Availability Based Tariff (ABT)

Submitted to: Dr. Suman Bhowmick Dr. Narendra Kumar

Submitted by:

Vipul Gupta 2k8/EE/889

Competition is least popular with competitorsevery supplier wants to raise the market price, just as every buyer wants to lower it. Perfect competition frustrates both intentions. Stoft Steven

April, 2012

Acknowledgement
The author is grateful to Mr. Bhanu Bhushan and POWERGRID Corporation of India Li ited! "hose foresightedness is not onl# i ple enting u$h needed refor s in the Po"er %e$tor of the $ountr#&'ut is also la#ing do"n the foundation for the ne(t re)olution that independent India is going to "itness in #ears to $o e. Let e also utili*e this opportunit# to appre$iate and to than+ ,ni)ersit# authorities! Dr. %u an Bho" i$+ and Dr. -arendra .u ar&"ho helped ateriali*e "hat is presented 'efore the reader as this report&'# in$luding se inar presentation as the ne$essar# part of our $urri$ulu . Ma# al ight# God hear Lastl#! allo" # than+s too for his presen$e in # "ar # life/

e to e(press

regards for the deser)ing reader.

Certificate
-a e1 Roll -o.1 2ipul Gupta 0+34EE4335

This is $ertified to 'e the 'onafide "or+ of the student in %e inar Presentation during the e)en se ester of the a$ade i$ #ear 0611710. Date1 8888888888 88888888888888888888 Dr. %u an Bho" i$+ 88888888888888888888 Dr. -arendra .u ar

Abstract
The report is $on$erned "ith :)aila'ilit# Based Tariff ;:BT<! "hi$h go)erns the e$ono i$ aspe$ts of Central Generating %tations in the $ountr#. In addition! spe$ial e phasis has 'een gi)en to the ,ns$heduled Inter$hange ;,I< Me$hanis &"hi$h is a dire$t out$o e of appli$ation of :BT&and pro)ides an alternate route to Bilateral :gree ents in inter7state sale7pur$hase of po"er! in a region. The effe$ts of ,I Me$hanis on intra7state generation and the possi'ilit# of appli$ation of :BT to %tate7O"ned Generating %tations ha)e also 'een gauged.

Contents
Page -o. i. ii. iii. 1. 0. 9. =. @. >. C. 3. 5. :$+no"ledge ent Certifi$ate :'stra$t Introdu$tion The Dail# %$heduling Pro$ess Wh# "as :BT -e$essar#? 16 ,I Rate 2s %#ste Marginal Cost 11 Threshold AreBuen$# Generation 2s %$heduled Generation 10 Opti u ,tili*ation of Intra7%tate Resour$es 19 Trading of %tatesD %urplus Generation 1@ ,ns$heduled Inter$hange ;,I< Charges 1C Referen$es 15 0 9 = > 5

Introduction (a) What is Availability Based Tariff?

:BT is a rational tariff stru$ture for po"er suppl# fro $ontra$ted 'asis. Po"er plant $osts $an 'e di)ided into1 a< Ai(ed Costs '< 2aria'le Costs Ai(ed Costs $o i. ii. iii. i). ). )i. prise of1 Interest on loan Return on eBuit# Depre$iation O E M e(penses Insuran$e Ta(es and interest on "or+ing $apital generating stations! on a

2aria'le Costs pri aril# $o prises of fuel $ost. In the :BT e$hanis ! fi(ed and )aria'le $ost $o ponents are treated separatel#.
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The Indian )ersion of :BT $o prises of three $o ponents1 a< Capa$it# Charge '< Energ# Charge $< ,ns$heduled Inter$hange ;,I< Charge

Capacity Charge:
The pa# ent of fi(ed $ost to the generating $o pan# is lin+ed to a)aila'ilit# of the plant! i.e. its $apa$it# to deli)er MW on a da#7to7da# 'asis. The total a ount pa#a'le to the generating $o pan# o)er a #ear to"ards the fi(ed $ost depends on the a)erage a)aila'ilit# ;MW deli)ering $apa'ilit#< of the plant o)er the #ear.

Energy Charge:
It $aters to the )aria'le $ost ;i.e. fuel $ost< of the po"er plant for generating energ# as per the gi)en s$hedule of the da#. Energy charge (at the specific plant specific rate) is not based on actual generation and plant output, but on scheduled generation.

