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By: B.M.VERMA Advisor- Essar Power (M.P.) Limited Ex- Chairman Jharkhand State Electricity Board Ex- Chairman & Managing Director Uttarakhand Power Corporation Limited Contact: +91- 9810588500/9899337132 Email: bmverma@yahoo.com,b.verma@essar.com 2 nd Coal Conference Slide 2 Slide 3 Slide 4 Slide 5 DEMAND AND SUPPLY Slide 6 Transparent Meters Reading We Interact, We Listen, We Learn, We Act. Reliable & Quality Power Faster Fault Removal Consumer Relationshi p Easy Mechanism of Attribute Change Quick Grievance Redressal Correct Billing Payments Convenience Easy New Connection Consumer Expectations Slide 7 Gross Shortage Rostering Schedule Unrestricted Drawl SHORTAGE / ROSTERING (IN MW ) Gross Shortage Rostering 4.1.2007 78 9101111819 2021 Overdrawl Slide 8 Power Cut Unrestricted Demand Hydro Gen. Net Import from Grid Time in Hrs. Demand Met (Total Availability) POWER CUT Date: 06-04-06 & 07-04-06 Slide 9 KING COAL ! Reserves Proven 91 billion Tons Indicated116 billion Tons Inferred 37 billion Tons TOTAL245 billion Tons Coal reserves:> 250 years at present levels of consumption Concentrated in Eastern India Slide 10 CAPACITY ADDITION DURING XIITH PLAN (2012 - 2017) PLANTOTAL CAPACITY ADDITION PLANNED (MW) THERMAL (MW) HYDRO (MW) NUCLEAR (MW) XIITH82200402003000012000 Slide 11 Coal Units in 12 th Plan It is estimated to commission 12 Nos. units of 660MW (XIIth Plan) 31 Nos. units of 800MW (XIIth Plan) Slide 12 UMPP on Imported Coal PPP PROJECTS: Ultra Mega Power Projects: Three Ultra Mega Power Projects awarded through tariff based bidding only Mundra is progressing fast Project: 4000 MW Power Project in Mundra, Gujarat Cost: USD4 billion Status: 1 st. Unit Commissioned in February 2012 Problem due to increase in cost of Imported Coal. Slide 13 Hydro-Electricity Inferred potential > 120 GW Installed capacity 30 GW Most big projects are in North- Eastern states of Arunachal Pradesh, Sikkim, Uttaranchal and J&K Problems of rehabilitation and resettlement with large projects Environmental issues Water sharing agreements with neighbors National Hydro Power Corporation, Government of India Slide 14 Slide 15 Other OPTIONS Slide 16 Indian power sector is passing through a very critical phase. 16 Slide 17 Capacity Addition Scenario 17 Slide 18 Impact of Enabling Environment PPAs have been executed for an aggregate capacity of 41,059 MW including Ultra Mega Power Projects Case 1- 14,819 MW Case 2- 10,240 MW UMPP 16,000 MW 30 number of Case-1 and Case-2 bids have been concluded However, conditions and premises under which the bidding documents were prepared and under which the bids were submitted have changed drastically over the last 5-6 years, necessitating a relook. 18 Slide 19 Tariff Adjustment A Necessary Evil? What Needs to be Done Why It Needs to be Done What are the Challenges One Time Tariff Hike Tariff hikes critical to avoid contagion risk of loan defaults, worsening of power deficit etc Higher tariffs for existing Case I/II PPAs may still be cheaper than tariffs discovered in a fresh bid process Why should Discoms pay for poor fuel risk assessment by IPPs How to identify which projects need bailout even sound projects would want a tariff hike Opposition from losing bidders in a project Would tantamount to favoring the private sector politically sensitive Comprehensive Tariff Policy Existing tariff policies, although sound, have not accounted for uncertainties such as short supply by Coal India or changes in international regulations An all-weather tariff policy critical to attract long term investor interest in power generation Source: IDFC Presentation on Power, March 2012 19 Slide 20 Coal Balance for the XIIth Plan In order to meet this shortage of 238 MT for domestic coal based plants, the Working Group on Power for 12 th Plan estimates an import requirement of 159 MT after adjusting for GCV. An additional 54 MT is likely to be imported