectsarelikelytobelocation
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specific, depending the particular design of the local distribution system. Interconnection
standardssuchasIEEE1547limittheinstallationcapacityofsolarPVatthecustomersite.
Key technical concerns of integrating large amounts of DG include (1) twoway flow/back
flowintoprimarydistributionlines;(2)powerislanding(whereaportionofthedistribution
systemremainselectricityactivedespiteanoutage;thisconditionraisessafetyconcernsto
utilities);(3)voltageirregularity,duetofluctuationofsolarPVoutput.Ifrenewablesgrowth
in India is dominated by the central model, then these challenges of integrating high
penetrations of DG may not be a dominant concern. Due to the localized nature of
distributedgeneration,Indianlocalitiesmaybeabletoavoidfutureoperationalproblemsif
DGgoalsareincorporatedatthedesign/planningstage.
IntheIndiancontext,multiplefactorswilldrivedecisionmakingongridoperationsbesides
integrating renewables, such as increased demand, electricity access, changes in load
shapes (i.e., becoming peakier), and efforts to address climate change. An integrated
planningapproachwillbeessentialforachievingthesemultiplegoals.
4.2.3. Priceparityisnottheonlybarriertorenewablesadoption
Decreasing costs of solar and other technologies are important parts of making these
technologies more accessible. However, regulatory planning and planningprocedural
barriersarealsosignificantandmustbeaddressedatanypricelevel.Asexplainedearlier,
as in the California example, transmission planning, and making it more adaptable and
anticipatory to renewable needs, can be a significant bottleneck to renewable energy
development. In addition, renewable energy requires coordination among agencies on a
muchmoreintensivelevel,asprocurement,planning,andoperationspoliciesandactivities
spanstateandnationallevels,andimplementingrenewablesinvolvesagreaternumberof
multiplekindsofresources,locationswhicharefurtherfromloadcenters.
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4.2.4. Crossscaleinstitutionalinteractionwillbeessential
Tobeeffective,Indiawillhavetobuildplanningframeworksthatcoordinateacrossitsrange
of regulatory institutions. This will be essential not only for bringing generation and
transmission planning entities together, but also for designing policies which are rational
across the multiple levels of governance that are involved in India. For example, the
governmentistryingtoaddressregionaldisparitiesinREresourcesthroughRECs;butitalso
hasnationalandstatelevelFITs(whichmaycreatecompetingissues).IfRECsaretowork,
thenthismeanspricingRECshigherthanFIT,butthisunderminesFIT.Ontheotherhand,
states are looking for regional distribution mechanisms. Thus, the issue is one of
rationalizingpoliciesacrossscales,andii)howtodoregionalplanningeffectivelyinaRE&
grid planning context (i.e., Can a Strong grid planning framework be a form of regional
planning,pricingisastateissue,butgridplanningisanationalissue.)
4.2.5. Renewablesrevealpoliticalchoices&tradeoffs
One of the important and valuable aspects of framework tools is that it can create greater
transparencyandvisibilityofthekeytechnicalandpoliticalchoicesandtradeoffsinvolvedin
renewable energy policy decisions. The value, and also the challenge, of these tools is for
policymakers and stakeholders to recognize how far up the serviceplanning context, they
arelookingtoevaluateandaddressincleanenergypolicy.
For example, grid connected solar involves significantly higher wholesale prices, the Indian
governments current approach to dealing with these costs include policy tradeoffs which
impingeonothergoals,Forexample:a)Thegovernmentschoicetobundlesolarwithlow
cost stateowned coal in many ways can undermine Cabatement goals, b) the choice of
passingcleanenergypremiumsontoconsumers,forexamplethroughthe40UScents/kWh
FiT,canhaveeffectsonsocialaccessandaffordability.Incontrast,theremaybesignificant
costsavingsbyapplyinganintegratedanalysisofsupplyanddemandresources.However,
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a broader analysis of energy policies will reveal existing political choices in tariff pricing,
supply procurement, and demand management. Integrated approaches are likely to draw
attention to, but also raise political challenges and choices about which tradeoffs to
continue to sustain for example, the nearfree provision of electricity to agricultural
consumers.However,takeninisolation,anREtechnologyapproachmayaddmorecosts
andresourcesthanwouldbeneededifanintegratedplanningapproachwasadopted.India
will need to consider these tradeoffs, as they are embedded within the policies, whether
examinedornot.
4.2.6. Frameworktoolscaninitiatecrossinstitutionalefforts
Frameworktoolscanbringentitiestogether.Oneofthekeybenefitsofplanningtoolsasa
form of technical intervention is the institutional and information integration process it
creates.Definingthedataneeds,identifyingaparticularquestion,assemblingsourcesfrom
acrossinstitutionalpurviewsisapoliticaltechnicalprocessthatbringsinstitutionstogether
in new ways. This will foster interactions between entities, which may not communicate
otherwise. It will reveal barriers that hinder information gathering around renewables, for
example issues of institutional jurisdictions, data authority, and technical information
control.Thesetermswillrevealonthegroundbarriers,andelementsmustbeovercomeif
we are to consider how planning activities can be meaningfully integrated into the policy
process. The act of developing a framework tool can bring institutions together, reveal
barriers,andcatalyzenewrelations.Thisisacrucialstepinadvancingthegovernancetools
tosupportrenewables.
4.2.7. Smartgridinperspective
Smartgridisnopanacea,andaholisticapproachthatincorporatessuchtechnologiesalong
with market policies to promote balancing, such as the adopted Availability Tariff, will
facilitate the integration of renewables. India has taken great strides to improve grid
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discipline and operations through two key policy mechanisms the Availability Based
Tariff, with the unscheduled interchange at its core, and the Electricity Policy Act of 2003.
With the establishment of state and regional dispatch centers and the implementation of
financialincentivestomotivategriddiscipline,Indianpowerqualityhasimprovedinthelast
several years. Still, chronic shortage and theft remain as core problems. The balancing of
additionalincrementalvariablerenewableenergyissecondarytoshortagefromareliability
perspective.
Smart grid investments can play a role in improving grid operations by bringing better
control, information and communication to grid operations. Tools like automated fault
detectionanddiagnosticsappliedtosubstationsandtheuseofphasormeasurementunits,
bringreliabilitybenefitsandcanoftenbejustifiedonacostbenefitbasis.However,therole
of smart grid should be kept in perspective. These technologies and other smart grid
approaches wont negate the need for basic steelintheground investments. In the U.S.,
manysmartgridtechnologiesthathavebeenavailablefordecadeshavenotbeendeployed
byutilities,inpartbecauseofnontechnicalbarriers,suchasstovepipingwithintheutility
betweenplanningandoperations.AlthoughthepowergridintheU.S.isreasonablyreliable,
the benefits of improved reliability outweigh the costs; however, general inertia in the
utilitysectorpreventslackofinnovationthatisrequiredfordevelopingsmartergrids.
Notallsmartgridtechnologiesmaybeeasilyjustifiedonacosteffectivenessbasis,suchas
smart meters. Even in the U.S., the value of smart meters whether they are installed in
isolation, or in combination with rates and clean energy programs is not yet well
understood,astheARRAfundedSmartGridInvestmentGrantrolloutsareinprogress.
Energystoragetechnologiescanplayaroleinprovidinggenerationcapacityvalue,reducing
peakloads,improvinggridreliabilityandintegratingrenewableenergy.Althoughstorageis
largely recognized as nonessential for integrating RPS levels of renewables (~ 20%), they
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canaddvaluetointegratingrenewablesbyprovidingancillaryservicesandabsorbingexcess
renewable energy generation. Thermal energy storage can be especially relevant in the
Indian context because of increasing AC loads and renewable energy. Thermal energy
storagecanalsobeenergyefficientwhenasystemsapproachisappliedtoHVACdesignand
operations;however,thisisnotcommonpracticeevenintheU.S.Pricingpoliciescanhelp
motivategoodperformance.

