Adding flexibility to India s electricity system

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1 [ ENERGY / IN DETAIL ] [ ENERGY / IN DETAIL ] Adding flexibility to India s electricity system AUTHOR: Rajagopalan, M (Raj), Market Development Director - MEA, Wärtsilä Power Plants 10 in detail

2 WÄRTSILÄ TECHNICAL JOURNAL India s current approach of relying heavily on baseload coal-fired plants cannot adequately cope with variations in power demand. An 80:20 hybrid mix of coal plants and flexible gas plants would impart more flexibility and improve the system s efficiency. The Indian economy is the fourth largest in the world. Yet, weighed down by its large population of 1.2 billion people, the per capita income is among the lowest in the world. Similarly, India s electricity system, with around 240 GW of installed capacity, is the fifth largest in the world. Yet its per capita utilization of electricity is just 917 kwh/person/year, which is well below the global average of 2900 kwh/person/year, and far below the 10,000 kwh/person/year of some of the more developed countries. Given the lower energy elasticity of developing economies, it is well recognized that India needs to scale up its electricity market rapidly to match its aspiration of becoming a global economic power. An estimate says that 300 million people in the country do not have access to electricity. To ensure inclusive growth, the needs of these potential consumers must also be addressed. In trying to overcome the shortage and achieve adequacy of power at the lowest possible cost, the emphasis in all the in detail 11

3 [ ENERGY / IN DETAIL ] [ ENERGY / IN DETAIL ] country s planning exercises, has been on adding baseload thermal plants that operate on coal. The reasoning has been that the country is rich in domestic coal resources at a price that is controllable and not subject to global market dynamics. At present, coal plants account for 58% of the country s total installed capacity (MW) and about 72% of its total generation (MU). Coal will continue to play a dominant role in the future too, as an average addition of 14,000 MW per year has been planned. Thus in the foreseeable future, coal plants will account for over 60% of the total capacity and more than 65% of the total generation. Some 15,000 MW of gas-based generation plants using combined cycle gas turbines (CCGT) were added in the period The hope was that the production of domestic gas would be ramped up, and that it would be supplied at a cost that would make power generation competitive with that from coal. Unfortunately, there have been problems with respect to both the availability and price of domestic gas, with the result that most of these gas plants are under-utilised and are viewed as stranded assets. They cannot be revived by using alternatives such as imported R-LNG (Regasified Liquefied Natural Gas) as the cost is seen as being prohibitive. Challenges posed by variable load Given the shortage of electricity and the absence of alternatives, one would conclude 12 in detail that the coal-powered plants must be running flat-out at close to full load most of the year round. But the reality is different. Although India s total installed capacity, including coal, hydro, nuclear, gas, was 223,346 MW as at the end of March 2013, and the peak demand was far less at 135,453 MW, there was still a shortfall in meeting the demand. Shortages continue to exist in different parts of the country. Coal plants are seen to be operating at close to full load during peak hours and cannot be ramped up further to overcome peak shortage. Yet, paradoxically, the average load-factor of coal-based plants has been coming down over the years, as can be seen below (Figure 1). There have been several attempts to explain this falling plant-load factor (PLF) trend. One reason cited is that an inadequate coal supply has severely restricted generation in many of the thermal plants, resulting in a lower average despatch. Another explanation is that there are inter-state and inter-regional transmission constraints that prevent the free flow of power. It is argued that once these bottlenecks are removed, and when the southern grid is hooked up to the NEW grid to form a composite national grid, the offtake from coal plants would improve. Yet another explanation is that loss-making distribution companies (discoms) are reluctant to procure more power due to poor cost-realisation from the consumers, and without a 24 x 7 supply obligation- would prefer to resort to loadshedding instead. All these explanations have some merit. However, an analysis carried out by Wärtsilä in its white paper Peaking and Reserve Capacity in India shows that the most plausible reason for the lower PLF is the significant variation in power demand between peak and non peakhours. While peak demand continues to grow rapidly, the average drawal throughout the day grows at a slower pace. The cyclical pattern is becoming more pronounced with increased urbanisation, as is evident from the daily load curve of a plant in Maharashtra in Western India (Figure 2). A similar cyclical pattern is discernible in many of the thermal plants across all seasons. The conclusion is this: If, to ensure adequacy, the system is packed with baseload capacity beyond a certain threshold, it can be counter-productive. The plants will be forced to operate at suboptimal, lower load during off-peak hours and at night. They will run at very poor efficiency, burning more fuel for every kwh generated while entailing additional maintenance costs. This will increase the generation cost per kwh. In addition, when the plants are run at less than normative PLF, the fixed cost amortised on a kwh basis will increase in inverse proportion.

