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India crosses new milestone in EHV equipment testing

National High Power Test Laboratory Pvt Ltd (NHPTL) last week announced that it began commercial operations from July 1, 2017, and that it was now open to accepting enquiries for high-voltage equipment testing. The commissioning of India’s most advanced laboratory for high voltage equipment testing, albeit just the first phase for now, is a very important development for the electrical equipment industry. Not only will the laboratory (located at Bina in Madhya Pradesh) serve Indian customers, it is also expected to attract business from SAARC, ASEAN and Middle East countries.

India’s inadequacy in the field of testing of high- and extra high voltage equipment, typically power transformers, is well known. The new Bina lab is expected to mitigate India’s reliance on foreign testing houses, typically CPRI (Italy) and KEMA (The Netherlands).

India’s two traditional testing laboratories, ERDA and CPRI, have been bolstering their competency but they haven’t really been able to obviate the dependence on foreign labs. For instance, though ERDA is capable of carrying out impulse test on transformers up to 400kV, there is no scope for undertaking the most crucial short-circuit test. The Bina laboratory of NHPTL, on the other hand, is well equipped to carry out short-circuit test on 400kV power transformers. It is estimated that Indian transformer manufacturers spend an estimated Rs.30 crore each year in getting their products type-tested in foreign laboratories. Apart from the high expenses, the turnaround time in getting transformers tested overseas labs is very high.

While the first phase of the Bina laboratory is commissioned, it is also encouraging to see that ERDA and CPRI are also moving on with their expansion plans.  All this is good news for the Indian power transmission industry that is progressively moving to higher voltages (765kV, 800kV and even 1,200kV). It is also pursuing high voltage direct current (HVDC) power transmission modalities, apart from conventional alternating current (AC).

NHPTL’s Bina laboratory has an intrinsic advantage of having taken birth in a technogically-advanced era. This being the case, it will not face legacy-related impediments of migrating from a low-voltage regime to an extra-high voltage regime. For CPRI and ERDA, on the other hand, this transition will not be seamless. Also, NHTPL is a corporate entity (company) that makes matters like decision-making and fund raising relatively easier than in the case of ERDA and CPRI that are registered as non-corporate entities.

All said and done, India’s reliance on foreign laboratories will decline only gradually. It must be acknowledged that KEMA and CESI, in particular, have been longstanding partners to the Indian electrical equipment fraternity. Certification from these agencies has been very helpful for Indian companies, especially those exporting high-voltage equipment. Both these agencies have played a critical role in the development of NHPTL’s Bina laboratory, right from the conception stage.

Coming back to the Bina laboratory, NHPTL, in the second phase, has envisaged a high power synthetic (HPS) lab for short circuit testing of circuit breakers up to 550kV, 63kA with synthetic methods. Also part of the second phase, is a high current low voltage (HCLV) lab for testing high current withstand capability of electrical equipment such as low-voltage bus bar, contacts, breakers, disconnectors, bushings, current transformers, etc.

Self-sufficiency in high-voltage electrical equipment testing was a cherished dream of Indian electrical equipment manufacturers, and NHPTL’s Bina lab is a definitive first step towards the realization of this dream.

Venugopal Pillai by — July 10, 2017 in Power Transmission 0
The highs and lows of tariff-based competitive bidding

It is a matter of irony that while the country the celebrating the success of the tariff-based competitive bidding (TBCB) mechanism in the solar and wind energy sectors in terms of historically low tariffs quoted by developers, the same philosophy is creating turmoil in the conventional power generation and transmission industry.

According to reliable reports, the Supreme Court has disallowed any increase in tariffs from Tata Power’s 4,000-mw Mundra ultra mega power project (UMPP) to be passed on to beneficiary utilities. Tata Power in late 2006 had clinched the Mundra UMPP quoting a levelised tariff of Rs.2.26 per kwh during the 25-year concession period. The tariff quoted by Tata Power was based on long-term negotiated deals signed with Indonesian coal suppliers. However, Indonesia in 2010 ruled that coal cannot be exported at less than market price. The fuel cost for Tata Power shot up, rendering the tariff (of Rs.2.26 per kwh) simply unviable.

Two mega transmission schemes of Reliance Power (Anil Ambani Group) have been under litigation for quite some time now, on the same grounds. Reliance Power had won the North Karanpura and Talcher-II transmission schemes under the TBCB mechanism, back in 2009. Reliance Power has sought revision in tariffs as the company has alleged that work on the projects could not start on time due to non-timely pre-project clearances from the Union government. Reliance Power has sought 160 per cent increase in tariff for the North Karanpura project and 90 per cent in the case of Talcher-II. Beneficiary state utilities have contested this plea and the matter is still sub-judice. The next hearing of the Appellate Tribunal of Electricity (ATE), with whom the matter is now resting, is scheduled on July 12, 2017, for both these projects. Incidentally, Power Grid Corporation of India has stepped in and offered to take over the projects but on conventional “cost-plus” basis, and not under the tariff-based competitive route.

