In the first part, we observed that NTDC’s IGCEP2047 envisages addition of 50 GW of new capacity in the grid by 2030, with investments to top over USD 70 billion. For a country already sinking under foreign loans and where electricity prices have risen beyond the affordability of most consumers, this should be a cause for serious concern. We must explore every option and avail every opportunity to minimize future capacity needs without compromising country’s aspirations for development and consumers’ capacity to pay. With this objective, we re-examine below, the rationale behind the existing reliability criteria and explore a few options which could help the country reduce its future investment requirements in the power sector.
The discussion, admittedly illustrative and non-exhaustive, essentially focuses on three aspects. First, we examine the suitability of the capacity-based reliability criteria as the primary basis for resource adequacy planning in the local context to see if some other criteria, alone or combined with the present, can serve our needs better. Second, we explore how objectively the present criteria or the proposed one can reflect the costs and benefits of reliability to consumers. Finally, we offer a few suggestions that our policy- and decision-makers and regulator can use to assess the full range of technical and financial implications of resource adequacy plans and take informed decisions that best serve our country’s socioeconomic interests.
Capacity-based reliability criteria, either “loss of load” events or “reserve margin”, are a legacy of the past when economy of scale ruled the monopolistic electricity business. Most demand was served by central-station generation via a complex inter-tied T&D grid. Utility managers actually had a propensity to go for capital-intensive larger plants since that meant lower costs in generation and higher return on their asset bases.
Reserve capacity was the only economic choice to deal with uncertainties in demand, weather and generation availability. Storage of electricity was either not possible or very expensive and technologies for controlling power flows in the grid or for consumer demand were non-existent.
With the advent of competitive small generators, smart grid technologies, and electronic sensors and control devices, multiple options have emerged and are being used successfully around the world to deal with the possibility and actual events of supply failure quite effectively and at a fraction of the cost of maintaining reserve generation upstream which is called upon only a few hours in the year to deal with peak demands.