India’s energy basket, as indicated in figure 4 and 5, indicates heavy dependence on thermal power for production of electricity. Figure 4 - Electricity Generation Source: World

Managing Power: Smart Governance Through Technology

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The Associated Chambers of Commerceand Industry of IndiaD. S. RawatSecretary General5, Sardar Patel Marg, ChanakyapuriNew Delhi - 110021Tel : +91 11 4655 0555Fax : +91 11 2301 7008/9Email : [email protected] : www.assocham.org

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February 2014

Foreword

Power is a key catalyst for economic growth and industrial development. Rapid growth in population coupled with increasing industrial and service sector requirements are pushing the demand for electricity in India making it the world’s fifth largest energy consumer, accounting for 4.4% of global energy consumption. Establishing power transmission system through smart grids to link solar and wind plants to transmission grid would help utilize the potential of renewable energy in India and bring down the dependence on fossil fuels.

Power has emerged as a critical driver for sustainable economic development. However, India incurs a loss of approx. INR 4,14,800 crore of its GDP due to shortage of electricity. To bridge the rising demand-supply gap and reduce import dependency, it is imperative to invest in clean energy technologies and remove transmission and distribution losses, which amount to 26.4% of the produced electricity. Existing grids are constrained to meet growing demands of power along with providing stable and sustainable supply of energy. Such challenges make a compelling case to adopt smart grid technologies in India, which not only improve efficiency of existing grids, but also help meet the growing demand through demand response management system.

Integration of Smart Grid technologies will help gain greater control over energy costs, improve transmission efficiencies and offer a more reliable energy supply to consumers, thereby transforming the power sector in India. Environmental benefits of a Smart Grid include reduced peak demand, integration of renewable power sources with reduced emissions and other pollutants. India has planned for capacity addition of 89 GW under the 12th Five-Year Plan (2012–17) and around 100 GW under the 13th Five-Year Plan (2017–22).

India’s mega infrastructure project Delhi Mumbai Industrial Corridor (DMIC) envisages creating new industrial “Smart Cities” which would incorporate the latest technology in infrastructure sector. The project envisions setting up of 24 new cities by 2040, industrial parks, investment regions and agro-processing zones along with supporting infrastructure. Adoption of Smart Grid technology would help improve the economics of operation, for various sectors envisioned under the project. However, this needs proactive steps from the government through effective PPP policies and institutional mechanisms for the states to implement.

Towards the foregoing, I am pleased to present the ASSOCHAM - YES BANK Knowledge Report ‘Managing Power: Smart Governance through Technology’ that outlines the scope and potential for Smart Grids in India. I am confident that the contents of this Knowledge Report will provide valuable insights to policy makers and industry stakeholders towards achieving Energy Security of India.

Thank you.Sincerely,

Rana KapoorPresident, ASSOCHAMManaging Director and CEO,

Message

The Indian grid is rapidly expanding with the rising demand for power and the need for integrating renewable energy.

The adoption of smart grid technologies in India is being driven by factors such as energy security, emphasis on climate change mitigation issues and integration of renewable energy. The government as well as utilities is taking initiatives to make the electricity infrastructure smarter. Green energy is certainly the future of power sector. Efforts are being made to make it an inherent part of policy road maps worldwide. Smart grid technology is likely to be a crucial driver for green energy.

However, the country’s power demand is also increasing rapidly with the expanding economy. There is an urgent need to control, manage and replace the growing demand for fossil-fuel based electricity. I trust many issues confronting the growth of smart grid infrastructure will be deliberated and effective suggestion will evolve.

I wish the Summit all success.

(D S Rawat)

Table of Contents

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1. Power Sector in India

The Indian economy is set to be the world’s third largest economy by 20281, promising a better future to millions. Besides providing electricity for domestic consumption, Power is the key driver of economic development steering growth across all sectors – agriculture, manufacturing and services.

Power System in India is the fourth largest in the World with 230 GW2 of installed capacity with utilities. However, the sector needs to catch-up to the demands of a burgeoning economy. Per-capita consumption of electricity in India is only about one-fourth of the world average and 404 million people in India do not have access to electricity. Grid failure in July, 2012 affected manufacturing, establishments, households and train operations, affecting 600 million across Northern India. India also needs to balance economic growth and carbon emission reduction. Growing economy calls for greater energy consumption making imperative to provide power at the right cost and in the most efficient manner to sustain economic growth.

India accounts for 4.4% of global energy consumption.(DnB)

1 World Economic League Table, Centre for Economics and Business Research (CEBR)2 U.S. Energy Information Administration (EIA)

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Smart Governance Through Technology

Figure 1- Electricity Production (kWh), 2011

Source: World Bank

Apart from insufficient generation capacity, India needs to focus on a robust transmission and distribution (T&D) network to increase evacuation capacity, prevent cascading failures and transmission losses. Incorporating technological transformation can make Indian power supply framework more manageable. Smart Grid Systems employ automation, communication and IT systems that can monitor power flows from points of generation to points of consumption, integrate multiple points of power injection and control the power flow or curtail the load to match generation in real time or near real-time. Roping in private sector and developing a transparent, competitive, market driven regime should be the cornerstone of government’s endeavors to provide Power to All at an affordable cost.

1.1 Power Generation: Capacity & Utilization

GenerationIncreasing power generation to keep in pace with energy requirement can play a pivotal role in boosting the country’s growth prospects. Figure 2, indicates a high growth rate in China’s energy generation as compared to India. India needs to increase its capacity manifold to support the needs of its rapidly growing economy.

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Figure 2 - Power Generation (2004-2012)

Source: World Bank

Rapid population growth and increasing industrial and service sector requirements are pushing the demand for electricity in India. As on March 2012, the aggregate installed power generation capacity in the country stood at 2,36,387MW, at a compound annual growth rate of 6.65% 3 .

Figure 3 - Total Installed Capacity

Source: Ministry of Power, GOI

Power is a concurrent subject under the constitution. With the onus of generation, capacity installation and transmission flowing on both, central and State Governments Share of center, state and private sector in term of owner ship of installed capacity is 39%, 29% and 32% respectively. Power sector in India was historically twin responsibility of

3 CSO/ “All India Region-wise Generating Installed Capacity of Power”. Central Electricity Authority, Ministry of Power, Government of India, August 2013.

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both the state as well as the central government and was opened up to the Private sector after 1991 reforms. The Electricity Act, 2003 made way for Open access which facilitated Power trading across the country.

India’s energy basket, as indicated in figure 4 and 5, indicates heavy dependence on thermal power for production of electricity.

Figure 4 - Electricity Generation

Source: World Bank data, 2011

Figure 5- Electricity Generation, India, 2013

Source: Ministry of Power, GOI Renewable Energy Sources (RES) include Small Hydro Projects, Biomass Gasifier, Biomass Power, Urban & Industrial Waste Power, and Renewable Energy Sources

Key challenges of the electricity sector in India include low efficiencies of thermal power plants, ageing infrastructure, continued reliance on coal plants, and inadequate transmission and distribution networks.