4 WÄRTSILÄ TECHNICAL JOURNAL Fig. 1 - PLF of coal plants Oct May Jan Jul - 13 Fig. 2 - Daily load curve of the Mahagenco, Nasik power plant. in detail 13

5 [ ENERGY / IN DETAIL ] [ ENERGY / IN DETAIL ] Sub-optimal use of plants means also more CO 2 emissions. The problem threatens to worsen in the future. If the capacity addition of 70,000 MW of coal-based plants is completed in the next five years as planned, the average PLF of the plants could come down to 65%, or even lower, while meeting the energy demand projected for the period. The problem will be rendered more acute by the planned addition of 30,000 MW of wind and solar power plants. To allow preferential evacuation from these must-run plants, the average PLF of the coal plants may have to dip below 60%. Coping with the challenges Conscious of the need for specific action, a Task Force was constituted by the CEA (Central Electrical Authority) in 2012 to deliberate over various aspects of setting up peaking power plants and creating adequate system reserves. The key observations made by the Task Force were: The load curves in different regions show that demand tends to peak during certain times of the day and in certain seasons. It is evident that dedicated peaking power plants are required to meet the spikes in demand. Pure baseload plants will not be able to serve this need. Peaking plants must have definite characteristics, such as quick starting time and the ability to run at part-load without a drop in efficiency. Such plants should also serve the purpose of standby reserve, i.e. to come online rapidly. Plants capable of meeting these requirements are hydro-electric or gasbased power plants operated by opencycle gas turbines or internal combustion engines. The identified potential for hydro power is only 10,897 MW during the next five years. Another 17,000 MW of peaking capacity, not to mention the 17,500 MW for reserves, recommended by the Task Force must, therefore, come from gas plants that use aero-derivative turbines or large internal combustion engines (ICE). The Wärtsilä white paper points out the advantages of using ICE technology. The instant start and rapid ramp-up characteristics make it ideal for peaking and reserve applications among all technologies that use gas. Plants using ICE can be built to any size, even 500 MW or larger, in a single phase or spread over a period of time. These plants consist of multiple engines each of which operates at high efficiency. The modularity ensures the highest efficiency at any plant load, as the number of engines pressed into service can be controlled to suit the variation in load. This feature is essential as peaking demand can vary, and the plant may be required to cater to different loads at different times of the day. ICE s excel on this count. The flexibility of ICEs is extremely useful in countering the variability of renewable energy, as they can be brought on instantly if there is a drop in generation from renewable energy sources, and stopped to allow its evacuation into the grid when the renewable generation picks up. Thus, they act as enablers of renewable energy and contribute to the reduction in carbon emissions. Myth: Gas-based power is more expensive There is widespread belief that power generated from gas-based plants will be far too expensive compared to using coal, and that distribution companies (discoms) will resist the evacuation of such power due to unwillingness on the part of end consumers to pay a high price. This may be true for power from baseload CCGT plants, but the white paper argues that gas-based peaking plants enable reliability, and that the cost of power from such plants needs to be assessed in a broader perspective: Instead of viewing the cost of generation from a gas-based peaking plant on a standalone basis and concluding that it is too expensive, a more holistic pricing approach should be followed. A hybrid combination of coal and gas plants can be planned for, and the weighted-average cost of generation worked out accordingly. The capacity of coal plants could be limited to 80% of the system s peak demand, which could then be complemented with flexible gas-based plants sized for the other 20%. The resulting benefits would be: Coal plants would serve the baseload needs and be allowed to operate at normative load (80-85%), where their efficiency is highest. Efficient, quick-start, gas-based plants could be used to supplement the power supply for peaking needs. Though the PLF of these plants will be less than 15% (as they will come on only during demand peaks), they will, by design, operate at their highest efficiency at all loads. Although the capacity (MW) of these plants will be fully available, gas consumption will be limited since the energy generated annually (MU), as a percentage of the total, will be low. This hybrid combination will offer the advantages of best efficiency and flexibility. The weighted-average cost of generation from the hybrid or optimized combination can then be compared with that of coal plants operating at a low PLF of 67%. Applying the hybrid principle on two representative coal plants of the largest generator of thermal power in the county, NTPC (National Thermal Power Corporation), the white paper showed that power from a hybrid combination of 80% coal and 20% gas is more cost-effective than that produced by plants based on 100% coal and operating at a lower PLF. This is valid even when using more expensive R-LNG instead of domestic gas. If the 80:20 hybrid principle is extrapolated and applied across the entire 70,000 MW of thermal plant capacity targeted during any 5-year block in the whole country, the coal plant capacity addition can be limited to 56,000 MW, and gas-based peaking plants can make up the remaining 14,000 MW. Calculations show that the average cost of generation, taking into consideration both fixed and energy 14 in detail

