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.
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| 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.
Ref:
Electric power distribution,
A.S Pabla
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