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Figure 6- Renewable Energy Capacity

Source: 12th FYP

Fossil fuels such as coal, gas, oil & diesel drive most of our generation capacity. In light of rising coal and oil imports and its adverse impact on escalating fiscal deficit, Power sector in India must focus on grid interactive renewable energy and micro-grids, while optimizing energy usage.

Figure 7 - Grid Interactive RE

Grid Interactive Power Cumulative Capacity (Mw)up to 31/07/2013

Wind Power 19,661.15Small Hydro Power 3,706.75Biomass and Bagasse Power 3,602.20Waste to Power 96.08Solar Power 1,839.00Total 28,905.21

CO2 emission from coal fired plants will increase to 1.6billion tons by 2030 (2.3 times as compared to emission in 2007, IEA

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Off-Grid Power Cumulative Capacity (Mw)Up To 31/07/2013

Waste to Energy – Urban 115.6Biomass(non-bagasse) Cogeneration 486.84Biomass Gasifiers 16.89Waste to Energy - Rural (Industrial) 142.88Aero-Generators/ Hybrid system 2.14SPV systems 131.86Water mills/micro hydel 10.65Total 906.83

Source –Installed Capacity as on date (MW) - Grid Interactive. Source- Installed Capacity as on date (MW) – Off-Grid Power. Source: MNRE

Developing domestic and inexhaustible sources of energy would help cut CO2 emissions. Another challenge faced by the power sector is that investments in power transmission and distribution network are not in tandem with generation capacity. At present power generated is not effectively utilized due to transmission bottleneck, for instance, installed wind energy capacity of Tamil Nadu is around 7,000MW; however generation is much lower due to poor evacuation, losses running around 35% (July, 2013).

It is therefore crucial to push production and integration of clean sources of energy into the power network.

Consumption

Currently, per capita consumption of electricity is very low at 879 kWh4. This low consumption is amplified by the lack of access to electricity to a significant proportion of the population. Figure 8 indicates that industries accounts for lion share of electricity consumption.

4 CSO, Energy Statistics, 2013

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Figure 8 - Sectorwise Consumption of Electricity (Utilities) (2011-12)

Source: Energy Statistics, 2013, MOSPI

Currently the energy and peak availability shortage is 8.7% and 9%, respectively.5 Electricity losses in India during transmission and distribution (T&D) were about 23.97%, and Aggregate Technical and Commercial (AT&C) losses were 26.1%6, which is highest when compared against largest power producing countries such as China, Japan, US and Russian Federation. (Figure 9)

Figure 9 - Electric power transmission and distribution losses (% of output) (including pilferage)

Source: World Bank data

India needs an efficient and reliable T&D network to carry power over long distance, as power generation centers cannot be equitably distributed across the country.

5Load Generation Balance Report 2013-14, Central Electricity Authority, Ministry of Power, Government of India6CEA(2011)

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• Only 67% of households in India have electricity connection

• 45% of rural households do not have electricity connection

Sourece : (Energy Statistics, 2013, MOSPI)

1.2 State Energy Scenario

India’s power network comprises five regions spanning the country. Poor inter-regional connectivity due to inadequate power infrastructure leads to poor transmission of electricity from surplus states to those in deficit.

The five states with largest power demand and availability, as of May 2011, were Maharashtra, Andhra Pradesh, Tamil Nadu, Uttar Pradesh and Gujarat.

States with power surplus include - Madhya Pradesh (1939MW), Maharashtra (1488MW), Haryana (465MW) , Himachal Pradesh (592MW), Damodar valley Corporation (1554MW), Orissa (438MW)and West Bengal (293MW)

During 2011-12, among all the states Himachal Pradesh registered highest growth (92.95%) in the installed capacity followed by Jharkhand (62.11%) and Gujarat (44.9%). (CSO)

Tamil Nadu had the highest installed capacity of grid connected renewable power (7,664.03 MW) followed by Maharashtra (3,644.05 MW) and Gujarat (3,607.27 MW), mainly on account of wind power. (CSO)

Massive power cut in 2012 hitting swathe of the country and affecting millions in the state of Punjab, Haryana, Uttar Pradesh, Himachal Pradesh and Rajasthan points out the pressing need of adopting smart grid technologies in India to improve reliability of power supply.

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Figure 10 - Inter-regional Flow of Power at the end of Twelfth Plan Period (Unit-MW)

Source – 12th FYP

Efficient energy transmission systems to transfer power surplus can help optimize power usage in India. Cooperation from various states as well center to ensure smooth roll out and timely implementation of Smart Grid technologies would augment power supply in the country.

1.3 Demand and Supply Future Scenario

The potential demand by 2032 is estimated to be as high as 900 GW. The Twelfth Plan aims to add another 88,000 MW of generation capacity. About 57,000 MW of capacity addition needs to come from the private sector. Report by Central Electricity Authority (2012) suggests that in order to the meet the expected energy demand over the next decade, supply needs to grow at the rate of 8.36%.

India needs to import 79% of the petroleum it needs and has been relying increasingly on imported coal. It is necessary that India looks for domestic sources of energy.

(Union Budget 2013-14)

Region End of Eleventh Plan

End of Twelfth Plan (Tentative)

Eastern/Southern 3,630 3,630Eastern/Northern 12,130 17,930Eastern/Western 4,390 12,790Eastern/Norht Eastern 1,260 2,860Northern/Western 4,220 14,420Western/Southern 1,520 7,920132/110 KV Lines 600 -North Eastern/Eastern-Norhtern/Western

- 6,000

Total 27,750 65,550

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Figure 11 - Power Demand Scenario

Source: National Electricity Plan, 2012

MNRE estimates the total potential of wind, small hydro, and bio-power as 102,772 MW, 19,749 MW, and 25,000 MW respectively The Twelfth Plan envisages addition of 30,000 MW of renewable energy making the cumulative installed capacity 54,503MW. However due to poor access to energy, consumption remains low.

The country’s power sector is grappling with several challenges such as policy delays, high transmission and distribution losses and pilferage.

Increasing power generation while investing in low-carbon technologies should be the corner stone of government’s endeavors to ensure sustainable development. Smart Grid technologies offer unique opportunities to optimize energy usage as well as reduce CO2 emissions to overcome existing challenges such as inadequate access, supply shortfall, network losses and pilferage.

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Power has emerged as a critical driver for sustainable economic development. To bridge the rising demand-supply gap and reduce import dependency, it is imperative to integrate clean energy technologies and remove transmission and distribution losses which amount to 26.1% of the produced electricity. With one of the highest AT&C losses in the world, transmission and distribution is the weakest link in the Indian power sector.

Existing grids are constrained and under pressure to deliver the growing demands for power, along with providing stable and sustainable supply of electricity.

These complex challenges threatening the energy security of the country are pushing the need to adopt smart grid technologies in India. Deployment of such technologies would not only improve overall efficiency of existing grids, but also help to meet growing demands through response management systems. As transmission and distribution (T&D) infrastructure in India is still in a developing stage, Smart Grids technologies can be used to leapfrog traditional infrastructure investment.