UI Charge:
In $ase there are de)iations fro the s$hedule! the energ# $harge pa# ent "ould still 'e for the s$heduled generation&and the e($ess generation "ould get paid for at a rate dependent on the s#ste $onditions pre)ailing at that ti e. This $o ponent "ould 'e negati)e ;indi$ating a pa# ent '# the generator for the de)iation< in $ase the po"er plant is deli)ering less po"er than s$heduled.

(b) How do the Beneficiaries Share the Payments?

The Central Generating %tations in different regions of the $ountr# ha)e )arious states of the region as their spe$ified 'enefi$iaries or 'ul+ $onsu ers. The latter ha)e shares in these plants $al$ulated a$$ording to Gadgil Formula and dul# notified '# Ministr# of Po"er.

Capacity Charge:
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The 'enefi$iaries ha)e to pa# the $apa$it# $harge for these plants in proportion to their share in the respe$ti)e plants. This pa# ent is dependent on1 i. The de$lared output $apa'ilit# of the plant for the da# ii. The 'enefi$iar#Ds per$entage share in that plant &and not on po"er4energ# intended to 'e dra"n or a$tuall# dra"n '# the 'enefi$iar# fro the Central %tation.

Energy Charge:
The energ# $harge to 'e paid '# a 'enefi$iar# to a Central %tation for a parti$ular da# "ould 'e the fuel $ost for the energ# s$heduled to 'e supplied fro the po"er plant to the 'enefi$iar# during the da#.

UI Charge:
In addition! if a 'enefi$iar# dra"s ore po"er fro the regional grid than "hat is totall# s$heduled to 'e supplied to hi fro the )arious Central Generating %tations at a parti$ular ti e&he has to pa# for the e($ess dra"al at a rate dependent on the s#ste $onditions! the rate 'eing lo"er if the freBuen$# is high! and 'eing higher if the freBuen$# is lo".

The Daily Scheduling Process

i. Central Generating %tations in the Region de$lare their e(pe$ted output $apa'ilit# for the ne(t da# to RLDC. ii. The RLDC 'rea+s up and ta'ulates these output $apa'ilit# de$larations as per the 'enefi$iariesD plant7"ise shares and $on)e#s their entitle ents to %LDCs. iii. %LDCs $arr# out an e(er$ise to see ho" 'est the# $an eet the load of their $onsu ers o)er the da#! fro their o"n generating stations! along "ith their entitle ent in the Central %tations. i). The# ;%LDCs< also ta+e into a$$ount the irrigation release reBuire ents and load $urtail ent et$. that the# propose in their respe$ti)e areas. ). The %LDCs then $on)e# to the RLDC their s$hedule of po"er dra"al fro the Central %tations ;li ited to their entitle ent for the da#<. )i. The RLDC aggregates these reBuisitions and deter ines the dispat$h s$hedules for the Central Generating %tations and the dra"al s$hedules for the 'enefi$iaries dul# in$orporating an# 'ilateral agree ents and adFusting for trans ission losses.

)ii. These s$hedules are then issued '# RLDC to all $on$erned and 'e$o e the operational as "ell as $o er$ial datu . )iii. De)iations fro the s$hedules are deter ined in 1@7 inute ti e 'lo$+s through spe$ial etering! and these de)iations are pri$ed depending on freBuen$#. :s long as the a$tual generation4dra"al is eBual to the gi)en s$hedule! pa# ent on a$$ount of the third $o ponent of :BT is *ero. For each Central Generating Station and States, the actual energy has to be metered on a net basis, i.e. algebraic sum of energy metered on all its peripheral interconnection points, for every 1 !minute time bloc". #ll $% payments are made into and from a regional $% pool account, operated by the concerned &'(C.

Why was ABT Necessary?

