Way forward for Smart Grid in India

Rakesh Kumar GoyalRitesh Kumar SinghTetra Tech ES India Limited

New Delhi India

2nd Feb 2011

October 26-29, 2010

The Facts

-About 50000 villages are still un electrified.

-There is about 11% demand supply gap.

-In some of the States peak shortage is about 30%

-In last ten five years plans generation targets were never met.

-AT&C losses are about 27%

-Total annual subsidy in power sector is about $ 10 billion.

--Consumers hate to pay electricity bill

-Employee motivation is a big issue in all state owned utilities

-India’s installed thermal power generation capacity represents 70% of net generation

capacity and 57% of greenhouse gas emissions. Based on current plans, this scenario

will likely continue until 2020

The Challenge

The link between electricity and economic growth remains unbroken so the challenge

is much the same i.e. adequate supplies of reliable electricity at low cost. But:

• Economic expansion and population growth are driving electricity demand.

• An increasingly digital world has amplified the need for high-quality electricity.

• A global construction boom is underway, increasing competition for resources.

• The link between scale and cost / kWh for generation has been loosened

• Meanwhile, some potential game changers are developing

- Smaller-scale generation

- Renewable energy

- Storage

- Electric vehicles

Meanwhile, the long-term trend for the cost of electricity has turned up and a climate

emergency demands more efficient use of natural resources.

Thus, business as usual is not a sustainable option.

So what’s the Big Picture?

Add capacity, strengthen networks and

reduce carbon while minimizing cost :

•Build new generation and T&D: High-

growth requires base load capacity, but

today that’s not enough.

•Increase demand response and energy

efficiency : Proven techniques and

technologies can help get more output

for each unit of input of least-cost

energy.

•Expand use of renewable energy:

Solar, hydropower, wind energy and

other forms of RE are growing rapidly.

•Implement ‘Smart Grid’ concepts to

use energy more effectively: Smart grids

can help to optimize the network,

minimize T&D losses and reduce O&M

costs while helping customers minimize

their total costs.

The journey to a Smart Grid will be evolutionary

Manual Meter Reading

Automatic Meter Reading

Advanced

Metering

Smart

Meters

Features of the Utility of the Future

• Energy management

services

– Residential, commercial

• Home area network

gateway

– PLC

– RF

• Major superconductors

• PHEV Vehicle support

• Renewable energy

optimization

• Remote energy storage

• Web-based applications

– Demand response

– Prepayment

– Load control

– Revenue protection

– Web move in/out

• Distribution

– Load profiling & control

– Transformer

optimization

– Loss optimization

• Transmission

– FACTS

– Managed flows

• Solid-state platform

• Integrated communications

• Integrated/ Remote connect

& disconnect switch

• Current readings

• Power factor

• Frequency

• Detailed power outage

• Remote upgradeable

• Internal expansion port

• On-demand reads

• Programmable load

intervals

• Bi-directional and net

metering

• TOU, RTP, CPP pricing

options

• Demand response

• One-way or two-way

• Monthly kWh reads

• Interval data

• Basic theft detection

• Outage/restoration

detection

• Monthly kWh

reads

Manual

Station

Automation

Station & Field

Automation

• Mapping

• Switching

• Restoration

• OMS

• Asset management for

stations

• Voltage control

• SCADA• Phase balancing

• Dynamic Volt/Var and

loss reduction

• Transformer loading

Grid

Automation

• Self healing Grid

• fault anticipating relaying

• Dynamic line ratings

The Smart Grid Maturity Model

Step 1

Step 2

Step 3

Step 4

Step 5

Optimization:

– Capability of real-time optimization of distribution network performance

– Decisions based on near real-time information, no longer only historical data

• Analytical infrastructure:

– Development of new data analysis capabilities

– Increased ability to display information (in form of dashboards, etc.)Integration:

– Corporate IT systems integrated to allow rapid processing of data

– Open architecture based design to facilitate sharing of information

Mat

uri

ty

Capability

• Intelligent devices infrastructure:

– AMI, or ‘Smart Meters’

– Distribution Automation Devices

– Demand Response Devices

– Substation IED Controllers

• Communications infrastructure:

– Enterprise communication system for rapid and accurate transmission of data

– Integration of fiber and mesh broadband networks

Adapted from IBM

But the pace of change is accelerating

• $4.5 billion in federal stimulus

funding and a total of $7.1 billion

funding has spawned many pilot

projects in the USA.

• At an estimated $7.3 billion in

Smart Grid investment, “China's

investment in smart grids and

related technologies already

exceed investment in power

generation.”- Mark Ishac, Zpryme Managing Director

(Going Green Practice)

• $ 45 Million in RAPDRP C

Accelerating the pace may produce unforeseen results

The Unforeseen

• New technology involves a venture into the unknown.