India loses $68 billion, or about Rs 4,14,800 crore of its Gross Domestic Product due to electricity shortage. (Economic survey 2012-13)

2. Smart Grid

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Figure 12 - Smart Grid System

Smart Grid Vision defines the upcoming technology as:

A smart grid is an electrical grid with automation, communication and IT systems that can monitor power flows from points of generation to points of consumption (even down to the appliances level) and control the power flow or curtail the load to match generation in real time or near realtime.

Smart grid systems will bring in more accountability, predictability and flexibility in both generation and consumption. This would facilitate integration of intermittent renewable generation and also reduce costs of peak power. Increased reliability and efficiency will make smart grid cost effective and mitigate potential grid failures in medium term.

2.1 Energy Demand Management

Demand management is a strategy used to forecast and manage energy consumption by shifting or reducing consumption from peak hours to leaner demand periods. With the objective of altering end-use of electricity and optimizing available and planned generation resources, demand side management (DSM) encourages consumers to choose non-essential loads and shift the time of energy use to off-peak hours. Since power networks are designed to respond to peak demand, DSM will help reduce the overall investment, installation and operating cost and prevent load shedding and grid failures.

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Figure 13 - Primary Drivers for Implementing Demand Response Programs

Source: ALSTOM

To ensure implementation of DSM strategy, it is imperative to foster consumer participation through creating awareness and providing appropriate incentives. Load management through dynamic pricing programs which provide consumers the option to voluntarily curtail loads based on pricing schemes need to be evolved. Collaborative efforts by utilities, IT and telecommunication are required to coordinate, convey and execute DR events, informing consumers on the prevailing demand, supply, prices, incentives and options.

Implementation of Automatic Metering Infrastructure (AMI) is under way, which integrates customer information systems (CIS), Geographical information systems (GIS), Outage Management System (OMS), Work Management (WMS), and Mobile Workforce Management (MWM), SCADA/DMS, Distribution Automation System (DAS). Framing clear framework and uniform standard for operation of various systems is crucial for seamless operation.

For successful rollout of smart grid and customer acceptance, it is vital to ensure consumer awareness and transparency in the process.

Benefits of adopting Energy Demand Management - • Bulk generation alternative

• Emergency capacity

• Defer capital expenditures

• Targeted network reliability

• Balance renewables

• Monetize DR assets in wholesale markets

• Avoid peak time energy prices

(Smart Grid Forum)

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2.2 Efficiency

Integration of smart grid technologies will provide greater control over energy costs and provide a more reliable energy supply to consumers, thereby transforming the power sector in India. The system facilitates and encourages responsible power usage inculcating energy efficient technologies and end use appliances across various consumer segments.

Monitor Optimizing and distributing energy loads to manage demand. Increase efficiency of existing as well as new lines

Prevent pilferageDetect and address pilferage issues through GIS mapping, real time sensors and information systems.

Promote Green Building Concept of Green buildings is establishing instructure that are resource efficient, minimized energy consumption and reduced impact on the environment. Introducing Energy service performance contracting (ESPC) to Financing energy efficiency mechanism in India can foster growth of green building, thereby reducing the overall demand for electricity.

BedZED (Beddington Zero Energy Development), the UK’s largest and first carbon-neutral eco-community: the distinctive roofscape with solar panels and passive ventilation chimneys

(Source: ARUP)

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1. Certification Mechanism For ESCO Companies Government needs to formulate framework to certify and register

Energy Service Companies (ESCO). Accreditation mechanism and standard procedure to establish credit worthiness would put to rest the bank’s apprehension for financing EE projects.

2. Establishing Certification Body Establishing Energy Efficiency Regulatory Authority at Centre/State/

UT, which would register and oversee the transactions by ESCO, audit actual saving and check energy efficiency, would promote development of EE projects.

3. Evaluation (Audit) Mechanism Standard process for auditing energy saving (sector specific) and

viability/ scalability of projects, which would help to establish return on investment (ROI) and encourage banks to finance energy efficiency projects.

4. Recovery Through other Mechanism- Example- The Clean Development Mechanism (CDM) which is a defined by the Kyoto Protocol where projects comprise of components responsible for the reduction or sequestration of green house gas (GHS) emissions.

5. Priority Sector Lending- Inclusion of EE projects as part of PSL- The public sector can develop policy and regulatory instruments to overcome the barriers and facilitate the scaling-up of investments in EE projects E.g. for rural electrification

6. Guarantees for ESCO Establish mechanism by which the government provides guarantee for loans disbursed by bank to ESCO companies / for EE projects.

Ancillary Services are support service which aim at bolstering efforts to maintain power quality, reliability and security of the electricity grid and optimize utilization of resources. Proper design of ancillary service market is essential to ensure seamless operation of the power transmission system. Introduction of such service would reduce dependence on UI and ensure grid security through utilization of despatched/surplus capacity thereby, enhancing the power supply to the grid.

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2.3 Integrating Renewable Energy

India is endowed with vast renewable energy potential. Currently, renewable power plants constitute only 12.30% of total installed capacity. Uncertainties’ pertaining to the availability of fossil fuels and the need to provide modern and clean energy at affordable prices is driving India’s Low Carbon inclusive growth agenda.

Variable Renewable Energy (VRE) resources such as wind and solar offer immense potential to meet the country’s energy deficit, but pose significant challenges due to their intermittency. Variability of VRE makes load and grid management fairly complex. These challenges need to be addressed through the following interventions:

Develop storage, balancing and spinning reserves which can replace VRE generation when the latter reduces

Integrate Demand Responsive Mechanism to trigger price signals i.e. cheaper tariff when electricity generation through VRE is above schedule.

Adopt advanced forecasting techniques to quickly balance variation on the system and efficiently manage grid operations.

Integration of VRE requires smart grid systems that can address variability and ensure high reliability during peak load situations.

Green Corridor

The ‘green energy corridor’ project aims at synchronising electricity produced from renewable sources with conventional power stations in the grid. Integrating renewable electricity into the grid offers significant challenges due to variation in voltage and supply. Implementation of the project would boost RE generation and facilitate compatibility with the grid.

Establishing power transmission system through smart grids to link solar and wind plants to transmission grid would help utilize the potential of renewable energy in India. The step would ensure the following:

1 MW of renewable energy capacity can displace about 500 tonnes of petroleum and contribute significantly to India’s energy security. (Re-energising India: Policy, Regulatory and Financial Initiatives to Augment Renewable Energy Deployment in India)

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Meet fast-growing energy needs in a sustainable manner Improving the country’s energy security by reducing reliance on

imported fossil fuels Bring in economies of scale to support large projects as compared

to smaller stand-alone renewable energy projects

Stepping up renewable energy growth rate through making provisions for off-grid applications, promotion of bio-energy, grid connectivity and transmission planning is required. Thrust for smart grid stems from the need to improve grid connectivity and to connect numerous distributed points of power injection and distribution. Further Electric Vehicle (EV)

Initiatives taken by the Government, to employ alternative energy source on a large scale are as under:

• GovernmentofIndiahaslaunchedJawaharlalNehruNationalSolar Mission (JNNSM) on 11th January, 2010. The Mission targets deployment of 20,000 MW of grid connected solar power by 2022 in three phases.

