Thursday, June 20, 2013


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.

Price per Unit
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

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.

On a very different note [a shameless plug], if you are interested in unique tamil short films, feel free to visit couldn't tolerate the mass masala entertainers anymore and decided I will do my best to produce content with substance. I have a long a way to go as a producer and a start-up founder, but I am glad our journey has begun. I look forward to your support. Each film on our site costs INR 15. Thanks!!!

Reference No.

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  1. .....2020 TAMIL NADU will become £ DARK CITY $ in india.NADU without current....

    1. All we can do is hope that it doesn't happen.

  2. All of the present situation is because of earlier minister of the department. This guy was always in a film function watching the dances of young girls. Never made any improvement.

    1. I did not know about this. But if this was true, then the responsibility has to be shouldered by the idiot who chose the concerned person for the post of the minister. It is time people with the relevant skills and experience get the opportunity to head their respective departments. If no one is available, then a specialist team shall be appointed to assist the minister.

  3. Good information. No party is taking action on the basis of future requirements after the Kamarajar period, in all the departm ents.


Thanks for the comment!!! Have a good one!!!!