11-10-2012, 12:13 PM
Significance of Unscheduled Interchange Mechanism in the Indian
Electricity Supply Industry
Significance of Unscheduled.pdf (Size: 167.19 KB / Downloads: 58)
Abstract
The Unscheduled Mechanism (UI) enforced in the interstate sale-purchase of power has succeeded in transforming the fabric of the Indian power system operation in a manner unparallel. Nonetheless, categorizing the scheme as a disciplinary and penal mechanism would be like missing bull’s eye wide off the mark. UI rate is much more than what meets the eye. The paper argues that the mechanism is primarily a real-time balancing mechanism and an instrument to achieve economy and efficiency at the macro level.
INTRODUCTION
The two fundamental characteristics of power delivered to a customer are frequency and voltage. The short run supply-demand balance is indicated by frequency. Frequency is a ‘public good’ having large external effects. Stable operation of the interconnected power system, requires that frequency be maintained within a certain tolerance as defined by the standards adopted in a country.
REAL-TIME BALANCING
Power systems all over the world have to make provisions for achieving a balance between real time demand and supply. Power markets generally have control areas that are prohibited from deviating from scheduled interchange. Concept of Area Control Error (ACE) used to measure these instantaneous deviations takes into account of both frequency and net excess flow out of a control area. Control areas are required to keep their ACE near zero for maintaining a constant frequency in the interconnection. This model for load frequency control used in developed countries may be a good practice but given the techno-economic and socio-political realities prevailing in India, it is currently incompatible with Indian power system.
PRE-ABT SCENARIO
Power system of a country is a manifestation of its society. The indiscipline, lawlessness and absence of accountability prevailing in the Indian society were visible even in power system operation. Till recently regional power system operation was more frightening than an Alfred Hitchcock horror movie. Scholars could be excused for getting a shock of their lives by a mere glance at the daily frequency and voltage profile of any region. System operation was an endless ‘jihad’ to prevent the system from collapsing.
FLOATING FREQUENCY REGIME
Post ABT the power system in India is operated as loose power pools where the state utilities /generators have the liberty to deviate from their interchange schedules as long as the frequency remains within the IEGC specified band of 49.0 to 50.5 Hz. However several experts have expressed reservations on the floating frequency regime adopted in our country. They argue that frequency deviation/fluctuation is problematic for non-digital clocks and rotating machines especially steam turbines.
The IEC standards specify that the steam turbines have to perform satisfactorily within a tolerance of 49.0 to 50.5 Hz. This is precisely what the UI mechanism is trying to achieve in a simple and efficient manner. In the decentralized dispatch scenario, the UI mechanism provides the Automatic Generation Control (AGC) for the Indian electricity grids without employing a vast set of inputs, processing software and last mile connectivity to the generators. The whole design encourages the utilities to conserve when in surplus so as to provide for when in shortage and thus smoothening the frequency curve. Post ABT the operating frequency band has narrowed down considerably but still sharp fluctuations in frequency do persist. These fluctuations would get further smoothened out only after all the generators sincerely operate on free governor mode of operation as stipulated by IEGC. Switching in and switching out of hydro units, manual disconnection of large feeders to restrict over drawals and frequent interventions by the system operator results into wide variations in the interchange pattern of the utilities and grid frequency.
UI FOR MERIT ORDER AND EFFICIENCY
Economists consider perfect competition as an instrument to realize productive and allocative efficiency. A market is considered perfect only when every competitor is small enough to have no discernible influence against the “invisible hand” of the market. This implies that every player in a perfectly competitive market is aware of the market condition and is a price taker.
The UI mechanism adopted in India tries to fulfill that design requirement in a rather unconventional manner. Every utility is aware of the UI vector ex ante and in real time (perfect information); the UI rate applies to all inter utility transactions at the regional level (homogeneity); there are no contracts to be signed, no access charges fees; no transmission charges; no losses applicable (no entry barriers); every utility big or small having some control over its generation or load is transformed into a formidable player in real time. All generators connected to the grid can contribute to the unscheduled flow of electricity, dramatically increasing the number of competitors that can serve any customer connected to the grid (atomicity).
POWER EXCHANGE AND UI MECHANISM
There seems to be some substance in the argument put forth by the proponents of Power Exchange in the country that the absence of an organised day ahead-market is one of the reasons for the lack of investor confidence in the Indian market. Bilateral trading is being used for increasing the availability of power for a load serving utility especially after the enactment of the short term open access regulations but the exorbitant transaction costs and lack of transparency in price setting are a big deterrent. (Transaction costs are the costs of negotiating, executing and enforcing payment for each purchase.) The setting up of the Power Exchange could provide another option for power procurement. It could promote further competition on the supply side as well as on the demand side by bringing all sellers and buyers together on a common marketplace with standardized contracts, bid formats, and trading procedures. This would set up a transparent price discovery mechanism in day ahead exactly as UI mechanism is doing in real-time.
CONCLUSION
The UI mechanism has been a good course correction for the Indian power market and therefore we need to take further steps to reinforce the gains. It is time we started planning for the next step in this initiative. There are other difficult jigsaw pieces that have to be placed rightly before we can entirely solve the Indian power sector puzzle. We need to revisit and probably redesign the transmission pricing and hydro tariff to make it more scientific and effective. Intra state ABT and open access are essential for getting a stronger demand side response. With the interconnection of the Northern and Central grid in near future we would need to reconsider the reactive tariff to suit the new circumstances. Thus a lot more need to be accomplished to realize the vision of power to all by 2012.