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5. Discussion&futuredirections
5.1. Keyinsights
The framework and illustrative analysis underscore the importance of an integrated needs
assessmenttoadvanceshort,midandlongtermpowersectorgoals.Thekeythemesareto
determine the highest value needs, identify costeffectiveness options, weigh alternatives
againstdifferentmetrics(suchasenvironment,reliability,economics),andmaketradeoffs
more transparent. This would represent a starting basis for effective renewable energy
scalingandintegrationconsistentwithsectorgoals.
Integrated frameworks can reveal insights that help avoid costly mistakes, help
policymakers to recognize more robust and effective approaches through an incremental
impact analysis approach (drawn from costeffectiveness), and provide platforms for
communicating and catalyzing coordination across existing institutions to bridge important
gaps.
Effectiveplanningframeworksareespeciallyimportantforrenewables.Renewablesinvolve
a greater number and smaller size of generation projects. Renewables may be optimally
located further distances from existing transmission, requiring greater coordination
betweensectorinstitutions.Renewablesalsohavealargerfractionofupfrontcapitalcosts
(versusfuelcosts),meaningthatclearplanningcanhavealargeeffectonachievingproject
finance and risk perceptions. The successful deployment of renewables requires
coordinated efforts along state, central and local fronts to ensure policy incentives are
aligned. Finally, the nondispatchable operation of many renewables necessitates a
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systemsanalysis of existing resources to understand the need for investments on the
operationalside.
5.2. Futuredirections
5.2.1. Developingthegridplanningframework
Section 4 presents preliminary results of the grid planning framework applied to solar
energy development. The illustrativeexample can be expanded ina number of ways along
thelinesofquantitativeandqualitativeassessment.
EnhancementstomaketheframeworkmorerelevanttoIndianpolicy
Regional and statespecific analysis, based on regional environmental, economic,
andresourceavailabilityconditions
Integrating other renewables, not just solar; and expanding the tool to include
demandsideresources,andevaluationbetweenthem
Evaluatingloadbalancingopportunitiesandneedsfordifferentlevelsofrenewables
penetrationaregionalanalysiswouldbeappropriate
Inverting the tool to identify optimal policy scenarios. Currently, the tool is
structured to evaluate the impacts of policies, rather than determine policies that
achieve specified impacts. An example would be to set a goal of renewables
penetration and determine the most costeffective resource mix and development
options
Carrying out uncertainty analysis, and making it possible to better explore
sensitivitiesofkeydrivers
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Qualitativeresearch
Identifystatevehiclesforpublicstakeholderprocess
Interviewbasedresearchtoexploreregulatoryandmarketbarriers
Workwithpotentialstakeholdersandusersofthetool,suchaslocalnonprofitsand
stateelectricityregulatorycommissions
5.2.2. Directionsforfutureprojects
We summarize three types of studies that could evolvefrom the grid planning framework,
each representing a unique set of policy objectives and stakeholder. These include a
regional/localized study of clean energy opportunities, an evaluation of offgrid
opportunities, and an assessment of longterm GHG mitigation options in the electricity
sector. Each is described briefly below. (Section 3.2 and Appendix C provides background
material on these types of projects, based on previous completed analysis.) This list is not
exhaustive but illustrates the range of problems and policy goals that may be addressed
usingtheconceptsdescribed.
Regional/localizedstudyofcleanenergyopportunities
A natural extension of the grid planning framework and illustrative example is to explore
opportunitiesonaregionalscale,suchasatthestate,orlocallevel.Suchananalysiscould
exploreanumberoffacetssuchas:
TheoptimalmixofrenewablestomeetastatelevelRPSgoal(suchasthe33%RPS
analysis for California described in Section 3.2 and Appendix B). This analysis could
identify different portfolios of optimal RE, based on a variety of metrics
(environmental, economic, land disturbance). The analysis could also identify
opportunities for collocating different types of renewables, and renewables with
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conventional generation, a strategy that several stakeholders identified as an
importantcomponent.
o An important component of the RPS analysis is the identification of
transmissionneedstotransportrenewableenergy.
The value of demand side technologies in meeting demand, offsetting supply side
investments,andintegratingrenewables.Animportantmessageofthispaperisthe
needforanintegratedassessmentofresourceneeds,basedonsupplyanddemand
side resources. Efficiency and permanent load shifting are important demand side
resources, each with different merits and challenges. The GoI has made
commitments to energyefficiency. This study could help identify optimal pathways
toreachingthosegoals.
An analysis of the value of various smart grid technologies across generation,
transmission and distribution and behind the meter. As described, some utilities
havebeguntoexplorethebenefitsofautomatedmetering(atthesubstationlevel)
foraddressespowertheftandloss,andinvestmentsinsynchrophasorsforimproved
reliability.Thistypeofstudywouldprovideaframeworkandtoolsforcommissions
andutilitiestoselectfromamongthemanytechnologyinvestmentsthatfallunder
thesmartgridumbrella.
Giventhemanypossiblefacetsofaregionalstudy,adeterminingfactorwouldbetheneeds
andinterestsofthespecificregionand/orlocality.
Exploringoffgridopportunities
The governmental/policy needs, infrastructure and net impacts specific to offgrid
development can be explored by building on the basic analytical framework proposed.
Explorationofoffgridissuesmayincludethefollowing:
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Developmentanddemonstrationoftoolstohelpidentifycosteffectiverenewables
options grid extension vs. minigrid vs. standalone household options, taking into
account renewable energy resources, population densities, distances from existing
distribution networks, transmission and distribution capacity. The type of outcome
could be the development of optimal geographic arrangement of these three
optionsforaregion.
Studiestofacilitatedevelopmentofpolicymeasuresdesignedtoincreaseaccessto
electricityandprovideastableinvestmentenvironmentinisolatedareasintheface
ofanexpandingnationalgrid.Onekeyissueisaddressingclearlyhowminigridscan
beaccommodatedintothenationalgridwhenitarrives.Thesestudiesmightinclude
review of technical standards for isolated generation, technical standards for mini
grid distribution systems, and clear guidelines for tariffs before and after the big
gridreachesthelittlegrid.
The likely stakeholders for this analysis are rural development authorities and nonprofits.
The purpose would be to help inform highlevel policy and technology design strategies,
fromwhichprojectleveldesigncouldbeconducted.
LongtermGHGemissionsmitigationopportunitiesforIndia
The Government of India (GoI) has identified environmental security, including climate
change, as important considerationsfor power sector development. An integrated analysis
of GHG emissions reduction opportunities, addressing renewables and energy efficiency
opportunitiesinthepowersector,andanalyzingemissionsreductionsneededinadditional
sectors(suchastransportation)wouldprovidetheGoIwithanobjective,analyticalbasisfor
makinglongterminvestmentsandpolicychoices.AnyanalysisofGHGemissionsreductions
must consider nonGHG goals, such as addressing theft, providing affordable electricity,
economic efficiency, energy security, and rural electrification. This analysis will situate
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strategies to reduce GHG emissions relative to other electricity goals, identifying possible
synergies,andthetimelinestoachievethesegoals.
The development of such a tool is as useful as the tool itself, as it reveals important
institutionalprocessesneededtosupportpublicparticipation.Thetooldevelopmentwould
build on the various analysis supported by the Best Practices Network, such as the grid
planning framework reported here and technical potential of renewables. The analytical
platform can be drawn from recently completed studies on long term GHG emissions
reductionsforCaliforniaandChina(analysisconductedbyE3).Therecentlycompleted2050
studyofEuropeisalsocomparablestudy.
Datarequirements
These studies have different data requirements. Studies would benefit from historical load
data and forecasts, dispatch scenarios, renewable resource availability and costs,
environmental criteria, forecast of existing generation retirements & planned new
conventional generation. The process itself of collecting information reveals important
insights.Lastly,itisstillvaluabletomoveforwardwithanalysisintheabsenceofidealdata
sets,astheanalysiscanrevealthehighvaluedatasets.

