Regulatory Considerations in Smart Grid

Projects

13-Sept-2017

Need for Smart Grid Regulations

Who needs a Regulator?????.....

(Generation, Transmission,Distribution)COMPANY

REGULATOR

CONSUMERS

Why Do We Need Regulations?

o Establish standards for Quality of service to Consumers

o Rationalise tariff

o Ensure reasonable per unit cost for Consumers

o Reasonable return to investors

o Efficient and economic allocation and use of resources

Why Do We Need Regulations?

o Maximise Consumer satisfaction

o Achieve transparency

o Credibility

o Determine the tariff for Electricity distribution andTransmission

o Regulate power purchase and procurement process

Regulations & its evolution

Evolution of Regulations-Power Sector

o 1998 - Electricity Regulatory Commission Act (Regulation throughformation of CERC/SERC)• Provision for setting up of Central / State Electricity Regulatory

Commission with powers to determine tariffs.• Constitution of SERC optional for States.• Distancing of Govt. from tariff determination.

o 2003 - Electricity Act 2003

• Creating competition in the industry protecting consumer interest.

• Ensuring supply of electricity to all areas.

• Rationalizing tariff thus lowering the gross subsidization levels.

• Encouraging autonomous regulations with the separation ofpolicy, regulatory and operational aspect.

Evolution of Regulations-Power Sector

o 2005 - National Electricity Policy• Protection of Consumer interests & Quality Standards• Recovery of Cost of services & Targeted Subsidies• Competition aimed at Consumer Benefits• Energy Conservation

o 2006 - National Tariff Policy• Ensure availability of electricity to consumers at reasonable and

competitive rates• Ensure financial viability of the sector and attract investments• Promote transparency, consistency and predictability in

regulatory approaches across jurisdictions, minimize perceptionsof regulatory risks

• Promote competition, efficiency in operations and improvementin quality of supply

What Does Regulation Control?

TARIFF SERVICE STANDARDS

“Too Low”? “Too Low”?

- Service provider may not be able to operate sustainability

- Service standard suffers/ Govt. forced to subsidise

-Threat to safety of Consumers, Employees

- Dissatisfaction amongst Consumers

“Too High”? “Too High”?

-Consumers may be unable to afford

- General Public outcry

- Operating Costs may increase

AND!!! Here Comes The Regulator

Role of the Regulatory Commission

o Set standards for the electricity industry in terms ofQuality, Continuity and Reliability ofPower/service.

o Make avenues for participation of private sector inthe electricity industry to ensure a fair deal to thecustomers.

o To collect and publish data and forecasts on thedemand for, and use of, electricity.

o To regulate the assets, properties and interest inproperties concerned or related to the electricityindustry

Role of the Regulatory Commission

o Governing entry into and exit from the electricityindustry in such manner as to safeguard the publicinterest.

o Aid and advise the Government in mattersconcerning Electricity Generation, Transmission &Distribution.

o Promote competition, efficiency and economy inthe activities of the electricity industry

o Scrutinize proposals submitted by DISCOMsunder Capex Schemes and accord approvals forexecuting those proposals

DPR (Detailed Project Report) Preparation-BasicRequirements

o SAP Generated Scheme No.

o Background

o Proposal

o Justification

o Estimated cost

o Cost Benefit Analysis

o Pay Back period

o PO/Budgetary Offer

o Supporting documents

o Completion Period

Key Regulatory Considerations for Smart

Grid Projects

Smart Grid - Stakeholders and their

Expectations

Any smart grid investment needs to be looked at

from the perspective of its main stakeholders :

Utility, Consumers and Service Providers- It is

the responsibility of regulators to balance these

expectations and facilitate an environment for smart grid development

Smart Grid - Role of Regulators

Smart Grids cannot evolve without dynamic, flexible

regulation (“Enabling”)

Regulator will be a facilitator to smart grids business

(“Catalyst”)

Discoms need to demonstrate clear positive benefits to

consumers (“Business Case”)

Regulators more than ever need to protect the interests of the

consumers (“Avoid Tariff Shocks”) and (“Data and Privacy

Protection”)

Investment Cost Recovery

Through ARR process Specific Tariff schemes & designs

Design of SurchargesPricing of new Services

Modes of Cost Recovery

Smart Grid Investment Approval

Capital investments by utilities are considered bySERCs through submission of an ARR and tariffrevision proposal by the utility.

