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					                Workshop

                    On


Power Reforms : Technological and Financial


               Organised By


   Indian Institute of Technology, Kanpur


                  On


      4 – 5 September 2003, at Kanpur
Impact of technology on the financial health of the power sector

                                                                                             R.K. Belapurkar,
                                                                                    Executive Director / BHEL

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BACKGROUND

        The technologies for providing clean and quality power at affordable as well as
remunerative levels have to be evolved keeping in view the efficiencies of fuel use and ever
increasing environmental concerns. The power equipment manufacturing industry has been
trying to cope with these challenges for over a century now. Rapid industrialisation during
the 20th century, led to a spurt in demand for power all over the world. The power plant
equipment manufacturing industry made technological advances to keep pace with this
requirement by utilising a variety of fuels.

       With the building up of “Spinning reserves ” in the developed countries over the
years, the market for power generation equipment has shifted from the developed world to
the developing countries to meet the growing demand for electric power in these regions.

        Today the suppliers of power generating equipment and its users - the utilities, are
under tremendous pressure for supplying power to consumers at competitive prices. In fact
in the developed world the power is being traded like any other commodity where cost and
quality of power drive the consumer choice. However, this is not the case in developing
world where the demand far outstrips the supply.

       The principal uncertainty in global energy supply prospects is cost. Advances in
technology and productivity are driving production and transportation costs lower, but the
depletion of the cheapest reserves and the growing distances over which new supplies must
be transported are in many cases, pushing delivered energy costs up. The other factor in
the energy-supply picture is the price. Energy prices play a major role in determining the
timing and amount of investment that goes into expanding energy supply capacity.

         Financing :

       Financing for the development of energy infrastructure is a major challenge. Massive
investment in the production, transformation, transportation and distribution of energy will be
needed to meet the growing demand.The bulk of this investment is needed in the
developing countries. Mobilising this investment in a timely fashion will require the lowering
of regulatory and market barriers.

         Policy initiatives :

        Global energy supply trends have major implications for the governments of producer
and consumer countries alike. Addressing supply – security issues by creating appropriate
regulatory and market frameworks and in encouraging technology development and
deployment shall confront the Governments. Harmonisation of trade and tariff rules will be
especially important to cross border pipeline projects. Research and development will be
vital to reducing energy – supply costs.
       Environmental Concerns :

       The most uncertain factor affecting future fuel supply is the impact of environmental
policies on demand. Technology is expected to drive continuing improvements in efficiency
and reductions in the cost of fossil fuel extraction and preparation. The extent to which
governments encourage technologies that generate low or zero carbon emissions and the
costs involved are key issues in the long term. How much this will cost is very uncertain.

ENERGY SCENARIO - DEVELOPING COUNTRIES

       In the next 25 years, according to some estimates, as much additional power
generating capacity will be added around the world as was built in the entire past century,
with China, India and the Pacific Rim Countries accounting for a major share of this
addition. China’s generating capacity may increase from 315,000 MW to more than 500,000
MW by 2010. India is planning 100,000 MW between 2002 to 2012. Malaysia is likely to add
10,000 MW in 10 years, Philippines 10,000 MW by 2009 and other South East Asian
countries like Taiwan, Thailand, Indonesia etc all planning substantial capacity additions.

POWER GENERATION- THE INDIAN SCENARIO

          Demand for electric power is an index of growth in a developing economy.
Notwithstanding the fact that the total installed generating capacity in India has increased
substantially, the demand still outstrips generation. While in the recent past the annual
capacity additions have remained around 3500 MW due to constraints on resources and
investment flows, to make power available on demand (zero deficit) it is estimated by the
Government of India to add 100,000 MW in the next 10 years i.e. by the year 2012. India is
one of the very few developing countries, which produces a full range of electric power
generation and transmission equipment. In fact, the history and growth of BHEL
symbolically represents the overall growth pattern of this industry in our country. In this
regard, power plant equipment manufacturers such as my company i.e. BHEL besides
utilities and especially the national transmission and distribution networks have a major role
to play.