Selling stake

Coming back to the Mundra UMPP case, Tata Power has offered GUVNL 51 per cent stake in Coastal Gujarat Power Ltd (the 100 per cent Tata Power subsidiary that owns the Mundra UMPP) for just Re.1. This will result in CPGL relegating itself to an O&M contractor. GUVNL (Gujarat Urja Vikas Nigam Ltd) is the parent body of all power utilities in Gujarat. It is never going to be easy for power utilities to take over the project and sell power at Rs.2.26 per kwh. The project is designed to run on imported coal; domestic coal will be an inferior alternative from both technical and commercial standpoints.

Adani Power and Essar Power are also saddled with their projects – Mundra (4,620 mw) and Salaya (1,200 mw), respectively – that are based on imported (Indonesian) coal. Both the developers are finding it difficult to sell power at rates contracted in the power purchase agreements. [These projects do not technically fall under the TBCB mechanism but are based on long-term PPAs signed with beneficiary utilities. However, the impact of rising fuel costs on the commercial viability of the power generation asset is the same.]

Also read: Tariff-based bidding in wind energy to gain momentum

The TBCB mechanism has done wonders for the solar industry with tariffs falling to a historical and incredulous low of Rs.2.44 per kwh, as seen in the Bhadla-Phase III project in Rajasthan. Even in the recent 1-GW wind energy auction conducted by SECI, the winning tariffs have been around Rs.3.50 per kwh, much lower than the Rs.4-6 per kwh band seen in the feed-in tariff regime. The biggest advantage that solar and wind projects have is a complete insulation from the vagaries of fuel cost. Despite this, experts believe that such aggressive quotations have been submitted with an underlying desperation to bag projects. Solar developers have set up large teams but the flow of projects has not been much slower than anticipated.

What next?

Based on the cases under discussion, it appears that the TBCB regime is going through a rough patch. While the developer does his homework in quoting the winning tariff, there is always room for unexpected developments that can make financial calculations go awry. Agreed that developers fully subscribe to the project risk but what happens when a developer is confronted by a totally unanticipated situation that makes the tariffs unviable? This is more so considering that the concession periods are long—25 to 30 years. Although concession agreements provide for force majeure, not all eventualities can qualify.

The power projects of Tata, Adani and Essar under discussion are stuck in a policy logjam, and there is no easy way out. It is a tragedy that technically efficient power generation projects are becoming victims of commercial inefficiency.

The tariff-based competitive bidding mechanism, a sound philosophy of power procurement implemented in the country since January 2011, needs some rethinking. Right now, the Central government appears to be distancing itself as issue is strictly between the power generator, the procuring state government utilities, and the lending institutions. While this is understandable, the Centre could do well in reworking the nuances of the otherwise sound tariff-based competitive bidding mechanism, protecting the long-term interests of all stakeholders.

venu by — June 29, 2017 in Policy 0
Restricting China in India’s power transmission

The Union power ministry, according to reliable media reports, is planning to issue a note that seeks to restrict China’s involvement in the Indian power sector. The reports further suggest that restrictions will be imposed in the power transmission sector to start with, and will be extended to power generation and power distribution subsequently.

The objective of the policy is to maintain the principle of reciprocity. China, it should be noted, does not allow Indian companies in its power sector. While there are other countries that also disallow Indian participation, China is significant because of its widespread involvement in the Indian power sector.

When it comes to a Chinese, or any foreign entity for that matter, there are two ways in which it could associate with the Indian power sector. It could either be an equipment supplier or it could be a developer. In the case of a developer, the foreign (Chinese) entity will own equity in the power project, be in the field of generation, transmission or distribution, and will therefore share the risk of the project. When it plays the role of an equipment supplier, there is no equity stake. An equipment supplier can, at the most, become an EPC contractor and perhaps undertake a concomitant operations & maintenance (O&M) contract.

Within equipment suppliers, there are two classes. The first is one that has domestic manufacturing facilities in India, and the second is where the supplier caters to the Indian market through exports from the country of origin.

Thus, we have three broad categories in which a Chinese supplier could cater to the Indian power sector – developer, equipment supplier without local manufacturing facilities and equipment supplier with local presence.

