Monthly Power News Commentary: July – August 2018
India
The Revised Framework for Resolution of Stressed Assets issued by the RBI has forced the electricity sector towards NPAs and the new guidelines will only deepen the sector’s crisis, a Parliamentary panel has noted. India has around 175,000 MW of operational coal-based power generation capacity. Of this, around 60,000 MW capacity is under financial stress. Lenders have exposure to around ₹ 3 trillion of these stressed assets. With a view to clean-up the books of the banks, RBI had issued the revised framework which substituted the then existing guidelines with a simplified generic framework for resolution of stressed assets.
The government is likely to recommend that bankruptcy proceedings for stressed power plants should kick in after 360 days of default, giving relief to banks and companies that are struggling to meet the 180-day deadline set by the RBI in its controversial 12 February circular. The recommendation is expected to be presented to the Allahabad High Court which is hearing petitions against the circular and had asked the government to present its views after consulting all stakeholders. Separate recommendations are likely to be made for power projects depending on their operational status and resolution plans drawn by the lenders. Stressed operational projects and those under execution may be recommended for an extra 180 days over and above the 180-day deadline expiring 27 August. Special dispensation has been sought for projects resolved through CIL supplies (Shakti scheme) and those already in NCLT. A high-level committee to address cross-sectoral issues including delayed payment of private power companies is also being mulled. The power ministry and private power firms have demanded that stressed power projects should not be categorised as stressed in 90 days of default, while the deadline of 180 days to resolve a bad loan, after which liquidation process is immediately triggered, be extended to 270 days.
India may be looking at a huge electricity surplus in most part of the country in the current financial year, according to the latest data released by the power ministry’s technical planning wing CEA. The country is likely to experience energy surplus of 4.6 percent and peak power surplus of 2.5 percent in the fiscal year through March 2019, the CEA has said. Three states are expected to witness peak time power surplus of more than 30 percent including Tripura at 30.6 percent surplus, Himachal Pradesh at 35.7 percent and Sikkim at 79.2 percent, apart from areas served by Damodar Valley Corp at 40.4 percent. However, five states are likely to have peak power deficit of more than 15 percent — Punjab with 19.6 percent power deficit, Bihar at 18.9 percent, Uttar Pradesh at 17.4 percent, Assam at 17.4 percent and Jammu and Kashmir at 15.1 percent. In 2017-18, CEA had projected an all-India peak power surplus of 11,471 MW or 6.8 percent but the country suffered from a peak power deficit of 2 percent. Experts said the Indian power system is becoming energy surplus but peak deficit due to increased share of renewables and reducing share of hydro and gas-based power generation. CEA said the assessment of the anticipated power supply position for 2018-19 has been made taking into consideration power availability from various stations in operation and renewable energy sources apart from fuel availability and anticipated water availability at hydro stations.
Average spot price of power increased 39 percent to ₹ 3.46/kWh in July over a year ago at IEX. The price however declined 7 percent sequentially compared to ₹ 3.73/kWh in June this year. It said ‘One Nation, One Price’ was realised for 21 days last month. The DAM experienced minor transmission congestion of 6 percent mainly in import of power towards northern region. According to the National Load Dispatch Centre statistics, the all India peak demand touched 168 GW on July 10, 2018, about 1 percent decline over the previous month. The electricity market at IEX TAM and DAM combined traded 4,148 mu last month vis–vis 5,053 mu in June, and 3,729 mu in July last year. Good monsoon rains dampened the power demand as well as prices in July this year vis–vis the preceding month. The DAM traded at 4,028 mu in July registering a decline of 19 percent over 4,965 mu in June, and 10 percent increase over 3,669 mu in July 2017, it said. On a daily average basis about 130 mu were traded during the month with average daily sell bids at 237 mu and average daily buy bids at 161 mu, it said.
The CEA has undertaken a study to ascertain the cheapest power mix in 2030. The outcome of the study will also act as components to the regulators in determining power tariffs. According to estimates by the power ministry, the share of renewable energy in India’s electricity mix is set to increase to around 55 percent by 2030. At present, renewables account for nearly 20 percent of the total installed capacity. India has committed to produce about 40 percent of its installed electricity capacity from non-fossil fuel sources by 2030. It has also set a target of adding 175 GW of renewable energy capacity by 2022. Meanwhile, the CEA is also closely working with stakeholders in building a cost-effective power evacuation infrastructure in Leh and Ladakh region of Jammu and Kashmir. It can be executed by a combination of underground cables and towers installed by airlifting, he said.