• Provision for renewable purchase obligation for solar hasbeen made in the National Tariff Policy.

• ConcessionalImportduty/Excisedutyexemptionforsettingup of solar power plants, accelerated depreciation and tax holiday.

• GenerationbasedincentiveandfacilityforbundledpowerforGrid connected Solar & Wind Power Projects through various interventions announced from time to time.

• Awareness programmes such as exhibitions, trainingworkshops etc. are being conducted.

• SeveralR&Deffortshavebeeninitiatedfornewtechnologiesand improvement in efficiency.

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Under the project, set up jointly on an experimental basis by the state-owned Sardar Sarovar Narmada Nigam Limited (SSNNL) and the Gujarat State Electricity Corporation Limited, solar panels have been fitted over a 750-metre stretch on the Sanand-Kadi Narmada branch canal to generate 16 lakh units of clean electricity annually. As the canal will remain covered, it is estimated to prevent evaporation of 90 lakh litres of water annually.

roll out has further increased the complexity of the traditional electricity grid, making it imperative to bring in smart grid systems.

The burning of fossil fuels for electricity and heat is the largest single source of GHG emissions. In India, the four largest sectors in terms of GHG emissions were energy (58% of the net CO equivalent emissions), industry (22%), agriculture (17%), and waste (3%) Hence, using renewable energy can contribute significantly to reducing India’s carbon footprint.

(India: Greenhouse Gas Emissions 2007, Indian Network for Climate Change Assessment)

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3. Policy Framework to Facilitate Smart Grid Development3.1 Policy Framework and Current Impediment

Development of Power sector in India is the responsibility of both the state as well as the federal government. Ministry of Power (MoP) formulates the policy structure and takes decisions pertaining to investments in power projects. India’s T&D system consists of regional grids connected to state level grids through high voltage transmission links. Power Grid Corporation of India Limited (PGCIL) owns and operates inter-regional and inter-state transmission lines, facilitating transfer of power from surplus to deficit regions.

Figure 14 - Grid system in India

Source : YES BANK Analysis

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Five transmission regions Northern, Eastern, Western, Southern and North-Eastern regions have been interconnected to operate as a single grid – The National Grid. SEBs or state electricity own and operate distribution network and state grid. Private sector has limited presence in T&D, operating distribution networks in metros in Delhi, Mumbai, Kolkata, Ahmedabad, Surat and Orissa.

The GOI aims at providing 24X7 stable and quality power to all consumers by 2027.

Figure 15 - Development of National Grid

Source: Power Grid Corp. of India ltd.

Figure 16 - Transmission System (XII plan)

Source: Power Grid Corp. of India ltd.

Sector Capacity (MW) addition

envisaged

Transmission System planned for corresponding capacity

(MW)

Under construction

DPR under perparation

Central 28,600 4,140 17,394

Private 57,000 14,740 33,676

Total 85,600 18,880 51,070

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Various initiatives taken by GOI:

National Smart Grid Mission The government’s ambitious National Smart Grid Mission would

enable better access to electricity, providing lifeline supply to all households , reducing T&D losses, facilitate transition towards a low carbon economy and steer planning and investments for future power projects and T&D activities.

Restructured-Accelerated Power Development and Reform Program (R-APDRP)

Restructured-Accelerated Power Development and Reform Program (R-APDRP) is a Central Sector Scheme (CSS) which provides the basic building blocks for developing smart grids across the country.

Figure 17 - R-APDRP

Source: R-APDRP

Infrastructure developed under R-APDRP can be utilized to transform grids to smart grids with low incremental costs which would result in better utilization of R-APDRP assets.

DRUM: With the aim of improving the quality and reliability of last mile power distribution, DRUM focuses demonstrating the best technological and commercial practices that would help establish a commercial framework for financing such programs.

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Indian Smart Grid Task Force & Forum are Inter- Ministerial group that will serve as government’s focal point to deploy smart grid and evolve the road map for implementation of smart grids in the country

Figure 18

Power sector in India is fraught with various challenges such as poor infrastructure and efficiency, policy delay and financing infrastructure and development. The following table indicates issues faced by the sector and suggests policy measures to address the same.

Challenges Suggestions - Key policy changes

Impact

TIMELY IMPLEMENTATION OF PROJECTS

Time taken for concept to commissioning is very long – 5-6 years

Difficulty in obtaining ROW/ forest clearance [As many as 120 transmission projects have faced delays because of the developer’s inability to 11 acquire land and get timely clearances from all stakeholders]

Framework of bid document lacking technology and innovation requirement

Efficiency and standardization of the process for award of projects Conservation of ROW by construction of lines with tall towers/multi-circuit lines to minimize forest cutting

Single window clearance for Power projects

Encourage private sector participation

Ensure timely implementation of projects

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POOR EFFICIENCY

Existing power plants

Transmission lines

PPP

Incentives for investment in Smart Grid

Frame Anti-theft legislation to minimize AT&C losses

Increase efficiency

Optimize resource consumption

Reduce import

CENTER-STATE CO-ORDINATION

Regulatory disputes – lack of redressal mechanism

Tariff setting and adjustment

Set up regulatory body to minimize project delays due to disputes

Set-up committee to rationalize power tariff

Time of Day (TOD) metering

POWER TRANSMISSION CONSTRAINTS

Difficult to evacuate excess power and channel it to regions that face shortages.

Transmit at different frequency

Land not available for setting up substations

Upgrade Infrastructure through Implementing projects under Smart Grid and National synchronous grid

Conservative Voltage Regulation (CVR)

Grid Discipline State electricity board overdraw – state –center

Prevent grid failure

Minimize land requirement for setting up substations

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[The North-East has very large potential for producing hydro power—close to 50,000 MW— but the pace of implementation has been poor. The evacuation of power from the North-East poses a major challenge for several reasons. First, the entire capacity has to be evacuated through a narrow strip of about 25 km in West Bengal. Although no forest clearance is needed, land acquisition issues could pose problems, which need to be tackled.]

Voltage contour and GIS mapping

Frequency Support Ancillary Service (FSAS) to maintain the frequency within the band specified in the IEGC.

Congestion management through the introduction of Dynamic Line Rating

Establish Demand Response (DR) MechanismReduce land requirement through setting up Gas insulated Stations

FUEL SUPPLY PROBLEMS Focus on increasing power generation through Renewable energy resources

Onus lies on Coal India to enhance domestic production capability and timely provision of coal to power plants

Minimize environmental impact

Ensure fuel supply for power plants

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INCREASING PRODUCTION FROM RE SOURCES

PPP

FDI

Situational Awareness of the renewable generation

Promoting Community Models

Environmental benefits - reduced emissions and other pollutants.