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2010,Minneapolis,MN,USA.

Bhushan,B.(2009).OperationalandCommercialIssuesforNuclear,Renewable,and
ConventionalPowerPlanstobeSetupinIndia.ChallengesofIncorporatingNewNuclear,Fossil,
andRenewableEnergyProjectsintotheIndianPowerSector.Washington,DC,Independent
PowerProducersAssociationofIndia(IPPAI).

Bhushan,B.(2005).AprimerontheAvailabilityBasedTariff.
http://www.srldc.org/Downloads/ABC%20Of%20ABT%20
%20A%20Primer%20On%20Availability%20Tariff.pdf

CaliforniaISO(2010).Integrationofrenewableresources.Operationalrequirementsand
generationfleetcapabilityat20%RPS.

CaliforniaIndependentSystemOperator(2011).Summaryofpreliminaryresultsof33%
renewableintegrationstudy2010CPUCLTPPDocketNo.R.1005006.

CenterforStudyofScience,TechnologyandPolicy(CSTEP),Infosys(2008).Technology:Enabling
thetransformationofpowerdistribution:Roadmapandreforms.AReportcommissionedbythe
GovernmentofIndia,MinistryofPower.

Deshmukh,R.,A.Gambhir,etal.(2010).NeedtoRealignIndia'sNationalSolarMission.
Economic&PoliticalWeeklyXLV(12):4150.

Friedman,H.,Sreedharan,P.(2010).WiringtheSmartGridforEnergySavings:Mechanismsand
PolicyConsiderations.2010ACEEESummerStudyonEnergyEfficiencyinBuildings,American
CouncilforEnergyEfficientEconomy,PacificGrove,CA.

