Hello World,
I am writing
this post to discuss with you, my analysis of the state of irregular power
supply in the state of TN in India. Right here in Chennai, we are facing a
scheduled 2-hour power cut with great difficulties. But we are the fortunate
ones in Tamilnadu. The rest of the state faces power-cuts ranging between 6 and
18 hours, every day. That’s pretty much closer to the medieval era where
electricity was something unknown to most of the human population.
Click here to download the pdf version of this post.
Now this trend
of scheduled load-shedding and unplanned outages has been in effect for well
over 2 years now. There used to be a time when apart from the scheduled
maintenance shut-down, once a month, we would not remember any power-cut
exceeding 30 minutes. Power shut down exceeding an hour would usually be on
rainy days, in an attempt to avoid fallen power cables and posts causing any
serious damage. But as of now, people hardly remember when they had a full
day’s electricity without a gap.
The Expectation
I am of the
opinion that the electricity board has not made a thorough demand forecasting
for the state. I did not want to jump to a judgment and therefore made a feeble
attempt to learn if anything related to electricity demand forecasting has
actually happened, expecting to see a demand forecast methodology published
that might indicate the increase in demand and a sub sequential electricity
board’s plan for meeting the estimated increase in demand. I visited the
websites of the electricity board and I could not find any published literature
describing the demand forecast methodology. I did come across various other
literatures that startled me to the extent that I am seriously suspecting if a
formal demand forecasting was even executed.
I am not good at
understanding the details of electricity but even I expect a basic demand
forecasting that would include inputs including historical data, policy
assumptions and a load count, along with numerous other details which would be
analyzed and put through a statistical forecasting model developed exclusively
for the purpose and the result would be a forecast that would then get compiled
into specific forecast reports. These forecast reports would indicate the
future demand for power in terms that would help the electricity department
make decisions that would eventually end up attempting to meet the estimated
demand. I am not sure how the usual electricity demand forecasting happens but
my attempts so far to learn the actual demand forecasting done by the
electricity board in TN has ended up in vain.
The Revelations
Let’s go over
some of the interesting pieces of information that I came across in literatures
published by the TN Electricity Board, interpreting the information as we
proceed, that may help us make educated guesses on what might have actually
happened that has resulted in an entire state suffering from chronic power
outages for over 2 years in a row.
Contributor in
Suffocation
As per Reference 1 (scroll down
for details), released in 2006,
“The harnessing of wind
energy is the highest in Tamil Nadu with an installed capacity of 2931.465 MW
as against the country’s installed capacity of around 5340.60 MW.”
Even 6 years back, TN had 54.8% of the country’s
capacity to harness wind energy. As per the Electricity Board’s Data Card published
in 2012, TN has an installed capacity of 6970 MW. Now wind energy is not the
only source of power generation in India but it is quite difficult to imagine a
state that had a considerably larger share of power generation from one of the
most sought after renewable energy sources has to go through power cuts
extending up to 18 hours a day. My point is that, in any state, any investment
into alternate sources of power production usually would happen after all the
necessary investments into the mainstream energy sources have happened. If so
much has gone in harnessing wind energy, chances are that the investment on
conventional fossil fuel based power generation has already happened and the
administration has subsequently chosen to embrace non-conventional and
renewable energy sources for power production.
Slave to the Suppliers
As per Reference 1 (scroll down
for details), released in 2006,
“The rate shall be equal to
the base price in the year of signing of PPA, escalated at a rate of 5% per
year for a period of 10 years, from the date of signing of the Power Purchase
Agreement.”
The price per unit of electricity bought from the
private power producers has officially been allowed for an annual increase of
5% every year, for a period of 10 years. Now this statement needs to be read
twice for it clearly mentions that the tax-payers are distilled idiots who
cannot differentiate an elephant from a lemon. Why on earth would an
administration agree to a 5% increase every year, that too for a decade, when it
is clearly obvious that the financial situation of the state is a very visible
variable? No clear reason for the automatic hike has been specified in the
document except a few random mentions of increasing costs. The tariff levied on
utilities such as electricity is not bound to increase frequently as it falls
under the basic needs of the citizens. The charges have remained low for a long
time until they were revised some time back and it will be a while before they
are revised again. Now the increase in purchase price per unit by 5% every year
seems very less. You need to visualize the numbers to understand the joke here:
Let’s assume, the purchase price per unit is Rs.