Facilitate establishment of composite forecast facility

POOR RETURN ON INVESTMENT

Smart Grid to check pilferage ensuring adequate returns on investmentAdequate infrastructure provisions to ensure evacuation of produced power

POOR INVESTMENT IN TRANSMISSION

Ratio of investments in power sector to that in transmission is very low i.e. 30%

46% (USD 16 billion) of the investment in power transmission is expected to come from private sector.

Critical to ensure PPP projects in power sectors are successful Minimize Cross subsidies Utilize CSR funds for development of Renewable Energy projects Tax incentive to individuals on the lines of tax benefits associated with housing loans.

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Failure to attract FDI

Lack of transparency in allocation of projects

Unequal risk sharing deterring private sector participation

Enhancement of manufacturing capacity of main

Equipment viz. transformers, reactors, CB, CT etc.

Integrate and simplify various schemes and procedures to effectively channelize funds for development of smart , micro grids and RE(E.g Rajiv Gandhi Gramin Vidyutikaran Yojna only covers rural householdsOther schemes - Village Energy Security Programme (VESP), Rural Village Energy Security Programme (RVEP), Solar Home Lighting Systems (SHLS).)

Source: Public and Social Policies Management, YES BANK (data from various sources)

3.2 DMIC

Delhi Mumbai Industrial Corridor envisages creating new industrial “Smart Cities” which would incorporate the latest technology in infrastructure sectors. The project envisions setting up of 24 new cities by 2040, industrial parks, investment regions and agro-processing zones along with supporting infrastructure. DMIC is expected generate 2.15 lakh direct employments and 6.18 lakh indirect jobs. The following have been proposed under DMIC:

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Major initiatives in the DMIC influence area include power plants at Hissar (1200MW Coal based plant in Haryana), Kota (195MW Coal based plant in Rajasthan) and Surat (Lignite based plant in Gujarat).The Government of India envisaged a capacity addition of 100,000 MW by 2012 to meet its mission of ‘Power to All’. To meet this objective, Ultra Mega Power Projects (UMPPs) have been set up. These power projects would have an installed capacity of around 4000 MW each with Ministry of Power, CEA and Power Finance Corporation working in tandem for developing these projects under a tariff based competitive bidding framework. The NTP has clearly put the Generation sector in a fast track mode with impetus on generation of competitive power by Independent Power Producers (IPPs), Captive Power Plants (CPPs) and Merchant Power Plants (MPPs) for short-term supply and setting of Power exchanges. Adoption of smart grid technology is essential to ensure seamless operation for various sectors envisioned under the project.

Industrial Parks/SEZs /Agro-processing zones

11 investment region (specifically delineated industrial region with a minimum area of around 200 square kilometers (20,000 hectares)

13 Industrial areas, ( minimum area of around 100 square kilometers (10,000 hectares) for the establishment of manufacturing facilities for domestic and export led production along with the associated services and infrastructure

Agro processing zones

Real Estate/Integrated Township

DMIC Cities will help to meet pressures of urbanization and also lead India’s economic growth

Infrastructure

1483 km DFC, Rail links, Road connectivity, Port connectivity, Airports, Logistics Facilities, Power supply systems.

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The DMIC Corridor is envisaged as a solution to infrastructure and connectivity bottlenecks. Total Power Requirement for DMIC corridor is 1,700 MW. The composition is as follows:

• Industrial:1000MW• Social:600MW• Mixed:100MW

Major initiatives in the DMIC influence area include power plants at Hissar (1200MW Coal based plant in Haryana), Kota (195MW Coal based plant in Rajasthan) and Surat (Lignite based plant in Gujarat). Ultra Mega Power Projects (UMPP)

impetus on generation of competitive power by Independent Power Producers (IPPs), Captive Power Plants (CPPs) and Merchant Power Plants (MPPs) for short-term supply and setting of Power exchanges. Adoption of smart grid technology is essential to ensure seamless operation for various sectors envisioned under the project. Model project for micro-grid system using large-scale PV power

generation and related technologies at Neemrana.

Gujarat state is promoting renewable energy, which needs to be integrated with the grid.

DMIC cities are envisaged to be powered by IT for governance and infrastructure management. Smart Grid systems would provide reliable supply of power, thereby, improving the economics of operation, encouraging investment and foster economic growth.

3.3 Stakeholder Collaboration

a. People Public Private Participation (PPPP) Transmission Sector has been opened up for private participation

(1991) & has garnered significant interest from private players. The Electricity Act (2003) further restructured the approach for private sector participation. However investments from the private sector, in generation, transmission, and distribution remain insufficient.

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b. Community Model Community model for energy generation inculcates option that

link equity and sustainability.

CASE STUDY

Community Energy Partnership Program (Ontario, Canada)

Community ownership has proven to keep economic benefits of renewable power development close to home, improving the quality of life for local residents while generating clean renewable power to displace the environmental impacts of non-renewable electricity generation.

Ontario’s FIT (Feed In Tariff) program provides guaranteed purchase of all of the power supplied by renewable energy projects for 20 years (40 years for waterpower) at a fixed price that is high enough to generate a reasonable rate of return.Lessons for India:

1. Framework for development of Feed in Tariff – Guarantee purchase of power to incentivize the community. This can be facilitated through Smart Grids.

2. Develop Price Adder mechanism ie. More the number participant, higher would be the price paid per kWH of generation, which encourages communities to participate in community

‘Take my roof, give me solar power’ concept (Tamil Nadu, India)

Under OPEX model, industries and commercial establishments in Tamil Nadu are letting out their lands or rooftops in return for cheaper solar power.

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Community model can be effectively integrated in the following:

Policy promoting technological up gradation of small and medium scale industries can be the key to reducing energy consumption as well as emissions

Rural area SEZ

Figure 19 - Social Equity Model for Power Transmission

Source : YES BANK Analysis

c. Cooperation with other CountriesPartnership between India and other countries can open up avenues for low carbon economy.

Leverage experience and expertise – For instance collaboration with countries like Japan can help India facilitate growth in Power Sector e.g. Higher technology coal fired plants

Technology – Encourage investment in power sector to bring in efficient systems and better technology facilitating optimum utilization of resources.

3.4 Micro-Grid and Sustainable Development Micro grid system energizes local loads using locally available energy sources such as wind, solar, bio and hydro in combination with appropriate storage systems to effectively respond to energy demand.

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ProjectUHBVN, Haryana The pilot project covers 31,914

consumers and distribution system of 531 DTs.

CESC, Mysore Additional City Area Division (ACAD), Mysore Project involves 21,824 consumers with a good mix of residential, commercial, industrial and agricultural consumers including 512 irrigation pump sets covering over 14 feeders and 473 distribution transformers and accounting for input energy of 151.89 MU.

TSECL, Tripura The pilot project covers 46,071 no. of consumers. The proposed project area is covered under RAPDRP Scheme for IT implementation and system strengthening.