)*ill recently regional po+er system operation +as more frightening than an #lfred ,itchcoc" horror movie. Scholars could be e-cused for getting a shoc" of their lives by a mere glance at the daily fre.uency and voltage profile of any region. System operation +as an endless /0ihad1 to prevent the system from collapsing.2 i. The earlier tariff e$hanis s did not pro)ide an# in$enti)e for either 'a$+ing do"n generation during off7pea+ hours or for redu$ing $onsu er load 4 enhan$ing generation during pea+ load hours. In fa$t! it "as profita'le to go on generating at a high le)el e)en "hen the $onsu er de and had $o e do"n. ii. The load ser)ing utilities 4 %EBs "ould $o pare the )aria'le $ost of their o"n generators to the $o posite $ost ;sun+ $ost G energ# $harge< of the e(ternal generator $ausing a s+e"ed dispat$h. Ironi$all#! the Regional Grid operators had a harro"ing ti e tr#ing to get generation 'a$+ed do"n to prote$t the tur'ines of the )er# generators $ausing that situation.

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iii. On the other end of the spe$tru ! the state utilities $ould o)erdra" fro the grid "ith i punit# e)en during defi$it and still es$ape %$ot7free '# returning eBui)alent energ# to the s#ste during surplus $onditions. i). In $ase of :BT! 'e$ause of $lear separation 'et"een fi(ed and )aria'le $harges! generation a$$ording to erit7order is en$ouraged and pit7head stations do not ha)e to 'a$+ do"n nor all#. The o)erall generation $ost a$$ordingl# $o es do"n. ). : e$hanis is esta'lished for harnessing $apti)e and $o7generation and for 'ilateral trading 'et"een the $onstituents. )i. :BT! '# re"arding plant a)aila'ilit#! ena'les $atered at an# point of ti e. ore $onsu er load to 'e

UI Rate Vs System Marginal Cost

i. ,I rate is tightl# lin+ed to grid freBuen$#. :s the freBuen$# is sa e all o)er an a$ s#ste ! and $an 'e readil# seen through a si ple freBuen$# eter! it is easil# possi'le to +no" the pre)ailing ,I rate an#"here in the s#ste ! "ithout the help of an# $o uni$ation s#ste . ii. With this on7line +no"ledge of the $urrent ,I rate! a %tate "ould +no" "hat it "ould ha)e to pa# for an e(tra MW that it a# dra" fro the regional grid. It $an $o pare this "ith the fuel $ost it "ould sa)e if generation "ere redu$ed '# one MW at its o"n station! ha)ing the highest )aria'le $ost. iii. If the ,I rate is lo"er than the latter! it "ould 'e 'enefi$ial for the state to redu$e its o"n generation and dra" the repla$e ent energ# fro the regional grid! till it has 'a$+ed do"n all generation ha)ing a )aria'le $ost higher than the $urrent ,I rate. %n the process, the State1s marginal generation cost +ould move do+n, to+ards the prevailing $% rate. i). On the other hand! if a %tate finds the ,I rate to 'e higher than the )aria'le $ost of an# of its partl# loaded generating units at an# ti e! it "ould 'e
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finan$iall# 'enefi$ial for the %tate to a(i i*e the output of all su$h generating units and there'# redu$e its dra"al fro the regional grid. The %tate "ould ha)e an under7dra"al! for "hi$h it "ould get paid a ,I rate higher than its arginal generation $ost.

Threshold Frequency Generation Vs Scheduled Generation

i. Depending on its )aria'le $ost! ea$h generating unit has a threshold freBuen$#! i.e. the freBuen$# at "hi$h the ,I rate eBuals the )aria'le $ost of the generating unit. ii. The output of the generating unit should 'e a(i i*ed as long as the grid freBuen$# is 'elo" the threshold freBuen$#! irrespe$ti)e of the s$hedule gi)en out '# the RLDC 4 %LDC for the unit. :nd the unit should 'e 'a$+ed do"n "hen grid freBuen$# $li 's up and e($eeds the a'o)e threshold freBuen$#. iii. ,ydroelectric $nits3 a< :s far as the h#dro7ele$tri$ units are $on$erned! their a$tual )aria'le $ost is *ero! 'ut their generation a# 'e restri$ted depending on a)aila'ilit# of "ater. :s su$h! ea$h h#dro station "ould ha)e an energ# )alue in ter s of the $ost of energ# ;fro other sour$es< it $an repla$e.

