Winds of Change: Challenges facing the Integration of Intermittent and Unpredictable Generation in India

“Significant increase in wind based generation in India while providing clean, lower-cost, renewable power, poses new challenges to the transmission sector. As penetration of wind based generation increases, issues

such as network reinforcement, transmission planning, adjustments in existing operation and reliability practices, improvement in regulations and using more reliable wind forecasts, need to be addressed both at central and state levels to accommodate larger wind power plants. Paying attention to these issues now will ensure the exploitation of wind potential available in India to the maximum extent possible while maintaining

power system reliability without major curtailment of wind based power.”

Global warming, rising fossil fuel prices and ever increasing supply demand gap has catapulted the status of wind from playing a peripheral role to becoming a significant source of electricity generation. Recognizing the pivotal role of providing critical and clean, carbon free energy and thereby addressing climate change, India is seeking to implement a large wind-based electricity generation program1. The wind capacity in India has grown at an average of 33% over the last five years and contributes over 6% to the current capacity mix with total installed grid interactive capacity of 8,739 MW2. This is primarily due to engineering and technology developments, provisions under Electricity Act 2003, and financial incentives. In order to promote the needed investments, the Indian government is introducing policies such as renewable purchase obligations, financial motives such as income tax benefits, accelerated depreciation and generation based incentives. Table 1 shows a summary of wind potential in key states in India and the financial incentives and policy mandates that exist in those states. In addition to these stimuli, sale of accrued carbon credits in the CDM market provides additional revenue source for wind generators.

Even as these incentives stimulate development of large wind based power plants, transmission limitations are increasingly becoming roadblocks to the continued growth of wind in the foreseeable future. These transmission limitations force curtailment of wind generation to ensure in reliable system operation and also act as an inhibitor to wind installations in system planning. For example, in 2005-06, around 15 percent of wind generation in Tamil Nadu was lost due to congestion and shortage of evacuation facilities3. The current impediments in transmission that concern the wind developers, system operators, policy makers and regulators are summarized below:

Who should pay for the evacuation facility up to interconnection point: developer, power purchaser, transmission utility or distribution company?

What are the various methods to fund and attract investments for developing the wind transmission infrastructure?

How to address grid connectivity and transmission infrastructure development under transmission planning?

What is the role of State Transmission Utility (STU) in developing transmission infrastructure for renewable energy projects?

Should the technical parameters of interconnections like voltage level, number of circuits, interconnection points etc be revisited?

So far, no standard renewable related standards are available in CEA Regulations. Should the connection standards and Grid Code be modified to accommodate wind energy sources?

What are the ideal transmission and wheeling charges, T&D losses and other charges for wind under current regulations?

At present, SERCs have exempted wind from intra-state ABT regime. How to link wind with UI mechanism and Intra-state ABT?

Is there a need to study the dynamic interaction between wind farms and power systems including effects on and, due to unit commitment, balancing and reserve capacities?

1 The Perspective Plan of grid-interactive wind power by the Ministry of New and Renewable Energy (MNRE) at the end of XI Plan is 10,500 MW and by the end of XIII Plan (2022) is 22,500 MW. 2 A (as on 31.02.2008) CE3 Overcoming Power Shortages,, Business Line, 13.05.2008

Table 1: Wind Potential and Policies introduced by State Governments

Item Maharashtra Rajasthan Tamil Nadu Gujarat Kerala Andhra Pradesh Karnataka West

Bengal Madhya Pradesh

Potential (MW) 3,650 5,400 5,500 9,675 875 8,275 6,620 450 5,500 Installed Capacity

(MW) 1,756 539 3,857 1,253 11 123 1,011 1 188

Wheeling

2% of energy + 5% Transmission Losses

10% of energy

5% of energy

4% of energy

5% of energy

2% of energy in addition to very high transmission charges

2% of energy

Rs.0.3/unit which would be revised time to time

2% of energy + Transmission charges per regulatory Commission

Banking 12 months 3 months 5% (12 months) - 9 Months

(Jun-Feb) 12 Months 2% per month for 12 months

6 months Not Allowed

Buy Back

Rs.3.50/kWh Escalation of Rs.0.15 per unit per year for 13 years from DOC of the project

Rs.3.59 per unit for Jaisalmer, Jodhpur, etc. and Rs.3.67 per unit for other districts (base year 2008-09)

Rs.2.90/kWh (Levelized)

Rs.3.37/kWh fixed for 20 years

Rs.3.14/kWh fixed for 20 years

Rs.3.37/kWh for FY 2004-05 w.e.f. 1.4.2004, for 5 years

Rs.3.40/kWh fixed for 10 years

To be decided on case to case with a cap of Rs.4/kWh

Rs.3.97 (with decrease if 7 paise up to 4th year) then fixed at Rs.3.30/kWh from 5th year onwards uniformly for 20 years (w.e.f. 11.6.2004)