FUTURE FUEL OPTIONS FOR POWER GENERATION

        Globally, the future fuel options will be based on three broad categories viz . fossil
fuels, nuclear energy and the renewable sources. Choice and mix of fuel will depend mostly
on the local conditions of availability, cost of transportation, environmental considerations
and costs of production. No credible energy strategy can realistically postulate that the world
is going to change its energy mix dramatically for a considerable period into the 21st century.
Coal is a very important component of our energy future and because it is, it will be a very
important part of our forthcoming energy strategy. Coal is where our significant capacity
addition is targeted. Natural gas will also play an important role with substantial increase in
its use in the regions where the same is available as cleaner means of energy mainly for
meeting peak load conditions. Globally, gas reserves are sufficient to meet the demand for
next several decades in the long term, however, large-scale fuel switching from coal to gas
does not seem optimistic even at the global scale. Oil is likely to continue as an energy
source specially for standby or peaking plants. With a major thrust propounded by the Prime
Minister, Hydro power is expected to get an acceleration, particularly the North Eastern
Region. Nuclear fuels like uranium will find its application only in a limited way.
        The resource base of the renewable energies, particularly solar and wind, is so
immense that they could supply more energy than the world demand today once there are
technologies in place which can harness these economically. The fuel mix in each region
will drive the technology of the power plant equipment to be used for power generation.

ENERGY TECHNOLOGIES OF 21st CENTURY

Generation

        As world energy consumption rises, advances in energy technologies are taking
place in clean power generation and efficiency. Global trends in pollution free and high
efficient technologies indicate that the following technologies will dominate the generation
scene in 21st Century in addition to conventional fossil fuel based power plants, which can
be broadly classified in three categories namely :

a) Technologies substantially developed

·   Super Critical Thermal Power Plants
·   Coal based combined cycle plants
              -Integrated Coal Gasification Combined Cycle (IGCC)
              -Pressurised Fluidised Bed Combustor (PFBC)
·       Advanced Gas Turbines based power plants
·   Nuclear Power Generation with fast breeder technologies.


    b) Developing Technologies
    ·     Fuel Cells
    ·     Micro Turbines
    ·     Renewable energy sources like Wind Energy and Solar Photo Voltaic.


    c) Futuristic Technologies

    ·        Fusion Power
    ·        Geo-thermal, wave/ tidal etc.

SUPER CRITICAL THERMAL POWER PLANTS

       With increased temperatures and pressures, Supercritical boilers besides having
higher efficiency, also respond better to load changes, and in addition reduce emission of
pollutant green house gases like CO2, SoX, NoX and particulate matter.
       Present day efficiency of new power plants with high steam conditions even exceeds
43%. The main thrust has been in the development of materials to withstand higher
temperatures in the range of 540C to 650C. In the area of steam turbines, latest
developments are towards use of improved blading, reduction of cylinders from 3 to 2 and
even to single cylinder to reduce cycle times in manufacturing, erection and commissioning.
 However, cost of coal would drive this technology to its economical advantage.
COAL BASED COMBINED CYCLE PLANTS

       In India coal shall continue to stay as primary energy source during the 21st Century,
since the country is blessed with abundant coal reserves. The Indian coal also has high ash
content besides abrasive silica. Therefore due to its obvious effects on the environment, to
maintain low emissions of sulfur oxides and carbon dioxide, better technologies, with higher
conversion efficiency are required. The international trend is towards advanced coal fired
power generating systems and clean coal technologies like:

        - Integrated Coal Gasification Combined Cycle (IGCC) power generation for clean
coal usage. Overall efficiency of an IGCC plant will be about 3-5% higher than the
conventional Rankine cycle for identical capacity. For high ash Indian coals, with ash fusion
temperature around 14000C, fluidized bed gasification will be techno-economically more
appropriate and can be expected to be the viable technology for 21 st century. Based on this
experience, BHEL has plans to set up a 100 MW coal based IGCC demonstration plant with
assistance from Govt. of India. With improved efficiency,CO 2 which accounts for half of the
total green house emission can be directly reduced. BHEL has developed low NOx Gas
Turbine burner which is already a commercial product. Since the incidence of Sulphur in
Indian coals is generally low, SOx emission will also be well within the environmental
regulation.