KSEB, Kerala Pilot is proposed for around 25078 LT Industrial consumers of Selected Distribution Section offices spread over the geographical area of Kerala State.

Such systems can facilitate utilization of multiple renewable energy resources and ensure last mile connectivity. The system can help minimizing T&D losses while reduce investment in T&D infrastructure. Such systems can find application in large commercial and industrial complexes, hospitals, shopping malls/complexes, residential complexes etc.

Smart Grid pilot Projects

Figure 20

14 pilot projects have been sanctioned by government of India.

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Electricity Department, Government of Puducherry (PED)

Project proposes covering 87031 no. of consumers with dominant being domestic consumers (79%).

UGVCL, Gujarat Project proposes covering 20,524 consumers in Naroda and 18,898 agricultural unmetered consumers in Deesa-II division and accounting for input energy of around 1700MU (Naroda : 374.52 MU & Deesa : 1321.27 MU for 2010-11).

AP CPDCL, Andhra Pradesh The proposed project area is covered under RAPDRP Scheme; DAS, IT and SCADA shall be implemented.

APDCL, Assam The pilot project covers 15,000 consumers involving 90MUs of input energy. APDCL is in the process IT Implementation under R-APDRP and SCADA/DMS implementation is also to be taken up shortly.

MSEDCL, Maharashtra Project proposes covering 25,629 consumers with a mix of residential, commercial and industrial consumers and input energy of 261.6 MU.

CSPDCL, Chhattisgarh The pilot project includes installing smart meters at 508 H.T. & L.T Industrial Consumer premises including 140 smart meters for expected load growth during the implementation phase as well as Automatic Meter Reading (AMR) at 83 DTs including 10 smart meters for expected load growth during the implementation phase.

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HPSEB, Himachal Pradesh The pilot project covers 650 consumers and having annual input energy of 533 MUs. The functionality of peak load management and outage management is proposed by implementing Automated Metering Infrastructure (AMI) for Industrial Consumers, Distribution Automation and Substation Automation and power quality management by deploying Power Quality meters at HT consumers.

PSPCL, Punjab The functionality of Peak Load Management is proposed by implementing Automated Metering Infrastructure (AMI) in the project area for 9818 residential and industrial consumers. The area has around 60 MU input energy.

WBSEDCL, West Bengal The pilot project proposes to take up 4 nos. of 11 KV feeders for implementation of Smart Grid covering 4404 consumers.

JVVNL, Rajasthan Project proposes covering 34,752 consumers and distribution system of 651 DTs. The area has around 148.12 MU input energy.

Evolving suitable policy framework to facilitating the coming up of smart grids needs to be undertaken. Reforms pertaining to various facets such as removing entry barriers for smart grid solution providers, standard agreement for commissioning such projects, project implementing on PPP mode and integration with various existing policy provisions needs to be undertaken .

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4. Financing Smart Grid

Setting up Smart Grids is capital intensive in nature and requires a thorough understanding of costs and benefits to identify potential sources of finance. Given the nature of the implementation, innovative financing schemes need to be deliberated upon to ensure that a sustainable mechanism of financing is identified based on specifics of implementation. This will help provide correct incentives to all stakeholders and help make the Smart Grid implementation a success.

Smart Grid Projects in India are currently being implemented by way of the following financing mechanisms:

• External Grants: The Ministry of Power under the Government of India, along with the U.S. Agency for International Development (USAID) – India, jointly designed the Distribution Reform, Upgrades and Management (DRUM) Project in 2004. The aim of the DRUM Project was to demonstrate commercially viable electricity distribution systems that provide reliable power of sufficient quality to consumers. DRUM also assisted in developing the vision for “Smart Grids” for India’s power sector and helped seven utilities develop their roadmap towards a Smart Grid. It also supported the detailed project report on a Smart Grid pilot in Bangalore. DRUM was a bilateral project with a planned project funding of USD 30 Million.

• Regulatory Incentives: GoI introduced the R-APDRP (Restructured Accelerated Power Development and Reforms Program) program in 2008 with an expected total outlay of INR 516 BN. As per the scheme, the Indian government provides loans to the utilities to strengthen and upgrade their sub-transmission and distribution networks

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through the adoption of IT and the implementation of Smart Grid technologies. These loans are then partly or fully converted to grants based on whether the utility is able to implement the project within a stipulated period and bring down network losses to stipulated levels. Power Finance Corporation was appointed as the nodal agency for the program.

• Public Funding: As per the 12th five year plan, the planning commission is expecting an outlay of INR 95 BN for Smart Grids of which INR 50 BN is expected to come through grants from the government and the balance from private sources.

As outlined above, till date most of the Smart Grid projects in India have been funded by the government or by way of external grants. As the acceptability of Smart Grids increase and the associated capital costs decrease, a more prudent approach would be to provide an enabling mechanism for Public Private Partnerships which provide the right incentives to the private sector to make investments in Smart Grid.

4.1 Public Private Partnership (PPP)

The Twelfth Plan (2012 - 2017) estimates a total investment of INR 95 BN in developing Smart Grid infrastructure. Although the Governments (Central and State) are still the main investors in infrastructure, constrained public finances and the scale of investments require a greater role for the private sector. This has led to reassessment of infrastructure financing and a move away from the traditional model of public sector ownership. Smart Grids in particular are at the forefront of latest technology in the electricity distribution sector and accordingly need private enterprise to drive their adoption. Accordingly, the private sector has to substantially increase its investments and involvement from the current levels.

In a typical PPP implementation, the public sector contributes assurance in terms of stable governance, citizens’ support, financing, and also assumes social, environmental, and political risks. The private sector brings operational efficiencies, innovative technologies, managerial effectiveness, access to additional finances, and construction and commercial risk sharing.

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New techniques to share risks and gain access to capital market financing are becoming increasingly important and the ongoing reforms have created substantial opportunities for private investment in key infrastructure projects like Smart Grids.

Benefits of Public Private Partnership

Public Private Partnership (PPP) allow for effective risk sharing of project implementation and operations and promoting innovative mechanisms where the public sector is unable to take the lead. PPP projects are able to offer a whole plethora of advantages, including:

• Providing investment – PPPs often allow public sector to translate upfront capital expenditure into a flow of ongoing service payments. This enables projects to proceed when the availability of public capital may be constrained, thus bringing forward much needed investment.

• Faster Implementation – The allocation of design and construction responsibility to the private sector, combined with payments linked to the availability of a service, provides significant incentives for the private sector to deliver capital projects within shorter construction timeframes.

• Reduced whole life costs – PPP projects which require operational and maintenance service provision provide the private sector with strong incentives to minimize costs over the whole life of a project, something that is inherently difficult to achieve within the constraints of traditional public sector budgeting.

• Better risk allocation – A core principle of any PPP is the allocation of risk to the party best able to manage it at least cost. The aim is to optimize rather than maximize risk transfer, to ensure that best value is achieved.