Open Access Allowed Allowed Allowed Allowed Allowed Allowed Allowed Allowed Allowed

RPO

06-07 3% 07-08 4% 08-09 5% 09-10 6%

√ √ √ √ √ √ √ √

Reactive energy charges

25 paise per kVArh

5 paise per year w.e.f. 01/04/2006 with escalation of 5% per year

25 paise/kVARh up to 10% of net active power supplied & 50 paise per kVARh above 10%

10 paise per kVArh up to 10% of active power supplied & 20 paise per KVArh above 10%

Rs. 0.40 Per kVArh

10 paise per kVArh upto 10% of active power supplied & 25 paise per kVArh above 10%

- - 27 paise per kVArh

ROE adopted by SERC 16% pre tax - 17.63% pre tax 14% post tax

16% post tax with MAT at 7.5% on ROE

-

14% post tax with MAT at 10.1% on ROE

- 16% pre tax

Source: MNRE and CERC

Grid Interconnections: rethinking the cost sharing for transmission evacuation and upgrades

In India as in other countries, temporal and spatial variations in wind speed are for the most part, dependent on geography and spread across the states. Integrating a generation resource such as wind with its uncertainties requires a robust and flexible transmission infrastructure which is the primary responsibility of State Transmission Utilities (STU). However, due to the poor financial health of the STUs, they are often not in a position to invest the necessary capital for the required transmission upgrades. Therefore, some STUs are demanding prior payment for transmission augmentation carried out upstream of interconnection point. Grid upgrades and enhancements are needed for integrating planned large scale wind capacity. Without significant increases in the transmission capacity all the wind energy generated cannot be accommodated in the power system. This lack of sufficient transmission capacity acts as a dis-incentive that could result in less than expected additions in wind generation. Resolving this issue requires the involvement of state and central government entities, STUs, power plant developers and power purchasers. In such a forum, the need of introducing a better cost sharing formula that clearly outlines the process of cost recovery, determination of rate of return, the entities that are responsible for building the needed transmission (either utilities or private players) and, the process for allocating the cost of new transmission to loads and wind power plant owners, should be discussed and proper methodologies and processes and plans to increase transmission capacity formulated.

The Maharashtra Experience: Novel solution for socializing transmission infrastructure funding

Maharashtra has been the front runner in adopting innovative structures and schemes to develop and fund the evacuation infrastructure for renewable energy projects.

Maharashtra Electricity Regulatory Commission (MERC) has directed the STU to bear the cost of transmission lines and associated facilities downstream of the interconnection point. However, the developers have to provide interest free advance to STU for an amount equal to 50% of the cost of works carried out by the STU. The STU has to refund the amount in five equal installments. The commencing of installments starts one year after the date of commissioning of the project.

Government of Maharashtra has also devised a scheme of Green Energy Fund. A green cess at 4 paise per unit is levied on commercial and industrial consumers within state. The Green Energy Fund takings are exclusively used for funding the transmission system and other infrastructure requirements of renewable energy projects.

Transmission Planning: needs to be in tandem with Generation

With a low gestation period for wind based power plants, usually spanning from six months to a year, the corresponding transmission needed to evacuate that power, has to be planned ahead (since transmission takes a much longer time to be built) so that evacuation does not become a problem when the wind plants are built. Neither the CTU nor the STUs have traditionally included evacuation plans for renewable-based power as a part of their overall transmission planning. Resource constrained STUs are slow to invest in dedicated transmission systems due to the perceived low and/or uncertain utilization of these transmission lines caused by the inherent nature of relatively lower capacity factors for wind plants. This lack of planning and unwillingness to invest in renewable-power dedicated transmission lines could stall the growth in wind turbine installations. Further, a component of the evacuation problem can also be attributed to the rapid rise in the installed capacity as a result of both center and states tweaking policies to encourage capacity addition. At present, there are no planning criteria, processes and standards in transmission system operations and planning specifically

with regards to renewable capacity additions such as wind. One possible method to stimulate and facilitate transmission projects is by creating an entity such as a Renewable Energy Transmission Agency. This entity could facilitate development of renewable specific processes and standards for transmission interconnection and operation. In coordination with CTUs and STUs, this agency can conduct studies to plan and identify transmission projects, build (or cause to be built), operate and otherwise facilitate transmission corridors for power that evacuate power primarily from renewable sources. This agency could also be created as a part of the existing PowerGrid organization.

