Author: pmanifold@admin

There has been a continuous and growing interest for grid connected solar rooftops across India. This is primarily due to shift in consumer behaviour across all consumer categories (residential, industrial, commercial, etc.). The consumer is not just interested in consuming electricity but also producing it. By installing solar in their own premise, they can now produce and save on electricity bills. This prosumer behaviour is expected to rise further and attract more interest and investment on solar rooftop models.

Each state has its own load profile and installation capacity. Hence, to match up the industry trend, ensure grid stability, reduce environmental impact and power companies’ losses, the solar rooftop policy varies from state to state. In general, we cannot say which state has a best solar rooftop net metering policy as there are several factors which need to be considered while making a comparison.

In this blog, we have compared the solar rooftop policy of three states for residential consumers: Tamil Nadu, Andhra Pradesh, and Karnataka. The key assumptions considered for comparison are mentioned below,

The simulation result of above parameters for three states is shown below,

Conclusion:

• In residential solar rooftop with the 1kW system, Tamil Nadu has a favourable policy (payback less than 5 years) among the three states because of the subsidy provided by state government.
• For given power consumption level, the bill saving due of Andhra Pradesh consumer is higher than Karnataka. This is mainly due to the tariff slab difference between the two states.

Scenario Analysis 1: Average Monthly Consumption Vs Payback Period (In years)

Higher the monthly units consumed, higher the power tariff and hence the electricity bill. Therefore, every solar unit generated will deduct one unit from higher power tariff slab. Below is the scenario analysis performed to check the impact on payback period by changing the input parameter ‘monthly consumption’ and keeping other parameters same.

Conclusion: The payback period is dependent on consumer tariff slab, monthly power consumption, and solar generation capacity.

Scenario Analysis 2: Debt Equity Ratio Vs Annualized cost of solar generation over 25 years

Below table summarizes the impact of interest rate and debt portion on annualized cost of solar generation over 25 years.

Conclusion: The debt portion has a significant impact on annualized per unit cost of generation. The cost per unit may go up to 42% higher when compared with no debt situation.

Overall Remarks

In general, the payback period for 1kW solar rooftop system is 10 to 15 years without subsidy. Keeping in mind, MNRE priority on residential buildings is lower and high payback period, the adoption of grid connected solar rooftop may take more time to unlock the potential residential category promises. Hence, state government needs to step forward to provide financial assistance to meet their renewable targets by 2022.

Similar kind of analysis can also be extended to compare the solar rooftop policy for other consumer categories (commercial, industrial, etc.). In such case, the benefits like a central subsidy, 80% accelerated depreciation, MAT credits, etc. also needs to be properly accounted to determine the solar project feasibility and tax liabilities for project developers.

India has a momentum with National Solar Mission with a goal of 40 GW IN 2022 for rooftop and recently, the goal for solar is extended to 100 GW in 2022. India and France launched International Solar Alliance to boost solar energy in 121 countries with an aim to deliberate on a finance mechanism for the promotion of solar energy in member countries, crowd-funding and technology transfer.

India’s present rooftop solar installed capacity is 1.9 GW which is 10% of total installed capacity of solar energy. Indian rooftop solar market is in nascent stage but government has an ambitious target of 15 GW by 2022. To add, several banks, including the State Bank of India (SBI) and Punjab National Bank, have committed to providing financing support to rooftop solar projects.

The World Bank announced a $625 million loan to SBI to provide discounted finance for rooftop solar installations on factories and institutions.

The environmental profile of rooftop solar is impressive compared to other renewable energy sources. Solar panels generate electricity with no air or carbon pollution, no ash or other waste products, and no inputs other than sunlight. Individuals and businesses have been attracted not just to the environmental benefits of solar power, but also to the ability to generate their own power.