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GEEnergy(2010).Westernwindandsolarintegrationstudy.PreparedfortheNational
RenewableEnergyLaboratory.

GovernmentofIndia(2006).IntegratedEnergyPolicy,ReportoftheExpertCommittee.New
Delhi,PlanningCommission,GovernmentofIndia.

GovernmentofIndia(2007).11
th
FiveYearPlan20072012.NewDelhi,PlanningCommission,
GovernmentofIndia.

KalkiCommunicationTechnologiesPrivateLimited.IntroductiontoAvailabilityBasedTariff.A
WhitePaper.Revision1.0Version1.0.
http://www.kalkitech.com/articles/IntroductionToABT.pdf

Khaparde,S.A.(2006).SolutionsforpowerqualityandgridintegrationofwindturbinesinIndia.
WindIndia2006.

Kumar,M.(2009).PowerTradingandOpenAccessinIndia.NationalPowerConference2009.
http://www.assocham.org/events/recent/event_387/Mahendra_Kr.ppt

MinistryofNewandRenewableEnergy.GuidelinesforGenerationBasedIncentive.Grid
InteractiveSolarPVPowerGenerationProjects(2008).

MinistryofPower.DescriptionofAvailabilityTariff(originaldateofpublicationnotknown;
lastaccessedDecember,2010).
http://www.powermin.nic.in/distribution/availability_based_tariff.htm

NationalAcademies(2010).Electricityfromrenewableresources.Status,prospects,and
impediments.AmericasEnergyFuturePanelonElectricityfromRenewableResources.

NationalActionPlanforEnergyEfficiency(2008).Understandingcosteffectivenessofenergy
efficiencyprograms:bestpractices,technicalmethods,andemergingissuesforpolicymakers.
EnergyandEnvironmentalEconomics,Inc.andRegulatoryAssistanceProject.
www.epa.gov/eeactionplan

NationalRenewableEnergyLaboratory(2010).IndianRenewableEnergyStatusReport.
BackgroundreportforDIREC2010.NREL/TP6A2048948.

Pandey,V.(2007)."ElectricityGridManagementAnOverview."2007AnnualIssueofthe
ElectricalIndiaVol47No11.

POWERGRID.(2010)PowerGridCorporationofIndiaLimited:AtAGlance.
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Prayas(2010).CleanEnergyRegulationandCivilSocietyinIndia:Needandchallengesto
effectiveParticipation.Pune,India,PrayasEnergyGroup.

Rao,N.,Sant,G.,Rajan,S.C.,Gambhir,A,Gadag,G(2009).AnoverviewofIndianEnergyTrends:
Lowcarbongrowthanddevelopmentchallenges.Pune,India,PrayasEnergyGroup.

Sooney,S.K.,Narasimhan,S.R.,Pandey,V.(2006).SignificanceofUnscheduledInterchange
MechanismintheIndianElectricitySupplyIndustry.ICPSODR2006,DepartmentofElectrical
Engineering,ITBHU.

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(personalcommunication)

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theIntegrationofRenewableResourcesatHighSystemPenetration.CaliforniaEnergy
Commission.Publicationnumber:CEC50099013.


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AppendixA.IndiasNationalSolar
Mission
TargetsofIndiasNationalSolarMission(NSM)

Phase I Phase II* Phase III* Cumulative


RE Commitment
Elements
2009 2010-13 2013-17 2017-22 2022
1. Grid-connected solar
(MW)
6.0 ***1,100 3,000 16,000 20,000
Includes:
Grid-connected PV: promoted using a 25 year feed-in Tariff of Rs 17.9/kWh, set by CERC
Solar thermal: promoted using a 25 year feed-in Tariff of 15.3/kWh, set by CERC
Rooftop PV (small subset of above): promoted using a Generation-Based Incentive (GBI), derived from a
national budget allocation
In practice, resources are being bundled with NTPC coal and sold to state distribution companies at
combined average price, higher cost seen by NVVN who buys at FIT
2. Off-grid distributed
solar plants (MW)
2.4 200 800 1,000 2,000
Includes:
Promoted using a 30% capital subsidy; 90% capital subsidy if remote areas
CEA assumes Rs 23 crore/MW
Assume this is substantially PV-diesel hybrid mini-grids
3. Solar thermal
collectors (million m
2
)
3.1 7 8 5 20
4. Off-grid Solar lighting
systems (million)
1.3 No phase-level targets 20
Includes:
Solar Home Lighting Systems: a subset are included in the remote village electrification programs of
MNRE of 10,000 villages (~1-2 million sys); these receive 90% capital subsidy; others are promoted via
market mechanisms including subsidies via low interest loans
5. Special Incentive
Package, PV
manufacturing capital
subsidy

*PhaseII&IIIareindicative;setbyMinistryofNewandRenewableEnergy(MNRE),TheGovernmentofIndia
sanctionedtargetsforPhase1;Phase2&3areindicative,dependentontheoutcomesofphase1,andprospectsat
thattime
**SolarlightingincludesSolarlanternsandsolarhomesystems
***NSMmentions1,0002,000MWforPhaseI
Source:Deshmukhetal.,2010


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AppendixB.Illustrativeexample
supplementaldetails
Thissectionincludesadditionaldetailsoftheanalyticalportionoftheillustrativeexample.
Assumptions
TableB1summariesthemajorassumptionsforeachdevelopmentoption.
TableB1.Illustrativeexamplekeyassumptions