The Tamil Nadu Experience: Things have to worsen before they get better

Realizing the pace of growth and inability to develop the transmission systems, Tamil Nadu Electricity Board (TNEB) has been working with wind project developers for faster development of power evacuation infrastructure. The proactive support of TNEB to developers has resulted into high levels of growth.

To tackle the inadequate transmission planning, Tamil Nadu Electricity Board (TNEB) constituted a task force to monitor augmentation of transmission infrastructure for wind energy. Noting that the prime locations for wind mills had become congested, MNRE made efforts to develop alternative locations. Wind farms in areas that didn’t have inadequate infrastructure were not approved by TNEB until transmission and distribution facilities were upgraded. The wind developers were asked to give their projections for the next couple of years to streamline the development of transmission system. TNERC in its Order directed STU in the state to create necessary infrastructure.

Grid Integration: lacks grid codes that incorporate the behavior of renewable generation

One of the major constraints in harnessing the full wind potential is the inability of the grid to absorb the power generated by all the wind turbines simultaneously. This is a problem because wind farms are located in remote areas, with limited transmission capacity and limited local power demand. Moreover, most of wind power plants are small in size and hence are connected into the distribution network with distribution licensees holding the primary responsibility to evacuate wind power. In some cases where significant load is present closer to the wind power plants, increased renewable power injection at distribution level will relieve stress on transmission network to a certain extent. However, as the size of wind power plants get larger, they need to be connected to the transmission network to supply load in other areas. In remote areas where large wind farms are planned the existing transmission grid is limited and at a lower voltage level. Thus, transmission over long distances to load centers and at lower voltage levels could result in higher technical losses and potential system instability in case of faults or other problems. These issues can be addressed by modifying the existing connection standards and grid codes in addition to upgrading the transmission network.

Currently, no standard renewable related provisions are available in CEA Regulations. The existing grid codes needs to be modified to provide standards for system stability and reliability. These standards should include the impact of significant penetration of renewable based generation such as wind, on the operation of the transmission network. One of the challenges in reforming grid codes to account for renewable generation is in the contribution of wind generation to faults on the network. For example, if all wind generation trips off the grid immediately during a fault, the system may lose its capability for a quick recovery. Therefore, one requirement from the wind turbines could be to stay on the grid during a low-voltage event for a period of time before eventually disconnecting from the grid. Other challenges include provision of sufficient reactive power by the wind turbines and, maintaining voltage profiles at the point of interconnection.

Thus, grid codes that include standards for wind integration are required to ensure that wind farms do not adversely affect the power system operation with respect to security of supply, reliability of the grid and power quality of the injected power.

SERC Regulations: still at cross roads

The grid connected renewable generation has been accorded the major focus area of Ministry of New and Renewable Energy (MNRE). Further, the Electricity Act mandates SERCs to assist renewable generation in terms of obtaining grid connectivity and promotion of sale of electricity. But regulations across SERCs regarding renewable generation grid connections and transmission charges are not yet uniform, sometimes vague, and are still at the nascent stage.

MNRE guidelines stipulate 2% of energy as wheeling charges for captive and third party sale transactions. However, in reality, the costs involved in wheeling of energy are higher than this and fall in range of 2% to 10% of energy4. The lower end of the range of charges is primarily attributed to the promotional nature of policies. Lowering and standardization of wheeling costs across the country will incent and hence increase renewable and other forms of captive and third party generation.

Wind generation is also facing additional hurdles to open access because of reluctance by the host Discom to allow merchant generation located within its service territory to sell power outside the state to customers that are willing to pay higher rates. In some states it is being insisted that the host Discom has the first right of refusal on sale of power by a renewable captive facility. This message is often conveyed indirectly through delayed responses, complex and time-consuming procedural formalities and high wheeling charges. CERC should set an example by enacting regulations that give preferential treatment to renewable sources for arranging inter-state open access. Clear policies and their enforcement, clarity on the role of regulator along with an independent management of the State Load Despatch Center (SLDC) are some of the major drivers that are required to overcome the access hurdles faced by wind and other captive generation.

Looking Beyond: Innovating towards a better frame work

Due to their inherent variability and intermittence, wind power plants have different generation characteristics than conventional sources of energy. These generation characteristics could cause changes in cost of: unit commitment (to consider wind speed uncertainty), frequency regulation (needed to compensate for sudden changes in wind speeds) and, provision of ancillary services (such as voltage support, regulation and load following).

4 Table 1 and Ministry of New and Renewable Energy (MNRE)

The Over Voltage Experience: Peculiarity observed in the Indian Grid

Unlike other countries where low voltages are problem, high voltages is the feature of wind generation in India. This is because wind speeds are at their highest during the monsoon season when hydro generation is also at its highest and load is also relatively low. This creates issues such as dispatch of conventional generation during off-peak vs on-peak. Wind power needs to be curtailed to ensure that the thermal generation stays on line during off-peak so that they are available on-peak. The pronounced effect of this can be seen in Tamil Nadu where due to lack of inter-state transmission, surplus power cannot be transferred to possibly the Western or Northern grids.