for plants based on imported coal, thus bringing the total import requirement to 213 MT. 20 Slide 21 Slide 22 Summary of Mercados Report on Feasibility of Large Scale Coal Imports Key Assumptions Coal requirement of existing linkage based plants (99,436 MW as of Jan 2012) @ CV of 3000 kcal/kg is 487 MT. Captive mine linked projects (5800 MW) is 28 MT, thus total of 515 MT. Plant by plant analysis performed to estimate future requirements. Linkage coal supply estimates by 2016-17 based on 90% of ACQ for plants commissioned before Mar 2009 and 80% of ACQ for plants commissioned after Mar 2009 (based on Prime Minister/President directive) However, the domestic coal shortfall of 260 MT cannot be directly met by imports due to technical constraints on blending of imported coal. By considering average blending limit of 15% for existing plants and 30% for upcoming plants, imported coal requirement works out to be 111 MT (including the demand for imported coal based projects). This indicates ~26,000 MW coal based capacity is expected to remain stranded by 2016-17 The XII Plan Working Group Report import estimation of 213 MT does not seem practically possible under current blending constraints. Nevertheless, if such a scenario arises where the country needs to import ~213 MT coal, capacity constraints in inland transport infrastructure would not permit this to happen. Description 2012-132013-142014-152015-162016-17 Total Domestic Thermal Coal Requirement (MT) 526584634701839 Total Coal Supply including from Captive Blocks (MT) 387422457492579 Total Coal Shortage (MT) 139161176209260 22 Slide 23 As power, coal and gas are regulated sectors the government has to make the power sector in sync with the ground realities of fuel availability and its pricing and bring about necessary measures to improve the financial condition of the distribution utilities so that they have the ability to procure power for the end consumers. 23 Slide 24 Slide 25 Today the major challenge before the power developer is to arrange adequate quantity and appropriately priced fuel for power generation 25 Slide 26 FSAs for 305 MT have been signed for ~ 68,000 MW capacity commissioned prior to 31 March 2009 A total capacity of 25,500 MW expected to be commissioned after March 2009 and before March 2012 have LOAs executed but are pending FSAs Shortage of Domestic Coal Current Situation 26 68,000 MW11,500 MW14,000 MW TOTAL 93,000 MW 411 MT Deficit of 64 MT coal due to which 22,000 MW capacity is not operating at optimal capacity Shortage of domestic coal has led to unwillingness of CIL to provide firm commitment for supply of 100% of normative requirements (as mandated under NCDP). Thus 33 thermal plants commissioned between FY09 and FY10 do not have FSA signed. Slide 27 Linkage coal based plants where activities have been initiated and likely to be commissioned during 12 th Plan period = 40,000 MW requiring 167 MT Plants where LOA has been issued but no construction activities initiated = 31,000 MW requiring 144 MT Requirement of linkage coal by end of 12 th Plan period = 722 MT Shortage of Domestic Coal XIIth Plan Looking at the fact that 83% of the 12 th Plan capacity addition is based on coal, it is estimated that the total coal deficit will be 238 MT by the end of 2017 27 As per R.K. Pachauri (Director General, TERI), India will be importing 1400 MT of coal and 750 MT of oil by 2030, which will cost the nation 20% of the GDP Slide 28 Unprecedented growth in Private Sector generation capacity addition Delays in Environmental Clearances Stagnant Production by Coal India Reasons for the Shortage (1/4) 28 Slide 29 Unprecedented growth in Private Sector generation capacity addition Original overall capacity addition target was 78,700 MW out of which private sector target was 15,043. Private sector target was revised to 19,800 MW as per Mid Term Appraisal (MTA) of Planning Commission Out of ~ 54,300 MW capacity commissioned during XIth