Friday, 20 July 2018

Cost of electricity

Cost of electricity
The utility electricity sector in India has one National Grid with an installed capacity of 344.00 GW as on 30 June 2018. Renewable power plants constituted 33.23% of total installed capacity.
The gross electricity consumption was 1,122 kWh per capita in the year 2016-17. India is the world's third largest producer and third largest consumer of electricity. The per capita electricity consumption is low compared to many countries despite cheaper electricity tariff in India.
power plant model
India has surplus power generation capacity but lacks adequate infrastructure for supplying electricity to all needy people. In order to address the lack of adequate electricity supply to all the people in the country by March 2019, the Government of India launched a scheme called "Power for All. This scheme will ensure continuous and uninterrupted electricity supply to all households, industries and commercial establishments by creating and improving necessary infrastructure. It's a joint collaboration of the Government of India with states to share funding and create overall economic growth.

India's electricity sector is dominated by fossil fuels, and in particular coal, which in 2017-18 produced about three fourths of all electricity. However, the government is pushing for an increased investment in renewable energy. The National Electricity Plan of 2018 prepared by the Government of India states that the country does not need additional non-renewable power plants in the utility sector until 2027, with the commissioning of 50,025 MW coal-based power plants under construction and achieving 275,000 MW total installed renewable power capacity.
The cost of electricity can be divided into
a) Plant-level costs,
·         Capital cost
·         Operation and maintenance  cost
·         Fueling cost
b) Grid-level costs,
c) Other costs.
a) Plant-level costs consist of capital, operation and maintenance, and fuelling cost. Capital cost is reflected in the cost of generation by way of interest on debt and return on equity. For nuclear power plants, capital cost is high, but fuelling cost is low. For coal-fired power plants, capital cost is low, but fuelling cost is high. The capital cost of solar and wind is continuously decreasing; fuelling cost is nil.
Electricity reaches a consumer through the grid. Laying a grid needs significant investment. A distributor buys electricity from a generator, adds transmission and distribution charges, a charge to recover technical losses, operating expenses, and his profit to determine the tariff to be charged from a consumer. Since several generators are connected to the grid, interaction with the grid and grid-management policies influence the working of a generator. At present, electricity markets do not assign any price to system effects, that is, to the complex interactions among various generators connected to the grid.

In recent years, a large capacity based on variable renewable energy (VRE) sources has been connected to the grid. These sources are intermittent, but get priority feed-in due to nil fuelling cost. A grid manager may ensure that adequate dispatchable generation capacity is connected to the grid to meet the peak load in the evening when solar power is not available. Dispatchable generation is provided by base load technologies like coal and nuclear, and by large hydropower.

b) Grid-level costs have several components: grid connection, grid extension and reinforcement, short-term balancing costs, and long-term costs for maintaining adequate back-up supply. VRE sources demand much higher back-up, grid connection and reinforcement costs. This aspect needs attention during policy formulation.

The emphasis on VRE sources without any investment in energy storage has converted daily load profile for dispatchable generating stations into a “duck curve”, that is, with a reduced electricity load during the day when solar is available and a rapid ramp up in the evening. This lowers the capacity factor of dispatchable generators.

c) Other costs
Other costs include those arising from the influence of electricity generation on health, influence on existing generation capacity due to adding new capacity, cost of accidents, security of supplies and net energy gain for society.
It adds health costs, costs of intermittency, opportunity cost of land, cost of government incentives and cost arising from stranded assets.
Conventional metrics like levellised cost of electricity generation cannot be relied on to compare intermittent and dispatchable electric supply options. India’s electricity requirements are enormous. It doesn’t need a ‘technology versus technology’ debate, but a policy framework that integrates all low-carbon energy technologies with coal in a manner that ensures reliability and security of electric supply along with affordability and climate-resilient development.
The average unit cost of energy during 1999-2000 in the country as below:
Item                                        % of cost/KWH
Fuel                                         17.2%
Power purchase                       44.5
Estt/admn                                13.6
Miscellaneous                         1.8
Depreciation                            6.6
Interest                                    12.9
Types: There are two tariff systems, one for the consumer which they pay to the DISCOMS and the other one is for the DISCOMS which they pay to the generating stations. Let us first discuss the tariff of electricity for the consumer i.e the cost consumer pay to the DISCOMS. The total cost levied on the consumer is divided into three parts usually referred as 3 part tariff system. Here, a = fixed cost independent of the maximum demand and energy consumed. This cost takes into account the cost of land, labor, interest on capital cost, depreciation, etc. b = constant which when multiplied by maximum KW demand gives the semi-fixed cost. This takes into account the size of power plant as maximum demand determines the size of power plant. c = a constant which when multiplied by actual energy consumed KW-h gives the running cost which8m takes into account the cost of fuel consumed in producing power.
Electric power distribution, A.S Pabla

Central Electricity Regulatory Commission

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