       - Pressurized Fluidized Bed Combustion (PFBC) power generation emphasizing
both sulphur removal from furnace and improved efficiency. Efficiency levels of PFBC
based power plant will be around 2-3% less than IGCC. Reduction of sulphur emissions
during combustion can be achieved by adding limestone to the bed materials. The main
technological challenge in PFBC technology is the cleaning of hot gases.

However, economics of power generation have still to mature for these technologies.

ADVANCED GAS TURBINES

       Currently Gas Turbines of sizes up to 160 MW are in use in the country. However
advanced class gas turbines have become a leading source of power generation and will
take further strides in the coming years with increased ratings through improved metallurgy,
protective coatings and effective cooling methods, significant improvements in efficiency of
the order of nearly 60% coupled with lower emissions etc. through improvements.

      These are versatile in terms of using a wide array of fuels such as natural gas, coke
oven gas, refinery gas, naphtha, distillate, kerosene, etc.

NUCLEAR POWER GENERATION

       The Nuclear Power Corporation (NPC), has drawn a Vision to attain 20,000 MW by
2020. There is a need to evolve fool proof safety measures, particularly after the accidents
in technologically advanced countries like USA, Russia and more recently in Japan.
RENOVATION & MODERNISATION

        The Power plants which have been set up prior to 90's were with technologies in
which rapid advancements have now taken place in terms of increased efficiencies and
producing cleaner and quality power. It is now required to retrofit the existing power plants
after necessary studies with user friendly and accurate controls, energy efficient systems
and pollution control devices. In addition life extension of the older plants should also be
undertaken where the costs are expected to be about one-third of a new plant.
Central and State utilities besides private sector would be compelled to look at this option to
quickly benefit from the low cost capacity and efficiency improvement programme, which is
likely to be unleashed from this source. With the thrust by the Government of India for
funding R&M programmes at concessional interest rates, a number of RLA studies have
been initiated and these are being taken up rapidly for implementation.

FUEL CELLS

       Fuel Cells are electrochemical energy converters and have long been recognized as
having excellent features such as high efficient energy conversion, low carbon dioxide
emission and potential application to both small and large-scale plants. Of many types of
fuel cells mainly characterised according to the electrolyte use, Phosphoric Acid Fuel Cells
(PAFC), Molten Carbonate Fuel Cells (MCFC), Solid Oxide Fuel Cells (SOFC) and Proton
Exchange Membrane Fuel Cells (PEMFC) find application for power generation.
Developments are rapidly taking place in the world led by Japan and USA.

      In India, BHEL has been leading the R&D efforts in PAFC and has successfully
developed and demonstrated 1 kW and 5 kW PAFC power modules in 1991 and 1995
respectively at a chlor-alkali industry. Currently, with MNES support, 50 kW PAFC power
module is in advanced stage of development and performance evaluation is in progress for
a 200 kW PAFC power plant, It is expected that BHEL will be in a position to design and
supply higher capacity fuel cells in near future.

     This technology is likely to find commercialization in the next few years provided it is
adequately supported by the respective Governments of the world.

MICRO TURBINES

Distributed generation (DG) technologies have the greatest potential in areas where there
 is no local utility or where power generation is unreliable or highly priced. Mainly because
 of lower capital cost, micro turbines hold the most promise of all DG technologies for
 application today with very high growth projections. Microturbines are approaching
 threshold of economic viability and efficiencies approaching 30%. Even though the capital
 cost for Microturbines is higher, it can be made up in more reliable performance and lower
 maintenance costs over the unit’s lifetime.

RENEWABLE ENERGY SOURCES

           The clean energy sources such as solar, wind, tidal wave, ocean thermal,
geothermal, hydrogen etc. are almost unlimited in amount, besides being environmentally
friendly. However, excepting solar and wind power technology many of these options are still
in an experimental stage.
Wind Energy

       The thrust on wind energy in several countries like US, Germany, UK, Sweden,
Canada, India etc. can be traced to the oil crisis in early 70’s. These have been largely
driven by tax credits and renewable energy targets. In India, these machines were
introduced in 1986. Presently, the largest machine in India is rated 600kW while
internationally, 1.2MW and 1.5 MW machines are being introduced.

