India's crippling power infrastructure

In the wee hours of Sunday, July 29 2012, India witnessed one of its worst power failures in over a decade. An inter-connect substation near Agra tripped, followed by the automatic shutdown of all power generation plants in the Northern region.

The following day witnessed a more widespread collapse, which included not just the Northern grid, but also the Eastern and North Eastern power grids, extending power failure to 19 states and two Union Territories, covering half of India’s population.

It has emerged that a few states (Uttar Pradesh, Haryana, Rajasthan, and Punjab) in the Northern grid overdrew power beyond their permissible limits, ignoring strong warnings from the Northern Regional Load Despatch Center (NRLDC) and the Central Electricit India's crippling power infrastructurey Regulatory Commission (CERC) to maintain grid discipline and stop overdrawal.

Table 1 shows the amount of power overdrawn by Uttar Pradesh, Haryana, and Punjab in June-July 2012.

A startling fact that has emerged is that most of these states have refused to install Under Frequency Relays (UFRs) for automatic demand management schemes, which could have prevented such a massive failure.

Similarly, the states were found to have overdrawn power when the grid frequency was below 49.5 Hz and 48.8 Hz, in contravention of the orders of the regulatory authority and load despatch centers. Overdraw has been much higher in the past as well, and continued abuse of grid discipline over the years have made the grid vulnerable resulting in the collapse last week.

As automatic relays shut down the most overloaded transmission lines and vulnerable power generators, electricity surged around the rest of the network taking increasingly unpredictable pathways, unbalancing more and more parts of the system, and forcing further emergency shutdowns, until the
grid and power generation collapsed across the entire region.

India has five electricity grids and all of them are inter-connected, except the Southern grid. These grids are being run by the state-owned Power Grid Corporation, which operates more than 95,000 circuit kilometers of transmission lines.

Table 2 shows the national grids and the states covered under each.

Surging power demand, existing power deficit scenario, and monsoon deficits are believed to be some key reasons for overdrawal of power by these states. Furthermore, poor financial condition of the respective State Electricity Boards (SEBs), has compelled them to overdraw power from the grid rather than meeting power requirements from merchant power plants at spot prices (costlier by almost 80 percent, compared to the power available through the Power Purchase Agreement with Power Generation Corporations).

Tables 3 and 4 show the power supply scenario across Indian regions and states.

Impact of the Grid Failure

While the Northern grid failed for the second straight day on July 30, 2012, the Eastern and Northeastern grids, too, collapsed. These three grids carry about 50,000 MW of electricity. About 19 states and 3 union territories were affected as a result. The blackouts left 600 million people (almost half of India’s population) without electricity in one of the world’s most widespread power failures, bringing normal life to a standstill.

As an aftermath of the outage, normal life in the entire Northern region was crippled, including transportation facilities. Some 300 odd trains consuming power from the power grid came to a grinding halt. In New Delhi, the Metro service (which ferries approximately 1.8 million commuters daily in New Delhi and NCR) was not functional for several hours.

Furthermore, the traffic lighting system in New Delhi for road transportation also stopped working, which resulted in severe traffic congestion and traffic jams during the morning rush hour across the city.

Such was the scale of power failure, that mining operations in Eastern India were immobilized. Nearly 200 miners were trapped in a coal field in West Bengal and 65 others were trapped in the Bharat Coking Coal facility in Jharkhand.

What led to the Grid Failure

This grid failure can be linked to a host of issues in the entire power infrastructure, which include inability to add sufficient power generation capacity as per requirement/plans, coupled with ageing transmission and distribution (T&D) infrastructure, and huge T&D losses. Additionally, the deteriorating financial condition of the SEBs, extensive subsidies, and low tariffs are other issues further aggravating this abysmal state of affairs.

(A) Fuel Shortage
Of India’s total power generation capacity, approximately 56 percent is coal-based. Given Coal India Ltd’s constraints of ramping up coal production capacity, there was a shortage of 80 metric tons (MT) of coal for the power sector in FY2012-13. Moreover, natural gas production from Reliance Industries’ KG-D6 basin has been decreasing over the last few years impacting the gas availability for power plants.

As per Ministry of Power, the average daily availability of natural gas in India during 2010-11 from different sources was 162.1 MMSCMD, with a share of 55.35 MMSCMD from KG-D6. During 2011-12, the availability of gas from KG-D6, which is the major source of natural gas, has steadily declined with the availability of only 34.3 MMSCMD in March 2012.

In 2011-12, power utilities reported a generation loss of the order of 9 Billion Units (BU) and 11 BU due to shortage of coal and gas, respectively. Given the fuel shortage almost 32,000 MW of coal-based plants likely to be commissioned in the 12 the Five Year Plan are in jeopardy (either shelved or put on hold by the developers).

Without regular and proper fuel availability, developers are struggling to achieve financial closure resulting in power projects being abandoned.

A few thermal power plants in India are operating at a low Plant Load Factor (PLF) of 40 percent (as compared to average PLF of 72 percent), whereas a few gas-based plants are lying idle, due to the fuel shortage. Consequently, project developers have been advised by the Ministry of Power not to plan projects based on domestic gas till 2015-16.

(B) Cost of Supply versus Generated Revenues (lower tariff)
Absence of timely tariff revisions and increasing input costs, have resulted in increase of revenue gap of power producers and Distribution Companies (DISCOMs) to the tune of around 30 percent.

According to data from the Power Ministry, the average cost of supply (ACS) for all power companies has exceeded the average revenue realized on a subsidy basis. State Governments have not been permitting an increase in electricity tariffs, while cost of power has gone up, resulting in stagnant revenues and losses.

The agriculture and residential segments consume 47 percent of the total electricity generated, and these consumer categories are two highlysubsidized segments.

Chart 1 shows the gap between average cost and average tariff per unit of electricity.

(C) Continued T&D losses and increasing power demand-supply deficit 

Dismal conditions and inappropriate maintenance of existing T&D equipment/infrastructure, and rampant power theft has led to huge T&D losses in India. Inability to add sufficient power generation capacity in tandem with the increased demand, and huge T&D losses have given rise to the power deficit scenario in the country.

Chart 2 shows the comparison of India’s power T&D losses, energy, and peak deficits from 2008-12.

(D) Accumulated losses of T&D utilities

Accumulated losses of SEBs, at end of March 2012, have reached INR 1.8 Trillion (approximately US $32 Billion). Continuing with the current power tariffs and increased cost of generation, SEBs are expected to add another INR 58,000 Crore (US $10 Billion) to their accumulated losses, in FY2012-13. Given the poor financial position of SEBs, they are struggling to add new power plants, renovate/modernize existing T&D infrastructure, and purchase power from merchant power plants at spot prices (in situations of sudden surge in power demand).

(E) Inter-regional power transmission capacity India’s inter-regional power transmission capacity was expected to reach 32,650 MW by the end of the 11 the Five Year Plan (March 2012), but only managed to touch 29,750 MW. Limited transmission capacity within the five regional grids, as well as between the grids, further reduces
system flexibility in the face of local problems.

The way out...

India’s power infrastructure requires a major overhaul, which involves some major reforms and policy implementation across the entire value chain. From an action standpoint, this would involve combination of increased generation capacity, efficient T&D infrastructure, and better grid control. Besides these, reducing theft and wasteful usage of electricity, revised power tariffs, and better billing systems would lead to customers paying accurately for exact power consumption thus curbing wastage.

Table 5 highlights the key steps to strengthen India’s power infrastructure to avoid any future grid failures.