Smart grid investments can also be encouragedthrough new business models that encouragevendors to bring in upfront capital investmentsand be paid through the benefits achievedthrough deployment

Investment Cost Recovery – Through ARR

Process

• Recovery of investments through the regularARR process

• Socialization of expenses wherein theincremental expenditure is spread over a widerconsumer base

• The impact of large investment is minimizedwith entire consumer base sharing the burdenof investments

Investment Cost Recovery – Specific Tariff

Schemes and Designs

Critical Peak Pricing (CPP) rates, (normallyduring times of stress for a period of 2 weeksand related to summer cooling load) thatencourage downstream connected entities toreduce consumption during this time

RTP ( Real time pricing) programs are offered byAmeren Illinois and ComEd in Illinois, USAwhere consumers pay electricity supply ratesthat vary by the hour.

Investment Cost Recovery – Design of

Surcharges• In Germany all domestic consumers pay a green surcharge to cover

the costs of investing and integrating renewable energy

• In the US, the Pennsylvania Public Utility Commission (PUC)recently approved the use of system improvement charges to allowelectric companies to use a surcharge on consumers’ bills

• The Maharashtra Electricity Regulatory Commission (MERC)introduced reliability surcharge for withdrawal of load shedding forspecific Instances of application of surcharges

Customer Participation and Protection

Redressal & Feedback

• In the event that a consumer or prosumer is notsatisfied with the remedy provided by the internal cellthe consumer could have the option to submit thegrievance to the Consumer Grievance RedressalForum (CGRF) / Electricity ombudsman.

Awareness

• Smart grid technologies and tools can enableconsumers to understand their electricity use, managetheir electricity bills, and sell power back to the grid

• Adequate consumer awareness and involvement iscritical for successful deployment of smart gridprograms and applications

Participation

• In a Smart Grid, a prosumer can be a new and activeparticipant in balancing the electricity system

Protection

• Protection of consumer interest – laying of

standards, its enforcement and monitoring,

regulations for privacy protection and information

sharing

Safety and Standards Related to Smart Grid

• Ensure an interoperable system that involves seamless communication across multiple entities involved

• Prevent vendor lock-in and proliferation of proprietary standards

• Ensure scalability of the systems installed

Net Metering for renewable energy

regulations -2014

• Distribution Transformer level capacity offered for connecting renewable energy system by DISCOMs shall not be less than rated capacity of DT.

• Three tier process for application and registration i.e. Feasibility analysis , registration and connection agreement.

• Net shall be capable of recording both export and import of electricity.

Net Metering for renewable energy

regulations -2014

• Net meter shall be meter reading instrument ( MRI) compliant or AMR or AMI.

• If export of energy units exceeds import of units than surplus units shall be carry forwarded to next billing period as energy credit.

• If consumer is injecting energy into distribution system in peak hours, DISCOMs may purpose incentives to such consumers with the approval of commission.

National Tariff policy Revised national tariff policy issued by ministry of power dated 28th Jan

2016 , clause 8.4(3) under definition of tariff components and their

applicability…. Wherein :

Appropriate commission shall, therefore, mandate smart meters for:

(a)Consumers with monthly consumption of 500 units and more at earliest

but not later than 31.12.2017

(b)Consumers with monthly consumption above 200 units by 31.12.2019

DERC Approval – Automated Demand

Response • Shall enter into an agreement with consumers

• Shall pay incentive of 40% and 20% of average commercial

and industrial tariff for immediate and advance intimation

respectively for deferment / shedding of load

• The benefits accruing from the scheme be reviewed on

quarterly basis. After two years, commission will take overall

view on whether the scheme should be extended and

conditions of such extensions if so decided.

• Relevant records for expenditure / receipt shall be maintained

separately

DERC Approval – Smart Metering

DERC Approval – Field Force Automation

Thank You!

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