Maharashtra power sector: Leading the energy transition race
With an installed generation capacity of 43,471.28 MW, the state of Maharashtra leads India's power generation capacity, but as the share of renewable energy increases in the energy mix, new policies and proactive measures will shape the State's power system in the future.
India is a country with huge diversity. This is not only limited to the geography but also to all other facets of the economic value chain. In the previous issue of ETN, we focused on the Union Territory of Delhi and how it is ramping up efforts to be future-ready in terms of energy transition. In this issue, we will focus on Mumbai, the financial capital of India; and more broadly, on the state of Maharashtra and how its bracing itself for the dynamic grid of tomorrow.
Maharashtra is one of the power houses of the Indian economy.
It is the biggest contributor to India's GDP. The state has also witnessed tremendous industrial growth in the recent past. It is known as one of the most densely populated States in India. Its capital Mumbai, is the world's second most densely populated city with 26,357 persons per square kilometer. This is much higher than comparable metros like Delhi which lags behind at 11,320 persons per square kilometer.
To add to that is the overcrowded public transportation system – Mumbai's suburban trains – ferries more than 7.5 million passengers daily, making it the world's busiest suburban railway network. Thus, it's easy to comprehend the vast energy demand that the State puts forward. Maharashtra has the largest base of electricity consumers among all States. The power sector in the State has witnessed substantial improvement over the past decade due to an increase in generation capacity and a strengthening of network infrastructure, leading to an improvement in power supply position of the State. With per capita energy consumption of 1,239 kWh, Maharashtra is among the top 10 States in terms of energy consumption. In terms of electrification, it has made notable progress in electrification of the last mile, in fact, it has already achieved 100 percent electrification as per government records. The State constitutes roughly 14 percent of the total installed electricity generation capacity in India. It has an ambitious renewable energy policy that targets 14,400MW by 2020, including generation from solar, bagasse, small hydro, biomass, industrial waste and solar hybrids.
The Maharashtra State government has prioritized generation of energy from renewable sources and is the first State to establish a green energy fund that will finance transmission of renewable energy projects. At present, Maharashtra has a generating capacity of 9.7 MW of renewables (3rd highest in India). The actual energy shortage in Maharashtra in 2019 was 0.1 percent, as anticipated due to estimated energy surplus of 2.2 percent.
The increasing share of solar and wind energy in Maharashtra (up from 6.5 percent today) will redefine how the State's power system is organized, planned and operated in the coming years. With Maharashtra Electricity Regulatory Commission (MERC) having set a high Renewable Purchase Obligation (RPO) target of 25 percent by 2025, system flexibility will be a key issue for the State.
Maharashtra has an installed generation capacity of 43,471.27 MW (as on February 2020) the largest in the country with highest share of private ownership of around 22,004.27 MW capacity. Reason being the State of Maharashtra had launched a successful IPP policy which has attracted several private players to set up power generating projects in the State.
Implementation of pilot on SCED
The implementation of the pilot on security constraint economic dispatch (SCED) in ISGS pan India was directed by the Central Electricity Regulatory Commission (CERC) w.e.f. April 1, 2019. The pilot has been implemented for all the thermal ISGS that are regional entities and whose tariff is determined or adopted by the central commission for their full capacity honouring the existing scheduling practices prescribed in the grid code. Further, the central commission directed the extension of the pilot up to March 31, 2020. Although POSOCO reports showing positive sides of these pilot, it is equally urgent to focus on overcoming issues faced by these pilot plants. Common issues raised by thermal plants during implementation of this pilot project were with respect to flexibility, reliability, design and safety factors of the plants.
In Maharashtra, Bhusawal Unit-5 (500MW) and Parali Unit- 8 (250MW) have been identified for pilot project demonstration for flexibility of coal-based thermal unit. Few of the technical challenges include operating on lower PLF, increased forced outage and O&M cost, reduction in efficiency due to poor heat rate and high auxiliary power, loss of useful life of components due to fatigue and creep. These things need serious consideration because the impact of these challenges is long term.
