Murdoch University. School of Engineering an Information Technology PEC624. Master of Science in Renewable Energy Dissertation

Murdoch University School of Engineering an Information Technology PEC624 Master of Science in Renewable Energy Dissertation A Study on Tamil Nadu s Approach to Deal with the Electricity Crisis and Analyze if it is the Best Way Forward By: Anirudh Unnikrishnan Submitted: August 2015

Abstract Electricity is a necessity, electricity is crucial to development. There are many steps involved in an electricity network, from creating electricity to transmitting electricity to the consumer. Each of these steps require upright planning and high technical precision; lacking such ability in an electricity network system will cause financial losses. Tamil Nadu is a state located in India. The state electricity utility in Tamil Nadu has not been able to provide constant electricity supply in the state and this has become the biggest concern over the recent past. The state electricity utilities financial health is also very poor. The state electricity utility has an accumulated loss of 53694.87 crores, as of march 2012 (Planning commission, 2013-14). The state has implemented financial restructuring plan to provide a leeway for the state electricity board on their future operation. Over the past few years (2014-2015), the electricity gap between supply and demand has dropped considerably and that senses a betterment in the working efficiency of the SEB. This study analyses the strategies adopted by SEB to reduce the electricity supply and demand gap faced in the state and examine reasons to why be the SEB in a financial crisis. This study also analyses the future prospect in terms of electricity network in the state. Finally a recommendation is made to suit the state s need in short term and in long term. The state requires a system which will run successfully alongside with the state s existing plan, such that the working efficiency of the SEB will not be able to affect this system. Residential Roof top Photovoltaic system will provide that substance to the state. 2

Acknowledgment The Author would like to thank Dr. Trevor Pryor Academic chair for Renewable Energy at Murdoch University in Western Australia. My sincere gratitude for sharing your knowledge and guidance throughout the dissertation. I would like to thank my parents Unnikrishnan Panicker and Rema Panicker, who have always loved me and supported me throughout my life. Thank you Anirudh Unnikrishnan 3

Contents Title... 1 Abstract... 2 Acknowledgment... 3 List of Tables... 5 List of Figures... 6 Abbreviations... 6 1. Introduction... 8 1.1. Purpose of the study... 8 1.2. Report Scope... 8 1.3. Limitations of the study... 9 2. Background... 9 2.1. The History and Structure of the State s Electricity Utility... 9 2.2. Financial Restructuring Plan... 10 2.3. Installed Capacity, Power Demand and Supply in Tamil Nadu... 11 3. Management Methods Applied by TNEB... 13 3.1. Demand Side Management... 13 3.2. Energy Efficiency Schemes... 14 3.2.1. Energy Conservation Building Code... 14 3.2.2. Energy Star Labelling... 14 4. Energy Sources... 14 4.1. Renewables... 14 4.1.1. Bagasse Cogeneration... 16 4.1.2. Hydroelectricity... 16 4.1.3. Wind Energy... 16 4.1.4. Solar Energy... 21 4.2. Conventional Source... 22 5. Performance of the Utility... 23 5.1. Reasons for the Bad Performance of the Utility... 23 5.1.1. Execution of Plans... 23 4

5.1.2. Power Purchase... 25 5.1.3. Tariff and Subsidies... 25 5.1.4. Unmetered Supply of Electricity... 27 5.1.5. Conclusion... 29 6. Policies Set For Betterment of the Future Energy Market in Tamil Nadu... 30 6.1. RAPDRP... 30 6.2. Vision 2023... 30 6.2.1. Shortcomings... 31 7. Requirements... 32 8. Sustainability Option to Improve the Electricity Supply in TN... 32 8.1. Switch focus to roof top residential solar generation... 32 8.1.1. Reduction in Technical & commercial losses... 35 8.1.2. Profile of solar radiation... 35 8.1.3. Other reasons... 35 9. Potential for further work... 36 10. Conclusion... 36 11. Recommendation... 37 12. Reference... 38 13. Appendix... 45 List of Tables Table 1: Yearly Operating Losses Funded by State Government and Banks... 10 Table 2: Energy Requirement/Availability in TN... 13 Table 3: Peak Demand/ Peak Met in TN... 13 Table 4: Schedule of Power Projects in TN... 24 Table 5: Current Tariff Set by TNERC... 26 Table 6: Summary of Key Financial Parameters... 28 Table 7: Revenue/Expense of TNEB for the Years ( 2010-2014)... 28 Table 8: Possible Impact with Roof top PV... 34 Table 9 : Monthly Solar Isolation on a Horizontal Surface Received in all Districts of TN- kwh/m2/day... Error! Bookmark not defined. 5

List of Figures Figure 1: Capacity Share in MW, 2015... 12 Figure 2: Installed Capacity in TN (MW), 2015... 12 Figure 3: Renewable Energy Capacity by 31-07-2014... 15 Figure 4: Installed Capacity With/Without Renewables... 15 Figure 5: Wind Passes in TN... 17 Figure 6: Supply Drop in Electricity During the Years 2011-2012, 2013-2014... 18 Figure 7: Typical Wind Generation Pattern... 20 Figure 8: Wind Capacity Addition Format... 21 Figure 9: Flowchart- System Thinking by TNEB... 29 Figure 10: Planned Capacity Addition... 31 Figure 11: Planned Capacity Share... 31 Figure 12: Solar Radiation in Chennai- Kwh/m2... 21 Figure 13: Average Annual Solar Intensity Received by TN... 34 Abbreviations AT&C- Average Technical and Commercial BEE- Bureau of Energy Efficiency CAG- Comptroller and Auditing General of India CEA- Central Electricity Authority CWET- Center for Wind Energy Technology CIL- Coal India Limited FRP- Financial Restructuring Plan G, D, T- Generation, Distribution and Transmission GOT- Government of Tamil Nadu GWh Gigawatt hour HT/LT- High Tension/ Low Tension IEX- Indian Energy Exchange JNNSM- Jawaharlal Nehru Solar Mission KW/kWh- Kilowatt / Kilowatt hour MW- Megawatt MRNE Ministry of New and Renewable Energy MOEFCC- Ministry of Environmental, Forest and Climate Change, Government of India 6

MOP- Ministry of Power NIWE- National Institute of Wind Energy PFC- Power Finance Corporation Ltd PGCI- Power Grid Corporation of India Ltd POSOCO- Power System Operation Corporation Ltd PV- Photovoltaics R-APDRP- Restructured Accelerated Power Development and Reform Program RES- Renewable Energy Systems SEB- State Electricity Board SRPC- South Regional Power Committee SRLDC- Southern Regional Load and Dispatch center TN Tamil Nadu TEDA- Tamil Nadu Energy Development Agency TNERC- Tamil Nadu Electricity Regulatory Commission. TECA- Tamil Nadu Electricity Consumers Association TANGEDCO- Tamil Nadu Generation and Distribution Corporation Ltd. TNPCB- Tamil Nadu Pollution Control Board TNPFIN- Tamil Nadu Power Finance and Infrastructure Development Corporation Limited. TANTRANSCO- Tamil Nadu Transmission Corporation Ltd. NOTE: 1 Indian rupee =.021 Australian Dollar (2015) 7

