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Captive power generation in factories and apartment complexes can be tapped to supply to an entire city. This can bring down unit costs.
The long and unusually hot summer in India this year has magnified the electricity crisis. Rising demand for electricity is driven by rapid economic development, with demand in major load centres doubling every 4-5 years a pace that the incoming generation capacity is not able to match.
That demand has far outstripped electricity supply is manifested in long hours of power cuts, and the public outcry. To be fair to the distribution utilities, they are trying to do all they can within the limited options at their command.
The case in point is Gurgaon, where an impressive rise in generation capacity is unable to cater to the surge in power demand at over 25 per cent per annum.
As per the distribution utility, Dakshin Haryana Bijli Vitran Nigam (DHBVN), the 16 million units (kilowatt hours) of electricity distributed each day by DHBVN is about 25 per cent short of demand when temperatures rise.
Demand growth is way ahead of projections. DHBVN, as reported in a section of the press, was candid in confessing that there has been a 25 per cent increase in power demand this year, over the same period last year, while DHBVN had anticipated a mere 10 per cent increase.
However, innovative solutions can enable tapping excess capacities in the captive power plants of large facilities in and around the service area of the utility, in particular the industries and large establishments, such as apartment complexes.
PRICE OF POWER
Most modern apartment complexes, like industries, have installed full-power back-up to hedge against power outages.
Most of these generators use diesel for generating electricity, making it 2-3 times more expensive than the price of grid-based power.
A recent blog in The New York Times, discussing the power situation in Gurgaon, quoted a resident saying that her electricity bill for June (2012) was Rs 5,000, of which she paid around Rs 2,000 just for the power back-up (for a few hours).
Another source quoted in the blog, who is responsible for running back-up power for over 1,000 apartments in an upscale Gurgaon neighbourhood, said on a day when he needs to compensate for a power cut of over four hours, he runs four generators which use 2,500-3,000 litres of diesel.
Undeniably, for individual facilities, it is an expensive option, which is being exercised for want of an economically sound alternative. In addition, emissions from diesel generators are harmful for the local environment as well as overall climate.
It is a fact that captive power exists in excess of the requirement. This, perhaps, is because facility owners consider it necessary to have a hot stand-by for the main generator and cater to future demand.
If these excess capacities installed at diverse locations are aggregated, in theory they could plug the demand-supply gap.
Therefore, if an appropriate mechanism is created whereby captive power is harnessed by the distribution utility, these decentralised generation facilities could provide a short-term solution to power outages at a fraction of the cost to the consumer. The economics becomes favourable because generation from a few units is paid for by a much larger population, as compared with a few where the facility is located.
Therefore, if the utility is able to set up the necessary technical infrastructure to tap this power and is also able to secure regulatory approval, it will be able to secure the additional power needed in-house.
In a successful project that was able to bring decentralised generation into the local city grid, the additional cost to the consumer was less than a rupee per unit, as compared with the cost of diesel generation of Rs 10-12 per unit that most consumers usually pay.
This project was a shining example of Public Private Partnership (PPP) and was implemented in Pune in 2005-06 under the supervision of the Confederation of Indian Industry (CII).
The distributed generation model for mitigating load shedding in Pune city was developed by the distribution utility, MSEDCL, in consultation with the CII. The objective of the exercise was to tap surplus power available from unutilised captive power installed by large industrial consumers during peak hours, and make available the grid power for supply to other consumers who, otherwise, will face power cuts.
In that year, Pune city experienced load shedding of about 1.2 million units per day, which for common citizens meant load shedding for about 4-5 hours everyday.
The CII surveyed the installed capacity of captive/standby generator sets in the premises of commercial and industrial consumers and found that the total unutilised installed capacity was more than 400 MW, which was more than sufficient to bridge the demand-supply gap.
The study, in fact, narrowed down on the installed capacity of the top large 30 consumers, which was in excess of 100 MW and was sufficient to cater to the worst-case scenario of load shedding.
The approach adopted, in consultation with the large consumers and the regulators, required the identified 30 consumers to reduce their off-take from the grid at certain specified peak periods, and instead operate their own generators.
The additional grid power made available through this strategy was diverted by MSEDCL to other consumers to mitigate load shedding.
The cost of generating power from captive plants by these 30 consumers was distributed over the beneficiary consumers, who had to bear an additional charge of 41 paise per unit consumed.
This additional tariff levied was used to cover the cost of the 30 industries/consumers whose captive units were used.
The extra tariff for mitigating load shedding was allowed by the Maharashtra Electricity Regulatory Commission (MERC) as reliability surcharge for all consumers. The project was successful in eliminating the power outages in Pune at a very reasonable cost.
The model holds promise for scores of urban conglomerations, particularly where commercial establishments and industries are in strong numbers and the demand-supply gap is high. Most State capitals and major cities in the country would fall in this category.
Taking the case of Gurgaon, preliminary studies conducted by the Ministry of Power and Bureau of Energy Efficiency (BEE) a couple of years ago pointed to the feasibility of replicating the CII-Pune approach.
With an estimated unutilised captive capacity of about 500 MW in and around Gurgaon, DHBVN could create the necessary technical infrastructure and determine the reliability surcharge in consultation with the regulator.
The available capacity is sufficient, as per the assessment, to alleviate the power outages in the short run and the gap between demand and supply could be minimised with an additional levy of reliability surcharge of around 60-80 paise per unit.
Replication of the CII-Pune model holds promise for distribution utilities to minimise power outages.
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