Gauging the impact

Let us gauge the impact of the proposed restriction in the power transmission sector. So far, there are no Chinese developers of power transmission lines. This means that no Chinese company owns and operates transmission lines in India, as yet. Ownership and management of power transmission lines is possible under the under the BOOT/BOOM model. All the same, it is learnt that CLP (incidentally the only independent power producer in India, of Chinese origin) has bid for some interregional lines offered under the tariff-based competitive bidding route. CLP India had bid for three lines but did not secure any. Very recently, CLP India in association with China Southern Power Grid International (CSGI) has bid for three interregional lines, the results of which are awaited. The entry of China as a potential developer of power transmission lines in India was also discussed in a Parliament session earlier this year. Barring this case, there is no other Chinese company that has evinced interested in India’s power transmission sector, in the capacity of a developer.

When it comes to equipment used in the power transmission sector, the proposed ban could have some impact. India’s power transmission infrastructure is gradually moving to extra high voltage levels, typically 765kV. Till around five years ago, power utilities (both Central and state) made large-scale imports of 765kV gear, like transformers and reactors. However, today, local manufacturing capabilities of 765kV equipment have improved thereby lowering the reliance on Chinese equipment. However, there are some items like insulators are imported on a large scale from China as they are available at a very low cost. It is well known that Indian insulator companies have been hurt badly by cheap imports, for several years now.

China as a local player

It is also interesting to note that China is taking the Indian power transmission sector seriously and has even set up local manufacturing facilities. BTW, TBEA and Hyosung are some Chinese companies that have started operations in India through local plants, in the field of EHV power transformers, reactors, switchgear, etc. The Indian manufacturing fraternity, is should be mentioned, has not objected to Chinese companies setting up facilities in India. Their contention has always been to put a check on cheap imports from China.

Though details of the proposed restrictions are not available, it remains to be seen if India actually prohibits Chinese companies from setting up manufacturing facilities in India. Given that India currently permits 100 per cent FDI in the electrical equipment sector, and is also encouraging the “Make in India” campaign, how deftly it deals with the sensitive issue remains to be seen.

The final picture

Since the proposed restrictions on China in the power transmission sector have not yet been spelt out, the final picture cannot be painted. In summary, there will little impact from the “developer” angle. By and large, Chinese companies are not interested in owning and managing transmission lines. It is unlikely that Chinese equipment suppliers that have already set up shop in India will come under the ambit of the proposed restrictions. What could be done is to check imports of power transmission-related equipment. Here, India will be affected but fortunately the dependence on Chinese equipment today is far lesser than what it was, say, five years ago.

Read more story on

China’s Role In Power Transmission Raises Concern

venu by — June 6, 2017 in Power Transmission 0
BHEL gets “developer” tag

 

Very recently, the first unit of the 2×800-mw Yeramarus supercritical power plant in Karnataka was commissioned. This development assumes significance on several counts. First, it imparts to public sector engineering firm Bharat Heavy Electricals Ltd (BHEL) the status of “power developer.” The Yeramarus plant is owned by Raichur Power Corporation Ltd – a joint venture between Karnataka Power Corporation Ltd (approximately equity stake: 50 per cent), BHEL (26 per cent) and IFCI Ltd (24 per cent). BHEL, after having supplied equipment to a very large share of India’s power generation capacity, is finally an owner, albeit part-owner, of a power plant.

venu by — March 24, 2017 in Power Transmission 0
Making the distribution franchisee model work

 

Early last month there was some good news on the power distribution front when private utility CESC Ltd (part of the RP-Sanjiv Goenka Group) was appointed the distribution franchisee for the Bikaner circle in Rajasthan. For the northern desert state, this was the third case of appointing a distribution franchisee. In July 2016, Rajasthan had appointed distribution franchisees for Kota and Bharatpur. Incidentally, both these mandates were won by CESC Ltd.

venu by — March 14, 2017 in Power Transmission 0
Consolidation in power transmission business

 

There appears to be some consolidation in the power transmission business with Adani Group’s recent signing of definitive agreements to acquire a large transmission asset of Anil Ambani-controlled Reliance Infrastructure (RInfra) in western India. Once acquired, Adani Group is poised to become the largest independent power transmission company owning and managing over 10,000 circuit km (ckm) of transmission lines.

venu by — February 10, 2017 in Power Transmission 0
Separating CTU from Power Grid Corporation

 

For quite some time now, Power Grid Corporation of India, the Central PSU engaged in interregional power transmission, has been in the news with respect to separating itself from the “CTU”, which is “Central Transmission Utility.” It is worthwhile to understand the issue in some detail.

Something very significant had taken place on January 5, 2011. The power ministry ruled that all power purchases made after this date would be based on tariff-based competitive bidding (TBCB) mechanism. This has had serious bearing on all aspects of the power value chain—generation, transmission and distribution.