100.
Year
|
Price per Unit
|
1
|
100
|
2
|
105
|
3
|
110.25
|
4
|
115.76
|
5
|
121.54
|
6
|
127.61
|
7
|
133.99
|
8
|
140.68
|
9
|
147.71
|
10
|
155.09
|
Table 1: 5% Increase on a price for a period of 10
years
So, since the document was released in 2006, the 10th
year would be around 2016/17 and by that time the electricity board would be
paying half of the initial price in addition to the initial price agreed upon,
for about the same volume of purchase, if not increased as per increasing
demand. The current power outages clearly indicate lack of financial solvency
to purchase external power to meet the current demand and as the years pass by,
the board would be paying more and more for a usual recurring purchase. Another
way of interpreting this mockery of a financial logic is to expect more of
tax-payer’s money to be used for buying same or less of a commodity, in spite
of an increasing demand for the same. The only increase in cost for the
producers is going to be that of the raw material. The other increases in cost
would be either absent or very low that would definitely not warrant such a
price hike that has been agreed upon. The production, transmission and
distribution network is already in place and continued capital investment would
not be a pressing necessity to any of those producers after the first year or
so. Moreover, the charges levied by the electricity department would either be
the same or would have a very minor revision, ensuring the electricity board’s
continued loss due to increased costs. Why would a sane administration agree to
a long-term recurring increase in price when it has already recorded losses for
years together in a row?
Harnessing Traitor Talent
As per Reference 1 (scroll down
for details), released in 2006,
“At present, around 65 % of
the wind mill developers are under wheeling category and the balance 35 % alone
are selling to TNEB. The wind mill generators ( who have installed their wind
mills prior are presently permitted to wheel their energy to services other
than industrial also, subject to the condition that they should pay to TNEB the
difference in tariff as applicable to HT industrial service and the category of
service wheeled to.”
65% of the private power producers have been
allowed to wheel their production, which means they can sell to consumers
directly, instead of selling to the electricity board. This means that the private
power producers who are under the wheeling category have less or nor obligation
of supplying to the electricity board, when the very opportunity of
installation and production has been provided it. Also there is a rather
unusual mention of higher prices that can be levied on the supply to consumers
other than the electricity board, except that the excess price collected should
be deposited to the electricity board. Why is there an opportunity to collect
more than the government’s prescribed price and then carry out a financial
burden of submitting the difference back to the electricity later on? Instead,
there can be a strict price ceiling that would not allow private power
producers to charge consumers more than the government’s prescribed price. Any
excess collection to be submitted later on, from the accounts standpoint, would
involve a yearly valuation of the billing account by the authorities and
billing the concerned parties for the amounts that they owe based upon the
billing data as maintained by the concerned party. In simple words, this is
exactly where an opportunity for financial favors to be exchanged between the
private parties and the authorities gets created and a few lakhs can make
crores being neglected from being included in the dues list. If this is not the
reason, why would the board specifically allow private parties to charge more
and pay the excess later instead of restricting excess billing altogether?
Suppliers First, Consumers
Last
As per Reference 1 (scroll down
for details), released in 2006,
“Similarly Commission’s
staff prepared a draft discussion paper on “Tariff related Issues for
Non-Conventional Energy Sources”. Copies of the draft consultative paper were
sent to all State Advisory Committee Members and special invitees on 24-10-2005
and the discussion paper was discussed in the State Advisory Committee meeting
held on 11-11-2005.”
When the private power producers have expressed
their disappointment in lower prices, the commission’s staff had prepared a
“draft discussion paper” and circulated among “State Advisory Committee
Members” and mysterious “Special Invitees” prior to the formal discussion of
the paper.