1. Introduction This section of the report determines the purpose of this report, scope of this study and the limitations associated with the study of this topic. 1.1. Purpose of the study This report was initiated to understand the state of electricity supply in the southern state of India- Tamil Nadu. Tamil Nadu is one of the 29 states in India. It lies in the southernmost part of the Indian peninsula. The state is eleventh largest state in India, with area of 130,058 Km 2. It is a leading region for manufacturing, information technology, agriculture and health care. Over the past few years, the economic growth of the state has been on decline and it registered an all-time low 4.14% in the year 2012-2013. In the same year, the state s electricity supply fell 3000 MW short of the demand. This is majorly related to the energy crisis faced by the state. The state of Tamil Nadu has constantly failed to provide sufficient electricity to the consumers of the state. The state s electricity network were not able meet the increasing demand. As a result of this, the consumers of electricity in Tamil Nadu are facing the consequences. The people of Tamil Nadu are imposed to reduced quality of life. The productivity of the manufacturing and commercial sector were reduced, which resulted in reduction in economic growth. During this period, the SEB had also accumulated financial losses due to the strategies adopted by the SEB and also due to the low working efficiency of the SEB. However, the situation improved in the year 2014 and constant load shedding has been cancelled for all districts of Tamil Nadu and the losses has been reduced. There are still unexpected blackouts due to insufficient load capacity to meet the peak power demand. This brings us to two main fundamental research questions. What have been the main causes of the electricity supply problems in Tamil Nadu in recent times and will the current policy solve this problem? Are there any options available in the state which could be used to improve the situation towards a more sustainable growth? This report evaluates the performance of the state electricity utility and reviews the relevant energy policies set for Tamil Nadu by the state and the central government and provides a recommendation that will bring sustainability to Tamil Nadu electricity sector. Specifically the report considers whether the system thinking pattern followed by the state electricity utility will lead the electricity sector in the state towards a sustainable future. 1.2. Report Scope The study will, 1. Assess the existing installed generation capacity in the state 2. Review the supply and demand gap in the state 3. Review the practices adopted by the state to reduce the demand of electricity 4. Evaluate the performance of the state electricity utility 5. Assess the tariff set by the regulatory commission over the years 6. Evaluate vision 2023- Policy relevant to the energy sector 8

7. Provide a sustainable option which will lead Tamil Nadu self-sufficient in their energy needs. 1.3. Limitations of the study The study depends 1. On the information provided by the State and Central Government Agencies 2. On reports submitted by the Central State Authority of India and Tamil Nadu State Regulatory Commission 3. Real time data on wind and solar energy were not made available data such as variation of yearly/ monthly/ daily wind speed - wind data had to be interpreted from the total wind generation 4. Quality of reports submitted by the state government have been poor- data such as transmission losses are not accurate nor updated yearly. 2. Background This part of the report summarizes the structure of the electricity utility and the recent history of the SEB. It also examines the existing installed capacity in the state. 2.1. The History and Structure of the State s Electricity Utility The electricity utility in Tamil Nadu is owned and controlled by the state government (TNEB, 2015). All over India, such is the case. The ministry of power controls all electricity related matters in the country (MOP, 2015). It is mainly responsible for electricity capacity development, monitoring of power projects, policy construction and it is also the administrative force for presentation of legislation in regards to thermal and hydro power G, T, D (GIZ, 2013). The Ministry of power has assigned Central Electricity Authority to perform some of its main functions (CEA, 2015). The CEA is accountable for the technical coordination of programs and supervision of those programs (GIZ, 2013). CEA carries orders set by the ministry of power. The CEA is also trusted with a number of constitutional functions. The state electricity Regulatory Commission is accountable for determination of Tariff in the state and granting authorization at intra state level (GIZ, 2013). There is a state load dispatch center which ensures cohesive operations of the power systems (SLDC, 2015). In Tamil Nadu, the electricity utility is named as the Tamil Nadu Electricity Board. TNEB was originally formed in the year 1957 (TNEB, 2015). It was formally called Madras State Electricity Board as per the Electricity Act 1948 as a part of restructuring of the electricity network after the independence. Madras, which is now known as Chennai, is the state s capital city. TNEB was restructured in 2010; TNEB is the holding company and it is divided into two sub-companies, Tamil Nadu Generation and Distribution Corporation Limited for generation and distribution of electricity and Tamil Nadu Transmission Corporation Limited for transmission of electricity (TNEB, 2010). The state has its own regulatory body- Tamil Nadu Electricity Regulatory Commission. TNERC sets regulation on the state electricity utility and the power producers in the state. It also sets the tariff rates for different consumer group and implements energy efficiency and energy related policies in the state (TNERC, 2015). TNEB can purchase and sell power from/to the neighboring states through interstate transmission network in the Southern grid- comprising Kerala, Karnataka, Tamil Nadu and Andhra Pradesh (SRLDC, 9

2015). Tamil Nadu is not self-sufficient, hence it is not capable of selling electricity due to shortage of installed capacity of electricity in the state. In the year 2014, the Power Grid Corporation of India Ltd achieved a landmark by connecting the Southern grid with NEW grid (North, East, West and North East grid). This was achieved by connecting a transmission line with a capacity of 765KVA between Sholapur (Western Region Grid) and Raichur (Southern Region grid) (PGCIL, 2015). Due to this development in the recent past, if needed, it is possible for TNEB to purchase electricity from other regions of India at a higher cost as all the grids in India are synchronized together. The transmission line is although not yet fully functional. Power Trading agents in the country are Indian Energy Exchange and Power Exchange India Ltd (GIZ, 2013). They help in maximum utilization of generation capacity the country possess. TNEB can purchase power from these agencies on short term basis. The market price fluctuates depending upon the demand for electricity. 2.2. Financial Restructuring Plan By 2012, TNEB had a short term liabilities of 24,422 Crore Rupees (AF Mercados, 2014). TNEB were experiencing constraints in applying for more borrowings from the lenders. The interest rates on these liabilities were set at 13 percent (India ratings, 2014). This was causing more financial stress for TNEB. The central government of India suggested the state electricity utility to apply for a financial restructuring plan. Under the FRP scheme, the government of Tamil Nadu will take over 50 % of those liabilities, over a five years span (AF Mercados, 2014). The balance 50 % will be restructured by the lenders. The government of Tamil Nadu has accepted to finance this plan under one condition; that TNEB increases their working efficiency and that they increase their yearly revenue to match the spending. FRP is now being performed in Tamil Nadu (GIZ, 2013). This will increase the creditability of SEB. This plan is to only provide short term financial improvement of the SEB. It is not certain that this plan would leave to sustainable betterment over the future years. It will largely depend on the working efficiency of the SEB and the regulators. Ignoring such key parameters will lead the goals of this scheme towards failure. This scheme will also provide backing of state government for a moratorium of 3 years, with a repayment principle of 7 years. The operating losses for the first 3 years will be funded by the state government and the banks as shown in table 1 (AF Mercados, 2014). Table 1: Yearly operating Losses funded by State Government and Banks Particulars Years 2012-2013 2013-2014 2014-2015 Cash Loss/Operating Loss,(Rs. Crores) 8183 3849 2060 Funding by Banks 100% 75% 50% Funding by the State Government - 25% 50% Source: AF MERCADOS 10

