States not buying peaking power: CERC

The Central Electricity Regulatory Commission (CERC) has sought the power ministry’s intervention to persuade states to conduct separate bidding for the procurement of electricity to meet their peak hour power requirement.

The regulator has said that while the ongoing capacity addition in base-load power generation is expected to reduce the country’s overall non-peak electricity shortage to 2% by the end of the current fiscal, peak power shortfall will still remain at 6.5%. This gap can only be bridged by setting up dedicated peaking power plants under a differential tariff regime.

In a study undertaken in 2007 at the behest of the government, global energy consultancy firm McKinsey & Company projected that India’s peak power deficit could rise to 70,000 mw by 2017. Natural gas-based, open cycle power plants are best suited for meeting peak power requirements as they can be switched on and off and generation ramped up as per convenience. However, higher tariffs would be required to make these plants commercially viable.

Despite a provision in the competitive bidding guidelines, states hardly procure electricity for meeting their peak power requirement. “Although there is a provision in the competitive bidding guidelines for separate bids for peaking power plants, past experience shows that discoms rarely requisition peak load servicing capacity through the competitive bidding route,” the CERC has said in a letter sent to power secretary P Uma Shankar recently. Due to shortage of peaking power, discoms resort to loadshedding when electricity demand rises sharply during certain hours of the day. This issue was also discussed in a recent state power ministers’ conference held in Delhi.

The CERC constituted a task force in 2008 under the then central electricity authority chairman, Rakesh Nath, to examine issues related to peak power requirement. The task force underlined the urgent need for setting up separate generation capacities for meeting peak power demand, especially in high load centres like metros, big cities and industrial estates. It also recommended a differential tariff structure to support such power plants, which would run only during peak hours.

Based on the recommendations of the task force, the regulator prepared a proposal to amend the tariff regulations to provide for a separate dispensation for peaking power plants. But since the national tariff policy had no provision for exempting peaking power plants from mandatory competitive bidding after January 5, 2011, the Central Electricity Regulatory Commission redrafted the proposal.