The average consumer in TN has been struggling to
cope up with power outages of up to 18 hours a day and no visible paper or
discussion has happened for years. The average consumer cannot use the toilet
because the pump could not be switched on to fill the overhead tank with water
and farmers specializing in crops that need large quantities of water have
either given up on the crop or farming altogether. Small scale businesses have
been shut down and the business owners are struggling to get employment. A
draft paper on how much the supply gap has affected the consumer needs to be
prepared and discussed but it is highly unlikely that such a thing might
happen. Why can’t the electricity board treat the consumer and the supplier the
same way? After all, it is assessment of situation that is being sought. When
the suppliers can get such elaborate treatment, why can’t the consumer’s
situation be analyzed by the electricity board?
Financial Strength to the
Financially Strong
As per Reference 1 (scroll down for details), released in 2006,
Capital Cost of Windmill Power
Generation: 4.5 to 5 crores per megawatt
Debt/Equity Ratio:
70:30
Life of Plant: 20 years
Depreciation Rate: 4.5%
up to 90% (SLM)
For a plant that has an estimated
life of 20 years, requiring a capital investment of 4.5 to 5 crores per
megawatt, the depreciation rate allowed is 4.5% up to 90% in straight line
method. This method of depreciation allows the private power producer to
depreciate an equal amount every year eventually leading to a depreciation
floor of 90%. The other conventional depreciation method usually involves an
yearly evaluation of the assets’ value and the yearly depreciation is based on
the last evaluated book value of the assets and therefore the value of the
asset would never come to a zero. There is a 90% depreciation floor but still
the private power producers are enjoying straight line depreciation, after
winning a permission to sell to consumers directly, charge more than the
government’s rate, and a 5% annual increase in price for 10 years. We might as
well hand over the electricity board to the private power producers. This is far
more dangerous than Wal-Mart entering the multi-brand retail segment. Incentives
are usually given to those who give a long term commitment or a contribution of
large volume. Instead, the incentives have been given to those who have been
specifically chosen to enjoy financial privileges at the cost of the
administration’s loss over a long period of time. I may be wrong here but I
seriously wish to learn how the administration interprets this kind of a
situation. They are private power producers and not an aids-eradicating drug
manufacturer, who in a theoretical sense would call for a weigh over the
financial privileges thrown at them in exchange for the greater good that the
community might enjoy.
Installed Capacity vs.
Actual Consumption Analysis
TN’s Installed capacity of Conventional Power Production
Facility= 10364.54 MW
(Hydro+Thermal+Gas+Central Share+Private+others)
TN’s Installed capacity of Non-Conventional Power Production
Facility = 7791 MW
(Wind+BioMass+CoGeneration+Solar)
TN’s Total Installed Capacity = 101364.54 + 7791 = 18155.54 MW (As of 01-04-2012)
In case of 24*7 operation for one year of 365 days, the
maximum possible total output of electrical energy would be:
= 18155.54*365*24
= 159042530.4 MWh
Multiplying the final value by 1000, we arrive at the KWh
version of the same value, which is:
= 159042530.4 MWh *
1000 = 159042530400 KWh
Since 1 KWh = 1 Unit
of electricity (as used for the billing purposes), the above value in terms of
Units would be = 159042530400 U
The same number in terms of Million Units, which happens to a
popular unit used by the electricity department to denote consumption, we
divide the value by 1000000:
= (159042530400
U)/1000000 = 1,59,042.5304 MU
1,59,042.5304 MU is the maximum
amount of electricity that can be produced by the power plants in TN, if they
are operated 24 hours a day, throughout an year of 365 days, and with a
capacity factor of 100%.
As per Electricity department’s Data
handbook, the total consumption for the year 2011-2012, including High Tension and
Low Tension consumers is,
= 53,933.508 MU
Even a blind assumption that TN’s power plants put together can produce
only 50% of their ideal production capacity for a year and also bear a 15% loss
(transmission/distribution), we arrive at a value of 35% (55664.88564 MU) which
is 3% greater than the actual consumption of TN recorded during 2011-2012.
It has to be noted the actual
consumption recorded during 2011-2012 was after the state endured long hours of
planned load shed-down and unplanned outages ranging between 2 hours and 18
hours per day.