2.3. Installed Capacity, Power Demand and Supply in Tamil Nadu According to the census of India 2011, the population of Tamil Nadu is approximately 72 million. The consumer base of the state is enormous. According to TANGEDCO, it has a consumer base of 22.344 million and energy consumption per unit capita of 1040kwh/yr. The state s electricity utility haven t been able to keep with the demand of the ever growing consumer base of Tamil Nadu. The state s electricity utility always had a problem with supplying constant power throughout Tamil Nadu. According to the government of Tamil Nadu, the state is making constant efforts to cut the gap between the supply and demand, yet it has failed to achieve it constantly throughout the years. This has been the state s biggest barrier to development in the past 5 years. The demand for electricity has been increasing by 8-10% every year (TANGEDO, 2013) and yet only a mere capacity of 290MW was added inbetween 2005 and 2010 by the SEB (CAG, 2010). The average annual growth of consumers of electricity has been increasing by 5% every year (ICLEI, 2014). The electricity demand in the commercial sector increased from 9.5% in 2009 to 20.93 % in 2011 (ICLEI, 2014). All this increase in demand has to be met by TNEB in order to bring sustainability to the energy sector in Tamil Nadu. The state now has an installed capacity of 22370.14 MW (CEA, 2015).The state s share of electricity capacity is shown in Figure. 1. The state also has a separate capacity of 659.4 MW from bagasse generation and 266 MW from biomass power plants (TEDA, 2015). This is not included in the total capacity, as the capacity to deliver power depends on the feedstock, such as harvest of sugarcane for bagasse cogeneration, which differs every year. The state s own generating capacity is just 7598.45MW, while power of 10017.09MW comes from private power producers, who are on long term contract bases with the state s electricity utility and 4754.6MW of electricity is from the central body of India (CEA, 2015). Over the year 2012-2015, the state s share of installed capacity has only grown from 5733 to 7598 MW, An increase of only 1860MW in 4 years time, where the demand has been increasing at 10% every year. This shows that the state is not self-sufficient with its electricity needs. Figure 1 reinstates this point. The state requires constant help from the central government and private investments to meet its energy needs. 11

installed capacity share 4754.6 7598.45 10017.09 state private central Figure 1: Capacity Share in MW, 2015 Source: CEA, 2015. Over the past 4 years the situation has gotten worse, especially in the years 2012 and 2013. The state adapted to load shedding, as the state couldn t keep up with the demand. In the year 2011-2012, the state s electricity deficit was 10.5% and the peak deficit reached a high of 17.5% (CEA, 2012). The situation has become worse the following year, with the state s electricity deficit reaching an all-time high of 17.5% and a peak deficit of 13.2% (CEA, 2013). In the year 2014-2015, the state s electricity situation has gotten considerably better compared to the past few years (In terms of electricity supply). After the difficult two year period, the state has gradually reduced its shortage, with 5.9% deficit in the year 2013-2014. The difference in shortage of electricity can be seen in Table 2 and Table 3. The current share of installed capacity is shown in Figure 2. Installed capacity(mw) in TN 2015 8075.38 9688.1 2182.2 986.5 411.66 1026.3 Coal Gas Diesel Nuclear Hydro RES(MNRE) Figure 2: Installed Capacity in TN (MW), 2015 12

Source: CEA, 2015. Table 2: Energy Requirement/Availability in TN Year Energy Requirement (GWh) Energy Availability (GWh) Energy Deficit(GWh) Energy Deficit % 2011-12 85685 76705 8980 10.5 2012-13 92302 76161 16141 17.5 2013-14 93508 87980 5528 5.9 Source: (CEA, 2012), (CEA, 2013), (CEA, 2014). Table 3: Peak Demand/ Peak Met in TN Year Peak Demand (MW) Peak Met (MW) Peak Deficit (MW) % Deficit 2011-12 12813 10566 2247 17.5 2012-13 12736 11053 1683 13.2 2013-14 13522 12492 1030 7.6 Source: (CEA, 2012), (CEA, 2013), (CEA, 2014). 3. Management Methods Applied by TNEB This part of the report reviews the methodology applied by the state during the years 2011-2014 in order to control the electricity crisis. 3.1. Demand Side Management The state did not possess the required installed capacity to meet the demand. Supply side management was not possible in this scenario. The state chose demand side management. The electricity demand was reduced by load shedding, it was made to ensure efficient use of electricity. High tension industrial & commercial services were enforced with 40% cut on their base demand ( (POLICY NOTE, 2013), (CEA 2013)) Domestic users were imposed with load shedding - Chennai, which is the capital city of Tamil Nadu was enforced with power cut for 2 hours daily between 8 am till 6 pm. On the other hand, Urban and rural areas were imposed with 4-8 hours power cut and agricultural services were enforced with 9 hours load shedding ((CEA, 2013), (POLICY NOTE, 2013)). Power holidays were imposed in the state. A day in a week or a month without electricity supply was forced on consumers, depending the consumer type ((POLICY NOTE, 2013), (TNEB, 2015)). For example, high tension consumers such as industrial consumers were imposed with one day power holiday per week. Power holidays are still occurring as of year 2015, although it is mainly used for maintenance purposes of the power system. In area concerning reactive power management in the grid, Penalty were levied on High/ Low Tension services with power factor less than.90 (TANGEDCO, 2015). Reactive power is required to run the electrical devices, power factor is measured to determine the reactive power used by the electrical devices. It is the ratio between the real power and the 13

true power. An energy efficient electricity appliances has a power factor closer to 1. It means that electricity power that is supplied is applied fully towards real work. This kind of demand side management was implemented to reduce the electricity losses which exists due to usage of inefficient electricity devices. 3.2. Energy Efficiency Schemes The state government issued an order on performing energy conservation in all of the government buildings. The government also issued a ban of use of incandescent bulbs in all government buildings such as administrative buildings, hospital and institutions. Awareness on energy conservation were provided by the government through campaigns and workshops (ICLEI, 2014). The government also reduced the total consumption of electricity by replacing incandescent lamps with compact fluorescent lamps for 14.62 lakhs huts (ICLEI, 2014). 3.2.1. Energy Conservation Building Code This scheme was launched by MOP to promote energy efficiency in buildings. Performing energy efficiency in all buildings will reduce the overall electricity demand. Energy efficiency bureau of India have provided guidelines that has to be incorporated into the design and construction of the building. This is applicable only for buildings with a load of 100kW or over (BEE, 2015). 3.2.2. Energy Star Labelling This scheme was made mandatory by government of India. Assigning star labelling on equipment such as refrigerator, tube light and air conditioner were made compulsory. Labelling had to be done by the manufacturer. Labelling were made depending upon the efficiency of the equipment. Equipment which are highly efficient had higher star rating and equipment which were less efficient had lower star rating. Equipment with no rating were not allowed for sale (POLICY NOTE, 2014). Energy efficiency is crucial in saving unnecessary losses in electricity management. The government of Tamil Nadu took a positive step towards controlling a part of their electricity crisis by applying energy efficiency to their power system. Energy efficiency will also help in financial savings in the long term. 4. Energy Sources This part of the report summarizes the main source of energies that are used in Tamil Nadu and evaluates the big two source of power in the state- namely wind and fossil based power plants. This section will be analyzed to understand why the state had to restrict to demand management methods 4.1. Renewables Tamil Nadu is considered the leader of renewable energy in India. The state has a renewable energy capacity of 8075.38 MW (TEDA, 2014), which is 40% of the total installed capacity in the state. Renewable energy capacity has grown considerably in the state since the year 2005 till 2012, mainly due to the addition of wind energy (TEDA, 2015). The total capacity is dominated by wind energy, with 90% of the installed capacity is from wind energy. Refer to figure 3 to notice the dominance of wind energy to the total renewable energy capacity present in TN. The development is rather slow in the last few years. This is mainly related to the technical difficulties, the state is experiencing at the moment due to transmission constraints (TNEB, 2014). 14