Central solar PV Distributed solar
PV
Offgrid solar PV
RE System
Installed cost ($/kW) 5000 6000 6000
Lifetime (y) 20 20 20
Interest rate 10% 10% 10%
Capacity factor 22% 22% 22%
Total MW 20,000 2,000 2,000
Integration
Forecast error 9% 9% --
Operating criteria (enough
reserves x% of the time)
95% 95% --
Hours per day of increase 12 12 --
Fuel cost ($/MMBtu) 2 2 --
Heat rate (Btu/kWh) 10,000 10,000 --
kg CO2/MMBtu 93 93 --
Infrastructure components 5000 km of new TX
at $1M/km
Distribution feeder
upgrades
Case 1 & 2: backup
storage at $500/kWh, 4
hr duration
0.5 km per 200 kW
installation
Case 3: storage and
wiring costs
a

Baseline cases
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2011 EnergyandEnvironmentalEconomics,Inc 80Page 80
Central solar PV Distributed solar
PV
Offgrid solar PV
Case 1: Conventional fuel Coal fuel at Rs.1000/tonne, 14,000 Btu/lb,
10,000 kWh/Btu, 93 kg CO2/MMBtu
Diesel fuel costs: Rs.
30/L, 130,500
Btu/Gallon, 12,000
Btu/kWh
Case 2: Conventional fuel &
new generator
Coal fuel and new power plant at
$3,500/kW, similar financing factors as
RE, 80% capacity factor
Diesel fuel costs & gen
set at $1000/kW, 80%
capacity factor
Central/DG: Case 3a: low cost
of rationing (diesel backup)
Diesel backup generator fuel costs of Rs.
30/L, heat content of 130,500 Btu/Gallon,
heat rate 12,000 Btu/kWh
Grid extension and new
conventional power plant
b

Central/DG: Case 3b: high cost
of rationing (no service)
Loss of service value Rs. 50/kWh
a Based on village size of 150 homes/businesses, 2 km of low voltage distribution lines per village,
distributionwiringcosts$3,500/km,0.2kWaveragecapacityperhousehold.
bBasedon150home/smallbusiness,0.2kWaveragedemand/home,10kmdistancetogrid,highvoltage
line cost of $7000/km, $3500/km distribution line cost, 2.0 km of distribution line per village, 1
distributiontransformerpervillage,1meterperhouseholdat$100/meter.Newcoalpowerplantandfuel
costsareequivalenttobasecase2fortheCentralandDGgridconnectedcases.
These assumptions will vary based on the application and regional context; however, the
analyticalapproachisconsistentandcanbeexpandedtoanalyzearangeofimpactsacross
differentconditions.
Baselinedescriptions
The incremental impact of solar PV is compared against multiple baselines. The appendix
contains an additional baseline for the gridconnected cases in which the solar PV is
comparedtoacaseofnoservice.Forconvenience,weredescribethebaselines.
Case1:SolarPVdisplacesconventionalfuel.Thisscenarioassumesthattheexistingpower
system can meet electricity demand. Due to Indias chronic shortages, this may be an
optimisticassumptioninthenearandmidterm,butpossiblyaccurateinthelongterm.In
the centralized and DG cases, the offset fuel is coal; in the isolated minigrid case, thefuel
offsetisdiesel.
Case2:SolarPVdisplacesfuelandnewgenerationcapitalcosts.Inthisscenario,solarPV
offsets the need for developing a new coal plant in the centralized and DG options and a
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2011 EnergyandEnvironmentalEconomics,Inc 81Page 81
new diesel genset for rural minigrids. This scenario assumes that without the addition of
solarPV,newfossilfuelgenerationwouldbebuilttomeetthesamedemand.
Case3(a)and(b):Central&distributedgenerationsolarPVdisplacespowerrationing.In
case 3, the addition of solar PV leads to improved reliability and improved service of
demand. This scenario models the cost of rationing when the power system cannot meet
thedemandwithalowcostofrationingcasebasedonoperatingabackupdieselgenerator
(Case3a)andahighcostofrationingcasefromlossofserviceandunserveddemand(Case
3b).
Case 3: Offgrid solar PVdiesel minigrid displaces grid extension. The offgrid case 3
comparestheimpactsofanewsolarPVdieselminigridwithabasecasewherethegridis
extended.Thebasecasealsoassumesthatthegriddoesnothaveexistingcapacitytomeet
village demand and that a new conventional fuel power plant would be constructed with
thegridextension.
Results
FigureB1showstheeconomiccomparisonsbetweenthreesolarPVdevelopmentoptions:
centralizedgridconnectedsolar,decentralized/distributedgenerationgridconnectedsolar,
and offgrid solar development. The figure combines the analysis shown in Section 4 and
augments it with an additional baseline comparison in which electricity service is not
provided(highcostofrationing).
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FigureB1.Illustrativecalculation:costcomparisonbetweensolardevelopmentoptions

AnimportantobservationforthecentralanddistributedcasesisthatifsolarPVisdisplacing
anoservicescenario,theincrementalcostisnegative.Thatis,thenetsocietalbenefitof
reducingoutagesisgreaterthanthecostoftheresource.Thesescenarioscanbeviewedas
bookends from which additional scenarios can be derived through combinations (e.g.,
solarPVdisplacessomecoaluse,somedieseluseandsomelackofservice).
Table B2 shows the economic, environmental and reliability impacts of all three
developmentoptions.
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TableB2.Illustrativeexample:economic,environmentalandreliabilityimpactsofsolar
options

The negative environmental impactsof solar PV occur for thecase in which the solar PV is
comparedtoabaselineofnoservice.Thisresultreflectstheadditionalenergyrequiredfor
integrationpurposes.