To handle such situations, special counter voltage control measures and Grid Code requirements are needed. Further, protocols are needed to be in place to allow the output to be curtailed when necessary.

Short term forecasting for the day ahead and hour ahead power system operation and dispatch is critical for any market for reliable power supply and to minimize the cost of power supply. Therefore, it is important to ensure that the best available forecast of wind speeds in both day ahead and hour ahead time intervals is utilized. For enabling increased integration of wind based power generation into the grid, incorporation of wind energy forecasts by power system operators in their day ahead and hour ahead dispatch schedules should be made a requirement. It is possible to achieve long-term significant reduction power production cost by using accurate forecasts of wind speed. The cost of infrastructure and equipment needed to provide such forecasts will be justified by the savings in cost of electricity over the long term. In order to maximize benefits and minimize cost impacts, utilities incorporating wind energy in their resources must learn to accommodate the uncertainty and variability of wind energy in their operational and planning practices.

Thus, the CTU, STUs, RLDCs and SLDCs should have in place the infrastructure for wind based power plants that would enable them to (a) monitor and if possible, control the amount of wind power output from each wind farm and, (b) forecast with the maximum possible accuracy, the amount of wind power that would be available over the desired operating interval. Such an infrastructure would assist in developing long term generation and transmission resource plans with successful integration of renewable based generation into the system without compromising system operational efficiency, reliability and security.

Conclusion

The full utilization of wind potential in a region or a country to generate electricity depends on solving transmission evacuation issues, accommodating wind generation in the power system without negative bias (such as high wheeling charges and procedural bottlenecks) and, developing renewable-friendly grid codes (without degrading system reliability) in addition to providing the necessary financial and policy incentives. Several SERCs have already taken important and proactive steps towards formulating and implementing solutions that could stimulate the growth of wind generation. However, the pace and extent to which these policies and reforms could be implemented still remains uncertain. Wind energy can bring considerable benefits to utilities in terms of clean, cost effective energy, long-term price stability, and increase in system capacity. Wind based power generation is expected to grow in India as in other parts of the World. To ensure full exploitation of the existing wind potential in India, transmission limitation issues and other operational constraints identified in this article, must be addressed with suitable policies, mandates and standards as soon as possible.

Short Bios of Authors: Venkat Banunarayanan Dr. Banunarayanan is a Senior Manager in ICF’s Transmission Services Group within the Whole Power Practice where he analyzes issues relating to power generation, transmission and ancillary services valuation, transmission congestion and energy and capacity markets.

Prior to joining ICF Dr. Banunarayanan was employed at General Electric in their Energy division. During his 10 year tenure at GE, Dr. Banunarayanan developed expertise in generation asset evaluation, transmission congestion analysis, energy and capacity

price forecasts, market power considerations, impact of emerging environmental rules on power plants and power system reliability, in all regions of the U.S. He has worked with a variety of clients ranging from internal GE Energy divisions, utilities, government organizations such as the DOE and finance firms. His international experience includes study of power tariffs imposed by companies in India, Japan, Norway and Germany. He has also been involved in developing production simulation models of UK, Australia, Germany, India, China, Mexico and Canada power systems. Dr. Banunarayanan’s consulting background includes a two year overseas assignment in India where he was responsible for the startup and operation of the Indian arm of GE Energy’s consulting division.

Dr. Banunarayanan holds a Ph.D. degree and a M.S. degree in Electrical Engineering. His research work at North Carolina State University focused on quantifying and allocating transmission/ancillary services such as real power losses and reactive power support, to power transactions in the new electricity market using load flow based methods. His work has been published in IEEE Transactions in Power Systems and also presented in conferences such as CIGRE and North American Power Symposium. Dr. Banunarayanan is an expert user of GE-MAPSTM and has received training in power markets analysis, economics, finance and marketing.

Yasir Altaf Yasir Altaf is currently working as an energy analyst with ICF Consulting, Inc., with over 4 years of experience in energy economics and energy engineering issues. The most of his work has been in the areas of transmission studies and utility restructuring. His expertise includes power system modeling, transmission asset valuation, generation interconnection assessments, forecasting transmission Interface capabilities (ATCs and TTCs), Locational Marginal Prices, transmission congestion and losses and their effect on the plant dispatch and cost benefits in the US and Indian power markets. He also specializes in Load Flow Studies, Optimal Power Flow simulations, Contingency Analysis and Power System Stability Studies.