6 WÄRTSILÄ TECHNICAL JOURNAL costs, from this hybrid combination of plants will be cheaper by INR 0.14/kWh (1.8 Euro/MWh) than when the entire addition of capacity comes from coal plants. This is after assuming a fairly high gas price of USD 18/MMBTU for operating the peaking plants. The savings spread over the entire 70,000 MW capacity would be approximately MINR 56,000 (MEUR 700) per year. Other advantages of gas-based plants In addition to the above, the flexible gas plants would offer the following benefits over a 5-year time frame: As the burden on investment will be lower by nearly MINR 350,000 (approx. MEUR 4375), financial closure will happen much faster. The IDC of these plants will be lower, as the modular plants can be constructed faster. The land requirement will be lower by 14,000 acres. The avoided water consumption will be nearly 500 million cu.m/year. To put this in perspective, this quantity is more than enough to satisfy the annual need of a large city the size of Bengaluru. CO 2 emissions will be reduced by 13 million tons/year. This comes from using a cleaner fuel like gas for peaking, as well as from operating the baseload coal plants at improved efficiency. The flexibility offered by the gas plants is of immense value in the following applications: Ancillary services: Frequency support and regulation Reserve capacity: As these plants offer the comfort of standby reserve, they can meet a large part of the secondary and tertiary spinning reserve requirements. Load-centre servicing: Gas plants can be located close to cities/ towns and reduce the strain on the transmission system. Moreover, the black-start capability of these plants will be useful in evolving an islanding scheme for important load-centres. Enabling policy Obviously, such a concept needs to be supported with policy initiatives and a regulatory framework. The setting up of dedicated peaking plants needs to be incentivised through a competitive bidding process, which can be technologyneutral but which lays down minimum criteria for start/stop and ramp up/down characteristics. Also, the current system of merit order despatch stacks power plants unit-wise, based on energy cost. Thus, power from a gas-based plant on a standalone basis always appears more expensive than that from a coal plant. The existing system also considers the heat rate of coal plants at normative PLF, even though the plants, in reality, run at a lower load-factor due to lower evacuation. A system that allows bids and despatches from hybrid plants, will pave the way for higher system efficiency. Conclusion Relying only on baseload coal plants to meet India s growth needs would be fraught with risks and would lead to inefficiency. A hybrid mix of coal and flexible gas plants, in the ratio of 80:20, would make the system flexible, more efficient, more capable of absorbing clean renewable energy into the system, and bring the country closer to realising the vision of 24 x 7 power supply for all. in detail 15