Plan till 31.12.2011, private sector contribution has been a massive 28,280 MW Reasons for the Shortage (2/4) 29 M W Increasing contribution of private sector in the total capacity addition Source: CEA Slide 30 Environmental Clearances Critical coal bearing areas stuck under MoEF notification on Jan 2010 dealing with Comprehensive Environment Pollution Index (CEPI) led to critical coal bearing areas stuck. Out of 43 areas with a CEPI score of more than 70, seven coalfields Chandrapur, Korba, Dhanbad, Talcher, Singrauli, IB Valley and Asansol were impacted and had a moratorium on mining placed on them. MoEF classified some coal mining areas as No-go based on their location with respect to dense forest areas. 203 coal blocks were identified as No-go areas thus having a serious impact on coal production Reasons for the Shortage (3/4) 30 Total coal bearing area in India (sq km)17,300 Total no. of coal blocks in India602 No. of blocks identified in No-Go203 Spread over in area (sq km)3,039 Annual Production Potential (MT)660 Slide 31 Stagnant Production by Coal India CIL production has remained static ~ 535 MT in last two years. Monopolistic market design and lack of competition has kept productivity and efficiency much below global norms. Dominance of open cast mining due to short term and cost benefits deeper coal reserves remain inaccessible. Reasons for the Shortage (4/4) 31 Slide 32 Logistical Issues Resource Nationalization Indonesia, Australia, South Africa Forex Outgo Coal Import Bill could touch Rs 150,000 Cr Price Volatility Global Coal Markets Technical Limitations Equipment design Energy Security 32 Restrictio ns on export, additional customs and duties etc Almost 1/3 rd of current crude import bill Distributio n utilities to get exposed to fluctuating price risks Most plants can take up to 28% imported coal max Port-rail connectivity is a serious constraint in coal evacuation from ports Is Imported Coal a Viable Option? (1/4) Slide 33 Slide 34 Is Imported Coal a Viable Option? (2/4) 34 Increasing Coal Prices due to Resource Nationalism Indonesia introduced regulations on Price Fixing of Coal and Minerals Selling Price in 2010, according to which all coal mining licence holders are obliged to sell coal at a rate higher than a determined reference price. Indonesias Mining Law additionally imposed a Domestic Market Obligation under which coal mining companies are required to allocate coal as per Government decree for the domestic market prior to any export deals Australia has imposed a fixed carbon tax of A$23 a tonne from July 2012 onwards. A Mineral Resources and Rent Tax (MRRT) has also been made applicable to iron ore and coal mining business whose annual profits exceed $50 million. Forex Outgo Coal import bill for FY12 (uptil Oct 2011) was ~ Rs 40,000 Crores, almost 40% more than the imports during the same period of the previous fiscal and almost 1/3 rd of the current crude oil import bill. Unless domestic coal production is augmented, the coal import bill could rise to Rs 150,000 Crores Slide 35 Is Imported Coal a Viable Option? (3/4) 35 Price Volatility Volatility in internationally traded coal prices has increased significantly since 2008 as compared to 2001-2005 and recent coal price index movements have been highly volatile on a month to month basis. US$/T Slide 36 Is Imported Coal a Viable Option? (4/4) 36 Logistical Constraints Port-Rail Connectivity railways account for the inland haulage of only 24% of port cargo (with large chunk linked to the major ports) indicating the weak rail connectivity to ports other than the major ports Inland Rail Infrastructure Transportation of imported coal to the consumption centers is a major road block. There are seven major trunk routes via which coal is transported in the country. These routes cater to more than 90% of the total coal requirement and are already operating at 100% capacity utilisation. Technical Constraints in Blending While