31/07/2014(MW) 8000 7349.41 7000 6000 5000 4000 3000 2000 1000 0 wind power 659.4 bagasse cogeneration 226 109.26 bimass power solar PV Figure 3: Renewable Energy Capacity by 31-07-2014 Source: TEDA, 2015 installed capacity in MW 25000 20000 17601 19432 21603 22370 15000 10000 10263.53 11975.39 13117.26 14294.76 5000 0 2012 2013 2014 2015 capacity without renewables capacity with renewables Figure 4: Installed Capacity with/without Renewables Source: TEDA, 2015 Figure 4 shows the state s ratio of renewable and non-renewable capacity. Controlling and maximizing the use of renewable capacity is important to the SEB in meeting the electricity demand of the state. The SEB has not managed to do so. One of the main reasons for not being able to meet the electricity demand is because of the inability of the SEB to manage and utilize the existing renewable capacity. 15

4.1.1. Bagasse Cogeneration The second highest renewable capacity in TN comes from bagasse cogeneration with a total capacity of 659.4 MW (TEDA, 2015). The state is the 3 rd highest sugar producer in India (TANGEDCO, 2015). There are 43 sugar mills operating in the state of Tamil Nadu (TANGEDCO, 2015). The byproduct produced by these sugar mills are used to run the turbines of the cogeneration plants. Bagasse is a dry fiber produced by crushing the sugarcane. The crushing season depends on the harvesting of sugar cane begins in December and ends by June (TANGEDCO, 2015). The power that is provided by bagasse will be around the same time of the year. During the remaining time of the year, the cogeneration plants uses coal or lignite to run the boilers (TNEB, 2015). 4.1.2. Hydroelectricity Tamil Nadu has various small hydro power projects ranging in a total installed capacity of 2182 MW (CEA, 2015). Hydro generation depends on the amount of the water collected in the reservoirs. The rain received in the state depends on the North east monsoon. In Tamil Nadu, this season occurs during October to December (IMD, 2015). According to TNEB, the state has already exploited hydro generating capacity. No further exploitation is possible. The state although has potential for pumped storage (GOT, 2014). At the moment Tamil Nadu has pumped storage capacity of 500MW (TEDA, 2015). Pumped storage technique is an energy storage system. It is used to save excess energy available in the power system. It saves energy in form of water. Water is pumped from the low reservoir to the top reservoir using the excess energy available in the grid and the same water is used to produce energy during peak periods by letting the water down to the turbine to create hydroelectricity. In Tamil Nadu, pumped storage technique is used to observe the variability in wind generation. More capacity is expected to be added by TNEB. 4.1.3. Wind Energy Centre for wind energy technology is a department under the National institute of wind energy in India (NIWE, 2015). CWET is responsible for the research and development of wind energy in India (NIWE, 2015). The development of wind energy in the state has been phenomenal over the past 10 years, excluding the last couple of years. Tamil Nadu had a wind capacity of 857 MW in the year 2001, it has increased to 7251 MW by the year 2014 (CWET, 2014). The state of Tamil Nadu has a good wind resource, with a mean wind speed of 5.5 to 7.5 m/s at a 50 m mast in majority of the location (CWET, 2014). The state has the highest wind capacity compared to the other states in India. Out of 7251 MW, Only a mere 120 MW of wind power projects are owned by TNEB, the remaining capacity of power plants were developed and run by private power producers (CEA, 2015). CWET performs feasibility studies all over the state using different sized mases and prepares possible wind power project areas to TNEB. TNEB invites private power producers to invest and develop the project. 16

Figure 5: Wind Passes in TN Source: TANGEDCO Wind passes is a term used by TNEB to show the passing of high wind in the districts of Tamil Nadu. The highlighted part in the figure 5 shows the districts in Tamil Nadu which has wind farms. These locations are highly suitable in generating electricity from wind mainly due, the passage of the south west monsoon, areas nearer to the coastal region and the land terrain of these location (SPC, 2015). The south west monsoon travels from the direction of Africa and passes through Tamil Nadu from June till September (IMD, 2015). This is the peak wind season as the south west monsoon brings in the strong winds. The south west monsoon season brings in high speed wind for a period of 4 months, which is from June September (BNL, 2014). The peak demand during these 4 month period is expected to be met by wind energy every year. The electricity shortage is lesser during these 4 months. Please refer to Figure 6 & 7 to see the change in electricity supply in the months June, July, August and September 17

16000 2011-12, 2013-14 supply drop 14000 12000 10000 8000 6000 4000 2000 0 apr may jun jul aug sep oct nov dec jan feb mar Figure 6: Supply Drop in Electricity during the years 2011-2012, 2013-2014 Source: (CEA, 2012), (CEA, 2014) peak demand MW, 11-12 peak availability MW,11-12 deficit MW,11-12 peak demand MW,13-14 peak availability MW,13-14 deficit,13-14 MW The state has always favored wind energy by implementing policies for the development of wind energy due to the excellent conditions the state possess. Banking system was introduced in 1986 by TNEB to promote the development of wind energy. A charge of 5 % of the energy banked will be charged by the utility (TNERC, 2014). Tamil Nadu is the only state in India which offers banking of wind energy, which makes it extremely suitable for the wind power producers. Wind energy can be banked with the electricity utility by paying a banking charge. This option makes wind energy highly attractive for the private power producers, the energy that is generated and send to the grid, can be utilized by the wind producers for later when required. From my analysis, Renewable energy capacity is not considered in the state s yearly electricity planning stage, as it is an intermittent source of energy (CEA, 2012). It is more or less considered as a source which can be used if required. This does not do justice to the investors of renewable energy in the state, as this produces a sense of insecurity to the investors. Maximum utilization of renewable energy and forecasting the intermittent energy is crucial in attracting investors. Following such strategy will give an assurance for the renewable energy providers. This is not followed in the state. This is one of the reasons for the drop in the state s renewable energy capacity growth over the past couple of years, especially in the wind energy sector. The state which was once considered the wind hub of India, has started to face uncertainty in the last couple of years (from 2011-2014), where the capacity addition has dropped compared to the trend of the previous years. Please refer to Figure 8 to observe the change in wind addition pattern over the past 4 years. There are a few reasons for the drop in wind energy development in the state. 18

Firstly, wind is an intermittent source of energy, Forecasting of wind generation is crucial for maximum utilization of wind energy in a distributed grid management. This was not followed by TNEB. The SEB instead uses the pumped storage plant that is present in the state to observe the wind energy as it is produced or it reduces generation of thermal power plants (TNEB, 2014). Failing to implement forecasting techniques will result in low utilization of wind energy in the grid. The wind turbine that were implemented before the year 2006 does not possess SCADA (IWPA, 2015). There are about 134 Wind Turbine that do not possess such system (IWPA, 2015). Forecasting techniques should have been adopted by the state in earlier stages of wind energy development but now with a wind energy capacity of almost 7500 MW, it is almost impossible to integrate all the wind power into the grid without forecasting. Over the past few years (2013-2014), the private wind power producers have faced financial losses due to low utilization of wind by TNEB (TNERC, 2014). Concerns were raised by the wind producers to the regulatory commission (TNERC) over the issue. This has now led, TNEB to work on a forecasting strategy with the help of National Institute of Wind energy. Secondly, the state s electricity transmission utility does not have enough transmission capacity to evacuate the whole of wind energy generated during the high wind periods (CEA, 2014). During these high wind periods, the transmission lines get congested due to low transmission capacity present around the Wind turbine regions. When transmission lines are congested, it leads to voltage instability and that leads to power quality issues, thus resulting in instability of the grid. For example, during south west monsoon, wind turbines receive the peak wind and the electricity demand in the agricultural sector becomes insignificant due to high rainfall received naturally, no need for irrigation. Due to this, over the last couple of years, TNEB could not use all of the wind energy that was generated by the wind turbines, only an approximate of 3000MW was made available. This can be observed from the daily reports shown by the state load dispatch center website (SRDC, 2015). From the year 2012, TNEB had to ask the wind generators to curtail the wind turbines, resulting in financial losses for the wind power producers due to constrain in the grid (TANGEDCO, 2013). Furthermore certain wind generators that were connected to the grid did not have low voltage ride through capability and this was compromising grid stability (SRPC, 2015). During the voltage dip, generating units produces active power to be in proportionated to reactive voltage. It is a technical requirement that is necessary to maintain grid stability. TNEB needs to stringent in following such regulations. In order to maintain grid stability, generation capacity has to match the transmission capacity, TNEB has failed to achieve this criteria. Implementing more substations and increasing the transmission capacity around the wind generation region will provide relief. 19