Bangladesh, which is importing around 700 MW of power from India, is looking to ramp up its electricity import from the country, the neighbouring nation said. The neighbouring country is aiming at importing 10,000 Mw from India. Power sector cooperation between the two countries is “not limited to transmission and supply only.” India is “supporting its neighbouring country to enhance the capacity building”, particularly, human resource development for power generation, transmission and distribution.
Bihar initiated power projects worth over ₹ 75 billion and it is anticipating that each household in the state would be electrified by the end of this year. Three power units in the state – Kanti, Navinagar and Barauni – have been handed over to the NTPC Ltd which was likely to “ensure better power generation and availability of electricity to consumers in Bihar at cheaper rates”. Subsidy to domestic consumers besides developing special “agriculture feeders” to cater to the electricity requirements of those involved in farming is expected to improve efficiency in the electricity sector.
The MERC has allowed Adani Power to recover additional expenses incurred by its subsidiary APML due to introduction of the GST. The company put the total impact of the GST to be ₹ 0.35/kWh which amounts to about over ₹ 4.025 billion till February 2018. APML had filed a petition with the MERC in April to adjust tariffs of electricity sold to the state from its 3,300 MW Tiroda power plant. The company sought the electricity regulator’s approval to offset financial consequences of GST and evacuation facility charge by CIL.
Power discoms in Delhi sold 615.5 mu of electricity to customers outside the state during April-June despite the AAP-led government’s allegation that the capital was staring at power crisis in peak summer season due to coal shortage at plants. According to official data, discoms in Delhi sold 296.228 mu of electricity in June 2018 against 233.578 mu in May, registering an increase of 26.8 percent. Among distribution companies, BYPL sold 144.14 units, BRPL sold 4.29 mu and TPDDL sold 106.381 mu in June. In May, BYPL sold the maximum 130.047 mu, BRPL sold 16.594 mu and TPDDL sold 64.071 mu to outside customers. BSES said that due to the nature of the power business in India, power demand is arranged keeping in mind the peak power demand. In June, the AAP government wrote to the Power Minister that Delhi was staring at a power blackout due to the fast depleting coal stockpiles at power plants in the city and urged for action with the Railways which transports coal to the national capital.
Faced with reduced supply of electricity by private sector companies under power purchase agreements, GUVNL has invited bids to procure 1,000 MW power on short-term basis through tariff based competitive bidding. The apex electricity utility intends to procure 1,000 MW, which includes 500 MW round the clock and 500 MW for twelve hours, for the months of September, October and November. For December, GUVNL has invited bids for 250 MW round clock power and 500 MW for twelve hours. Meanwhile, the power demand across the state increased to 13,500 MW. The demand had declined to 11,000 MW after heavy rains lashed the state.
Goa said that to improve the power situation in the state a 10-15% hike in the electricity tariff was needed. The electricity department is “seriously working” on improving the power equipment in the state. The department has issued various work orders to the tune of ₹ 4.1 billion, as also kept ₹ 1.13 billion for underground cabling, ₹ 7.55 billion to take up priority work and ₹ 750 million for automating the electric distribution network. Additionally, this year, the government has kept budgetary support of ₹ 3.17 billion for various subsidies, including power connections for households and agricultural farms. Work worth ₹ 4.11 billion is underway. The government will come out with a policy to regularise meter readers and line helpers.
Rest of the World
Iran said it had resumed supplies of electricity to Iraq and other neighbouring states 10 days earlier, after shortages in Iraqi cities sparked unrest in July. Tehran stopped supplying electricity to Iraq in July due to unpaid bills and because of a rise in Iranian consumption during the summer. The power shortage in Iraq sparked protests in Basra and other cities, as people blamed what they called an inept and corrupt Iraqi government. A number of protests have also broken out in Iran in recent months over regular power cuts and water shortages. Saudi Arabia offered to sell electricity to Baghdad at a discount, part of an effort by the kingdom to curb the influence of its rival Iran in Iraq.
Brazil’s Eletrobras (Centrais Eletricas Brasileiras) has delayed the auction of a power distributor based in the state of Amazonas to 26 September from 30 August, while keeping the original date for three other units, the power generation company said. Amazonas Distribuidora de Energia will be put on the block in September while Eletroacre, Ceron and Boa Vista Energia will be auctioned off in August, the company said. Eletrobras is seeking to offload heavily indebted distributors ahead of government plans to privatize the overall company.
