1

Captive Power Plant

Presented by:

Paridhi Gupta (19)

Prashant Sarkar (20)

Rahul Kumar (21)

Rohan Swamy (22)

2

Flow of the Presentation• Introduction• Need of CPP• Segmentation• Regulation• Different provisions• Concerns for state govt. and owners.• Economics• Features, advantages, limitations and constraints.• Conclusion.

3

What is Captive Power Plant?

Captive power plant has been defined under the Electricity Act-2003 as

“…a power plant set up by any person to generate electricity primarily for his own use and includes a power plant set up by any co-operative society or association of persons for generating electricity primarily for use of members of such cooperative society or association”.

4

New Policies

Persistent Supply Deficit

High Industrial Tariff

Quality of Electricity

Non-availability of adequate grid supply

Poor quality and reliability of grid supply

High tariff as a result of heavy cross subsidisation

Why Captive Power Plant?

5

Where it is ?

Industry type

• Textile

• Cement

• Chemicals

• Fertilizers

• Manufacturing

• Paints

• Paper

• Petrochemicals

• Steel

Fuel Used• Coal • Natural Gas • Naptha • Naptha/Natural Gas • Oil• RCO • FO • HSD • LDO

6

Regulation of Captive Power Plant

Provision in Electricity Act 2003.

Provision in National Electricity policy.

Provision in Electricity Rules 2005.

7

Provision in Electricity Act 2003

Define as a power plant set up by a person for their own use.

No license required.

No surcharge is levied, if they get open access.

8

Provision in National Electricity Policy

Securing Reliable, Quality and cost Effective power.

Facilitate Employment opportunities.

Harness Surplus power to meet power demand.

Regulatory commission determine tariff when licensee take power

9

Provision in Electricity Rules 2005

Qualify Criteria For Captive power plant.

Not less than 26% of ownership is held by Captive user.

User has to consume 51% of aggregate electricity generated in plant, determined on a Annual Basis

10

The Concern of State Governments and SEBs for CPP is because:-

Captive plants may have adverse impacts on the finances of the utility,

Industrial load is the main source for cross-subsidizing revenue flows

Billing and collection is much more efficient for HT consumers

SEBs ability to service escrow accounts for security packages is also reduced

Non-optimal growth of the sector.

Problems in grid management especially in case of states with surplus power

Adverse environmental impacts arising from types of fuels used and from higher emissions per unit of production, as compared to large power plants.

Reliability of power supply from captive and co-generation plants as a source of firm power

11

CPP in India…

Captive power today is significant source of power for the Indian economy, which plays an important role in the present power scenario being characterised by inadequate supply of power, poor and unreliable power quality, and high tariffs resulted due to heavy cross-subsidization. There is paradigm shift in usage pattern of captive power plants from back-up use to baseload use.

Presently the captive power plants capacity accounts for nearly one-fifth of the total installed capacity. With liberalisation of economy and technological developments many options are available for captive structuring.

12

Continued….

Six states – Gujarat, Orissa, Andhra Pradesh, Madhya Pradesh, Karnataka and Tamil Nadu – account for almost two-thirds of the captive capacity. Other significant contributors include Bihar, Maharashtra and Uttar Pradesh.

For the industries that use energy intensively, the energy is the critical component of the total production cost.

The engineering, chemical and mineral/metal industries account for almost two-thirds of the total installed capacity in the captive segment. Other industries include cement, textiles and sugar.

13

Some features:

• Captive Power refers to generation from a unit set up by industry for its exclusive consumption.

• Captive power plants are essentially non utility power plants.• These power plants are owned by specific industries which

consume all the power produced for its production purposes. • The size of these power plants varies. These power plants can be

as small as 0.2 MW or can be as big as 300 MW.

14

The Advantages

Captive power plant is close to the load centre and hence reduction in the fixed cost of electricity generated due to lesser stranded assets

Reduced transmission and distribution losses

Grid is strengthened at multiple points, even at the tail-ends.

Higher thermal efficiency, due to waste heat recovery by method of cogeneration

Distribution of environmental impact

Shorter gestation period to set up power plants

Captive power plants have modular designs and hence can match the load profile

15

Captive Constraints

Industry consumer which accounts 40 % of load, but inadequate to meet their demand

State Policy & Regulations are resisting the growth of CPP segment in order to protect the distribution utilities.

Several states are restricting to open access and imposing high cross-subsidy charges and electricity duty

16

Continued…

Section 11, EA 2003 – “to restrict the generators from selling

power outside the state during “exceptional circumstances””

Electricity duty charge on CPP increased from 40 paise to 1.50

paise by State government.

Environmental clearances issues

Fuel linkages

Electricity cost is 25 % in the production cost.

17

Limitations

Reduction in contract demand of a CPP holder with distribution licensee may be allowed without any penalty.

CPPs which are parallel with the grid, standby demand charges should be reasonable. However, if the CPP exceeds the Contract standby Demand then reasonable penal rate should be applicable on excess drawl.

High wheeling charges & losses make open access unviable.As captive surplus would be sold within a limited area, wheeling charges / losses should be applied for the particular area rather than average grid charge / losses.

Wheeling charges for transfer of surplus power may not exceed 7% of the generation cost within the state.

The State Regulatory Commissions which have not issued the regulations for open access may have to expedite the process.

18

Limitations

The cross subsidy surcharge applicable on HT consumers opting to purchase surplus power from CPPs must be reasonable. This may be fixed in accordance with avoided cost method suggested by FOIR (Forum of Indian Regulators).

For the purpose of recovery of T&D losses in OA charges, the losses should be benchmarked to reflect technical losses, gradually reduced and equitably distributed. Gradually recovery of commercial losses needs to be reduced

Parallel Operation Charges (POC) imposed by state utility is very high. Aligning of POC with ABT regime would encourage connectivity to grid for facilitating transfer of surplus power to the licensee.

19

Future Perspective of CPP

There is high scope for CPP as the main constraint of license is already been resolved.

Single window clearance system to accelerate the development of CPP.

Reduction in the production cost of Textile industries, Cement industries etc.

To reduce the demand-supply gap

Competitive market sustanability

20

Conclusion

CPP plays major role in meeting the demand-supply gap as our maximum requirement of power is in the industrial sector, so the regulation needs to be made favorable

CPP generation from sources like Biomass, Bagasse and renewable sources need to be encouraged in light of fuel security issues.

21

Thank you !!