• An interesting example is the introduction of materials

requirements planning (MRP) systems in the 1970s

• MRP systems were supposed to reduce inventory

levels

• But inventory levels increased – often significantly –

after installation of a new MRP system. Why?

• Because the system did what it was supposed to do,

i.e.

– It “filled up” under-stocked items

• What will be the unforeseen outcomes for Smart Grid?

• Should that shape a utility’s Smart Grid preparations?

True Believers vs. Skeptics

True Believers vs. Skeptics

• When personal computers were first introduced, the world split into two camps

– True Believers held that PCs would unleash great productivity and creative advances

– Skeptics argued that the observable and measurable (early) benefits did not offset the costs

• The same argument is being waged over the Smart Grid

– Some believe Smart Grids will revolutionize the business

– Others say the claimed benefits for the brave new world of smartgrids are overstated and the costs are understated

• The heart of the issue is cost-benefit analysis

• One key factor is that electric companies have regulators and/or government officials to persuade

Technology can enable improvements in many areas

Availability Reliability Reduce operating costs

Reduce commercial

losses

Increase electricity supply

CRM applicable

Automated meter reading

� � ��

Remote disconnection and reconnection

� �

�

Outage monitoring and evaluation � �

Mini-SCADA � � � �

DSM and LM � � �

Renewable energy � �

Distributed, standby and off-grid generation

�

�

Time-of-use tariffs � � �

Islanding � � � �

Capacitor control � � �

Demand response � � �

Phasor Measurement Unit

� � �

What are the benefits?

Potential benefits

• Peak load reduction. TOU price signals offer potential.

• Technical and commercial loss reduction. This is a major commercial and regulatory consideration.

• Self-healing. A smart grid automatically detects and responds to routine problems and quickly recovers, minimizing downtime and financial loss.

• Consumer motivation. Smart grids give consumers visibility into pricing offers an opportunity to control usage

• Attack resistant. Smart grids have security built-in from the ground up.

• Improved power quality. A smart grid helps provide power free of sags, spikes, disturbances and interruptions.

• Accommodation of all generation and storage options. Enables interconnection to distributed sources of power and storage

• Enabled markets. Supports investment and innovation.

• Optimized assets and operating efficiently. Lowers new infrastructure needs and enables the sale of more power through the existing system.

Service benefits

• Improved reliability. Enables major improvements in power quality and reliability. Smart meters allow utilities to confirm more easily that meters are working properly. Two-way communications across the grid let utilities remotely identify, locate, isolate, and restore power outages more quickly without having to send field crews on trouble calls. A smart grid can eliminate up to 50% of trouble calls in a mature power sector.

• Increased efficiency of power delivery. Up to a 30% reduction in distribution technical losses is possible from optimal power factor performance and system balancing.

• Consumption management. Advanced meters tell consumers how energy is used within their home or business, what that usage costs them, and what kind of impact that usage has on the environment. Customers can manage use interactively or set preferences to adjust automatically.

• Improved system security. Security of supply and cyber security.

• Enhanced business and residential consumer service. Allows automatic monitoring and proactive maintenance of end-use equipment, which can be an avenue for energy savings and reduced carbon emissions.

There are risks too

Risk factors

• The Impact of a Smart Grid project’s scale and complexity –

Uncertainties create a financial risk that actual benefits from a smart

grid plan may prove to be less than the stated projections.

• The “Systems Integration” Effect – The costs and benefits of a

partial, “stand alone” Smart Grid implementation might be notably

less attractive than the costs and benefits of a broad, holistic

program.

• Accelerated depreciation of technology – The technological and cost

curves for computers are very different from equipment historically

used in the electric industry. If advanced metering systems exhibit

technological and cost behaviors similar to those of computers, their

useful lives may turn out to be shorter than estimated.

• Risk of stranded assets – This could involve equipment that was, at

the point of installation, state-of-the art but before it reached the

end of its useful life it was eclipsed by newer technology costing less.

Cost-benefit analysis warrants a broad approach

• Societal benefits and externalities should be included as well as the

costs and benefits of conventional investment proposals.

• This will require a delicate balance, but the transformational

potential of the smart grid vision warrants it.

– A reduction in carbon emissions will improve public health.

– Smart grid projects can create employment, enhance agricultural

security, stimulate economic growth or provide other benefits outside

the boundaries of conventional projects.

– These should be taken into account.

• Such benefits are difficult to measure, but that shouldn’t deter

policy makers and regulators from devising a methodology.

