Indian Power Sector:- Summary Of Evolution

Pre-Independence Era:-

1. 1879:- First demonstration of an electric light in Calcutta.

2. 1897:- Kilburn & Co secured the Calcutta electric lighting license as agents of the Indian Electric Co. A month later, the company was renamed the Calcutta Electric Supply Corporation.

3. 1882:- Mumbai saw electric lighting demonstration for the first time at Crawford Market.

4. 1887:- Indian Electricity Act 1887 was enacted for the protection of person and property from injury and risks, attendant to the supply and user of electricity for lighting and other purposes.

5. 1897:- The first hydroelectric installation in India was installed near a tea estate in Darjeeling.

6. 1903:- Indian Electricity Act 1903 was the first attempt to regulate the electricity sector broadly in the country. But, this act was ambiguous, as it did not recognize bulk sale of electricity and also jurisdictions of local government and Government of India were not clearly demarcated.

7. 1905:- Bombay Electric Supply & Tramways Company (BEST) set up a generating station in 1905 to provide electricity for the tramway. The first electric street light in Asia was lit in 1905 in Bangalore.

8. 1910:- Indian Electricity Act 1910 gave the power of licensing to local governments and moreover, issuing of license for bulk supply was introduced.

Post Independence Era:-

1. 1948:- Electricity Supply Act 1948 was enacted to envisage State Electricity Boards (SEBs) in different states with full powers to control generation, distribution and utilization of electricity within their respective states and also to constitute Central Electricity Authority (CEA).

2. 1964: – Five Regional Electricity Boards (REBs) were formed by the Government of India with the concurrence of State Governments with a view to ensure integrated grid operation and regional cooperation on power.

3. 1969:- Rural Electrification Corporation (REC) was established to ensure the availability of electricity for accelerated growth as a remedy to famines of 1960s and also to improve the quality of life for rural and semi-urban population.

4. 1975: – Creation of Central Generating Companies for development of super thermal power stations at coal pit heads and large hydroelectric stations leading to creation of NTPC, NHPC, & NEEPCO.

5. 1986:- Power Finance Corporation (PFC) was incorporated as a dedicated financial institution for the power sector.

6. 1989:- Power Grid Corporation of India Limited (PGCIL) was set up by carving out the transmission assets from various central utilities.

Power Sector Reforms

1. 1991:- Electricity Supply Act 1948 was amended to pave the way for the formation of private Generating companies. CEA empowered to fix the norms for determining the tariff of all generating companies. RBI allows 100% foreign investment in power sector. Also to establish Regional Load Dispatch Centers (RLDCs). To encourage private investments into generation, several policies were promulgated like:-
   

2. A guaranteed 16 percent return on equity with full five years tax holiday.

3. Debt to equity ratio of 4:1.

4. Sovereign guarantees and escrow benefits in case SEBs defaulted

5. 1992 – First Gazette Notifications on the criteria for fixing the tariff for sale of electricity by the Generating companies to SEBs or any other agency.

6. 1998:- Transmission sector was also opened for private investments subject to approval of PGCIL as Central Transmission Utility (CTU).

7. 1998:- Electricity Regulatory Commission Act enacted paving the way for the formation of Central Electricity Regulatory Commission (CERC) and State Electricity Regulatory Commissions (SERC). Regulatory power of the State governments transferred to SERC. Consequently, Tariff regulatory function of CEA transferred to CERC.

8. 1999 – Privatization of distribution in Orissa.

9. 2000 – Indian Electricity Grid Code (IEGC).

10. 2002 – Privatization of distribution in Delhi.

11. 2002 – Availability Based Tariff was introduced.

12. 2003 – Electricity Act 2003 enacted by the Parliament. This Act repeals the Indian Electricity Act 1910, Electricity supply Act 1948, Electricity Regulatory Commission Act 1998. The Salient features of the Electricity Act 2003 are:-
    

13. Creates a liberal and transparent framework for the development of power sector.

14. Facilitates investment by creating competitive environment and reforming distribution sectors.

15. SEBs has to be unbundled into separate generation, transmission and distribution entities.

16. Licensing for generation sector is removed, except techno-economic clearance for hydro projects exceeding a capital cost notified by Central Government.