Any estimate taking into account the
elements of reality would help us interpret data in a more realistic way. In
case of power plants, they do not always produce power as much as their rating
and they are not operated 24*7 owing to cost and demand fluctuation reasons.
Also there will be transmission and distribution losses that are inevitable.
The actual power produced by power plants is usually denoted by a term called
Capacity Factor which when defined discreetly would narrow down to the ratio of
actual output to the maximum output possible.
Capacity Factor by
Energy Source (subject to vary from plant to plant):
Coal = 60% – 70%
Natural Gas = 10% - 30%
Nuclear Energy = 75% - 90%
Hydro = 30% - 45%
Wind = 15% - 25%
Bio-Mass = 60% - 85%
Solar = 10% - 25%
Most of TN’s electricity is generated
from Thermal (coal), Hydro and Wind energy.
The capacity factor would play an
important factor in the actual output of the power plants compared to their
rated outputs.
Since all the power plants are not
usually operated 24*7 owing to cost and demand reasons, we need to deduce an
approximate output counting in the timed operation and actual outputs of the
plants in TN.
Worst Case Scenario
For the sake of the analysis here,
let’s take a capacity factor of 25% for the entire TN’s power production
facility and an operation period of 273.75 days (75% of a year of 365 days
counting for the restricted operation and losses).
For the 25% capacity factor,
= 0.25 * 1,59,042.5304
= 39760.6326 MU (approx.)
For the operation period of 273.75 days, the output would be
(75% of annual output)
= 39760.6326 * 0.75 =
29820.47445 MU (approx.)
Our calculations say that with a
capacity factor of only 25% and an operation period of 3/4th of a
year, TN’s power production facility put together, can produce enough
electricity to meet 55% of the actual consumption recorded during 2011-2012.
Even if we assume the power plants to
be working for the entire year (365 days) with the same capacity factor of 25%,
the electricity generated would have met 75% of the actual consumption recorded
during 2011-2012.
In reality the average capacity
factor would have varied between 30% - 45% (depending on the energy source) and
the power plants might have operated for a total period exceeding 275 days
which prompts us to take an educated guess that says we would have had more
energy than what we had actually consumed in 2011-2012.
The ratio of ideal production
capacity of TN’s power plants to our actual consumption and the comparison of
worst case production to actual consumption recorded in 2011-2012, clearly
indicate the possibility of power generation exceeding the actual consumption
in spite of the transmission and distribution losses.
Looking from the actual consumption
perspective, TN had endured long hours of load shedding and unplanned outages
(2 to 18 hours per day) which clearly indicates that the actual demand was well
above the actual consumption.
It has to be noted that the
transmission and distribution losses that the TN Electricity Board endured
include the huge volume of free electricity that was given away through
subsidies to various consumers from multiple business sectors.
To sum up this brief numerical pulse-check, I
strongly suspect TN generated more electricity than what it consumed in
2011-2012 and also deduce that TN’s actual demand is well over the actual
consumption in 2011-2012.
We do need more information to back this
interpretation as the mathematical analysis given above is a “What-If” type
analysis using actual numbers but still maintaining a rather predictive
approach. A closer look at the chronological events that has led to TN suffering
with monumental power outages would get us closer to a more logical
interpretation. As per the news links given below, the events as reported
indicate that around November, 2008, the TN administration has officially
opened up power sale, declared a loss of Rs. 60 million around March, 2009,
chronic power outage hits TN around April, 2010, TN EB proposes to buy 500 MW
to meet summer demand and as of August, 2012, TN EB conducted electricity
awareness programs for consumers.
Fundamental Physics Kicked
in the Crotch
With the entire state reeling in power outage, the
political parties chose to fill the homes of consumers with free television
sets, table fans, blenders and grinders. I am not sure if any more appliances
were handed out to the public who did not have electricity to run their water
pumps and toilet lights. Isn’t it obvious that given the state of lagging power
supply, handing out free electrical appliances would lead to excess use of
electricity and that might in turn cause increase in the existing demand for
electricity? Political parties have learned a new tactic for capturing the
minds of unassuming voters by handing out things for free that were essentially
bought using the tax money of the same voter. Since one party achieved this
task the others followed suit when they won the election and started the next
government. I am guessing the next election season is going to witness the
distribution of batteries and inverters for free as that is required to run the
free appliances already handed out. They might as well distribute free caps
with the word “Fool of the Millennium” printed on it as that would make more
sense given the way the state has suffered at one end while still managing
freebies to the voters that hardly mean anything to them considering the dearth
of basic amenities and access to the same.