domestic coal shortfall is expected to reach 260 MT by the end of the 12 th Plan, technical constraints in blending will limit the use of imported coal to a maximum of 30% in plants set up on the assurance of domestic coal. Thus blending possibility will be restricted and there will be a risk of ~ 30,000 MW capacity getting stranded. Slide 37 Other Issues related to Coal Shortage 37 Non Adherence to New Coal Distribution Policy (NCDP) FSA documents as proposed by CIL is not in consonance with the NCDP NCDP mandated FSA for Power Valid for 20 years from Apr 09 OR life of the facility, whichever earlier Provision for review of terms of FSA every 5 years ACQ level typically 90% Penalties in case of shortfall 85-90% - 10% penalty 80-85% - 20% penalty Indias Future Growth India needs sustained economic growth > 8% to radically improve its Human Devp Index Growth in last few years ~ 5%-7% Growth hampered by infrastructure: electric power Peak shortfall Average shortfall High T&D Losses: Unscheduled black-outs, especially in rural areas Supply to agriculture sector not metered and almost free Slide 44 GROWTH AREAS Present growth is skills or resource driven (exports: software, gems and jewels, garment manufacture) Future Growth will have to be on value addition & engineering Rural sector to play a major role (agricultural and dairy produce; minimizing wastage and improving efficiency) Infrastructure building (roads, buildings, railroads etc.,) Manufacturing The elasticity has to be greater than 1 for powering future growth Slide 45 Elasticity and Electric Power Needs Target economic growth ~ 8% Elasticity of electricity with GDP stabilizing at ~ 1.2 Implications for future electric power requirements by 2015: Capacity addition Investments Fuel mix Pricing and Policies T&D reforms Slide 46 The Task Ahead Need To Add : 135 GW in ten years 13.5 GW per annum One Power Plant (1.1 GW)/mth Maximum added till now is 4,600 MW (One in four months) ( China adds one per week !! ) Slide 47 FUEL SUPPLY: OPTIONS FOR FUTURE Coal Conventional Gasification Natural Gas Hydro Nuclear PHWR + FB + AHWR PLWR Wind On-shore Off-shore Biomass Solar Photo voltaic Concentrating Solar Power FuelPresentIn 2015 Coal67,166 MW? Gas11,840 MW? Hydro30,135 MW? Nuclear2,720 MW? Wind2,488 MW? Biomass1,000 MW? Solar-? TOTAL115,035 MW250,000 MW Slide 48 ALL INDIA GENERATION CAPACITY (ALL FIG. IN MW) Slide 49 Indian Energy Scenarios: 2015 Same Fuel Mix as nowAggressive Nuclear Capacity Addition Slide 50 Investment Opportunities Coal Based 660/600 MW Sets Jharkhand Orissa Chhattisgarh Madhya Pradesh All other states on linkage Import Coal Based Power Station on the Coast Line Slide 51 ULTRA MEGA POWER PROJECT Slide 52 Slide 53 Hydro-Electricity Inferred potential > 120 GW Installed capacity 30 GW Most big projects are in North- Eastern states of Arunachal Pradesh, Sikkim, Uttaranchal and J&K Problems of rehabilitation and resettlement with large projects Environmental issues Water sharing agreements with neighbors National Hydro Power Corporation, Government of India Slide 54 STATUS OF HYDRO POWER DEVELOPMENT FOR STATES HAVING POTENTIAL MORE THAN 5000 MW MW Slide 55 STATUS OF HYDRO POTENTIAL DEVELOPMENT IN ARUNACHAL PRADESH (ALL FIG. IN MW) Slide 56 Biomass India predominantly agricultural country. Annual production of agro-forest and processing residues: 350 million tons Power generation potential > 22,000 MW Advantages: Decentralized generation: close to rural load centers. Technology reasonably well developed Environmentally friendly: No net CO 2 emissions FeedstockExamplesPotentialInstalled Agro-forest residues Wood chips, mulberry, coconut shells 17,000 MW50 MW Processing residues Rice husk, sugarcane bagasse 5,000 MW1000 MW Slide 57 GENERATE CHEAPER, EFFICIENT AND RELIABLE POWER THROUGH CO-GENERATION SUSTAINABLE SOLUTION Slide 58 BIOMASS constitutes around 14% of the world energy and 38% of the energy consumed by the developing