long-term power options for india: modelling and policy analysis p.r. shukla
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Long-term Power Options for India:Modelling and Policy Analysis
P.R. Shukla
Indian Power Sector Dynamics
Government Ownership
Tariff Distortions
Demand - Supply Disequilibrium
High Reliance on Domestic Coal
Restricted Primary Energy Market
Cautious Reform and Restructuring
Indian Power SectorOverview
0
20
40
60
80
100
120
1980 1985 1990 1995
Year
Cap
acit
y
Coal Diesel+Wind Gas Hydro Nuclear
Power Capacity in India (GW)
Power Generation Capacity
Coal Oil Gas Hydro Nuclear Renewables
GW
0
20
40
60
80
100
1970 1975 1980 1985 1990 1995
Plant Ownership and Performance
Plant Load Factor : 1996(Thermal Power Plants)
60.3
71 71.2
64.4
0
20
40
60
80
SEB’s CENTRAL PRIVATE OTHERS
Ownership affects Performance
SEB Plants have remained inefficient
Sectoral Electricity Consumption
(GWh)
19801985
1990
1995
0
50
100
150
200
250 AgricultureRailwayIndustrialCommercialDomestic
Electricity Consumption has grown at 8 % in past few years
Share of Agriculture has reached 30%
Power Gap and T&D Losses (1995)
0
5
10
15
20
25
%
Ener
gyD
efic
it
Peak
Def
icit
T&D
Loss
es
Rising Peak Deficit is major problem
Peak Deficit varies across zones
Inefficient technologies and pilferage cause high T&D Losses
Electricity Cost & Tariff
1990 19911992
19931994
19951996
1997
Cost
0
50
100
150
200
250
Tariff
1996-97
(Paise/kwh)
Cost - Tariff Gap: 24%
Subsidy in 1997 (Rs. Billion)
0
20
40
60
80
100
120
140
160
180
Domestic Agricultural Cross Subsidy Net Subsidy
80% Subsidy to farmers
20% to Households (mainly Rural)
Industries Cross Subsidizes
> 1 percent of GDP
Share of Power Sector in Total Emissions (%)
Carbon EmissionsN2O / NOX/ SO2
Emissions
0
20
40
60
1990 19950
20
40
60
80
N20 NOX SO2
1990
1995
0
100
200
300
400
500
1975 1980 1985 1990 1995
Ind
ex (
1975
= 1
00)
GDP Energy Power
Energy and Power in Indian Economy
Indian Power SectorInstitutional Structure
Power Sector Institutions (Pre 1990)
Institution Functions
CEA 1950 Arbitration, Advice, Power Policy
CPRI 1960 Power Engineering Research
Equipment Testing and Certification
REC 1969 Finance and Planning for Rural Electrification
MOEF 1974 Policy, Legislation
NTPC 1975 Thermal Power Generation
NHPC 1975 Hydro Power Generation
PFC 1986 Finance for Power Projects, T&D and Renovation
PGCIL 1989 Regional Grid Monitoring, Transfer of Power, Transmission Line Construction
EMC 1989 Energy Conservation Information, Research,Training
Central Power Organization
NJPC NTPCNHPC
NEEPCO
PLANNING COMMISSION
NRB AEC NPC
MINISTRYOF POWER
STATE GOVERNMENT
DEPT. OFATOMICENERGY
NATIONALDEVELOPMENT
COUNCIL
MNES
ENERGYMANAGEMENT
CENTRE
NPTICPRI
GOVERNMENTOF INDIA
PFCREC
PGCILTHDC
CENTRALELECTRICITYAUTHORITY
DVCBBMB
CERC
State Power Organization
PRIVATESECTOR
LICENSEES
STATEELECTRICITY
BOARDS
STATEELECTRICITY
DEPARTMENTS
STATEELECTRICITYINSPECTION
ORGANISATION
MINISTRY ORDEPARTMENT OF
POWER
STATEGOVERNMENT
SERC
Power Sector ReformsAn Overview
Why Reforms? The SymptomsDemand-Supply Energy GapPeak Power GapSystem InefficienciesFinancial LossesVintage TechnologyPoor Supply QualityEnvironmental Quality
What reforms aim at? Remove Barriers and reduce
Risk Transaction Costs
Enhance Technology Choices Enhance Financial Flows Enhance Efficiency
Competition
Early Reforms
Corporatization of SEBs
Privatization
Unbundling
Regulatory Changes
Slow Changing Reality
Weak Electricity/ Energy Market
Weak Grassroots Democracy
Strong Urban-Rural Divide
Antiquated-Inverse Bureaucracy
Corruption (High Transaction Costs)
Regional Conflicts
Future Power Sector Trends: Model Analysis
Economic and Environmental Power Planning Software
(EEPS)
User Inputs Exogenous
Power Plant Characteristics(cost, performance,
emission control)
Transmission GridCharacteristics(cost, geometry,
performance)
EnvironmentalDamage (Optional)
(emission externalities)
Existing Power System(capacity, generation,emissions, plants under
construction)
LevelizedCost
Calculations
Least-CostOptimizationof New Power
Plants
Power Demand
Fuel Availability(coal, gas, oil)
Fuel Characteristics(cost, heat value,
composition) Emission Caps orLimitations
Renewable EnergyAvailability
( hydro, wind, bio)
EquipmentManufacturing
and ImportLimitations
OUTPUT:Power Plant
Capacity Mix,Emissions Profile,
Total Costs
EEPS: Model Structure
EEPS
Excel spreadsheet program using Solver based on Simplex linear programming algorithm
Driven by exogenous electricity demand assumptions
Analysis over 20 years at 5 year time steps Spread- National as well as regional analysis Determination of power supply options
needed to meet future electricity demand.