Smart Grid : Financing Models

Issues

� Huge Investments Huge Benefits

� Technology Risks

� Technology has a low life span

� Utility does not have money !!

� Financial Institutions are hesitant to lend money to utilities

� Stakeholders are eager to participate in Smart Grid Program but ambivalent to move with

State owned Utilities

� Participation of societal stakeholders in investment is a challenge

� Assets ownership

Possible Financing Models

• Using the Regulatory Tools

• Government Contribution toward deployment

• Public Private Partnerships (PPP)

• Build and Operate

• Franchise to operate Micro grids

Smart Grid :Policy

• Sections of EA Act require tuning to address issues of Smart Grid

• Revision of Tariff Policy and Electricity Supply Code.

• It is a bottom up approach to ultimately make national grid smart --Integration

need to be addressed through proper protocols and Standards-Network,

metering, software, system control etc.

• Up dating of Grid Code to include smart distribution grid as well.

• Sharing of Communication infrastructure

• Involvement of societal stakeholders

Smart Grid :Regulatory

• Is investment Prudent enough to pass through to consumer?

• What is suitable incentive to consumer to shift its demand from peak to off peak ?

• Should retail tariff design be left to utilities? Regulators provide peak tariff?

• What should be the suitable compensation to consumer for using his captive generation by utilities ?

• What will be road map for infrastructure improvements to implement smart grid–metering, network and system operation?

• How to fully involve Consumers in the process?

• Should utility testing new technology be not be provided with higher rate of return ?

• What should be encouraging feed in tariff for RE ?

Organizing for Success

What to do while you’re waiting for the Smart Grid

• Three issues that should be addressed before pursuing a

Smart Grid implementation include:

– Develop your vision of the Smart Grid, then a plan

– Evaluate the processes that will be affected

– Address the organization’s readiness

Evaluate business processes affected by smart grids

Many business processes will be affected

• One client discovered it had 80 business processes

that would be affected by their AMI deployment

• As with enterprise systems, any business process

redesign is best done first

• The “Ready, Fire, Aim” syndrome has already begun

to crop up in smart grid initiatives

How will your staff adapt to a changed environment?

Where is the organization’s institutional know how?

• Many utilities will retire

25% of their staff in the

next 5 years.

• Technology and business

is growing faster than the

organization’s ability to

keep pace.

• Training and a focused

change management

program can make a big

difference.

• We are for consumers.

• Outsourcing smart grid

operation

How do you want to proceed?

You may need to rebuild the ship, but you can’t stop

sailing

• There is much unfinished business to be taken care of before adopting advanced smart grid features on a broad scale, but action should not be delayed.

• Transitioning to a smart grid vision tailored to India’s unique circumstances would include:

– Develop a national vision and a flexible plan to pursue smart grid benefits

– Build on R-APDRP & RGGVY and link service quality improvements to measurable KPIs

– Develop smart grid pilots to reinforce operational efficiency at discoms

– Conduct customer and marketing surveys to refine the understanding of what drives

customer satisfaction

– Craft policies and regulations to create a more receptive environment for smart grids by

encouraging innovation, establishing interoperability standards, and allowing more

market-oriented and entrepreneurial solutions.

– Implement techno-commercial “proof of concept” pilot projects for initiatives that have

potentially high impacts, including those that can be implemented independently of the

grid.

Summary of suggested smart grid elements

and components for India (2010-2020)Adoption Level

Element Components Timing National Utility Customer

1. Develop National Smart Grid Vision

Set up a smart grid task force (multidisciplinary, with major ICT focus) 1 �

Confirm target loss reduction curve for AT&C losses at discoms 1 �

Confirm impact estimates for renewable energy, carbon emissions, cost reduction and service quality improvement 1 � �

Conduct customer and market surveys to confirm objectives and get feedback from key reform participants 1 � �

Draft proposed vision and indicative plan identifying roles and responsibilities 1 � �

2. Develop Flexible Smart Grid Approach for India

Link R-APDRP to service quality improvements to service quality & operational improvements demonstrated by KPIs 2 � �

Identify smart grid elements for introduction to the discom business model and internal operations program using KPIs 2 � �

Foster partnerships between ICT and power sector players 2 � �

3. Develop Legal and Regulatory Framework

Amendments in Electricity Act 2003, National Tariff Policy and National Electricity Policy1 � � �

Regulatory approach for energy security and societal value 2 � �

Higher return to utilities for higher risk and use of cutting-edge technology efficiency and better service delivery 1 � �

4. Support Development of Smart Grid Infrastucture

Develop a policy approach for cost recovery 2 � � �

Identify funding source for ICT backbone infrastructure for qualified projects 2 � �

Identify funding source for electric grid infrastructure for qualified projects 2 � �

Develop standards and protocols for interoperability 2,3 � �

5. Conduct Techno-commercial Pilot Projects

Confirm and rank order commercial viability and environmental impacts and launch projects with strong monitoring and verification protocols 2 � �

Develop case studies, customer education and outreach to all major stakeholders to build commitment 3 � � �

Timing/Phases: 1 – Immediate / as soon as feasible; 2 – As soon as preconditions are met; 3 – Continuous

Techno-commercial pilots can serve as proof of

concept

• Thus, the first priority should be to identify ways to help reduce

AT&C losses.