CasesEvaluated
Case1:Displacedcoalfuel Case1:Minigridexists;displaceddieselfuel
Case2:Displacedcoalplantandfuel Case2:Displaceddieselfuel+geninstallation
Case3a:Displacedrationingassumingbackupdieselgeneration Case3:Noexistingservice;solar/dieselmini
Case3b:Displacedrationingassumingnoservice gridevaluatedagainstgridextension.
CENTRALGEN DISTRIBUTEDGEN OFFGRIDEXAMPLES
NetCostIncreaseofSolar $/MWhofSolar $/MWhofSolar $/MWhofSolar
Case1 320 $ 370 $ Case1:fuel 270 $
Case2 260 $ 310 $ Case2:fuel+gen 250 $
Case3a(reducebackupdiesel) 110 $ 160 $ Case3:gridext. 440 $
Case3b(increaseservice) (730) $ (690) $
NetCO2SavingsofSolar
tonnesCO2/MWh
Solar
tonnesCO2/MWh
ofSolar
tonnesCO2/MWhof
Solar
Case1 0.6 0.6 Case1:fuel 0.9
Case2 0.6 0.6 Case2:fuel+gen 0.9
Case3a(reducebackupdiesel) 0.6 0.6 Case3:gridext. 0.9
Case3b(increaseservice) (0.3) (0.3)
AdditionalEnergyDelivered
MWh
served/MWhSolar
MWhserved
/MWhSolar
MWhserved/MWh
Solar
Case1 unchanged unchanged Case1:fuel unchanged
Case2 unchanged unchanged Case2:fuel+gen unchanged
Case3a(reducebackupdiesel) 1 1 Case3:gridext. unchanged
Case3b(increaseservice) 1 1
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AppendixC.E3projectsummaries
ChinaGHGandEnergyEfficiencyCalculators
Keyobjective
Develop analytical tools to support transparent decision making on clean energy
policy decisions specifically on greenhouse gas reduction (GHG) emissions
strategiesandenergyefficiencyforChinaspowersector
Developatooltoestimatethebenefitsandcostsofenergyefficiency,specificallyto
provideindustrialpowerconsumersamethodforvaluingenergyefficiency
Methodology&framework
Twotypesofanalyticaltoolsweredeveloped
Cost and benefit analysis (using a spreadsheet tool) of 18 different GHG mitigation
options
Costandbenefitanalysis(usingaspreadsheet)ofenergyefficiency
KeyInsights
Some measures were already under way, but a systematic approach or comparing
andprioritizingpolicyoptionsisneeded;aplanningtoolforachievingthisisneeded.
Information sometimes exists but is not publicly available because of incentive
conflicts;ontheotherhand,informationmayseemtobeunavailablebecausethere
isnoincentiveforanybodytocollectit.
Informationthatisusefulforpolicyanalysisoftenhastobecreated.
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Process of tool development can reveal where institutions, data and processes will
need to come together to do more integrated analysis; process also reveals
challengesofengagingstakeholders
Stakeholderprocess
WorkedcloselywithcounterpartsinChina(SERCs)
The energy efficiency tool was part of a multistakeholder training process on
energyefficiency
OptimalresourceportfoliosforCalifornias33%RPS
Keyobjective:
Develop a tool to construct renewable resource portfolios for meeting Californias
33% RPS based ondifferent weightings of criteria to be used in long termresource
procurementplanning
Methodology&framework
CompiledadatabaseofpotentialrenewableresourcesavailabletomeetCalifornias
RPSgoal
Evaluated resource on the criteria of cost, environmental impacts, commercial
interest,andtiming
Using scenarios of different criteria weighting, ranked resources and selected them
forthescenarioportfolios
Keyinsights
TherearemultiplepathsforachievingRPStargets
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Cost is not the only determinant of renewable development; policy considerations
canplayalargeroleindecidingwhatgetsdevelopedandwhere
Stakeholderprocess:
Tool was developed in a multistakeholder public process conducted by the
CaliforniaPublicUtilitiesCommission(CPUC)
Stakeholderscanusethetooltodeveloptheirownrenewableportfolios
PortfoliosarenowusedintheCPUCslongtermprocurementplanproceeding
MeetingCaliforniasLongtermGreenhouseGas
ReductionGoals,A2050PerspectiveintheEnergy
Sector
Keyobjective:
Evaluate in physical terms the infrastructure changes that will be necessary for
California to meet the deep greenhouse gas reductions of 80 percent below 1990
levels by 2050 a level consistent with a State Executive Order andthe IPCC
emission trajectory for a 450 ppm CO
2
e stabilization path that avoids dangerous
anthropogenicinterference
Methodology&framework
Development of a physical infrastructure stockrollover methodology to simulate
energy demand and the composition of infrastructure turnover rates, retirements,
andtechnologyandefficiencyimprovementsthatarepossible,including:
Building a 2050 emissions baseline from government forecasts of population and
gross state product, combined with regressionbased infrastructure characteristics
andemissionsintensities
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Ensuring that electricity supply scenarios meet the technical requirements for
maintaining reliable service, via an electricity system dispatch algorithm that tests
gridoperability
Constrainingtechnologicalprogressandratesofintroductionbyphysicalfeasibility,
resourceavailability,learningcurves,andhistoricaluptakerates
Usingscenariostodevelopelectricitygenerationscenariosandmitigationoptionsin
demandsectors(residential,commercial,industrial,transportation)andnonenergy
CO2emissionstomeetthetarget
Keyinsights
Reaching 2050 level emissions reductions requires 5 combined efforts:
unprecedented levels of energy efficiency, nichelevel uses of highvalue, low
Carbon biofuels, massive decarbonization of the electricity sector, near complete
electrificationoftransportationandotherfueluses,and80%reductionofnonCO2
greenhousegasesandotherGHGsources.
Most importantly, the highest technically feasible levels of energy efficiency and
decarbonized energy supply alone are not sufficient to achieve the goal, and
meeting the target requires widespread electrification of transportation and other
sectors.
Electricity becomes the dominant form of energy supply, posing unique
opportunities and challenges for economic growth and climate policy. The
transformation demands technologies that are not yet commercialized and an
unprecedented degree of publicprivate and interindustry coordination of
investment,technologydevelopment,andinfrastructuredeployment.
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Stakeholderprocess
Theframeworkcanbeusedtoasabasisofengenderingamorerigorous,longterm
view of the changes required now to achieve longterm transformations, starting
fromnow
NonWiresAlternativeStudyforBonnevillePower
Administration
Keyobjective:
Explore if demand side resources (energy efficiency, demand response, distributed
generation)candefertheneedforanewtransmissionlines;onerunningnorthand
southalongtheI5corridor(I5CorridorReinforcement)andasmalloneinIdaho
(HooperSprings).
Methodologyandframework:
Overall framework was an assessment of the magnitude of the transmission
problemalongwithananalysisofdistributedresources
The transmission problem was estimated using load flow modeling and an
estimation of hours when the loads at substations and transmission lines are
expectedtoexceedoperatingcapacities.
The value of deferring the transmission line is estimated and compared with the
costeffectivenessofdistributedresources
Thesetypesofstudiestypicallyrelyonpubliclyavailabledatasets
Keyinsights:
Projectisinprocess,sospecificresultscannotbeshared
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Stakeholderprocess:
The results will be presented to the public through the publication of the
EnvironmentalImpactStatement.
PermanentLoadShiftingstudyinCalifornia
Keyobjective
Assess the market for permanent load shifting technologies (PLS) and the cost
effectivenessofPLSinCalifornia
Technologies include thermal storage, process shifting and nonthermal electrical
andmechanicalstorage
Akeydriverwasrenewablesintegration,specificallytoseetheavoidedcostbenefits
fromPLSbasedontheovergenerationofwindthatPLScanabsorb,andthebenefits
fromprovidingancillaryservices
Methodology&framework
Qualitative market assessment through review of utility programs, interviews with
utilities,programproviders,andtechnologycommunity
CosteffectivenessanalysisofPLS,includingestimationoftheavoidedcostbenefits,
participant and nonparticipant benefits, rate payer neutral incentive levels;
incentive levels that would be generate 3 and 5 year paybacks to spur market
investment
Methodologyincludedtwolevelsofanalysis:technologyneutralscenarioanalysisto
assessgenericvaluefromloadshifting;evaluationofspecificPLScasestudiesbased
onsimulationanddatafromrealinstallations
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Tools included a spreadsheet analysis that drew from publicly available avoided
costsandstakeholderfeedbackontechnologyperformance.
KeyInsights
ValuefromPLSis~$500$2000/peakkW;ratepayerneutralincentivesrangedfrom
~$100800/peakkW;energyefficiencydrivesthevalueinthewintermonths,while
capacityvalue(T&Dandgeneration)isconcentratedinthesummermonths
ValueisconstrainedbythefactthatCaliforniahasexcesscapacity,ontheorderof~
30%reservemargins(comparedtoarequirementof17%).
Maturetechnologies,especiallymediumandlargethermalenergystoragearemore
cost effective; controls enabled thermal storage, such as warehouse precooling are
verycosteffective.
Emerging technologies such as batteries and thermal storage for small commercial
airconditioningarelesscosteffective.
Low hanging fruit is likely to lie in process shifting technologies (warehouse
precooling is a hybrid process shifting and thermal storage example). Additional
examples may include charging warehouse forklifts at night rather than during the
day;shiftingagriculturalpumpingtonight
Segmentation of the market may be necessary if the goal is massive market
expansion because of the diversity in technology characteristics (costs, benefits,
performance)
Incentivelevelsthatwouldgeneratea35yearpaybackweregenerallyhigherthan
realutilityprogramincentivelevels
Detailsoftheprogramdesignareveryimportanttoavoidgaming;totheextentthe
tariffcanserveastheperformancemechanism,thebetter.
Load shifting can be energy efficient in some cases, especially for welldesigned
thermal energy storage; best practices in the HVAC industry are not very energy
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efficient and with systemsoriented engineering, TES can deliver systems that are
upwardsof4050%moreefficient.
The qualitative market assessment revealed several noneconomic barriers that
need to be addressed, such as lack of education and training across the PLS supply
chain(architects,engineers,contractors,operators,utilityprogramadministrators).
Manyofthesebarriersarethesamebarriersthatfaceenergyefficiency.
Among the consensus feedback provided by stakeholders, the desire for a utility
tariff that has certainty and a significant TOU differential (between peak and off
peak) was cited as a key policy lever that could stimulate investment in the PLS
market.
RelevancetoIndia
Value of PLS increases as capacity reserve margin decreases; value of PLS for
renewablesintegrationincreasesifrenewablesaregeneratedduringnoncoincident
periods;valueincreasesasdemandbecomesmorepeaky
Potential for PLS is large and increases for thermal energy storage increases as air
conditioningloadsincrease
Many systems are much cheaper if done at the new construction or expansion
phases;canhaveasignificantmarketimpactthroughnewconstructionifthereare
lotsofbuildingsbeingbuilt
Incentives can be offered through pricing, upfront incentives or performance
incentives(ofwhichpricingcanbeasubset).AMIfacilitatestheimplementationof
TOUforcommercialandindustrialsectors
Almost all of these conditions are met in India: the value determined in the
CaliforniastudyislikelytobefarshortofthevalueofPLSinIndia
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Stakeholderprocess
Interviewsofkeystakeholders
Generationofpubliclyavailablecosteffectivenesstools
Twopublicworkshopstodiscussmethodologyandresults
ReportissubmittedtotheCaliforniaPublicUtilitiesCommissionandpostedonthe
website,alongwithotherdocuments
CAISORevisedTransmissionPlanningProcess
Keyobjective:
Developarevisedtransmissionplanningprocessformeetingthestates33%RPS
obligation.
Develop a more anticipatory framework for planning, which identifies
transmissionneededtomeetCaliforniaspolicygoals
13
.
Methodologyandframework:
Scenario approach, examining different generation portfolios to evaluate the
sufficiency of the states planned transmission lines and any new lines that
wouldneedtobebuilttomeetthegoal.
Uses existing proposed generation projects (in the transmission queue) and
evaluateshowtransmissioncouldbedevelopedtomeetthegoal.