       India has the third largest installed capacity in the world after USA and West
Germany. As per MNES estimates, the capital cost of wind power station is around Rs. 4.0
Crores per MW and thus compares favourably with thermal power generation. India also
has a vast wind energy potential, estimated around 20,000 MW.

Solar Photo Voltaic Power

       Photo Voltaic Technology is well established as a reliable source of electricity in
small, scattered applications like telecommunications, data acquisition, micro wave repeater
stations, space power and medium rating grid-connectable systems. Worldwide sale of PV
systems reached 150MW in 1998, after a decade of growth at 15-30% per year.
Extrapolating to 2023-half a century from the 1973 oil crisis and postulating a steady growth
of 25%, photo voltaics is expected to add a total of 40,000MW of new generating capacity
by that year. PV industry in the United States anticipates that about 15% of the added
capacity needed each year in the early 2020s will be covered by Photo Voltaics.

       Where governments are subsidising the installation of PV arrays, growth may be
even faster. Japan has maintained a large and steady R&D effort for decades and recently
begun an initiative to install 5,000 MW of PV by 2010.

        BHEL with an established annual capacity of 2 MW has supplied PV systems for rural
radio telephones, street lighting, water pumping, railway distant signalling, microwave
repeater stations, gas detection and telemetry on offshore platforms etc. based on mono-
crystalline solar cell technology.

        Presently Photo Voltaics systems are not cost-effective and cannot compete with the
 conventional power generation sources. However, developments in this field like gallium
arsenide solar cells, thin film technologies etc., are expected to reduce the costs and PV
systems can find wider applications. This is one of the renewable energy sources which has
the greatest possibilities to become an alternate source of energy to conventional sources,
in the very near future.

       FUTURISTIC TECHNOLOGIES

FUSION POWER :

       The quest for attaining controlled fusion power in the laboratory has been described
as the most challenging scientific endeavour and the ultimate solution to the growing energy
needs of the world. Fusion energy has the advantages of inexpensive and practically
inexhaustible fuel (deuterium occurs in water and tritium can be processed from lithium)
besides absence of radioactive byproducts. The Indian fusion reactor, called ADITYA,
based on Tokomak technology, was commissioned in September 1989 at the Institute of
Plasma Research, Gandhinagar. However, several technological issues need be resolved
before fusion power can become commercially viable. The requirement of financial
resources has been put at around US $50 Billion in 20 years. However, its promising
potential, and environment friendliness make this a technology worth pursuing.


TRANSMISSION

An age old cliché “Energy saved is energy generated” aptly fits into the regimen of efficient
power transmission.
The planning of networks i.e. establishment of new lines, voltage levels, routing, location etc
are extremely important but are also guided by socio-economic considerations. One of the
major equipment in a transmission line is the transformer, which works with an efficiency of
over 99%.
With the use of Static VAR compensation systems (SVC), the required amount of reactive
power is generated under varying load and system conditions. It also helps improve voltage,
thereby further reducing losses. Series capacitors reduce transmission line impedances,
thereby allowing increased power flow in the lines. Thyristor controlled Series Compensation
(TCSC) provides control over the power flow, helping in better routing of power flow in the
interconnected grid , lowering the losses further.

A recent development is “Controlled Shunt Reactor (SCR) which replaces fixed shunt
reactors employed in HV system. A CSR remains in circuit only for the required duration,
while still being able to come back into circuit as soon as required. BHEL has installed a 50
MVAR CSR in a sub-station of PGCIL at Itarsi and the feedback is excellent. Phase shifting
transformers (PST), STATCOM (static compensator) which is a further refinement of SVC
scheme are also available to have better control of power flow. PST vary the phase angle
between two points in the line, thereby affecting the power flow on that line. STATCOM is a
static SVC which eliminates physical capacitors and reactors (as required in SVC) and helps
in better control characteristics and reduced losses.
All the above schemes are part of Flexible AC Transmission System (FACTS), which have
been made possible with the advent of power electronics and microprocessor based control
systems.
Sharing of power between surplus and deficit regions with differing time zones and different
peak load times effectively utilize the commercially available interconnection option of
HVDC.