countries Biomass conversion technologies for commercial energy production have attracted attention the world over in recent times especially on account of rapid rise in fossil fuel prices About 10000mw of power generation capacity has been installed in USA and Europe Sporadic efforts in other countries including Phillippines, Thailand, Canada and China have been made. Multifuel cogeneration plants of higher capacities are established. GLOBAL SCENARIO Slide 59 Wind Energy Gross potential: 45,000 MW (assuming 1% land availability in potential areas) Technical potential: 13,000 MW (assuming 30% grid penetration in potential areas) Rapid growth in installed capacity from 1990s India ranks 5 th in the world Present installed capacity ~ 3000 MW Site selection issues: More from fiscal benefits than from power Many plants not operating Low average load factor~13% Global Wind Energy Council World Wind Installed Capacity (2005) Slide 60 Transmission Slide 61 Tramission lines in Private Sector Number of Transmission lines are being offered to Private Sector. Slide 62 Existing Transmission and Future Expansion (Ckt.km) Tr ansmission lines E xis ting (C kt.km) Addition 2007-12 Total M arc h 765 kV170454287132 HVDC 500 KV5872520611078 HVDC 200 KV162- 400 KV7572249278125000 220 KV11462935371150000 Total c km19808995283293372 Slide 63 National Grid by 2012 Slide 64 Distribution Slide 65 Nation without Electricity The country is reeling under a severe power shortage that has forced people to suffer long power cuts as fuel scarcity has hit Generation and precarious health of utilities has Ravaged the finances and payment Schedules in the sector. Deficit in North 3,000 MW Heat Wave Way Forward Policy & Regulatory Issues Fuel Shortage Subsequent graphs show power cuts even at night Slide 66 Transparent Meters Reading We Interact, We Listen, We Learn, We Act. Reliable & Quality Power Faster Fault Removal Consumer Relationshi p Easy Mechanism of Attribute Change Quick Grievance Redressal Correct Billing Payments Convenience Easy New Connection Consumer Expectations Slide 67 Delhi Model Delhi has been divided into three distribution Companies BSES Rajdhani BSES Yamuna NDPL Delhi has been reduce their AT&C losses Establishment of separate courts for Electricity Special Powers to Distribution officers Use of Technology for services. Slide 68 FRANCHISEE MODEL Number of cities are being offered on Input based Franchiee. Bhiwandi is good example Agra has been given to Torrent. Improvement is already noticed. Urban Cities are of interest to many players, but what about Rural Areas Uttarakhand had earlier handed over the Bill Reading, Bill Distribution, minor maintenance to Women Self Help Groups which improved the services in the rural areas. Slide 69 AT & C Loss Reduction Slide 70 ROSTERING Slide 71 Slide 72 Gross Shortage Rostering Schedule Unrestricted Drawl SHORTAGE / ROSTERING (IN MW ) Gross Shortage Rostering 4.1.2007 78 9101111819 2021 Overdrawl Slide 73 Power Cut Unrestricted Demand Hydro Gen. Net Import from Grid Time in Hrs. Demand Met (Total Availability) POWER CUT Date: 06-04-06 & 07-04-06 Slide 74 Slide 75 Slide 76 Franchisee - Urban Rural ? Slide 77 Slide 78 Slide 79 Coal Mining Slide 80 Clearances and Permissions Extremely Time Consuming Forest Clearance Concept of No/No Go Forest Rights Act Security Issues Subsequent Photographs show the security issues in one of the mines. Matching of Development of Coal Mine with Power Plant. Slide 81 Slide 82 Slide 83 Slide 84 Slide 85 Slide 86 IN SHORT NO POWER IS COSTLIER THAN NO POWER Slide 87 LET US JOIN TO KEEP THE BULB GLOWING Slide 88 This is not THE END Its just a beginning of the NEW POWER ERA THANK YOU! Slide 89 Slide 90 Clearances and Permissions Extremely Time Consuming Forest Clearance Concept of No/No Go Forest Rights Act Security Issues Subsequent Photographs show the security issues in one of the mines. Matching of Development of Coal Mine with Power Plant.