In light of the huge renewable capacity addition planned in the country, peaking power is emerging as the centrepiece of discussions in the sector. The intermittent and unpredictable nature of renewables makes it challenging to balance the supply and demand of power. The unavailability of solar power during the evening hours is yet another problem. Power Line recently hosted a panel discussion to deliberate on the peaking power requirements, the options available for load balancing and the need for a peaking power policy. The panellists were Pankaj Batra, member, planning, Central Electricity Authority (CEA); Manish Chaudhari, deputy chief, Central Electricity Regulatory Commission (CERC); G. Venu, general manager, NTPC Limited; K.B. Batra, general manager, Bharat Heavy Electricals Limited (BHEL); and Deepesh Nanda, chief executive officer, Gas Power Systems, GE South Asia. Excerpts from the discussion…
What are the challenges in integrating the huge amounts of renewable energy that is expected to be added? What are the peaking options available and what is the estimated peaking capacity required by 2022?
System operation requires both peaking plants and balancing plants to manage the variability of renewable sources of energy. Renewable sources of energy such as solar are intermittent in nature and may or may not be available during peak demand hours, depending on when the peak comes. Wind, however, is available during peak loads on an all-India basis, but is an intermittent and unreliable source. Peak is a daily occurring phenomenon that is different in different seasons and needs to be tackled. Further, reliable system operation requires generation and load to be balanced at all times. Earlier, only the load would change and generation was modulated in accordance with the load. However, now even generation is varying. Peaking plants have certain characteristics that help them pick up generation quickly, as peak demand approaches, and bring it down when the demand decreases. Gas-based and hydro plants are the conventional peaking plants. Now, a lot of stranded coal-based plants exist that are being retrofitted and made more flexible for use during peaks.
In 2012, there was a difference of about 40,000 MW between the peak and off-peak demand. This may increase or decrease at a later stage, but it depends on a lot of factors. Differential tariffs across all states are to be implemented according to the amended Tariff Policy, notified on January 28, 2016. While some states have implemented such differential tariffs, they are mostly for industrial consumers only. It would be ideal to have differential tariffs for all types of consumers, be it industrial, commercial or residential consumers. The CERC, as the secretariat of the Forum of Regulators, should coordinate with the states to implement this. The required peaking capacity will depend a lot on the tariff differential.
We currently have sufficient capacity to meet the peak. In fact, we have stranded generation capacity. Part of this is due to sub-transmission or distribution constraints within the state or due to the inability of states to buy power owing to their financial health. Even in 2022, we would have sufficient capacity to meet the peak. Currently, around 50,000 MW of coal-based plants and 3,500 MW of gas-based plants are under construction. If these projects become operational by 2022 as expected, we will have surplus generation. We will also have a coal-based plant load factor (PLF) of about 50 per cent and hence, will not require any additional coal-based power plants, other than the plants under construction, as given above, the details of which are given in our National Electricity Plan. However, for stable grid operations, we would require a mix of different sources of generation for handling the variability of generation from renewable sources of energy. A committee has been formed to consider the most optimum method of demand-supply balancing, considering also the variability of intermittent type of generation, as well as whether it should be balanced within a state, a region, or the whole country. It will also take into consideration neighbouring countries as a lot of hydro power is coming up in Nepal and Bhutan, which can be used for balancing in India. We may not require any additional peaking capacity up to 2027, considering that we have about 16,000 MW of stranded gas-based generation capacity. This, along with the existing hydropower plants, can be used for peaking, provided no adverse conditions arise, such as renewables not coming up as planned, change in wind patterns, a higher than the estimated 6.5 per cent growth rate or higher retirement due to stricter environmental norms.
What are the different regulations that are under consideration from a peaking point of view?
The concept of peaking power is still at a nascent stage in India. Although the Government of India has issued bidding guidelines for seasonal and peak load requirements, utilities have not come forward to procure peaking power. The reasons behind the slow development in this regard are the surplus power situation in many states and uncertainty regarding fuel. On the regulatory front, the concept of differential tariffs has been in discussion for a very long time; however, it has not been implemented by many states. Most of the states have implemented differential tariffs, popularly known as time-of-day (ToD) tariffs, only for industrial consumers. To an extent, this has helped the states to flatten the demand curve. The state electricity regulatory commissions (SERCs) should implement this framework for other consumer categories as well, taking into account state-specific conditions and future scenario of high renewable penetration.
Further, the implementation of the government’s renewable energy programme is bound to enlarge the scope of peaking power plants to cater to the balancing needs of the grid. Their ability to meet frequent and rapid ramping requirements makes them apt balancing capacities. Specific dispensations like additional return on equity provided to hydro plants by the regulators should be extended to peaking power plants. Further, there would be a need to treat peaking power differently in the merit order despatch mechanism. This has been in discussions for the past few months and we hope peaking plants will be treated differently in the merit order despatch. Further, if peaking power plants are to be used for balancing variable generation, then changes such as the scheduling of power are required in the market design as regulations alone may not be able to serve the purpose.
What role can the regulators play in addressing the issue of peaking power?
The central regulator has an important role to play. However, it is the states that have to actually implement it. The government first makes the policy, which is a broad framework. The regulator’s role is to make regulations in accordance with the policy. The National Electricity Policy is being revised and the draft is expected to be released in the coming months. It addresses the peaking issue and many other contemporary issues such as those related to electric vehicles. From the technical point of view, the CEA will handhold the CERC and SERCs, if required.
What is your view on the peaking requirements and options available?