765 KV transmission system has been on the anvil for some time now. Two lines have been
constructed but charged at only 400 KV. Another line is also under construction but will be
charged at 400 KV. A new 765 KV line is being taken up, which should further improve the
transmission system.

However, following technologies are being widely considered as future transmission options
in the world.

-   Superconducting Magnetic Energy Storage (SMES) – Size and expense are considered
    limiting factors. However, it is considered most appropriate and attractive for grid support
    applications.
-   Ultra Capacitors (UC) – This technology is in Laboratory research stage. Developments
    are promising and is likely to compete with established and mature technologies
DISTRIBUTION

Retail and demand side management

Real time metering and pricing through
       Smart meters
       WAN metering networks
       Smart appliances
       Advanced customer information system and billing

There are only 4 key needs of the consumer, namely:

-   Quality and Reliability of power supply
-   Accuracy of Bills
-   Easy payment mechanisms
-   Better complaint handling

Quality and Reliability of Power Supply

This requires system to be monitored on real time basis. Following IT applications can
address these
SCADA to start with and then progressing to distributed automation
GIS (geographical information system) for identifying area and equipments
CIS (customer information system) using internet, phones, call centers etc

Accuracy of Bills

Improved metering technologies by avoiding manual intervention and automating billing
processes

Payment Mechanisms

Electronic payments
Prepaid metering
Bar coding
Multiple payment locations

ISSUES FOR THE FUTURE

    An immediate issue that needs to be addressed is the faster development of
infrastructure sector in the country- essential for a reasonable GDP growth. Investment
flows in to the sectors like power, roads, ports, communications, information technology
need to be substantially augmented. Transmission & Distribution over the years has
become a weak link in the Indian power system. Greater emphasis is required in this area
so that quality power is available at economic rates at the delivery point. An essential pre-
requisite is to have a policy climate and frame-work that provides necessary incentives,
improves efficiency, provides better service to customers and addresses the concerns for a
clean environment and sustainable development. Restructuring of SEBs including
realisation of revenues from all sectors to meet the costs is required for attracting specially
the private investments as well as adding to their own capacities.

    The Electricity Act 2003 allows a number of consumers to come together to form group
cooperatives for own use and sell any surplus power through a trading mechanism. Such
stations could be established at pit-head or anywhere in the country, with the power being
wheeled to the consumers through the interstate and intra-state grids or through a dedicated
transmission line. This would provide incentive for setting up of small captives thereby
driving away the best paying industrial consumers from the SEBs fold due to cross
subsidization.

       The Research & Development spending has to be stepped up considerably to focus
on critical new energy technologies accelerating investments in the new devices and
channeling international energy assistance to developing countries. Globally, the
governments will need to set the rules, focussing on ways to ensure that environmental
costs are considered when economic decisions are made.

       A major global concern today is the need to generate clean and green energy. We
shall have to take immediate steps by inducting modern, highly efficient, pollution free
equipment and systems in all the existing as well as new plants.

       Presently the thermal/hydro mix ratio in India is 75 to 25 and hydro power meets the
peak load requirements of the grid. India has a vast hydro potential. Due to the high initial
capital costs as well as problems associated with obtaining environmental clearances and
long gestation periods, hydro projects do not receive the required priority. However the
associated benefits of low O&M costs, irrigation advantages and green power must get the
due weightage and a better thermal/hydro mix is an essential objective which must be
achieved.

       India’s requirement for power is immense requiring massive investments. The climate
of industrial liberalisation and the size of the potential market has resulted in the entry of a
number of global players. The expectation of customers is also changing. In this scenario, it
is essential that the Indian power industry becomes proactive and takes strategic initiatives
to develop and offer the best deal to customers. Fortunately, BHEL’s experience with
equipment that can be designed to the varying requirements of Indian coal and different
conditions of grid operation and experience of servicing diverse types of imported power
plant equipment has provided the company with a wealth of experience and confidence.
Along with capability to provide financing solutions, these strengths would provide the
required leverage for meeting growing needs of this sector, not only in India but also abroad.