• Better incentives to perform – The allocation of project risk should incentivise a private sector contractor to improve its management and performance on any given project. Under most PPP projects, full payment to the private sector contractor will only occur if the required service standards are being met on an ongoing basis.

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• Improved quality of service – International experience suggests that the quality of service achieved under a PPP is often better than that achieved by traditional method. This may reflect in the better integration of services with supporting assets, improved economies of scale, the introduction of innovation in service delivery, or the performance incentives and penalties typically included within a PPP contract.

• Generation of additional revenues – The private sector may be able to generate additional revenues from third parties, thereby reducing the cost of any public sector subvention required. Additional revenue may be generated through the use of spare capacity or the disposal of surplus assets.

• Improved public management – By transferring responsibility for providing public services government officials will act as regulators and will focus upon service planning and performance monitoring instead of the management of the day to day delivery of public services. In addition, by exposing public services to competition, PPPs enable the cost of public services to be benchmarked against market standards to ensure that the very best value for money is being achieved.

If properly managed and executed, public private partnerships can lead to a whole range of economic, social and service gains for the Government, the private players and the community as a whole and benefit both public sector as well as the private sector.

The benefits for the public sector include:

• Improvedefficiency,closelymanagedcosts• Efficientoperationfromtheprivatesector• Betterallocationofpublicsectorfundsandvalueforpublicsector

money• Bridging infrastructure deficit critical to sustaining the growth

momentum• Leveraginglimitedpublicfundstoattractprivatecapital

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• Bridgingprivatesectorefficienciestoinfrastructurefor• Improvedservicedelivery• Reducedcost• Efficientrisksharing• Sharpenaccountability

The benefits for the private investors in a project include:

• Totheextenttheconcessionframeworkisappropriatelyestablished,the private sector will be in a position to leverage its project and take it off its balance sheet

• Iftheprivatesectorperformswell,itwillbeabletoderiveattractivereturns on its initial investment

• Theprivatesectorinvestorswillbenefitfrombeinginvolvedintheproject for the whole length of the concession

• Enhancing their experience inmanaging long termprojects andenhancing their profile in the market

• Theremayalsobepotentialbenefitsfortheprivatesectorthroughleasing and other structures

Benefits to community include:

• Betterallocationoftax-payermoney• Passingonofefficiencygainsmadeby theprivate sector toend

users through decreased user fees• Betterqualityservicesresultingfrombettermanagedprojects

Although PPP is beneficial to the private sector, however the private investors carry lot of concern for participation in PPP projects. Some of the key concerns are:• Lackofconducivefinancial systemsandavailabilityofaffordable

long term funds• Inadequateuserchargesanduncertainrevenuestreams• Lackofcommerciallyviableprojects• Lackofqualitysupportandfundingforprojectdevelopment• Oppositionfromexistingvestedinterests

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Successful Privatization models across cities of Delhi, Kolkata, Mumbai, Ahmedabad, and Surat showcase improved service levels, reduction in transmission and distribution losses and increased network efficiency.

The Franchise model implemented in Bhiwandi, Maharashtra showcase positive gains with network losses going down from63 per cent to 19 per cent in Bhiwandi and service levels improving. The model is now being expanded to Nagpur, Aurangabad, Jalgaon in Maharashtra and Agra in Uttar Pradesh.

PPP and Franchise model for distribution segment can help reduce network losses and improve efficiency of service and consumer satisfaction.

Models of Private Participation

PPP is a broad umbrella for a relationship between public and private sector. PPP can take a whole variety of forms and there are a number of permutations and combinations that are possible under the PPP framework. The options available for delivery of public services range from direct provision by a ministry or Government department to outright privatization, where the government transfers all responsibilities, risks and rewards for service delivery to the private sector. While in some schemes/projects, the private provider may have significant involvement in regard to all aspects of implementation; in others it may have only a minor role.

While there can be various models of private sector participation in implementation of Smart Grid infrastructure projects, it is important to pick one or a combination of the following mechanisms based on a detailed analysis of what is likely to work in each instance.

• Concession – A private entity takes over the management of a state owned enterprise either to build or rehabilitate and thereafter operate for a given period.

• Green field projects – A private entity or a public private joint

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venture builds and operates a new facility for the period specified in the project contract. The facility may be returned to the public sector at the end of the concession period.

• Divestitures – A private entity buys an equity stake in a state owned enterprise through an asset sale, public offering, or mass privatization program.

• Management and lease contracts – A private entity takes over management of a state owned enterprise for a fixed period, while ownership and investment decisions remain with the state.

Under these routes, some widely used forms of PPP are Build-Own-Operate (BOO), Build-Operate-Transfer (BOT), Build-Own-Operate-Transfer (BOOT), Buy-Build-Operate (BBO), service contracts, operations and maintenance (management) contracts and capital projects with operations and maintenance contract. Additional forms of private sector participation include: Design-Build-Operate (DBO), Developer Financing; Enhanced Use Leasing (EUL); Lease/Develop/Operate (LDO) or Build/Develop/Operate (BDO) and Lease/Purchase among others.

In general, public private partnerships can be categorized based on the extent of public and private sector involvement and the degree of risk allocation.

Figure 21

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Build – Own – Operate (BOO)

Build – Operate – Transfer (BOT)

Build – Operate – Own – Transfer (BOOT)

The private sector finances, builds, owns and operates a facility or service in perpetuity. The public constraints are stated in the original agreement and through ongoing regulatory authority

The private partner builds a facility to the specifications agreed to by the public agency, operates the facility for a specified time period under a contract or franchise agreement with the agency, and then transfers the facility to the agency at the end of the specified period of time

A private entity receives a franchise to finance, design, build and operate a facility (and to charge user fees) for a specified period, after which ownership is transferred back to the public sector.

Figure 21 - A brief description of some forms of public private partnerships, including contracts, is as follows:

Buy – Build – Operate (BBO)

A BBO is a form of asset sale that includes a rehabilitation or expansion of an existing facility. The Government sells the asset to the private sector entity, which then makes the improvements necessary to operate the facility in a profitable manner.

Operations and Maintenance

A public partner contracts with a private partner to provide and/or maintain a specific service. Under the private operation and maintenance option, the public partner retains ownership and overall management of the public facility or system.

Operations, Maintenance and Management

A public partner contracts with a private partner to operate, maintain and manage a facility or system providing a service. Under this contract option, the public partner retains ownership of the public facility or system, but the private party may invest its own capital in the facility.

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Design – Build – OperateA single contract is awarded for the design, construction and operation of a capital improvement. A simple design-build approach creates a single point of responsibility for design and construction and can speed project completion by facilitating the overlap of the design and construction phases of the project.

Developer finance

The private party finances the construction or expansion of a public facility in exchange for the right to build residential housing, commercial stores, and/or industrial facilities at the site.

Lease/Develop/Operate (LDO) or Build/Develop/Operate (BDO)

Under these partnerships arrangements, the private party leases or buys an existing facility from a public agency; invests its own capital to renovate, modernize and/or expand the facility; and then operates it under a contract with the public agency. A number of different types of municipal transit facilities have been leased and developed under LDO and BDO arrangements.