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'< H#dro stations "ith a storage $apa$it# should 'e run onl# during the pea+7load hours! "hen their output $an repla$e or supple ent the $ostlier energ#. $< :gain! depending on the freBuen$# pattern and a)aila'ilit# of "ater! ea$h h#dro station $an 'e assigned a threshold freBuen$#. While the depleted h#dro plants a# ha)e a threshold freBuen$# in =5.67=5.0 H* range! the o)erflo"ing h#dro stations a# 'e assigned a threshold freBuen$# of @6.@ H*. i). This "ould lead to a freBuen$# 'ased dispat$h of generating stations! "hi$h $an 'e gi)en out '# the %LDCs as the dispat$h guideline or instru$tions for their generating stations. ). The underl#ing approa$h is that the freBuen$# "ould 'e allo"ed to float and there "ould 'e no atte pt to operate the grid at a freBuen$# )er# $lose to @6.6 H*. )i. :lso! "hile the s$hedules "ill ser)e as the $o er$ial datu ! the entities "ould 'e free to de)iate fro the s$hedules! to a$hie)e real region7"ide erit7order in generation! in an autono ous! de$entrali*ed and )er# $ost7 effe$ti)e anner! "ithout depending on an# $o uni$ation and EM% 4 %C:D: s#ste .

Optimum Utilization of Intra-State Resources

i. :lthough :BT has so far 'een i ple ented onl# for Central Generating %tations! and is per$ei)ed to 'e operating at regional ;inter7state< le)el! it has an i ediate! though indire$t! i pa$t on intra7state operation. ii. In the e$hanis no" in pla$e! ea$h state has a spe$ified allo$ation in the identified Central %tations! in ter s of a per$entage share in the generating $apa$it#. This deter ines the MW entitle ent of ea$h %tate da#7'#7da#! depending on e(7po"er plant $apa'ilit# de$lared for the da# '# the respe$ti)e generating stations on the pre)ious da#. iii. In an inter$onne$ted po"er s#ste ! the net dra"al of a %tate is al"a#s eBual to the total $onsu er load "ithin the %tate inus the total of intra7%tate generation. i). In $ase the a$tual net dra"al e($eeds the net dra"al s$hedule ;'ased on %tateDs entitle ent in Central %tations and its reBuisitions<! the %tate has to pa# ,I $harges. This lia'ilit# $an 'e redu$ed '# restri$ting the o)erdra"al!
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parti$ularl# "hen freBuen$# is 'elo" nor al. This in turn reBuires ;if load shedding has to 'e restri$ted< a(i i*ation of output fro all intra7state stations&"hi$h eans that thereDs a pressure on ea$h %tate as "ell for perpetuall# enhan$ing the a)aila'ilit# of all intra7state stations. ). The intra7state stations are ostl# lo$ated at load7$entres and ha)e a higher )aria'le $ost as $o pared to Central %tations! "hi$h are ostl# pit7head. In the earlier regi e ;pre7:BT<! in $ase an %EB redu$ed its dra"al fro Central %tations! its pa# ent lia'ilit# $a e do"n at the $o posite rate ;fi(ed G )aria'le $ost< of those stations. The %EBs! therefore! ade an une)en $o parison&)aria'le $ost of their o"n stations )ersus $o posite $ost of Central %tations&and did not 'a$+ do"n their o"n stations ;in $ase of less de and< if for er "as lo"er! e)en if it "as higher than the )aria'le $ost of Central %tations. )i. In effe$t the erit order "as 'eing distorted and generation "as not 'eing opti i*ed. The position has no" radi$all# $hanged. The %EBs $o pare onl# the )aria'le $osts! and as+ intra7state stations to 'a$+ do"n during off7pea+ hours. )ii. Intra7state stations ho"e)er are relu$tant to 'a$+ do"n ;due to $ontinuation of single7part tariff for the ! "hi$h dis$ourages su$h 'a$+ing do"n< and %LDCs fa$e pro'le s. The re ed# lies in i ple entation of :BT for all intra7state stations as "ell and onl# then "ould the %tates 'e a'le to a$hie)e a(i u opti i*ation in their o"n operation. )iii. Aurther e(tension of the ,I e$hanis to the intra7state stations "ould get the to respond to grid $onditions on their o"n in the ost desira'le "a#. The %tates "ould 'e dire$tl# 'enefiting1 a< High po"er a)aila'ilit# during pea+ load hours '< Redu$ed load shedding $< : possi'ilit# of earning ,I