• Other priorities include:

– support to demand response / energy efficiency

– enhancing customer value

– easing the demand for electricity on discoms to facilitate

improvement in their commercial / financial position

• A basic requirement should be that each possible pilot mitigate

carbon emissions.

• Another consideration would be pilot projects that help to

accelerate the pace of reform.

• The following slide shows a sample of possible pilots

• This is followed by one-page summaries of two possible pilots

Smart grid focus areas in India-Pilots

Possible Pilot Project/Study

Reduce AT&C Losses / Improve Efficiency

Reduce / Mitigate Carbon Emissions

Improve Service Quality / Enhance

Transparency

Facilitate Demand Response

and Energy Efficiency

Reduce Demand

on Discoms

Transform the Biz Model /

Accelerate Reform

1. Link R-APDRP to measurable service-quality KPIs

� � �

2. Smart green apartment complex� � � � �

3. PHEVs� � �

4. Replacement of small- scale gensets with renewable energy

� �

5. Off-grid renewable energy for irrigation pumping

� � � � �

6. Smart grid pilot in BESCOM� � � �

7. Wastewater methane generation� � � �

8. Distributed RE generation in remote rural villages

� � �

9. TOU rate pilot project� � � � �

10. Advanced Volt/VAR support� � �

11.Direct debit delivery of subsidies coupled with cost-based tariffs

� � � �

� High potential impact � Contributing impact � Enabling precondition

Business Case

Many of India’s 10,000,000 irrigation pumps are powered by electricity that is provided free or at a nominal tariff. These dysfunctional but politically correct tariffs have caused the wasteful use of water and electricity. Underground aquifers are being depleted at an ever-increasing rate and estimates of electricity used for irrigation pumping range from 20 to 30% of total. Distributed renewable energy (e.g., wind, solar) could be used to provide power to operate pumps that could irrigate fields directly or pump water to storage tanks for later use or, alternatively, energize batteries. A one-time capital grant to offset the installation cost of such a system might be justified in terms of the value of subsidies to the power sector that could be discontinued. This could be integrated as part of an ESCO Agricultural DSM solution as is being tested at Doddaballapur, Karnataka or with other models considered (e.g., farmer cooperative), including the franchise model to improve the economic viability of franchises with significant agricultural demand.

Implementation Approach Key Challenges and Questions

• Analyze EA03 and state regulations to identify preconditions • Survey RE and high-efficiency pump manufacturers to identify the technology options and estimated costs

• Study the results of Ag DSM pumping pilots and franchise pilots

• Develop an economic model, evaluate costs and benefits, and assess funding options

• Plan demonstration pilots for several regions with different RE.

• A intensive program to educate farmers will likely be required• Regulatory approval and assent by a discom may be required if anESCO (with a contract with the local discom) will own the RE source

• Vested interests who get free electricity under Ag tariffs may oppose something that reduces the known benefit they now receive

• The economic viability of the program might require metering andpossibly a cost-recover mechanism, e.g., tariff.

Benefits Costs

• Reliable electricity for irrigation pumping• Enhanced control of ability to irrigate crops for farmers • Improved agricultural outcomes, i.e., crop quality, farmer incomes

• Reduction in power sector subsidies

• The initial capital cost could be significant • Installation and O&M costs are unknown.

Off-Grid Renewable Energy for Irrigation

Pumping

Conclusions

• Electricity is morphing from a commodity into a premium form of energy

• Demand for more high-quality electricity will continue growing unabated

• The link between economic prosperity and quality electricity is tightening

• Traditional fossil fuels will be increasingly scarce, expensive and polluting

• The smart grid vision offers unique solutions to customers’ and society’s

need for a sustainable, high-growth, low-carbon economic model

• For India, the smart grid may offer a unique opportunity to leapfrog into

a vastly improved electricity environment.

• There is enormous potential for gain, but also some significant risks.

• The best course of action is to proceed with deliberate speed with a

program that emphasizes front-end analysis, planning and goal setting.

The secret to survival is to embrace

change and to adapt

- Rohinton Mistry, A Fine Balance