Figure 7: Typical Wind Generation Pattern Source: Load dispatch center-2013 Finally, there is an uncertainty regarding the banking system. According to TNEB, wind energy is a cheap source of electricity in the state and because it is a renewable source of energy, TNEB is required to absorb all the wind energy available from the wind generators (TNERC, 2014). During windy season (South West Monsoon- four month period) all energy that are in excess are banked by the utility. During low wind season, when the demand is more and subsequently the cost of electricity is high, and the captive users can consume the banked energy from the utility at a cheap cost (TNERC, 2014). TNEB has to buy electricity from higher source (Due to the increased demand of electricity during less windy period) in order to supply back the banked energy. TNEB has recommended to TNERC for the removal of the banking system (TNERC, 2014). No decision has been taken by the regulatory committee yet and the banking system will be made available till 2016. Due to these reasons, investors in wind energy are uncertain over investing in new wind power projects. 20

upto 1999 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Total Wind Capacity MW 8000 7000 6000 5000 4000 3000 2000 1000 0 Figure 8: Wind Capacity Addition Format Source: TANGEDCO 4.1.4. Solar Energy Tamil Nadu has one of the best solar resources in India with almost 300 days of clear sunny days (TANGEDO, 2015). The area of Tamil Nadu is 130,058 Km 2, the radiation does differ from one location to another depending on the orientation. Solar radiation reading taken by Ministry of new and renewable energy in Chennai, shows an average annual solar radiation intensity of 5.36 kw/m 2. The average monthly solar radiation is shown in figure 13. The state has an annual average daily solar radiation of 4.5 to 6 kwh/m 2 (NREL, 2011). 7 6 5 4 3 2 1 solar radiation in kwh/m 2 0 jan feb mar apr may jun jul aug sep oct nov dec Figure 9: Solar Radiation in Chennai- Kwh/m 2 Source: MNRE, 2015 21

The state s solar PV capacity is a mere 109.26 MW (TEDA, 2015). The Government of India implemented Jawaharlal Nehru Solar Mission to promote solar energy by providing subsides in order to bring down solar power cost to grid parity (to bring down the cost similar to the levelized cost of electricity generated by fossil fuels (MNRE, 2015). The state government implemented solar policy 2012 to encourage investor to invests in solar power (GOT, 2014). To generate a minimum of 3000MW of solar power by year 2015. Solar purchase obligation was introduced as a part of the policy. 6% SPO mandatory for all High tension consumers such as the industries, schools, government buildings and to Information Technology towers. Eventually, Tamil Nadu electricity consumer association appealed against the solar power obligation to the appellate tribunal as they found it not to be fair on High tension consumers as it increases the total cost of electricity for the industrial consumers (ATE, 2013). The result came out in favor of TECA and 6 % SPO was cancelled and is reduced to a mere SPO of.25 % (TNERC, 2014). To encourage solar rooftops for domestic consumers, the government provided a Generation Based Incentive, where the domestic users with solar rooftop were provided with 2 rupees for every unit of electricity generated by the solar PV for the first two years and 1 rupees/unit the following 2 years and 0.5 rupees/unit for the remaining 2 year period (GOT, 2012). There are other incentives initiated by the state government which helps in developing solar power in the state. The government of Tamil Nadu has implemented mandatory rules supporting solar power, Such as all the new government buildings will have solar roof tops installed, the state government issued changes to the building rules, which states that all the new buildings such as hotels, houses, marriage halls and power projects having hot water/steam boilers which uses fossil fuels should have mandatory installation of solar hot water system (ICLEI, 2013). The state government plans to energize the street lights with solar power. A target is set by the government to energize 10,000,000 street lights with solar power by 2016. The government of Tamil Nadu, under the chief minister solar powered green house scheme, provided 3,000,000 homes to the poor with installation of 1 kw solar Photovoltaics system in each of these houses. The policy has failed to create any capacity addition in the state for the past 3 years (2012-2015), mainly due to not being able to attract the investors to create solar projects. In terms of residential roof tops, the feed in tariff provided is low and that is a result to why there is more or less no investment from the domestic consumers in roof top PVs. 4.2. Conventional Source India is majorly dependent on electricity from conventional source, same is the case with Tamil Nadu. As of the year 2015, 11126.06 MW of installed capacity is from conventional sources (CEA, 2015). Tamil Nadu has a heavy dependence on coal based power plants. 43% of the total installed capacity is from coal based thermal power plants. Coal is a cheap source for producing electricity. The thermal power plant are run very efficient, they have Plant load factor between 75 % and 93% (CEA, 2011), except Ennore thermal power plant which runs at 20 % capacity factor as the plant has fulfilled its life time. This plant is only run as there is not enough installed capacity in the state to replace this plant. Major overhaul work on the plant is expected to start in 2015 (CERC, 2015). Constant supply of coal is crucial for these power plants. There is no coal reserve existent in Tamil Nadu. The state does have lignite reserve, which is a low quality coal; Lignite are although used for exports in 22