13
Ananticipatoryplanningframeworkissomethingthatisakeycharacteristicofmanyofthemost
successfulrenewablesplanningjurisdictions;inthiscaseitmeansconsidering(andbuilding)
transmissioninadvanceofthegenerationprojectsbeingbuilt(WorldBankandE32010)
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Incorporatesparametersforcommercialinterest,environmentalciting,regional
sources, and scenarios for highimports versus high instate generation and/or
distributed,smallergenerationoptions.
Keyinsights:
Offers a robust assessment of transmission needs under a range of scenarios;
Category 1 projects: needed under a range of scenarios, should proceed with
development and permitting without delay; Category 2 projects: needed under at
least one future scenario, but are not sufficiently supported to proceed
immediately. They are identified for advance notice. Net result identifies new
transmissionlines,reconductorings,and6reliabilityprojectstomaintainstandards.
Stakeholderprocess:
Rationalizedwiththeplanningframeworksofotherstateagencies,andtheanalysis
isdesignedtobetransparentandavailabletothepublic.
CPUCLongTermProcurementPlanning
Keyobjective:
Assisted the California Public Utilities Commission in developing a longterm
procurementplanningprocess(LTPP)
14
.
Developedintegratedapproachestoprocurementandresourceplanningthatwould
helpmaintainreasonableratesforconsumerswiththeonsetofREandGHGgoals.