We also require few regulatory regimes since current regulations put limitations on account of fuel charges and normative parameters set by the regulator. Other than the above points, the scope of SCED covers all generating stations whose tariff is determined or adopted by the CERC, the IPPs are left out. Even if under competitive bidding under Section 63 of the Electricity Act 2003, wherein tariff discovered is much lower than many of the thermal generating stations under ISGS, the nature of PPAs do not allow sale of surplus power beyond the requisitioned supply. This may cause discomfort and limitations while expanding the ambit of SCED.
Renewable energy sector
In terms of renewable energy, Maharashtra is one of the States with highest installed capacity of renewable energy sources in its overall energy mix. Keeping in mind the future, MERC issued RPO regulations in 2019 and has set specific targets for solar and non-solar RE sources from April 1, 2020 to March 31, 2025. The solar RPO targets from the year 2020 will be 4.5 percent going up to 13.5 percent by the year 2025. Distribution licensee shall endeavor to achieve total RPO target notified by the Central Government and for doing so it will get incentive of `0.25 per kWh for RE procured above the minimum percentage.
With increasing RE mix in the overall supply in the State, there may be a need for additional investments to ensure grid stability/reserve. The table below shows the current progress of RE in Maharashtra. Although wind power and other types of RE power are promising to reach the targets, solar still needs to pick up the pace to reach the targets set by MNRE and State government.
The other dynamic of being a high RE resource State is the high penetration of RE in the grid, due to which the State DISCOMs are backing down cheaper conventional power to manage the mismatch between State demand profile and supply from RE projects. The good part here is that RE generators till now have not faced any back down issues in the State. In order to manage variability of current RE generation, the State has flexible capacity in the form of storage hydro capacity of 250 MW (Ghatghar) and 2,000 MW of hydro capacity. As per the State Working Group, the current flexible capacity is enough to manage the current RE penetration. However, to meet MNRE targets, the State would require around 3.3 GW of flexible capacity on an annual average basis by FY 2022. As per the State generation planning, the State will have a flexible generation capacity of 1.4 GW by FY 2022 and would have to rely on other States for the remaining. The capability also includes enhancing, ramping up and down capabilities during late evening and early morning hours in the instance of high solar penetration. Thus, here storage can also play an instrumental role, apart from pumped hydro, the State is
also looking into other modes of storage on both supply side and demand side management, which is both technically and commercially viable.
In terms of RPO compliance, Maharashtra is among the top States. As per the State Working Group, the State has achieved 100 percent compliance in 2016-17. Further, it has one of the strongest intra-State networks. The State is also planning to add another 3.6 GW of transmission capacity in view of the State RE targets. The focus is also on developing distributed projects to reduce the transmission requirement and it is planning to develop projects for sale of power outside Maharashtra in view of MNRE targets.
Maharashtra State needs to consider a proactive approach for network development in advance, keeping in view the upcoming RE addition. The time period for development of the transmission infra element is large compared to the time required for the completion of solar and wind power projects. Thus, this approach not only encourages RE developers to set up projects in the State but also ensures timely completion of evacuation facilities.
Policy and regulatory overview
The power sector is one of the crucial constituents contributing to the economic growth of the nation. Adequate development of the sector is essential for sustainable development of the Indian economy. Over the period, Indian power sector has witnessed significant transformation that has completely redefined the industry outlook. Development in the sector was not only limited to encouraging investments but also adopting policy and regulatory restructuring that helped India rise to prominence on the global energy map. As per the latest world energy statics published by International Energy Agency in 2019, India is the 3rd largest producer of electricity in the world and it ranks 106th in terms of per capita consumption as of 2017.
Maharashtra Energy Development Agency (MEDA), is the key State institution that finalizes policies in the RE sector of Maharashtra. RE policies released in 2015 received applause from the renewable industry. Now, with the ongoing trend and upcoming technology developments, wind and solar policies are under review and going to be released soon. Technologies like hybrid storage and others are expected to be included in the upcoming policies.