A Bosnian regional government agreed to guarantee a €614 million ($700 million) loan from China’s Exim bank to help Bosnian utility EPBiH to add a new generating unit at its Tuzla coal-fired power plant. The amount covers 85 percent of the total value of a contract signed last November for the largest investment into Bosnia’s postwar energy infrastructure, the government of autonomous Bosniak-Croat Federation said. In 2014 EPBiH picked a consortium of China Gezhouba Group and Guandong Electric Power Design to add the 450 MW unit, but the project has been delayed by red tape and negotiations over financing. Under its guarantee terms, the government cited a 20-year loan repayment, including a five-year grace period, and a one-off payment by EPBiH of 47.6 million Bosnian marka ($27.7 million) into a regional guarantee fund. The guarantee deal is expected to receive the required approval from parliament if the issue is put to the lawmakers before Bosnia’s 7 October general election. The government said the new unit at the 715 MW Tuzla plant is necessary to replace its three outdated units, adding that the latest environment-friendly technologies will be used in its construction.
In Australia residential consumers are paying 18 percent lower since 2012 and 8 percent below their global counterparts. According to a survey done by Australian-based consulting firm IEC, Meralco’s tariffs have decreased to P 7.77 per kWh in January 2018 from January 2012’s price point of P 9.57 per kWh. The bad news is Australia is still the third highest electricity rates in Asia behind Japan and Singapore. Japan and Singapore were reported to be among the top Asian countries with the highest electricity rates, placing Meralco’s average tariff 24th highest out of 46 markets surveyed. The study identified markets such as Thailand, Indonesia, Malaysia, Korea and Taiwan as having the lowest electricity rates due to annual subsidies amounting to $ 800 billion from their respective governments. These subsidies are in the form of cash grants, subsidized fuel or deferred expenditure. To reduce energy costs for the consumer, IEC recommended a focus in adding retail competition on top of more power generation facilities.
The Asian Development Bank has approved more than $375 mn made up of a loan and grants to help Bangladesh provide electricity to all its citizens. The package will go towards a project to develop two power lines in support of the government’s national target of electricity for all by 2021. The government of Bangladesh has pledged to address infrastructure deficiencies, including modern and affordable energy services. About 35 million people in the country are without access to electricity. The government will contribute $174.5 mn towards the total cost of the project, estimated at $532 mn, which is due to be complete at the end of June 2023.
The German government said it took a minority stake in electricity transmission firm 50Hertz for “national security” reasons, thwarting Chinese investors from buying into the strategic company. Berlin has therefore tasked a public bank with purchasing a 20-percent stake put up for sale by Australian infrastructure fund IFM and which has been sought by China’s State Grid. The Chinese group had already tried to take a minority stake in 50 Hz. But their first attempt was blocked as 50 Hz’s majority shareholder — Belgian power transmission system operator Elia — snapped up the stake and expanded its holdings to 80 percent.
State-sponsored Russian hackers appear far more interested this year in demonstrating that they can disrupt the American electric utility grid than the midterm elections, according to US intelligence officials and technology company executives. By comparison, according to intelligence officials and executives of the companies that oversee the world’s computer networks, there is surprisingly far more effort directed at implanting malware in the electrical grid. The Department of Homeland Security reported that over the last year, Russia’s military intelligence agency had infiltrated the control rooms of power plants across the US. In theory, that could enable it to take control of parts of the grid by remote control.
RBI: Reserve Bank of India, NPAs: non-performing assets, MW: megawatt, CIL: Coal India Ltd, CEA: Central Electricity Authority, kWh: kilowatt hour, IEX: Indian Energy Exchange, DAM : day-ahead market, GW: gigawatt, TAM: term ahead-market, mu: million units, MERC: Maharashtra Electricity Regulatory Commission, APML: Adani Power Maharashtra Ltd, GST: Goods and Services Tax, discoms: distribution companies, AAP: Aam Aadmi Party, BRPL: BSES Rajdhani Power Ltd, BYPL: BSES Yamuna Power Ltd, TPDDL: Tata Power Delhi Distribution Ltd, GUVNL: Gujarat Urja Vikas Nigam Ltd, IEC: International Energy Consultants, Hz: Hertz, US: United States
Courtesy: Energy News Monitor | Volume XV; Issue 12
India Energy Analysis 