The Indian power sector has witnessed several key developments in recent years, which require a redesign of the electricity markets. Given the increasing share of variable renewable energy and higher frequency of extreme weather events due to climate change, there is a need to ensure adequacy in generation capacity contracting such that demand is reliably met in the future, in all time horizons. In this backdrop, a key development has been the notification of the Draft Guidelines for Resource Adequacy Planning Framework for India by the Central Electricity Authority (CEA).
The framework can be adopted by distribution utilities for power procurement and capacity contracting. It will ensure an adequate supply of generation or demand responsive resources to serve the expected peak demand reliably. Adherence to such a framework will ensure reliable and efficient operation of the power system across all timeframes. The plan will assist the state distribution utilities in the optimal utilisation of generation capacity, harnessing the diversity associated with electricity demand and enabling the sharing of generating assets among various states. Pilot studies on resource adequacy planning are be-ing carried out in five states – Madhya Pradesh, Assam, Odisha, Tamil Nadu and Punjab.
Need for resource adequacy planning
A key aspect of resource adequacy planning is to ensure that adequate generation capacities are available round the clock to reliably serve demand under various scenarios. This naturally translates into the need for an adequate reserve margin, which could cater to varying levels of demand and supply conditions in the grid. Further, it is necessary to develop a resource adequacy framework to suggest the optimal capacity mix required to minimise the total system cost of meeting the projected demand for the future. This should include determining new generation capacities to meet the future demand growth. The resource adequacy framework should holistically look at a time frame of 5-10 years. This is critical considering the longer gestation period required for planning and constructing most generation technologies.
Moreover, it is important to determine the duration of time when a loss of load can occur due to demand forecast errors, generation forecast errors, outages, weather phenomenon, etc. Scenario planning under multiple load and supply positions outage conditions, renewable energy variability, etc., should be performed and integrated in the resource adequacy planning framework. A consideration for energy storage and other flexible resources, which can be helpful in balancing the variability and intermittency of renewable energy, should be included for increasing reliability and reducing system costs.
The expected deepening of short-term sale/purchase under bilateral contracts and in collective transactions needs to be considered in the resource adequacy planning exercise. Also, as short-term market gains liquidity, sharing resources through short-term markets should become an integral part of resource adequacy planning.
Key details of the draft guidelines
Key design parameters of the resource adequacy framework: Reliability is key to power system operations and the adequacy of supply needs to be maintained at all points in time. There could be unavoidable outages due to unforeseen circumstances and reasons, but the integrated resource planning should be such that these outages are restricted within acceptable limits. The CEA, from time to time, publishes the desired values for reliability indices such as loss of load probability (LOLP)/normalised energy not served (NENS) required for resource adequacy in India and accordingly estimate the planning reserve margin (PRM) required to optimally maintain at the national level. Similarly, system studies can be undertaken by the utilities to determine the PRM through any scientific method as approved by the concerned state electricity regulatory commission, provided the determined PRM is higher than the national-level PRM. The PRM is to be used by the utilities in their resource adequacy and capacity planning.
Integrated resource planning to fulfil resource adequacy: An integrated resource plan (IRP) is a plan prepared by a utility to determine the target generation capacities for meeting the forecasted energy demand over a specified future period. An IRP exercise requires inputs, such as demand profiles, demand growth rates, contracted capacities, costs for new capacities, among others. The model can optimise for a wide range of technologies such as renewable resources, conventional resources, distributed energy resources, demand-side management resources and energy storage resources.
An IRP model is a medium- to long-term planning model, developed through a mixed integer linear programming framework, to simulate the demand and supply positions with due recognition of the various operational constraints. The model undertakes least cost generation optimisation to meet the demand such that it minimises the overall system cost including capital costs, operations and maintenance costs, costs to procure spinning reserves, fuel costs, transmission cost, start-up, and shutdown costs. The optimisation includes all constraints related to power plant operations like ramp-up/ramp-down limits, startup/shutdown limits and costs, generation limits, energy storage operations, interconnection limits (import/export), renewable addition targets, retirement schedules of existing generation plants, etc. The model needs to be run for the planning horizon. It is essential to ensure that the IRP model chosen is capable of simulating on an hourly chronological resolution. This is necessary to capture the behaviour of the system with respect to ramping of conventional generation, profiles of renewable energy generation sources, behaviour of energy storage, etc.
Resource adequacy will be determined based on the resource availability and accessibility after due consideration of the sharing of reserves among utilities/ states through the national markets or through bilateral mechanisms. The model will provide an update on year-on-year optimal generation (conventional and renewable) and storage capacities required to meet the system demand and PRM securely and at the least cost.
Institutional mechanism for resource adequacy: The CEA will publish a long-term national resource adequacy plan (LT-NRAP), which will be updated annually. The report will publish a national-level PRM and the reliability indices (LOLP and NENS) as a guidance for all the states undertaking the resource adequacy exercise. It will also publish the optimal generation mix for the next 10 years required to ensure that the national-level system is resource adequacy compliant while meeting the all-India demand at the least cost. This will guide capacity buildout investments in the country. Further, the report will publish the capacity credits for different resource types on a region-wise basis; and specify the state’s contribution towards coincident national peak.
Power System Operation Corporation Limited (POSOCO) will annually publish a one-year look-ahead short-term national resource adequacy plan (ST-NRAP), which will include parameters such as demand forecasts, resource availability based on the under-construction status of new projects, planned maintenance schedules of existing stations, station-wise historic forced outage rates and decommissioning plans.
The hourly demand forecasts used by the CEA and POSOCO will be aligned with the projections as per the individual distribution licensees. State transmission utility/state load despatch centre, on behalf of the distribution licensees in the state, will provide the details regarding hourly demand forecasts to the CEA and POSOCO for the next five years by the month of June every year. The LT-NRAP and ST-NRAP will be published by August for the period starting from April in the next year. Each distribution licensee will undertake IRP for a 10-year horizon (long-term discom resource adequacy plan (LT-DRAP), which is to be submitted to the respective state electricity regulatory commission (SERC) for their approval. Distribution licensees may opt to simply adopt the PRM as published by the CEA or may undertake optimal reserve margin studies. The distribution licensees are free to consider higher PRMs or more stringent reliability constraints, depending on their consumer mix portfolio, subject to approval from the SERC.
Based on the optimal resources identified by the LT-DRAP, the distribution licensees will plan to contract the capacities suggested by the LT-DRAP to be procured to meet their PRM at the coincident national peak. The distribution licensees will demonstrate to the SERC a 100 per cent tie-up for the first year and a minimum 90 per cent tie-up for the second year to meet the requirement of their contribution towards meeting the coincident national peak. Only resources with long-/medium-/short-term contracts will be considered to contribute to the PRM. For the subsequent three years, the distribution licensee will submit a plan for 100 per cent capacity tie-ups to meet the estimated requirement of its contribution towards meeting the coincident national peak for the SERC’s approval. The SERCs will be responsible for the resource adequacy compliance by the distribution licensees.
Resource adequacy is a fundamental requirement to enable utilities to reliably meet the system load 24×7. The plan will help the states in optimal capacity planning and procurement of power, thereby reducing the cost of supply to consumers.