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Home News Power Sector News New Power Sector Policies - From Crisis to Disaster - Page 7

New Power Sector Policies - From Crisis to Disaster - Page 7

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* Short-term supply responses are constrained because of the difficulty of storing electricity

* Significant additions to supply still require substantial lead times

* The coordination of an integrated, real-time net work has broken down because competition reduces the incentive for market participants to cooperate and makes it difficult for system operators to manage the electricity grid.

* Provision of reserve margins is uncertain in a competitive market, since no one has an interest in building excess capacity, suggesting that these markets may remain tight".

What lessons can we in India learn from California's example? The first and the m6st important one is that there can be no free market in electricity when there are shortages. Instead, we need to strengthen the grid, integrate the power systems better and make the best use of our installed capacities. With this objective, we outline below an alternate set of policies for the power sector in the country.

The Problems of the Sector: An Alternate Perspective

It is true that SEBs have problems that require urgent attention. However, mindless privatisation, as is being advocated today, will lead to a sharp rise in electricity prices without reducing the losses of the state government. S.N.Roy, former Chairman, CEA, has already warned of large-scale political instability due to continuing steep rise of the electricity rates in the country. It is time that we looked at the power sector reforms afresh without the indeological blinkers that privatisation is the sole solution to the problems of the sector.

The problem of the power sector stems from an inability to recover enough revenue from the sale of electricity, leading to a financial crisis in the sector. Though there are shortages in the sector, they are neither as high as predicated nor are they are of an order that cannot be met by better utilisation of existing resources.

One of the problems of planning in the Power Sector has been inflating the demand for grid power. On one hand, captive generation for the industry has been encouraged, on the other the demand of the industry on the grid is predicted based on earlier growth rates. This has helped to create a false sense of panic and short term measures such as expensive IPP power and the liquid fuel route. One of the reasons for introducing Enron in Maharashtra was the alleged future shortages that were predicted which ae now shown to be fictitious.

For a realistic planning exercise, it is necessary to explode the myth of 1,00,000 MW additions to the installed capacity required in the next decade. Others also have noted this over-projection of demand by policy planners. The growth rate of electricity is not autonomous but depends on the cost of power, purchasing power of the people and economic growth. If we look at the steep rise in electivity rates, we will see that it has risen much faster than either the rate of inflation or the per capita increase in peoples' income, Further, the industrial growth has been low as also the growth of the economy. We will find that the annual rate of increase in power demand for the last decade has been of the order 4-5% and not 7-8 % as predicted by the 14th , 15th and now the 16th Electricity Power Surveys7. The 15th EPS8 estimated that the demand by the year 00-01 will be at 90,000 MW as against an actual demand of only 73,000 MW for 00-01 .A realisic assessment of demand will show that we need to increase our installed capacity by 25,000-30000 MW every five year.
realistic planning exercise, it is necessary to explode the myth of 1,00,000 MW additions to the installed capacity required in the next decade. Others also have noted this over-projection of demand by policy planners. The growth rate of electricity is not autonomous but depends on the cost of power, purchasing power of the people and economic growth. If we look at the steep rise in electivity rates, we will see that it has risen much faster than either the rate of inflation or the per capita increase in peoples' income, Further, the industrial growth has been low as also the growth of the economy. We will find that the annual rate of increase in power demand for the last decade has been of the order 4-5% and not 7-8 % as predicted by the 14th , 15th and now the 16th Electricity Power SurveysThe 15th EPS8 estimated that the demand by the year 00-01 will be at 90,000 MW as against an actual demand of only 73,000 MW for 00-01 .A realisic assessment of demand will show that we need to increase our installed capacity by 25,000-30000 MW every five year.

 



 

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