Summary
The Powergrid Corporation of India Ltd is the public sector company charged with the responsibility of creating and operating a National Power Grid.PGCIL is the third largest power transmission company in the world and will be taking its installed capacity to 37000MW by 2017. Until the power transmission capacity catches up with the demand,profitability of merchant power plants will remain largely governed by their long term power sale agreements with their dedicated users .
Analysis
The Powergrid Corporation of India Ltd is the public sector company charged with the responsibility of creating and operating a National Power Grid. It is in the process of creating a truly national grid with the sufficient excess capacity such that merchant power plants become truly viable in India.
Historically, in India the power transmission capacity has been built based on/along with power generation capacity being built.Each state of India has its own State electricity board who have been responsible for creating ,operating and maintaining power distribution capacities in the state.Most of these electricity boards are in very poor financial condition , with average T&D loss of up to 29% including thefts, non-payment etc. This has led to the transmission & distribution networks getting neglected for lack of investment capacity. Powergrid Corporation is responsible for creating the National Power Grid by installing transmission capacity between the Northern,Northeastern, Easter, Western and Southern electricity grids of India.All of the regional grids except the southern grid have been interconnected and synchronized. The Southern grid has been connected to the eastern grid by means of a HVDC transmission line. The current transmission capacity is about 15000MW and it is planned to increase the capacity to 37000MW by 2017.
Under the present scenario, merchant power plants(Independent Power Producers or IPPs) need to tie up atleast 80 to 90% of their generation capacity by means of long term contracts with users in order to ensure guaranteed offtake and therefore , their financial viability.Due to the current limited transmission capacity, they may not be able to sell their excess power even though the peak power shortage is to tune of 10-15% and they have the generation capacity.Thus the IPPs are unable to take much advantage of the peak power rates( Rs. 12-16/KWH Vs Rs.4-6/KWH normal) and impacts their overall profitability. Under the limited transmission capacity scenario, "Open access" power has no meaning as the mechanism to deliver does not exist . For true "Open access" power and market pricing of peak power rates to IPPs, about 15-20% of excess installed transmission capacity will be required. Until, then, the viability of the merchant IPPs will be basically governed by their long term power sale agreements with their monopolistic users.
This author consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