In the context of interregional and interstate power transmission, PGCIL was always the agency “nominated” by the power ministry. PGCIL could build power transmission lines on the “cost-plus” method, which meant that it could quote a project cost, factoring a mark-up on the envisaged construction cost. In other words, PGCIL was always assured of return on investment as the tariffs charged by PGCIL for transmission of power were based on the expenditure incurred on constructing the line.

Power Grid no longer nominated agency

Post January 5, 2011, PGCIL lost its status of being the “nominated agency” for building interregional and interstate lines. Under the TBCB regime, PGCIL would have to compete with private players and win projects based on the tariff quoted. It surely would have been a culture shock for PGCIL. The Central PSU now had to compete with the same private entities that used to be contractors for its projects. These private entities, in turn, were contractors that choose to groom into developers. In other words, a private contractor for PGCIL would now aspire to become an owner and manager of a transmission line—much more than simply building it for PGCIL. The TBCB regime, as one can see, marked the evolution of private enterprise in interregional power transmission. We have today private developers like Sterlite Power, Reliance (ADAG) Group, Kalpataru Power Transmission, etc—all of whom are sharing the power development space with PGCIL.

It is important to note that PGCIL along with being a power transmission company, in the sense of owning and managing interregional transmission lines, is also responsible for grid management and for planning the nationwide transmission infrastructure. For PGCIL to fit fairly into the TBCB regime, other aspects, namely the grid management, and the planning of transmission network, also had to be worked upon.

Grid management hived off, now it is CTU’s turn

Steps to reorganize PGCIL were taken much before the January 5, 2011. In February 2009, the grid management operations of PGCIL were hived into a separate company called Power Systems Operation Corporation Ltd (POSOCO). When incorporated, it was a wholly-owned subsidiary of PGCIL. The grid management operations of PGCIL, now under POSOCO, include one national load dispatch centre (NLDC), five regional load dispatch centres (RLDC) and 33 state load dispatch centres (SLDC). The incorporation of POSOCO was aimed at ring-fencing the grid management operations from PGCIL, though POSOCO’s ownership was still with PGCIL.

Very recently, an important development took place. On January 2, 2017, the ownership of POSOCO was transferred from PGCIL to the Union power ministry. The complete equity capital of POSOCO, comprising 30.64 million shares of face value Rs.10 each, was transferred to the power ministry for a consideration of Rs.81 crore. This now makes POSOCO a Central PSU, directly under power ministry. At the organizational level, POSOCO is now at par with PGCIL, as well as other Central PSUs under the power ministry. More importantly, POSOCO will have much more financial autonomy allowing it to even raise resources on its own.

With the grid management issue now taken completely care of, it is time to look at the CTU dimension. Among the various functions of the CTU is that of planning the national transmission network, which essentially means new interregional and interstate transmission systems. The paramount corporate objective of PGCIL is to develop a national grid for the seamless transfer of electricity between the five regional grids—north, northeast, west, east and south. Currently, the interregional transfer capacity of the National Grid is around 62,650 mw, which is very close to the target of 65,000 mw set for end-March 2017, the end of the XII Plan period. It should be remembered that PGCIL does not own this 62,650 mw entirely. Around 10 per cent belongs to private developers, representing projects won by private entities under the TBCB regime.

Also read: The changing complexion of Power Grid Corporation of India

Why the CTU needs to be separated

The CTU is a small but highly specialized cell within PGCIL. It is reliably learnt that the CTU is a group of five or six members. The main job of the CTU is to plan new transmission schemes, to augment capacity of the National Grid. The CTU not only plans new lines, but it also estimates the project cost and other sensitive parameters like the base tariff, etc. All this information is critical whilst bidding out the project under the tariff-based competitive bidding mechanism. Technically, PGCIL has access to this information and this could vitiate the tenets of tariff-based competitive bidding. It threatens to destroy the level-playing field between PGCIL and private developers. This is why the CTU aspect of PGCIL needs to be detached from PGCIL. The power ministry is already working to this effect.

The case of PGCIL is reminiscent of several such instances where Central government undertakings had to be restructured in the wake of the Liberalisation Policy of 1991. One such case is that of the erstwhile Oil & Natural Gas Commission. Till the early part of the 1990s, ONGC was both an operator and a regulator of sorts. When private sector entered the oil exploration business, ONGC could not perform a dual role. Thus, in 1993, was born Oil & Natural Gas Corporation Ltd (a corporate entity under the petroleum ministry) and Directorate of Hydrocarbons (DGH)—the regulator.

venu by — January 18, 2017 in Policy 0