Is Smart Grid Helping the Indian Energy Utilities and End-Consumers?

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Smart grid enables the energy utilities to effectively procure power by involving the end consumers in the supply-demand cycle. By making the consumers responsive, utilities can reduce procurements during the peak price periods. The reduced consumption by the end consumers is compensated appropriately by the utilities in the form of financial incentives to reduce their actual electricity bill.


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Usually the power procurement of the energy utility (termed as DISCOMs) is carried out through long term contracts, medium and short term contracts, self generation, and the rest is met through power exchange. The inexplicable load behavior in the day of operation sometimes override the risk hedging attributes of the long term and short term contracts held by the utilities. Owing to which they are left at the mercy of the power exchange offering exorbitant imbalance energy prices. DISCOMs in India face sky-high exchange prices (approx. 15INR/kWh) during summer peaks, elections and festival occasions. The flat rate tariffs (on an avg. 6.2INR/kWh, across all consumer classes- Residential, Industry, Commercial) levied on the consumers by regulatory compliance, further deteriorate the financial positions of the utilities. This appreciable difference between the actual cost of electricity on the exchange and the rate at which the consumers are charged has prompted TATA power, Mumbai, to involve end-consumers in the process of responding to such high price events facing the DISCOM by incentivizing them by giving financial perks. This program of demand response is named as “Tata Power Demand Response Program”. The program is being rolled out for the first time in India and is very beneficial for both the DISCOM and the customers. Nevertheless, implementation of such a program inevitably needs regulatory support, aptly provided by the MERC.

Initial Steps:

MERC took initiative in the year 2010 and offered regulatory support to demand side management and demand response by floating policy framework/guidelines with key features as below:

  • Time of the Day TOD tariff applicable for Industrial & Commercial Consumers
  • Annual budget for DSM/DR implementation is cleared “in principle” by MERC for each utility
  • Each project is analyzed by MERC before approval
  • All expenditure incurred towards DSM including load research is allowed
  • Set of DSM regulations in place
  • Defining the Cost Benefit Assessment tests
  • Formation of Inter utility DSM Consultation Committee
  • Draft on measurement and verification guidelines
  • Approval of pilot programs for utilities

About the TATA Power Demand Response:

The TATA Power Demand Response is a program where consumer curtails the load when utility demands and customer is paid for that on KWh basis. This is a voluntary curtailment up to 100 hours in a year. The load curtailment is triggered where Tata Power is incurring high cost towards power purchase and in case of network congestion. The consumers benefit from the reduced burden of costly power of DISCOM and can save on their monthly bills.

Tata Power is offering up to Rs. 2.25 per kWh of curtailed electrical energy compared to a defined baseline. Customer does the load curtailment with help from DR Service Provider who aggregates load of all customers and provides bulk load relief to Tata Power.

Tata Power enrolled the customers who can curtail load (more than at least 50 KW) for a short span of 2 hours when requested. Until now, the total cost savings are around 100 million rupees.

This is the first successful story of demand response implementation in India.

TATA power second round of its DSM/DR initiative is called as — ‘My Mumbai, Green Mumbai!’, launched in June, 2012. The highlights of this program are encouraging energy efficiency, and promotion of green buildings.

DesiSmartGrid Pointers:

  1. Smart grid technology implementations should not stick to the urban grids, viable options for extending them to the semi-urban/rural grids have to be explored.
  2. Demand Response baseline standardization has to be carried out across all the DISCOMs by the regulator for maximizing the social welfare (benefits for both the DISCOM and consumer) by taking into their respective procurement history.
  3. In the case of demand response, it is hard to involve the end-consumers of semi-urban/rural grids into the grid activities due to the low revenue collection (Electricity bills), this is majorly due to theft. To facilitate end-consumer involvement in this segment, a provision has to be made from the regulatory side to incorporate them directly into the total power procurement activities of the DISCOMs. This may encourage and provoke the social responsibility among the end-consumers not to involve in such activities. It will be helpful for the cash strapped DISCOMs.

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