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Trading of States Surplus Generation

i. Most of the large Central %tations are pit7head or nu$lear plants! "ith $o parati)el# lo" )aria'le $osts 4 energ# $harge rates. ii. The instan$es of su$h lo" )aria'le $ost po"er 'eing deter ined as surplus "ould o$$ur onl# "hen the off7pea+ hour $onsu er de and in the %tate $an 'e and is et fro other sour$es ha)ing a $o para'le or still lo"er )aria'le $ost. iii. : %tate "ould generall# ha)e its o"n load7$entre plants! "ith a )aria'le $ost higher than that of the Central %tation under $onsideration. These load7$entre plants "ould naturall# 'e s$heduled to 'a$+ do"n during off7pea+ hours! 'efore the possi'ilit# or reBuire ent of 'a$+ing do"n the Central %tation arises. i). The %tate ;"hi$h has off7pea+ surplus< has three options1

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a< ReBuisition po"er fro Central %tation onl# as per its o"n reBuire ent ;not full entitle ent< and dra" po"er as per resulting s$hedule. '< ReBuisition full entitle ent fro the Central %tation for the entire 0= hour period! find a 'u#er for the off7pea+ surplus! and s$hedule a 'ilateral sale. This "ould a+e sense as long as the sale rate per +Wh is ore than the energ# $harge rate of the Central %tation. $< ReBuisition the full entitle ent for the entire 0= hour period! 'ut dra" po"er onl# a$$ording to its a$tual reBuire ent. In effe$t! this "ould 'e a pre7planned de)iation fro s$hedule for "hi$h the %tate ;"ith surplus< "ould get ,I pa# ent. :ll that the $on$erned state has to "at$h for and 'e )igilant a'out! is that the ,I rate during the off7pea+ hours re ains a'o)e the energ# $harge rate of the Central %tation. In $ase the freBuen$# rises and ,I rate falls 'elo" the energ# $harge rate of the $on$erned Central %tations! the $on$erned %tate should redu$e its reBuisition and there'# stop under7dra"ing. ). In $ase of a Bilateral %ale! the pri$e at "hi$h %tate ;"ith surplus po"er< $onsiders selling its o"n surplus generation has no relationship "ith the rate;s< at "hi$h it gets its entitle ent fro Central Generating %tations. Instead! it "ill ha)e to 'e higher than the )aria'le $ost of %tateDs o"n stations &"hi$h "ould ha)e to 'e 'a$+ed do"n if this po"er is not pur$hased '# another state. )i. The pri$e that the latter a# agree to pa# shall ho"e)er depend on1 a< The pri$e at "hi$h off7pea+ po"er a# 'e a)aila'le to the need# %tate on $o para'le ter s fro so e other sour$e '< The li+el# ,I rate during those hours $< The $riti$alit# of the need for additional po"er d< The pri$e the need# %tate is read# to pa# O')iousl#! these aspe$ts $annot 'e $o)ered in a for ula and the pri$e "ill ha)e to 'e negotiated 'et"een %tate ;"ith surplus po"er< and the pur$haser;s<.

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Unscheduled Interchange (UI) Charges

The ,I Rate at an# freBuen$# represents the arginal pri$e of the $ostliest generator that is e(pe$ted to 'e on 'ar at that freBuen$#. The ,I rate therefore needs to 'e readFusted "hene)er the energ# $osts of generation in the $ountr# get re)ised.

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References
1. %te)en %toft! IPo"er %#ste E$ono i$s Designing Mar+ets for Ele$tri$it#J! IEEE Press! Wile# Inters$ien$eK Lohn Wile# E %ons 0. Bhanu Bhushan! I:BC of :BT8: Pri er on :)aila'ilit# TariffJ! 066@ 9. %. .. %oonee! %. R. -arasi han! 2. Pande#! I%ignifi$an$e of ,ns$heduled Inter$hange Me$hanis in the Indian Ele$tri$it# %uppl# Industr#J =. Central Ele$tri$it# Regulator# Co ission ;,ns$heduled Inter$hange $harges and related atters< ;%e$ond : end ent< Regulations! 0610

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