Captive Power Plant

Presented by: Paridhi Gupta (19) Prashant Sarkar (20) Rahul Kumar (21) Rohan Swamy (22)
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Flow of the Presentation

Introduction Need of CPP Segmentation Regulation Different provisions Concerns for state govt. and owners. Economics Features, advantages, limitations and constraints. Conclusion.

What is Captive Power Plant?

Captive power plant has been defined under the Electricity Act-2003 as

a power plant set up by any person to generate electricity primarily for his own use and includes a power plant set up by any co-operative society or association of persons for generating electricity primarily for use of members of such cooperative society or association.

Why Captive Power Plant?

New Policies Persistent Supply Deficit High Industrial Tariff Quality of Electricity Non-availability of adequate grid supply Poor quality and reliability of grid supply High tariff as a result of heavy cross subsidisation
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Where it is ?
Industry type Textile Cement Chemicals Fertilizers Manufacturing Paints Paper Petrochemicals Steel Fuel Used Coal Natural Gas Naptha Naptha/Natural Gas Oil RCO FO HSD LDO

Regulation of Captive Power Plant

Provision in Electricity Act 2003.
Provision in National Electricity policy. Provision in Electricity Rules 2005.

Provision in Electricity Act 2003

Define as a power plant set up by a person for their own use.
No license required.

No surcharge is levied, if they get open access.

Provision in National Electricity Policy

Securing Reliable, Quality and cost Effective power. Facilitate Employment opportunities. Harness Surplus power to meet power demand. Regulatory commission determine tariff when licensee take power

Provision in Electricity Rules 2005

Qualify Criteria For Captive power plant. Not less than 26% of ownership is held by Captive user. User has to consume 51% of aggregate electricity generated in plant, determined on a Annual Basis

The Concern of State Governments and SEBs for CPP is because:Captive plants may have adverse impacts on the finances of the utility, Industrial load is the main source for cross-subsidizing revenue flows Billing and collection is much more efficient for HT consumers SEBs ability to service escrow accounts for security packages is also reduced Non-optimal growth of the sector. Problems in grid management especially in case of states with surplus power Adverse environmental impacts arising from types of fuels used and from higher emissions per unit of production, as compared to large power plants. Reliability of power supply from captive and co-generation plants as a source of firm power
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CPP in India
Captive power today is significant source of power for the Indian economy, which plays an important role in the present power scenario being characterised by inadequate supply of power, poor and unreliable power quality, and high tariffs resulted due to heavy cross-subsidization. There is paradigm shift in usage pattern of captive power plants from back-up use to baseload use. Presently the captive power plants capacity accounts for nearly one-fifth of the total installed capacity. With liberalisation of economy and technological developments many options are available for captive structuring.

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Continued.
Six states Gujarat, Orissa, Andhra Pradesh, Madhya Pradesh, Karnataka and Tamil Nadu account for almost two-thirds of the captive capacity. Other significant contributors include Bihar, Maharashtra and Uttar Pradesh. For the industries that use energy intensively, the energy is the critical component of the total production cost. The engineering, chemical and mineral/metal industries account for almost two-thirds of the total installed capacity in the captive segment. Other industries include cement, textiles and sugar.

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Some features:
Captive Power refers to generation from a unit set up by industry for its exclusive consumption. Captive power plants are essentially non utility power plants. These power plants are owned by specific industries which consume all the power produced for its production purposes. The size of these power plants varies. These power plants can be as small as 0.2 MW or can be as big as 300 MW.

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The Advantages
Captive power plant is close to the load centre and hence reduction in the fixed cost of electricity generated due to lesser stranded assets Reduced transmission and distribution losses Grid is strengthened at multiple points, even at the tailends. Higher thermal efficiency, due to waste heat recovery by method of cogeneration Distribution of environmental impact Shorter gestation period to set up power plants Captive power plants have modular designs and hence can match the load profile
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Captive Constraints
Industry consumer which accounts 40 % of load, but inadequate to meet their demand State Policy & Regulations are resisting the growth of CPP segment in order to protect the distribution utilities. Several states are restricting to open access and imposing high cross-subsidy charges and electricity duty

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Continued
Section 11, EA 2003 to restrict the generators from selling

power outside the state during exceptional circumstances

Electricity duty charge on CPP increased from 40 paise to 1.50 paise by State government. Environmental clearances issues Fuel linkages

Electricity cost is 25 % in the production cost.

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Limitations
Reduction in contract demand of a CPP holder with distribution licensee may be allowed without any penalty. CPPs which are parallel with the grid, standby demand charges should be reasonable. However, if the CPP exceeds the Contract standby Demand then reasonable penal rate should be applicable on excess drawl. High wheeling charges & losses make open access unviable.As captive surplus would be sold within a limited area, wheeling charges / losses should be applied for the particular area rather than average grid charge / losses. Wheeling charges for transfer of surplus power may not exceed 7% of the generation cost within the state. The State Regulatory Commissions which have not issued the regulations for open access may have to expedite the process.

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Limitations
The cross subsidy surcharge applicable on HT consumers opting to purchase surplus power from CPPs must be reasonable. This may be fixed in accordance with avoided cost method suggested by FOIR (Forum of Indian Regulators). For the purpose of recovery of T&D losses in OA charges, the losses should be benchmarked to reflect technical losses, gradually reduced and equitably distributed. Gradually recovery of commercial losses needs to be reduced Parallel Operation Charges (POC) imposed by state utility is very high. Aligning of POC with ABT regime would encourage connectivity to grid for facilitating transfer of surplus power to the licensee.

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Future Perspective of CPP

There is high scope for CPP as the main constraint of license is already been resolved. Single window clearance system to accelerate the development of CPP. Reduction in the production cost of Textile industries, Cement industries etc. To reduce the demand-supply gap Competitive market sustanability

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Conclusion
CPP plays major role in meeting the demand-supply gap as our maximum requirement of power is in the industrial sector, so the regulation needs to be made favorable CPP generation from sources like Biomass, Bagasse and renewable sources need to be encouraged in light of fuel security issues.

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Thank you !!

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