From a technical perspective, peaking requirements should ideally be met through hydro power generation, followed by pumped storage and gas. Due to gas availability issues in India, we are also making old pithead stations suitable for flexible operations by increasing the ramp up rates of these plants. While plants more than 25 years old need to be retired as per the recent directive, we believe that these could be used to meet peaking requirements. However, hydro and gas will be the first preferences. NTPC has about 4 GW of gas plants, which are either not operational or are operating at a PLF of less than 25 per cent. If regulators provide better tariffs, these plants can be used for balancing.
In view of the current and emerging power scenario, peaking and balancing requirements are now overlapping. While gas, hydro and pumped storage are ideal options for peaking plants, taking into consideration the current installed base, most of the thrust will come from coal-based plants. As BHEL has a very large base of approximately 113 GW of thermal plants, we are working on the flexible operation of these coal-based plants. While technical solutions are available for faster ramping up and backing down the plant load, we also have to estimate how much would be the demand net of renewables, in the coming years up to 2022. The amount of flexibility required would depend on this net demand. Thermal plants can be made more flexible both for managing the technical minimum load and for faster ramping up load than what it is now.
What tariff would work well from a system point of view and a generator point of view for peaking plants?
A different tariff is required for peaking and balancing generation. Higher fixed charge should be allowed for the peak time than the off-peak time, while fuel charges will be almost the same for both. The differential between peak and off-peak tariff should reflect the market rates, which utilities and other consumers are already paying in the case of power exchange. The CERC and other regulators can work on the methodology to determine the ratio of fixed charges that can be recovered during the peak and off-peak period. As far as balancing charge is concerned, you need to have a two-part tariff — a fixed charge for committing the capacity, depending on the requirements of the grid, and the usage charge, depending on how much of the plant is being used, where all technologies can compete, including the new technology batteries.
In the current power market scenario, utilities are depending on the short-term market to meet their peaking power requirement. The price of peaking power should be commensurate with the market price in the short-term market. However, as the prevailing short-term market prices are less than long-term market prices, the utilities may not prefer to procure peaking power. The power plant with the highest tariff in the merit order despatch can be used as the reference for peaking power. If the price of the peaking power plant is less than the highest tariff in the merit order despatch, then utilities may prefer to procure peaking power as it provides the additional benefit of specific technical capabilities. While power generated from gas-based power plants may not be commercially viable due to the higher tariff than prevailing rates in the short-term market, hydropower can be used to meet the balancing requirement.
What is your view on the policy and regulations related to peaking power plants?
We are now looking for the flexibilisation of old pithead thermal power plants and this requires policy intervention. If a plant is operated at a lower load, it will entail higher expenditures. Also, for plants to be made flexible and environment-friendly, expenditure has to be incurred. However, such expenditures should be allowed for to a certain extent, if not 100 per cent, by the regulators.
We are also setting up solar plants (totalling 50 MW) with battery storage systems in the Andaman and Nicobar islands. This will be a learning experience. The cost of such systems, however, continues to be a challenge. Policy availability on this front should provide more clarity.
For flexible operation of thermal plants, policy intervention is needed to compensate the operators for increased costs. A start has already been made in the recent amendment to the Grid Code through compensation for higher heat rate and increased auxiliary power consumption at part load operation. This will need to be further fine-tuned as we go along with flexible operation.
What are your views on the best peaking option and on the potential policy and regulatory steps that need to be considered?
While India strides ahead aggressively to develop renewable power capacities, there is a dire need to complement it with a balancing power as well. Considering the caveats like environmental impact, sustainability and flexibility, using gas-based power generation seems to be among the best options available to us today. At present, the existing liquefied natural gas (LNG) terminals are running at near full capacity, while the upcoming ones are at various stages of construction. The government should look at avenues to establish long-term contracts with countries like Qatar and the US for fuel security. To achieve India’s ambitious target to ensure “Power for All”, we need a right energy mix and decisions at the policy level to develop the LNG-based power generation market to drive affordability and stability in the system.
There are a lot of coal-based as well as gas-based thermal power plants that are lying unutilised. Bids should be invited to see who can offer the cheapest source, whether it is these plants or hydropower or any other source, provided they satisfy the functional criteria of ramp rate that would need to be laid out. The idea is to minimise the cost to consumers. There are a lot of experiments are being done to ensure the flexibility of coal-based generation. A lot of companies are doing it and new ones are also coming into this field. For balancing power, gas-based generation is preferred from the technical point of view, as it is better than coal-based balancing. However, we will have to take an overall perspective of affordability.
The peaking requirement can be met from the existing gas-based capacity, hydro capacity and surplus thermal capacity. From the cost perspective, thermal or hydro could compete in the market. From the regulatory perspective, the pricing of power is very important. Earlier, we had thought that peaking power could be used for two hours in the morning and four hours in the evening. The fixed cost had to be recovered in those six hours. In that scenario, the objective was recovery of the fixed cost. This may have to be reconsidered in view of the need to meet the balancing needs of the grid due to the increased injection of intermittent renewable power. It is important to foresee for how much extra time beyond those six hours the power plant can operate. The utilities are procuring short-term power to meet the peaking requirements. There is also a need to change the perception. Peaking power plants are now to be considered as flexible power plants to be engaged to meet grid requirements for balancing intermittent generation beyond peaking power. This has to be deliberated on at the policy and regulatory levels to evolve new options for peaking plants.
According to me, the pithead thermal stations with flexibility can compete very well with any technology. Second, we already have stranded gas plants that will be the first priority and not the new plants. If the policy and regulations are in place, these plants will run and support peaking requirements. We require around 50 GW for peaking as per our estimates. A part of it can come from hydro, or we can also have a separate energy market with all the three forms of energy — hydro, pumped storage and gas —competing with each other.