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JUL 01 2015

PSU power: Victim, not villain

  • Economic Times, ET Bureau / Hyderabad
  • Created: Wed 01st JUL 2015

Fingers are often pointed at the Power Grid Corporation (PGCIL) for power cut in most parts of the country. Independent power producers have many times blamed transmission congestion in Power Grid lines for frequent power outages. However, PGCIL has a different version.

The mismatch between generation capacity additions and the shift in regional demand for power was primarily responsible for the transmission congestion, a senior PGCIL official said. According to this official, lack of co-ordination and planning between upcoming generation units and the transmission utility in the past further aggravated the problem, although the situation may be on the mend with more generation capacity being added to the southern states, which would curb the demand for imported power from other regions.

Data from Indian Energy Exchange, a platform for trading electricity in short-term, shows nearly 3 billion units of electricity remained unsold in FY15 owing to transmission congestion, especially in the southern corridor. Another industry estimate says nearly 10 GW of power, which have power purchase agreement (PPAs), are stranded as they do not have access to the transmission line due to lack of capacity.

Transmission networks, the official says, are created keeping in mind the destination of power supply, along with other variables. But in the last few years generation capacity that was to cater to the northern and western regions couldn’t find intended buyers, even as demand in the southern region soared. “With a host of power plants wanting to sell power to southern states, especially Tamil Nadu, the existing transmission capacity became inadequate,” the official said. To that extent, the transmission capacity shortfall was artificial, as the network was built to cater to specific buyers and demand, which changed for many generation units at the time of commissioning.

For instance, in cases of Delhi and Haryana, the anticipated rise in demand for these states led to the creation of a thermal power plant at Jhajjar, jointly owned by two states and NTPC. However, as the fuel scarcity and linkage issues pushed the tariff above R5 a unit, the states chose to abandon the capacity allocated to them.

“The transmission system was built for evacuation from the Jhajjar power plant but the states decided to import cheaper power for fulfilling demand. Not only did it leave the existing corridor idle, but left the company with an impossible task to strengthen the north-west corridor for this additional capacity in a very short time,” the official said.

The coal-rich state of Chhattisgarh alone saw independent power producers (IPPs) create nearly

15 gigawatts (GW) of capacity in the last three years. Originally, the developers had applied for long-term access (LTA)—prior permission to use transmission corridor—to supply a third of the power to northern and western regions each after internal consumption in the state. However, the northern and western state governments ramped up their own generation capacity while IPPs were still building plants in Chhattisgarh. This led to constriction in demand from these regions.

At the same time, southern states were facing a dearth of natural gas to run their gas-based power plants. Simultaneously, due to the unexpected price rise in Indonesian coal—preferred by domestic developers- the coal-based plants also became non-viable. This created a market for IPPs operating in Chhattisgarh, but the sudden rush of demand proved to be too much for the transmission capacity that was planned and built for a different purpose.

“If all the shoppers on any given day decide to throng one shopping mall it is bound to struggle for capacity even if its designed to cater to large crowds,” the official reasoned.

The official said PGCIL has completed nearly 35,000 circuit kilometers of transmission line in five years, but the reason that such massive capacity additions have not been able to cater to demand is because of the lopsided and unattached development of generation and transmission capacity.

PGCIL, on its part, has suggested to the Central Electricity Authority (CEA)—the government body for the planning and development of the power sector—and the Central Electricity Regulatory Authority (CERC) that each state should declare their expected demand five years in advance, including the expected mix—internal generation and imported—to meet it. The states would then be required to stick to the plan so that adequate transmission capacity can be built.

“This would help us avert situations like in Tamil Nadu where the corridor connecting it to the north can transmit 4,000 MW of power but it has proved to be inadequate because of lack of planning and foresight,” the official said.

While transmission congestion gets a bad name due to unused capacity and power shortage, the situation also demonstrates progress of the power sector in the country as only in a mature system can a state or a buyer choose to abandon expensive power and rely on cheaper power that required wheeling from a great distance.


Delhi Haryana Tamil Nadu WHEELING Southern Region Power Grid Independent Power Producers Grid Transmission System Central Electricity Regulatory Commission Coal Gas Tariff Natural Gas Power Purchase Agreement NTPC Ltd Energy Power Plant Central Electricity Authority United States Import Power Cut Power Power shortage Trading Electricity WHEELING

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