14
LTPPinitiallyemergedfromthelongtermcontractsnegotiatedintheaftermathoftheCaliforniaEnergyCrisis.Itis
amorestreamlinedprocurementandapprovalsystembasedonmultiyearplansratherthanregulatoryapprovalona
casebycasebasis.Ithasbeenadvancedintoframeworkforbroadergoals.
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Ensure the Commission receives highquality information from investor owned
utilities (IOUs), so that the Commission can make informed decisions inthe 2010
procurementrelatedproceedings
Methodologyandframework:
Developed planning standards for four renewable energy scenarios that IOUs must
include in their LTPPs, including: a cost constrained, time constrained,
environmentallyconstrained,andtrajectoryscenario.
Stakeholderprocess:
Coordinates among the Commissions resourcerelated proceedings and IOUs;
explores possible linkages between the LTPP proceeding and other Commission
proceedingsandexternalprocesses.
WesternElectricityIndustryLeaders(WEIL)analysis
Keyobjective:
TostudyhighprioritytransmissionprojectsinlightofnewRPSandGHGgoals
Methodologyandframework:
Transparentspreadsheetmodel
Estimated the cost of procuring energy from local sources and then estimated the
changeinprocurementcostsbyaddinglonglinetransmission
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Keyinsights:
study found that policies that favored renewable resources could increase the cost
effectiveness of many longline transmission proposals and that new multistate
linescouldhelphighloadstatesmeetpolicygoalsmoreeffectively
Stakeholderprocess:
Stakeholders helped develop scenarios and inputs for the modeling exercise and
alsoprovidedfeedbackthroughouttheanalysisperiod.
Phasormeasurementunitanalysis
Keyobjective:
Estimatethebenefitsasynchrophasorprogram(SPP)wouldhaveintheWECC
Methodologyandframework:
UsefourcasestudiestohighlightthebenefitsofanSPP
Case studies highlight improving reliability, operating efficiency, asset utilization,
systemplanning,andenvironmentalimpacts
Keyinsights:
Forthereliabilitycalculation,SPPwouldbeconservativelyexpectedtopreventtwo
majoroutages
Benefit of avoiding two outages affecting 500,000 customers each to range from
$1.2billionto$3.5billionover40years,dependingonwhattimewithinthe40year
periodtheavoidedoutagesoccur
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WesternElectricityCoordinatingCouncil(WECC)energy
imbalancemarketbenefitstudy
Keyobjective:
Estimate the potential benefits to WECC members of adopting a centralized 5
minute energy imbalance market throughout North Americas Western
Interconnection to improve the efficiency and coordination of generator dispatch
decisions.
Methodologyandframework:
Compare the total operational cost of WECCwide generator dispatch that results
under two production simulation scenarios: (1) a Benchmark Case that
approximates existing operations by modeling friction to transactions between
neighboring balancing authorities, and (2) an Energy Imbalance Market (EIM) Case
that models more integrated operations by reducing the friction that can impede
interzonalmarkettransactions.
Use ABBs Gridview production simulation model, a leastcost, securityconstrained
unitcommitmentandeconomicdispatchprogramthatmodelseachbusornodein
the WECC to createboth scenariosfor 2006 and 2020 based on historicaldata and
WECCsTEPPCdatabaseofprojectedloads,transmission,andgeneratorbuildout.
Estimate the total WECCwide benefits of adopting an EIM case as the savings in
productioncostsundertheEIMcasecomparedtothoseintheBenchmarkCase.
OngoingworkwilltestsensitivitytospecificdetailsofEIMmarketdesignandother
parametersincludinglevelofefficiencyofunitcommitment,efficiencyofoperating
reserveprocurement,windintegrationandloadfollowing,andfuelprices.
ElectricitygridevolutioninIndia

2011 EnergyandEnvironmentalEconomics,Inc 97Page 97

Keyinsights:
Work is currently ongoing. E3 has identified a range of positive benefits from EIM
market that could depend on specifics characteristics of market design and input
parameterspecification.
Stakeholderprocess:
Abroadstakeholdergroupandtechnicaltaskforcearehelpingadviseondesignand
inputsdecisionsforthemodelingscenariosandalsoprovidingfeedbackthroughout
theanalysisperiodduringaseriesofmeetingsandconferencecalls.

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