Tamil Nadu (NLC, 2015). All over India, 90 % of the production of coal is managed by a government owned company Coal India Limited (CIL, 2015). Coal required for the thermal power plants in Tamil Nadu are provided by the same company. Over the last couple of years, Coal India Limited were not able to sustain to the demand (Policy note, 2013). The main reason for this is due to the problem faced by the company from the ministry of environmental, forest and climate change. New coal mining projects are not being commissioned by the government due to regulations set by the ministry of environment (CIL, 2015). Hence CIL were not able to expand their production rate to meet the growing demand of coal in India. This shortage in coal did become an issue for the state of Tamil Nadu in the year 2012, where the thermal power plants in the state of Tamil Nadu were not able to operate due to shortage of coal (policy note, 2013). From the year 2013, TANGEDCO had to import coal in order to meet the demand of the thermal plants that are in the state. TANGEDCO has imported around 5 million tons in the year 2014-2015 (TNERC, 2014). Cost of imported coal are higher than domestic coal, this will result in increase in fuel cost and hence increasing the total cost of producing energy. The cost of domestic coal is 1088 Rupees per Ton (Green peace, 2014) and imported coal ranges from 50$ to 70 $ per Ton (CTI, 2015). The state has gas based power plant capacity of 1026 MW (CEA, 2015). The state has not invested in gas based power plants for 4 years (2010-2014). This is majorly related to two main points. Firstly, gas based power plants are more expensive than coal based power plants. TNEB would rather invest in coal based power projects to reduce the cost of electricity. Secondly, transportation of gas is a concern in the state, the state does not possess gas pipeline infrastructure. There are gas bottling plants in Tamil Nadu, which supply the gas required for the gas based plants. The Gas plants use fuel such as naphtha and low grade petroleum gas (TNERC, 2012). Investing in gas pipeline infrastructure will encourage private investments on gas power projects. Increasing the gas power capacity will help the state in managing it renewable capacity. Mainly because of the quick start up time involving gas power plants. 5. Performance of the Utility This part of the report will analyze the performance of the utility over the past 7 years (2007-2014), in order to understand the real reasons behind the electricity crisis faced by the state. It will also be able to interrupt the reasons for the state s poor financial health. 5.1. Reasons for the Bad Performance of the Utility 5.1.1. Execution of Plans For a stable electricity supply, it is important to predict the electricity requirement for the future years and it is necessary to put in plans which would help in meeting the requirement. Planning the required generation capacity, commissioning the power plants and executing these plans in a set time frame is crucial. The state of Tamil Nadu has failed to meet these requirements. Power projects were put in place by the government for the years 2010-2014 that would help in meeting the electricity demands. These projects were not finished in the set time line, please refer to table 4. The commissioning of the projects were delayed due to environmental concerns of the conventional power plants, slow progress of civil works in procuring the required equipment, poor financial health of TNEB causing delayed movement of 23

funds and the transmission constraints that is experienced by the state, as bringing in new power plants to the grid, will increase the congestion of power in the existing transmission lines (ICRA, 2014). Table 4: Schedule of Power Projects in TN Project capacity schedule date actual /anticipated date delayed months Kundankulum atomic 1000 Dec-07 Aug-14 80 Kudankulum atomic -2 1000 Dec-08 Dec-15 84 Neyveli Thermal power station -2 250 Jun-09 Feb-14 15 Vallur Thermal power plant-1 500 Jan-11 Feb-13 26 North Chennai extension 600 Apr-11 Sep-14 41 Mettur thermal power station 600 Jul-11 Oct-12 15 Vallur Thermal power plant-2 500 Aug-11 Feb-13 18 North Chennai extension- unit 2 600 Nov-11 Mar-13 16 Tuticorin JV-1 500 Mar-12 Oct-14 31 Tuticorin Thermal power plant 660 May-12 Jan-16 45 Tuticorin JV-2 500 Aug-12 Feb-15 30 Vallur thermal Power plant-3 500 Dec-12 Feb-14 15 Source: (CEA, 2008), (CEA, 2009), (CEA, 2012), (CEA, 2013), (CEA, 2014) For example, Kudankulum atomic power plant was delayed due to fundamental errors. Firstly, the first two nuclear reactor were set up without getting the local people s approval. Secondly, there are about one million people living within 30 km radius of the plant. In case of emergency, it is impossible to evacuate this amount of people within the limited time. Finally, the low grade waste is to be dumped on the sea, which will create impact on the marine life of that location. This causes a concern not only for the marine life but also for the people because it affect the food security. This plant is capable of emitting radioactive materials such as strontium, cesium and tellurium into the environment. In the year 2004, during Tsunami, the site was flooded. (J.P.KUMAR, 2012). The project faced troubles numerous times, resulting to delays in commissioning of the plant. These are fundamental errors caused due to poor planning and poor site evaluation. In the year 2001, an investment of 3.5 billion US dollars were made on this plant. The project was only commissioned due to the constant persistence of the central government. When compared to the years 2005-2010, the state has followed the same pattern. According to the report submitted by the comptroller and auditor general of India on the performance of the state s electricity utility (CAG, 2010), the state had planned a capacity addition of 3977 MW but managed only 290 MW of capacity addition during those years. This was again due to improper project management resulting in projects being delayed. Due to this, the state incurred an overrun cost of 392.37 crores (INR). In India, Planned Transmission projects are delayed most of the time due to acquiring of land. Implementing transmission lines requires getting Right of Way clearance from the land owners across the length of the transmission line. It is a time consuming process due to the magnitude of the population present in India. According to the estimation of CEA, more than 120 Transmission projects in 24

India have been delayed due to the inability of the developer of the project to acquire the permission of from the land owner. Delays are also faced in obtaining clearances from stake holders such as environmental department, telecommunication committee and power committee. 5.1.2. Power Purchase The state did not possess enough installed capacity to meet the state s electricity demand. Delays in commissioning new projects caused more stress to the utility. TNEB had to settle for procurement of power in order to meet the demand of the state. The cost of purchasing power over short term is expensive. In the year 2009-2010, 14500 GWh of electricity was purchased from the open market by TANGEDCO (TNERC, 2012). The cost of electricity paid by TANGEDCO was Rs.15/unit (TNERC, 2015). While even the highest tariff paying sector, the industrial sector only pays Rs 5.50/unit of electricity supplied by TANGEDCO. The difference in cost will be added to the losses of TNEB. TNEB due to desperation had agreed to buy from private power producers at high cost per unit. As of 2015, TNEB is in contract with two private power producers (Madurai power and Samalpatti power), where they are paying Rs.12.32/unit and Rs.13.57/unit respectively (TNERC, 2012). Continuing to purchase power from expensive sources will increase the losses to TNEB. 5.1.3. Tariff and Subsidies According to the National Tariff policy of India, the objective of a tariff is to reflect the cost of supply of electricity. To achieve this objective, the state s electricity utility has to provide an updated tariff, every year to the state regulatory body, which will reflect the cost of supply of electricity. The state s regulating commission will notify the state government with a tariff structure that are within plus or minus 20% of the average cost of supply (Tariff policy, 2005). The government provides cross subsidies to certain consumer groups depending upon the tariff rates. It is essential that tariff is adjusted every year and the adjusted tariff information is to be provided to the government, as it enables the government to plan the budget accordingly (Tariff policy, 2005). In Tamil Nadu, the tariff structure is different for every consumer group. The highest tariff rate are normally set for commercial consumers. The tariff rates are changed depending up on the consumption rate for the consumers in Tamil Nadu, except for industrial consumers, where the tariff is set. The tariff rate in Tamil Nadu for domestic users defer according to the level of use. For example: Domestic consumers are divided into three categories, consumers who consume less than 200 units per 2 month are charged Rs 3.5 per unit, domestic consumers who consume less than 500 units per two months are charged Rs 4.6 per unit and domestic consumers who consume more than 500 units per 2 months are charged Rs 6.6 per unit. Government provides subsidies for domestic consumers depending on their consumption rate. Consumers who consume less than 100 units per 2 months are provided with a subsidy of Rs 1.5 per Unit. Consumers who consume less than 200 units per 2 months are provided with a subsidy of Rs 1 per unit and consumers who consume 200 to 500 units per 2 months are provided with Rs.50 per unit (TNEB, 2014). This helps the people of Tamil Nadu, as the poverty line in Tamil Nadu is about 15-20 percent, there are people with low, middle and high income. This type of tariff is set as to be favorable to the people of Tamil Nadu. 25