Figure 23 - Resource and risk allocation

PPP Option

Labour Capital In-vestment / Financ-ing

Contract duration

Output Risk

Invest-ment Risk

Service Contract

Private NA 1-2 years Public Public

Manage-ment Contract

Private Public 3-5 years Public Public

Operating Lease

Private Public 5-15 years Public Public

Concession (Annuity)

Private Private 15-25 years

Public Private

Concession (BOOT-Toll)

Private Private 15-25 years

Private Private

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Risk sharing mechanism

Financial Restructuring Scheme

The Cabinet Committee cleared the financial restructuring scheme for state owned distribution companies on September 24, 2012. Under this scheme, 50% of outstanding short term liabilities (INR 1.9 Trillion as of March 31, 2012) of the state distribution companies would be converted into bonds backed by guarantees from the respective state governments. This liability would be gradually transferred to the state governments in due course with the State Governments lending support for servicing of these bonds in the interim. The balance 50% of liabilities shall be restructured with a 3 year moratorium on principal repayments. The Central Government Central shall incentivize acceptance of this scheme by providing grants on reduction of aggregate, technical and commercial losses (AT&C) beyond those specified in the Restructured Accelerated Power Development & Reforms Program (R-APDRP). The Central Government shall also provide capital reimbursement to the extent of 25% of principal repayments made by the State Governments on these liabilities taken over from the Discoms.

This scheme is likely to be very helpful to the State Discoms and shall lead to a gradual improvement in their financial health. The loan takeover by State Governments will lead to savings in interest payouts and the State Governments participating in this scheme are expected to clear all subsidies due to be paid to the Discoms. The Generating Companies are also going to benefit with a reduction in working capital

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intensity as the liquidity situation of Discoms improves. However, this is going to negatively impact the State Governments in the short term due to takeover of liabilities from Discoms. This is also likely to negatively impact Banks having an exposure to Discoms as a tenor increase in loans shall lead to an NPV reduction (estimated to be ~INR 40 Bn).

As on date, six states (Tamil Nadu, Uttar Pradesh, Haryana, Rajasthan, Madhya Pradesh and Punjab) have been able to finalize the Financial Restructuring Plan for a restructuring of their short term debt till March 2012. The CCEA amending its earlier order has allowed Jharkhand, Bihar & Andhra Pradesh to restructure their loans till March 2013.

4.2 Recommendation

Greenfield cities coming up as a part of the Delhi Mumbai Industrial Corridor (DMIC) are implementing the Smart Grid as a part of the planned capital expenditure without having a distinct financing mechanism specific to the Smart Grid. It makes sense for such Greenfield implementations of city wide electricity distribution networks to be ‘Smart’ upfront instead of implementing conventional networks and invest in their upgradation subsequently.

In case of brown-field implementations, there can be a wide variety of PPP mechanism tailored to each such setup. If the savings from implementation of a Smart Grid Infrastructure justifies the upfront capital expenditure, a long term concession to a private party funded by a sharing of savings obtained from the implementation can be a viable strategy. In case the savings are not sufficient, government grants in the form of a viability gap funding may also be worked out. However, in case the savings are too low, strategies such as awarding the project on a BOOT concession with fixed annuity payments may be a better strategy to involve private participation.

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5. Way Forward - Bringing in Smart Grid

Increased tempo in economic activity is laying demand on power. India faces significant challenges in providing sufficient, affordable and clean electricity. Smart grid reduced peak demand and AT&C losses, integration of renewable power sources, and reduced emissions and other pollutants.

Fostering PPP Studies by IEEE Standards Association place India third worldwide

for smart grid investment after United States and China. India’s needs to create a positive climate for foreign investors, the country’s reserves have not benefited from the best technology and expertise available.

Figure 24 - India Smart Grid Market value by Technology Area

Source : Zpryme [16]

Market Estimated investment in US$ million2011 2015

Software & Hardware 247 339Smart Meters 257 446Sensors 137 236Comm & Wireless 145 289Smart & T&D Equipment

234 392

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Removing entry barriers for smart grid solution providers Encourage private sector to set up power projects of any size to

increase investments and incentive for renovation of existing power plants

Ease out legal process by setting up arbitration cell Formulate standard agreement for commissioning power projects Unbundling of SEBs to bring in transparency, accountability and

better management VGF for promoting private sector to take up projects. Bring PPP approvals under the RTI

Strong Political Will Coordination between various states and center on policy issues

and implementation is required to ensure seamless integration of Smart Grid technologies across the country and facilitate stakeholder participation.

Public sector dominance needs to be done away with to pave way for private sector participation which would bring efficiency in operations and minimize losses.

Suitable measures to augment financial resources facilitating integration of smart and micro grid needs to be established. Framing and enforcing anti-theft legislation and legal system for speedy resolution of disputes would foster private sector participation in the distribution sector

Stakeholder collaboration India has a large pool of professionals and experts in the IT and

telecom sector which can be leveraged for development of smart and micro grids. Establishing collaborative community models and fostering empowered consumer base would make way for sustainable power infrastructure.

Human Resource Development 12th FYP envisages a capacity addition of about 1,00,000 MW

(including renewable) requiring a work force of the order of 4 lakh out of which nearly 3 lakh will be technical. Technically trained workforce comprising of engineers, supervisors, managers and so

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on are required in every sphere of the power supply industry. Smart Grids enable the more sophisticated use of the electricity system requiring Skill development and Training infrastructure.

Embracing reforms, facilitating private sector participation and open access would bring in competitiveness, which is vital to ensure sustainable development of Smart Grid infrastructure. Robust regulatory framework supporting the process of unbundling the State Electricity Boards (SEBs) and development of market mechanisms along with clear tariff policy framework is critical to ensure energy security fostering economic development.

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Alstom T&D India has a strong portfolio of products, solutions and services, comprising the entire range of transmission equipment up to Extra and Ultra High Voltages (765 kV and beyond) including air-insulated switchgear (AIS) and locally manufactured power transformers and gas-insulated switchgear (GIS). It also provides power electronics solutions (HVDC, FACTS) to create super highways and offers highly advanced power management Smart Grid solutions for transmission and distribution including renewable energies integration.

ASSOCHAM, acknowledged as the Knowledge Chamber of India, has emerged as a forceful, pro-active, effective and forward looking institution playing its role as a catalyst between the Government and Industry. Established in 1920, the Chamber has been successful in influencing the Government in shaping India’s economic, trade, fiscal and social policies which will be of benefit to trade and industry. ASSOCHAM renders its services to over 4,00,000 members which include multinational companies, India’s top corporates, medium and small scale units and associations representing the interest of more than 400 Chambers and Trade Associations from allover India encompassing all sectors.

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Documents

India’s energy basket, as indicated in figure 4 and 5, indicates heavy dependence on thermal power for production of electricity. Figure 4 - Electricity Generation Source: World