Never Too Late to Forecast
The electricity board can still execute a demand
forecast and publish the facts mentioning how and when the necessary steps
would be taken to bring the demand-supply gap to a minimum. It would be
criminal to expect a complete eradication of power outage scenario in the state
but that would definitely be a welcome target which can be efficiently placed
in the future, say about 40 years from now.
All that may be required is a robust demand
forecasting model and a self-sustainable power grid that can effectively
implement a “n+1” state of power source for every zone of the power grid, where
“n” would be the minimum number of sources required to meet the current demand
of the zone, which would mean that, in case of an unexpected shut-down in one
of the plants/sub-station, the additional one would automatically take its
place and make way for timely rectification of the issue in the broken down
plant. I am not completely aware of the expansion plans that the electricity
board currently has but based on the unfair treatment of the consumers, any
expectation of positive nature only calls for a sarcastic laugh and shrug.
As for the demand forecasting methodology, I came
across an interesting paper written by Professor Toshio Sugihara of Nagasaki
University. Download the paper from Reference.3 given below. Honestly, the
depth of statistics as mentioned by Dr. Sugihara in this paper literally flew
10 feet above my head. It is usually 3 feet but this paper is a high flier I
suppose. But I guess I was able to capture something that caught my eye. He
talks about a statistical approach to electricity demand forecasting, using
time series analysis that uses values from the past to predict values of the
future. Since the values from the past are used as the basis for predicting the
future, Dr. Sugihara refers to the technique as a data-mining type approach.
The paper also advocated the use of the Kalman Filter algorithm, which if I am
not wrong, is more famous for predicting future states based on the immediate
state from the past, using the principles of uncertainty analysis, where the
outcomes with higher probability of occurrence get weighed more, eventually
resulting in a sharper pronunciation of future. I am clearly shooting in the
dark here and therefore I would request you to go through Dr. Sugihara’s paper.
The point of sharing Dr. Sugihara’s work is to open the gates to the ideas of
statistical analysis that may contribute to the demand forecasting that TN
Electricity Board badly needs to do as soon as possible.
As to the idea of feasibility, Kosovo, a country
ravaged by decades of inter-ethnic violence, attempted to declare its
independence in 2008 and whose status is still questionable in certain quarters
of the world, has done a demand-supply analysis and evaluation of its power
supply options while asking support from the World Bank. Find the report in
Reference.6 given below.
I guess we are approaching an end to this post. So
after selling out surplus power, letting free the private producers, providing
the private producers with financial incentives and agreeing to a recurring price
hike for a decade and last but not the least, levying additional deposit
amounts from consumers based on the past 12 month’s consumption recorded in the
meters, TN Electricity Board has defied every sense of logic, shocking the
consumers without using actual electricity. A detailed explanation for the additional consumption based deposit has been given by Deepak Raghuraman that may help curious consumers to understand the concept and verify their own bills. A demand forecasting and subsequent
planning for state-run power generation facilities might save the state at
least a few years from now. Even now, in the back of my mind, I truly believe,
all these happened because some dumbass, high on cocaine, decided to sell out
all surplus power in the long term, just because one seasonal rainfall brought
more waters and winds than what was expected somewhere in 2005/06.
All of a sudden Jackie Chan’s line from movie “The
Karate Kid” “Use Switch…Save Planet” makes more sense than anything else…. ;) Well Jackie, you have no idea what it is to
stare at the switch for hours together, cherishing the fact that the planet is
being saved by this part of the world, not by using the switch but by
sacrificing the need for using it for hours together, every day. Thanks to the
Power Cuts of Tamilnadu.
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Reference
No.
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Details
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1
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2
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3
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4
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5
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6
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7
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Related links:
http://www.treepower.org/quickfacts.html
Regards,
