Capacity Addition Planning

in the Power Sector

Shantanu Dixit
www.prayaspune.org
shantanu@prayaspune.org
 Interaction plan

 Capacity addition plans – e.g Konkan region

 Climate friendly, economic options for meeting
energy services needs
 India’s current capacity addition plans
 Key shortcomings and implications for climate

2 Prayas
 ~4000 MW of
existing generation
in Konkan

~19,000 MW of new
generation planned in
the Konkan strip of
~7,600 MW of new Maharashtra
generation planned in
Shahapur Taluka, Dist.
Raigadh

~6,600 MW of new
generation planned
in Ratnagiri district
Raigadh : 9,558 km²
Ratnagiri : 8,208 km²
Sindhudurg : 5207 km²
 Interaction plan

 Capacity addition plans – e.g Konkan region

 Climate friendly, economic options for
meeting energy services needs
 India’s current capacity addition plans
 Key shortcomings and implications for climate

4 Prayas
 Integrated Resource Planning: Case
studies from India

 DEFENDUS (Karnataka 1990)

– Development Focused End Use oriented Scenario
Amulya Kumar N. Reddy et.al.

 Least Cost Plan (Maharashtra 1994)

– Prayas Energy Group

5 Prayas
 Typical Energy Saving Potential
(based on Karnataka IRP by Reddy et. Al.)

 End use efficiency savings

– Industry modernisation–efficient drives etc: 15-25%
– CFL for lighting : 14-58%
– Solar Water heaters: 28%
– LPG instead of electric stoves: 18%
– Frictionless foot-valves and HDPE piping for
agirculture pumps: 30%

6 Prayas
 Conclusions of Integrated Plan for
Maharashtra (Prayas 1993)

20,000

Ind.Co-gen
Gasifier
15,000
Small hydro
Rs/ KW (Bus-bar) /Yr

Suger Co-gen
CFL
Loadshift
10,000 CL-light
T&D impro.
SWH
IPS
5,000 Refri.
HT/LT industry

0
0% 20% 40% 60% 80% 100%

7 PLFn (at Bus-bar)

Prayas
 Typical Benefits of IRP

 Typically: efficiency can meet 25-40% and

renewable generation can meet 20-25% of
incremental needs at lower economic costs.
 Maharashtra IRP – while meeting same level of
energy services
– Financial saving - ~ 33%
– Reduction in incremental fossil fuel consumption - ~
55%

8 Prayas
 Interaction plan

 Capacity addition plans – e.g Konkan region

 Climate friendly, economic options for meeting
energy services needs
 India’s current capacity addition plans
 Key shortcomings and implications for climate

9 Prayas
 Capacity Addition: 11th Plan targets

 Projection to add ~ 600 GW in next 25 years

 11th Plan (2007-12) - 68869 MW
 48010 Coal & Lignite, 15585 Hydro, 3160 Nuclear, 2114
Gas
 53% Central, 33% State, 14 Private
 + 13,500 MW Renewable, Captive …
 Transmission & Distribution to carry this power

10 Prayas
 Drivers

 Growing economy
– GDP growth from ~ 5 - 6% to 8 - 9%
 Continuing shortages
– Peak shortage - ~ 12% and energy shortage ~ 8%
– Only 40-50% of targets met in 8,9,10th plans
 Need for greater reliability
– Target of 5% spinning reserves
 Need to electrify all houses
–44% houses do not have electricity
 About 12000 MW of capacity addition

11 Prayas
 Approach towards meeting energy
needs

 “We do not enjoy the luxury of an either-or choice: India

needs energy from all known and likely sources.” – Prime
Minister of India (Speech at Tarapur Automic Station 31st August 2007, -
http://www.rediff.com/news/2007/aug/31guest.htm)

 Ambitious projections for 10 years

– 100,000 MW Thermal
– 50,000 MW Hydro
– 11,000 MW Nuclear
 Expanding fuel supply and sources

12 Prayas
 Policy changes to meet capacity
addition needs

 De-licensing of generation projects

 Merchant plants
 Captive power plants
 Ultra mega power plants

 Encourage capacity addition through all means

13 Prayas
 Ultra Mega Power Projects

 4000 MW super critical coal thermal plants (5 – 7 plants

expected)
 Federal government lead
– Fiscal incentives, conducting competitive bidding, helped evolve
power purchase agreement and payment security mechanism
 Encouraging results for first two projects
– Half a dozen bids for each project
– Highly competitive tariff
 US cents 2.7 / kWh for pithead project and US cents 5 / kWh for
imported coal based project (levalised tariff)
– Both projects won by private sector

14 Prayas
 Ultra Mega Power Projects

 Key Features of UMPP Competitive Bidding Process

– Transparent process
 Well laid out procedures and timetable
 Anonymous comparison of all bids to be made public
 All contracts signed with winning bidder (including PPA) will be
public
– No uncertainty and little scope for post bid negotiations
 All required inputs and clearances to be provided by special
purpose vehicle (govt. owned shell company)
 Project contract formats finalized before bidding
 Simple criteria for selection of winner

15 Prayas
 Interaction plan

 Capacity addition plans – e.g Konkan region

 Climate friendly, economic options for meeting
energy services needs
 India’s current capacity addition plans
 Key shortcomings and implications for
climate

16 Prayas
 Capacity addition planning – Oblivious
of key challenges

 Significant over projection

Cap. Add. (MW) Peak Shortage (%)

5 year planProjected Actual Projected Actual
8 30540 16420 21% 18%
9 40250 19015 12% 13%
10 41110 19010 12% 14%

 Even though capacity addition is 40 – 50% less,

shortages have reduced or increased very moderately

17 Prayas
 Capacity addition planning – Oblivious
of key challenges

 Economic implications
 11th five yr. plan
– Projected investment need – US $ 255 Billion
 Fixed cost of US cents 15 / unit of incremental
sales!
(v/s current total tariff of around – US cents 8 / unit)

18 Prayas
 Social and Environmental issues -1

 Electricity Policy
– Environment
 Appropriate advance action through EIA and Environment Action Program
 Streamline procedures including setting up of Land Bank and Forest Bank
 Coal washeries, full compliance with environmental norms
– Demand Side Management, Energy Conservation
 Hydro Policy
– Proper implementation of National Policy on Rehabilitation and
Resettlement to ensure that the concerns of project-affected families
are addressed adequately.
– Adequate safeguards for environmental protection with suitable
mechanism for monitoring of implementation of Environmental Action
Plan and R&R Schemes

19 Prayas
 Environment issues -2
 Plans have little details on environment & social impacts
– Emphasis on ‘speeding up’ clearance of environmental ‘obstacles’
– No analysis on: How much land required? How many people
displaced? Livelihood impact?
– No focus on enhancing the effectiveness through democratisation
(participatory R&R mention in Transmission Chapter of11th Plan)

20 Prayas
 Salient observations

 Over projection of demand and poor

implementation performance
 Shortage psychosis and exaggerated capacity
addition plans
 Integrated resource planning is avoided
 Climate friendly options, even though
economical, are ignored

21 Prayas
 Lesson

To address climate change issues, improvement

in national level planning process is critical.

22 Prayas
The vicious circle
 India’s Capacity Addition Plans

Year Peak Inst. Remarks

Demand Cap
GW GW
2007 104 132 14% peak shortage; Coal (54%),Hydro
(26),Gas (11), Nuclear(3), Renewable
(6)
2012 158 220
2022 323 425
2032 592 778 ~Coal (50%),Hydro (29),Gas (6),
Nuclear(12), Renewable (5)
Source: Integrated Energy Policy, 8% GDP Growth Scenario
24 Prayas