Table 5: Current Tariff set by TNERC Type Units Cost Domestic Consumers Below 200 units/2months Rs 3.5/unit Between 201 to 500 units/2months Rs 4.6/unit Above 500 units Rs 6.6/unit Fixed Charges Rs 50/month Industrial Consumers low Tension Rs 6.35/unit Fixed Charges Rs 70/kw High Tension Rs 6.35/unit Fixed Charges Rs 350/kVA/month Commercial Consumers low Tension Up to 100 units Rs 5/unit Above 100 units Rs 8.05/unit Fixed Charges Rs 140/kW High Tension Rs 8/unit Fixed Charges Rs 350/kVA/month Private Schools & Colleges low Tension Rs 7.50/unit Fixed Charges Rs 120/kW High Tension Rs 6.35/unit Fixed Charges Rs 350/kVA/month Government Buildings & Government-Aided Schools low Tension Rs 5.75/unit Fixed Charges Rs 120/kW High Tension Rs 6.35/unit Fixed Charges Rs 350/KVA/month Temples Rs 5.75/unit Fixed Charges Rs 120/KW Temporary Connection low Tension Rs 12/unit Fixed Charges Rs 345/KW/month High Tension Rs 11/unit Fixed Charges Rs 350/kVA/month Source: TNERC, 2015 According to my analysis, the state s part of the financial suffering is due to two reasons related to the tariff. The tariff rates were unchanged for a prolonged period and the tariff for agriculture sector is set low. 26

TNEB has to apply for a tariff revision every year with TNERC (APE, 2014) but TNEB has failed to follow such regulation. For the industrial consumers, the tariff rate was set at 5.50 Rs/unit for 10 years straight. The tariff rate for the industrial consumers hasn t changed from 2003 till 2013 (TNERC, 2013, AF mercados, 2014), while the cost of delivering electricity has been increasing every year. In the year 2015, the tariff rates have been finally changed to 6.35 Rs/unit. Neither the state government nor the electricity utility have managed to revise the industrial tariff for a period of almost 10 years. The tariff was later revised in the year 2014 by TNERC on suo motu basis to reduce the gap between the average cost of supply of electricity and the average rate of realization. There are a few concerns in agricultural sectors. Initially, the tariff is fully subsidized by the state government. The tariff rate for the agricultural consumers have always been set really low. The tariff was just.4 Rs/Kwh till the year 2012 (Power & Energy, 2014). The tariff rate is set very low. The minimum cost of producing electricity in the state is around 2 Rs/kWh. TNEB was making losses by setting the tariff low. Tamil Nadu is the only state that has fully subsidized the tariff for the agricultural sector. This is mainly because, Agriculture is an age old tradition in the state of Tamil Nadu. Agriculture creates positive externalities and hence the state government has fully subsidized the sector. The revenue from agriculture sector is very low. Around 12000 GWh of electricity is used for agricultural sector (Power & Energy, 2014). It adds up to an almost 20% of the total electricity consumption of the state. 5.1.4. Unmetered Supply of Electricity The agricultural sector is unmetered and electricity supplied to huts are unmetered and that is of high concern. The consumption of electricity is predicted every month by qualified personals. TNEB sends out these personals to every location with agricultural activity or to the areas with huts and calculate the rate of consumption (AF Mercados, 2014). For example: in case of irrigation purposes, the energy consumption rate of the motor is multiplied with the hour of use for a day, if it is a 600watt motor and it is run for 6 hours a day, then the consumption rate for a day is 600*6 = 3.6 kwh. In terms of irrigation, days of rainfall are taken into consideration, and electricity consumption for these days will be considered as zero, because there is no requirement for irrigation of water using electric motors during rainy days. Following such method will result in insignificant errors in the calculation, as it involves many assumptions. This is a major concern due to two main reasons. First the subsidy received by agriculture sector from the state government will depend on these consumption numbers provided by TNEB. Financial losses are incurred. Secondly, electricity is lost due to inaccurate calculation methods, adding more financial loss. There is also another concern caused due to unmetered supply, which is theft of electricity. Theft of electricity occurs because of the fact that there exists no metering device to notice the electricity consumption rate in the sector. All the electricity that is lost due to theft and due to the assumptions because of not having a metering device, will be added to the total Annual Technical and Commercial losses (AF Mercados, 2014). These inefficient methods adopted by TNEB are resulting in increased yearly financial losses. 27

Table 6: Summary of Key Financial Parameters Key Parameters AT&C losses tariff hikes ACS-ARR Gap, Rs./kWh 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 17% 16% 16% 14% 19% 19% 20% NA NA 0% 0% 0% 0% 0% 9% 9% 34% 40% 0.49 0.44 0.81 1.55 1.77 2 2.47 NA NA SOURCE: AF Mercados, 2014 Table 7: Revenue/Expense of TNEB for the Years (2010-2014) Particulars 2013-14 2012-2013 2011-2012 2010-2011 units sold(gwh) 70976 61662 61387 24159 Income (Rs in Lakhs) Revenue from sale of power 2953639 2668882 2055559 832133 subsidies 498509 445723 207141 68857 other income 39128 32154 27138 15077 total income 3491276 3146759 2289838 916067 Expenditure Purchase of Power 3052930 2574083 2103451 916906 Generation of power 761387 661461 611007 234448 Repairs & Maintenance cost 53209 37966 31033 12032 Employee costs 462217 390351 398002 154120 Administration cost 26411 23742 21143 8857 Depreciation & other related 73107 65270 62006 24672 debits Interest & finance charges 793378 550039 425227 165646 Total 5222639 4302912 3651869 1516681 Capitalized expenses Interest & finance charges 115400 103798 66419 28243 capitalized Other expenses capitalized 223573 55823 25134 9162 Total expenses capitalized 338973 159621 91553 37405 total expenditure 4883666 4143291 3560316 1479276 other debits 2194 1155 3752 138 extra ordinary items 45 105 222 7 2239 1260 3974 145 Total 4885905 4144551 3564290 1479421 28

profit after tax -1394629-997792 -1274452-563354 Net prior period 3872 170115 57681 0 charges/credit Deficit -1398501-1167907 -1332133-563354 Source: TNEB, 2015 5.1.5. Conclusion The performance of the state s electricity utility has been poor. The system thinking chosen by TNEB to provide electricity has failed and has resulted in huge financial losses for them (refer to figure 10). The policies set by the government are not executed as planned. Figure 10: Flowchart- System Thinking by TNEB Firstly, commissioning of the power projects should be finished as planned. Failure to do so will cause the electricity utility to purchase power from an expensive source. It will also result in incurring losses due to the change of schedule in commissioning the plant- such as extra cash spent on labor for the extra days. Furthermore, transmission constraints has caused considerable losses to TNEB, mainly due to not being able to utilize the generating capacity that is present in the state. Finally, forecasting wind in a distributed grid is a necessity. Implementing forecasting strategies will increase the electricity utilization from the wind turbines. Thus increasing use of cheap and clean source of energy. In context of tariff reforms, TNEB has failed to update the tariff yearly for a period of 10 years, while the cost of producing electricity has been on a rise. This had resulted in reduction in the revenue of TNEB every year. TNERC is now implementing more strict measure on the SEB to present new tariff yearly. 29