Minimization of present value of system costs.
Costs- Capital, O&M, Fuel and Environmental costs
Levelized cost determination of power generation technologies
Fourteen power generation technologies are modeled
EEPS
Technology choices constrained by fuel availability and price penetration rate of technologies emission standards/caps
Regional analysis in a national model possible to account for differences in
availability, quality and cost of energy supply energy demand pattern technology characteristics
EEPS
Analysis with EEPS
Power Capacity: Scenario Results (2015)
0 50 100 150 200 250
Baseline
Reform
Efficiency
Environment
SusDev
GW
Coal Gas Oil Nuclear Hydro Renewables
Investment in Power Generation
0
3
6
9
12
15
2000 2005 2010 2015
$ B
illi
on
S.D. A.T. Efficiency
Base Env Reforms
Marginal Cost of Electricity Generation
4
5
6
2000 2005 2010 2015
Years
Co
sts
(c/k
Wh
r)
Ad. Tech Efficiency BaseEnv SusDev Reforms
Carbon Emissions
50
100
150
200
250
1995 2000 2005 2010 2015
Mil
lion
Ton
s
S.D. A.T. EfficiencyBase Env Reforms
Sulfur Dioxide Emissions
0
1.5
3
4.5
6
1995 2000 2005 2010 2015
Mil
lion
Ton
s
A.T. Efficiency S.D.
Env Reforms Base
Power Generation Capacity (Future)
0
50
100
150
200
250
300
1995 2000 2005 2010 2015
GW
Coal Oil Gas Hydro Nuclear Renewables
High economic growth can be less polluting.
Natural gas is a robust option for power.
Local pollution controls penetrate clean coal technologies, rather than substitute coal.
Capacity building for renewables is a good hedging strategy, but investing is not.
Regional co-operation for energy and power are effective economic and environmental strategies.
Policy Insights
Conclusions1. Power Sector has substantial mitigation potential.
Carbon Saving (2000 - 2015)
2. Local environmental policies have little carbon mitigation co-benefits.
3. Climate Change Mitigation policies for the Indian Power sector will have to be crafted for own sake.
0 200 400 600
Reforms
DemEff
AdTec
SusDev
India Power Sector:Analysis with
MARKAL Model
Electricity Capacity : BAU Scenario
From 1995-2035
Capacity Grows 4 times
Coal remains mainstay
Gas Penetrates
Hydro Triples
Nuclear and Renewable remain marginal
0
50
100
150
200
250
300
350
400
450
1995 2005 2015 2025 2035
Gig
a W
atts
RenewableNuclearHydroGasCoal
Electricity Price under Mitigation Scenarios
Average LRMC
0
1
2
3
4
5
6
7
8
9
10
1995 2005 2015 2025 2035
ce
nts
pe
r k
Wh
Reference 1 BT (5%) 2 BT (10%)
3 BT (15%) 4 BT (20%) 5 BT (25%)
Electricity Price Rises with Mitigation
In 2035, price can more than double
Reference 1 BT (5%) 2 BT (10%)3 BT (15%) 4 BT (20%) 5 BT (25%)
Electricity Price under Mitigation Scenarios
Peak LRMC
0
3
6
9
12
15
1995 2005 2015 2025 2035
cen
ts p
er k
Wh
Off-Peak LRMC
0
3
6
9
12
15
1995 2005 2015 2025 2035ce
nts
per
kW
h
Renewable Electricity Capacity
0
20
40
60
80
100
120
1995 2005 2015 2025 2035
Gig
a W
att
Share of Renewable
0
5
10
15
20
25
30
1995 2005 2015 2025 2035
Per
cen
tag
e
Reference 5 % Mitigation15 % Mitigation 25 % Mitigation
Implications of Mitigation TargetsRenewable Electricity
Insights from Scenario Analysis
Energy Supply/ Technology
Domestic coal will be the mainstay
Natural Gas is the robust option
Learning renewables is good hedging option, but high investment is not
Environment
Local Pollution Controls penetrate Clean Coal Technologies rather than substitute Coal
Global Climate Change policies can significantly alter the Indian Power Sector dynamics
Market Reforms Market reforms can save a billion $ each
year in the medium run, but can increase short run electricity cost
In short run, technology push policies are more effective than market reforms
High economic growth with market reform can be less polluting
Regional Co-operation
Regional co-operation for energy and power are effective economic and environmental strategies
Grid Integration and Regional Co-operation
Reduction in capacity requirements-6% in 2015
Investment savings - 14.5 billion $ between 2000 and 2015
Progressive reductions in marginal electricity costs
2005 2015
0
1.5
3
4.5
6
Red
uct
ion
(%)
Year
Marginal Cost Reduction
Grid Integration
Grid Integration + Regional Co-operation
Grid Integration and Regional Co-operation
CarbonSOX
0.0
1.5
3.0
4.5
6.0
7.5
9.0
10.5
Red
uct
ion
(%
)
Year
Emissions Reduction (2015)
Grid Integration
Grid Integration + Regional Co-operation
Increased share of gas and hydro2% increase in gas
share in 20155% increase in hydro
share in 2015
Significant reduction in emissions
Proposed Oil & Gas Import Routes and Gas Pipelines in India
RISK: Political Uncertainties
FACTS: Turkmenistan to N. India 20 BCum, Inv. $2 Billion Piped Gas Price : $3.5/GJ LNG Price : $5/GJ Dom. Coal Price : $1-2/GJ Imp. Coal Price: $2-3/GJ
RISK COST: $1.5 Billion/ year
Proposed Oil & Gas Import Routes
Proposed Oil & Gas Import Routes