17. Freedom to have captive and group captive generations.

18. Establishment of SERCs made mandatory.

19. Recognizing trading as an independent activity.

20. Open access in transmission facilitating multi buyer and seller model.

21. Open access to consumers having demand above one MW within five years from date of enforcement of Electricity (Amendment) Act 2003.

22. Regulators have been mandated to enforce this.

23. Envisaging consumer redressal forum and their appellate authority, the Ombudsman.

24. 100 percent metering made compulsory.

25. Provisions relating to theft of electricity made very stringent.

26. For rural and remote areas, stand alone systems for generation and distribution permitted.

27. 2004:- First Open Access Regulation was published by CERC.

28. 2006 – Tariff Policy, Competitive bidding for procurement of power, Ultra Mega Power Projects.

29. 2006:- Staff paper “Developing a common platform for electricity trading” where first time the prospective of Power Exchanges was discussed.

30. 2007:- Guidelines were issued by CERC for grant of permission for setting up and operation of Power Exchange.

31. 2008:- IEX commenced its operations in June 2008 and PXIL in Oct 2008.

32. 2008:- “Open Access in Inter-State Transmission Regulations” which covered Short-term Open Access transactions including collective transaction through Power Exchanges.

33. 2010:- CERC (Power Market) Regulations introduced with focus on operations of Power Exchanges.

34. 2010:- CERC (Terms and Conditions for recognition and issuance of Renewable Energy Certificate for Renewable Energy Generation) Regulations.

35. 2016:- CERC (Terms and Conditions for Dealing in Energy Savings Certificates) Regulations.

Steep Decline in Solar prices : What could be the possible reasons?

In a bid for 750 MW of solar projects in Rewa, Madhya Pradesh, tariff had gone as low as 2.97/KWhr which seems as unrealistic, unviable and ridiculously low. The reason could be the availability of solar modules from china at an incredible price of around 30 cents or un-hedged foreign currency loans at cheap interest rates or other reasons. However, few industry experts believe that current module prices are below costs and if this continues, quality will suffer.

Around 2 years from now, the solar prices were expected to drop down by 5 percent for rooftop residential systems, and 12 percent for larger utility-scale solar farms. However, for last 9 months the price drop down continued at the rate of 15%. Here are few of the reasons why this could be happened:-

1. Overall manufacturing cost goes down around the globe: – Solar panels, inverter costs and panel racking costs have come down at a steady pace each year, resulting in large declines over time. There are a variety of causes, including manufacturing efficiencies, a steep decline in polysilicone prices from their high levels a decade ago (a material used by the photovoltaic solar industry) and fierce competition among manufacturers. Crystalline silicon module prices dropped 10% in the last three months and by about 30% over the past year. The downward price trends are very common for new technologies same as in mobile phones, DVP players or other.

2. Oversupply from China: – As per the research by Bridge to India, the steep fall in prices can be seen as a result of oversupply from China, where an installation slowdown in the second half of the year has prompted solar module manufacturers to overload their modules into neighboring India. This oversupply is likely to result in severe financial stress for domestic module manufacturers. Bridge to India believes that China’s big Tier-1 suppliers are financial robust enough to survive this downturn, but concerns are mounting that many of the industry’s smaller players may be unable to compete.

There is concern also regarding Chinese modules is that bigger developers with adequate technical capability can make informed decisions, appoint third-party quality consultants and carry out necessary testing etc, but smaller developers, investors and end consumers do not have the necessary know-how and unfortunately, there is very high risk that many of them will end up buying sub-standard modules.

1. Technology Advancements: – The greater the efficiency of the solar, the greater the overall energy production of the system. The efficiency of system in the market ranges from 14% to 22 % which means efficient system could produce around double the power as compared to the inefficient system.

2. Other project based benefits:- There are many other features which are project based and beneficial for developers such as compensation to developers in case of grid unavailability or back-down, a payment security mechanism, viability gap funding and an annual increase in tariff at a particular rate.