To conclude, metering of agricultural sector as well as the huts are essential. Ensuring 100% metering in all sector will reduce the electricity losses faced by the state. TNEB has failed to achieve all the above and has chosen to procure power from a private source at a higher cost to neutralize the low working efficiency of the SEB. 6. Policies Set For Betterment of the Future Energy Market in Tamil Nadu This part of the report will analyze the policy (Vision 2023) set by the Government of Tamil Nadu and summarize the policy set by the Central Government. 6.1. RAPDRP - Restructured Accelerated Power Development and Reforms Program This is a scheme implemented by the central electricity authority of India. The overall objective of this scheme was to provide reliable power to the consumers and reduce the Aggregate Technical and commercial losses within 15% throughout India and this includes the state of Tamil Nadu (APDRP, 2015). The objectives of this scheme included Developing information technology services for energy auditing, supervisory control and data acquisition and distribution management system for the state of Tamil Nadu in cities or towns with population of 4, 00,000. Improving the distribution efficiency, which included building new transformers, erection of new feeders to reduce line losses and increasing the capacity of Low tension transformers. 6.2. Vision 2023 In the year 2012, The Government of Tamil Nadu introduced a strategic plan for development of the state. Development of the electricity network was an important part of the plan, as electricity is a requirement for development. VISION 2023 is the plan that was introduced by the government to achieve a set outcomes before the year 2023. The government has noticed the electricity issue faced by the state. Issues such as shortage in installed capacity and transmission constraints for interstate transfer of electricity and also the constraints of evacuating wind power into the grid. The government plans on implementing new projects to meet the electricity demand in the state, reducing the transmission constraints by introducing higher capacity transmission cables and expanding the transmission network and introduction of smart grid, which will help in managing the renewables into the grid. 30

100000 90000 80000 70000 60000 50000 40000 30000 20000 10000 0 coal based planned capacity addition gas based hydro solar PV & CSP wind cost(rs.crores) 90573 4000 10112 50000 62500 10000 capacity(mw) 14220 1000 2750 2000 10200 2000 any cost(rs.crores) capacity(mw) Figure 11: Planned Capacity Addition Source: Government of Tamil Nadu, 2014 capacity(mw) any 6% wind 32% coal based 44% solar PV & CSP 6% hydro gas based 9% 3% coal based gas based hydro solar PV & CSP wind any Figure 12: Planned Capacity Share Source: Government of Tamil Nadu, 2014 According to my analysis, there are a few good outcomes to this plan, which are, increased installed capacity to meet the demand, improving the transmission network, implementing the smart grid, creating gas pipeline infrastructure and introducing off shore wind projects. 6.2.1. Shortcomings There are already shortcomings with this plan. Firstly, the execution of plans from VISION 2023 is following a similar pattern like the government s earlier plans. For example, government introduced a 31

solar policy as a part of the VISION. According to the policy, solar capacity of 3000MW was to be installed in the state by the year 2015. This policy fell through in the initiation stages and it meant the state fell back on its plan of meeting the demand by 3000 MW (APE, 2013). Secondly, in relation to planned capacity addition ( Refer figure 12 and 13), the government is following the same pattern, which is, in terms of fossil fuel based electricity generation, majority of the projects planned are coal based thermal plants, while there is only one gas based plant planned. The cost of coal is increasing as the state has to resort to imported coal. Imported coal is 3 times more expensive than the domestic coal. This will create more financial stress for the state, which is already in shambles. Coal linkage for these new power plants are still not confirmed. Implementation strategy for a few of these projects are not certain, leaving space for uncertainty regarding commissioning time frame of the power plants. In terms of renewable energy, more wind energy addition is planned and less planning on solar (Refer to figure 12 and 13). Plans are made on implementing more wind capacity in the state, yet there is no mention of implementing forecasting techniques. Managing the renewables in the grid will continue to be an issue, with renewables being an intermittent source of energy, it requires sources which can support it. For example: In Tamil Nadu, wind capacity is around 7000MW and the wind is more constant during May to October. There is no subsequent plan to meet the demand of electricity using another source during these less wind period. 7. Requirements The state had planned to increase capacity addition. This capacity addition is majority dominated by coal based power plants (44%) and wind power projects (32%). While the state has stuck to same generation mix like earlier, it would be wise to implement a strategy which will complement with the state s existing plans. There are five main requirement for an energy source that can complement the already available energy capacity. They are:- A source that can provide short term and long term fix A source that can complement the wind energy generation in the state A source which will cause less strain to the weak transmission network A source that will provide cheap and clean source of energy A source which will enhance energy security in the state 8. Sustainability Option to Improve the Electricity Supply in TN 8.1. Switch focus to roof top residential solar generation The solar policy submitted by the Government has not been successful. The policy has failed to generate investments from private investors and it has failed to generate the investment from the domestic consumers. When a new policy is introduced, it is the responsibility of the government to generate significant push and pull for the policy. This can be achieved by creating good marketing strategy. In Tamil Nadu, policy should be implemented to make it attractive and economically viable for the targeted consumers. Achieving it will deliver substantial development of solar Power in the state and it will help in delivering stability to the grid. 32

Tamil Nadu has the perfect conditions to generate solar power. Table 8 shows the solar isolation present in each of the districts in Tamil Nadu. All the districts possess an average yearly radiation of 5 kwh/m2/day. Yet the technology is not widely used in the state. This is majorly due to the low awareness of the technology among people in Tamil Nadu and the low feed in tariff rates set by the government. The government introduced subsidies for the installation of Roof top solar PV system in the year 2012. Yet majority of the population are not aware about the financial viability of the solar PV systems. People in Tamil Nadu are not aware of the long term betterment of Investing in solar PV system. Ministry of New and Renewable Energy of India provides a subsidy for the domestic consumers for the installation of roof top solar PV system. MNRE covers 30% capital cost of the solar PV systems (MNRE, 2015). Simultaneously, The Government of Tamil Nadu provides an extra subsidy of Rs.20000 per kwh for first 10000 domestic consumers in the first phase of implementation of residential PV systems (Solar policy, 2012). The subsidized capital cost of solar PV can still be expensive for a certain income group. More support should be provided for development of solar rooftop systems in order to make it viable for all income groups. In Tamil Nadu, Banks provide low interest loans for consumer products such as car. Increased use of car will increase congestion on roads; it will result in increased pollution in the environment; it will also results in more accidents occurring on the roads due to congestion. This action creates negative externality. Investing in solar power system creates positive externality because solar PVs produces clean energy and it can simultaneously reduce the use of energy from fossil fuel. The state government should implement better marketing strategy to increase the popularity of residential solar rooftops use in the state. The state government should implement a structure which will make solar power systems more viable for the general population of Tamil Nadu. This can be achieved by passing a law which will entitle the financial institutes such as banks to provide low interest loans for purchasing solar power systems. The capital cost of 1kW system with inverter, that is manufactured in India will cost an approximate Rs.64000 after the subsidies. This cost is still considered high for the average income group. Income per capita in Tamil Nadu is only Rs.98550. It is more than half of the yearly earning. Lending measures should be introduced. Introducing a low debt to equity ratio will increase the popularity of PV investment in state by the locals. Introducing attractive financial assistance for implementing residential solar systems will increase the use of PVs in Tamil Nadu. 33

Figure 13: Average Annual Solar Intensity Received by TN Source: NREL Table 8: Possible Impact with Roof top PV Cost of PV with inverter 120000 Rs./kW Subsidy by MNRE (30%) 36000 Rs. Subsidy by GOV.TN 20000 Rs. Total cost of PV after being subsidized 64000 Rs./kW Debt: Equity 20-80 Ratio No of Domestic Consumers 17100000 Inverter Efficiency 0.9 % PV Output 3.375 kwh Output with 100% Roof top use 17313.75 GWh Output with 75% Roof top use 12119.625 GWh Output with 50% Roof top use 8656.875 GWh Output with 25% Roof top use 4328.4375 GWh Output with 10% Roof top use 1731.375 GWh 34