MERC through the MERC Grid Interactive Rooftop Renewable Energy Generating Systems Regulations 2019, allowed consumers who sanctioned load up to 10 kW to be exempted from payment of grid support charges for net metering systems. In line with this, Maharashtra State Electricity Distribution Company Limited (MSEDCL) for FY 2020-21 to FY 2024-25 in its multi-year tariff petition has proposed the grid support charges for net metering systems for the control period of FY 2020-21 to FY 2024-25.
Proposed grid support charges for high-tension (HT) category (Rs./kVAh) varies between `4.46/kWh and `8.66/kWh for domestic consumers and between `5.06/kWh and `8.76/kWh for commercial consumers. For industrial consumers, the variation would be between `3.60/kWh and `4.08/kWh. During public hearings, several consumers, developers and other stakeholders made representations regarding MSEDCL's proposal to levy grid support charge on solar rooftop PV system (net metered). They argued against excessive levy, and labeled it as a retrograde step that will hamper the future growth and deployment of RTPV systems in Maharashtra.
The commission in its final tariff order, has decided not to impose any grid support charges on rooftop solar installations until the State achieves solar rooftop capacity of 2,000 MW However, MERC has approved banking charges in the form of energy adjustment. It would be 7.5 percent for HT lines and 12 percent for low-tension (LT) of the energy being banked in the grid.
Maharashtra has also been one of the earliest States to come out with an EV policy in 2018. The State has set the vision to make Maharashtra a globally competitive State for EV and component manufacturing and it also aims to maximize the adoption of EV within the State. The same will be done through enabling fiscal and non-fiscal benefits, creation of dedicated infrastructure for charging the EVs and promotion of R&D and innovation through the creation of R&D institutes in the State. The policy targets to generate investment of `25,000 crore for EVs and component manufacturing and in the process generate job opportunities. The State also proposed incentives for the purchase of EVs and setting up EV infrastructure in the State.
Here are the few major incentives proposed:
• Government to promote EV in public transport in six cities i.e. Mumbai, Pune, Aurangabad, Thane, Nagpur, and Nashik.
• Subsidy for the first 100,000 EVs registered in the State (70,000 2Ws, 20,000 3Ws, and 10,000 4Ws all categories combined).
• Ten percent subsidy on base price (maximum `20 lakh per vehicle) to private/public bus transport buyers for the first 1000 EV passenger buses to be registered in State. The subsidy will be transferred to buyers account within three months of purchase.
• Fifteen percent subsidy on base price (maximum `5,000 for e-2Ws, `12,000 for e-3Ws, and `1 lakh for e-4Ws per vehicle).
• Exemption from road tax and registration fees for EVs.
• Commercial public EV charging stations for electric 2Ws, 3Ws, cars and buses will be eligible for 25 percent capital subsidy on equipment/machinery (max. `10 lakh per station) for the first 250 commercial public EV charging stations.
• The rate of electricity for EV charging will be applicable as per locations where the EV charging stations will be installed across the State, for e.g. if a charger is installed in the mall, the rate applicable to the malls will be applicable. Likewise, if it's installed in an industrial area then industrial rate will be applicable and if it's residential then the residential rate will be applicable.
• Petrol pumps will be allowed to setup charging stations freely subject to the area, fire, and safety standard norms of relevant authorities under relevant acts/rules.
The government also rolled out tariffs for EV charging with special rates to charge for during the off-peak hours in a day. India's first fleet of EVs was rolled out in Nagpur by OLA in association with Mahindra Electric. Under the Faster Adoption and Manufacturing of Electric Vehicles (FAME) policy, 317 charging stations have been allotted to Maharashtra.
MSEDCL has also proposed setting up of 500 charging stations in the State over the next three years. Maharashtra as of now has around 35,000 EVs on road, most of which are 2Ws and 3Ws, but over the last year, there has been a deployment of e-buses too in various cities like Mumbai, Pune, and others. Purple launched the first intercity e-bus on February 14 this year, between Mumbai and Pune. Apart from that, the State transport body is set to procure 150 such e-buses that will connect various cities across Maharashtra, including the widely used Mumbai-Pune and Mumbai-Nashik routes.