Some of the major advantage of installing solar rooftop are:

• Cleaner source of energy
• Reduces imports of fossil fuel
• Reduces dependency on grid power
• Provides financial benefits as surplus energy produced is paid back (in the form of reduced electricity bill) by utility
• Reduces T&D losses

As renewable energy is gaining popularity, the solar industry is growing very fast. But there are also challenges related to it. Some of them are listed below.

• Variability and uncertainty of sunlight
• No specific central regulation for solar PV power quality in India. As a result, validating the power quality of solar PV differs from state to state.
• Massive exercise for DISCOM to keep check on power quality.
• Criticality in performance measurement of Rooftop solar and inverter
• No regulation for frequency response.
• Karnataka is the only state in India having mandate for reactive power support.
• No alternatives to meet contingencies of power flow.
• Absence of accurate forecasting mechanism

Integration of rooftop solar has considerable impact on the grid which can be divided into technical and commercial impacts as mentioned by experts in APQI Webinar on ‘Impact of solar net metering on grid stability and preparations that Discoms can undertake’

• Technical
  • Increases voltage rise, voltage imbalance and instability
  • Increases losses in the system and creates system protection issues
  • Stability of the system also hampers due to weather fluctuations.
  • Increases frequency fluctuation
• Commercial
  • Initial installation cost is very high
  • Consumer is already sensitive and injection of solar system increases it

To overcome all the problems and make system more reliable and efficient, Discom has a vital role to play. Some of the major steps that DISCOM should undertake are as follows.

• Participate from project development, installation and O&M stage for RTS.
• Be proactive and consider RTS as a tool for providing supply
• Act more like system operator and not network maintainer and power purchaser
• Be brought on board through a technical and financial support
• AMI should be used which enables accurate data gathering and establish two-way communication channel
• Smart meters should be used to mitigate several grid integration challenges like transients, flickers, voltage fluctuations etc.
• Energy Storage system (ESS) can be used which helps in proper demand supply management.
• Micro grid controllers should be used as it helps in management of solar variability and uncertainty.

Conclusion: One of the important aspect to reduce the impact of roof top solar integration is to think of protection system for reverse power flow as current protection system is designed for unidirectional power flow. Load flow study needs to be done so that deciding capacity of distribution transformer for rooftop solar system gets easier.

The successful implementation of net metering policy will be critical for solar roof-top to grow in commercial and industrial segment. Different steps are already being taken by government such as National Smart Grid Mission, National Energy Storage Mission is in planning stage.

Discoms must be brought on board through a technical and financial support package.  Policy interventions by MNRE such as offering rooftop solar power a higher Renewable Purchase Obligation (RPO) credit can incentivize the Discoms to fulfill more of their RPO requirement. Such steps will reduce the perceived investment risk associated with the sector. Its implementation and proper functioning will be the key to scale up roof top solar and achieve the target of 40GW by 2022.

Ref:

1. https://www.livemint.com/Industry/aOhc0bEziRHFuoR5ae03xO/Challenges-ahead-for-clean-energy.html
2. https://www.ucsusa.org/clean-energy/renewable-energy/rooftop-solar-panels-benefits-costs-policies#.Ws8sS8aB28U
3. http://www.solarquarter.com/index.php/perspectives/6845-key-challenges-in-managing-a-rooftop-solar-asset-portfolio-2

Authors:
Yamini Keche and Ashutosh Durselwar

Indian Power market has fast changed and further evolving post unbundling reforms. There is rapid emergence of various private/PPP models across Power Distribution. There is high attractiveness of the end B2C Power Distribution business, as it brings cash for all other businesses in the value chain. The recent surgence of Franchisee models in Distribution has raised the end-service delivery & price value expectations of the end-customers, which is putting more and more pressure on utilities to bring efficiencies and streamline their operations and overall IT.

pManifold team recently spoke to Mr. Ananth Chandramouli, Head – Energy & Utilities, Infosys to understand about their IT solutions Utility-in-a-box (UIB), an innovative cloud-based platform for Utilities. The below shared are author’s personal views and not to be associated with any of their company’s association.

Q1) Please elaborate Infosys’s Utility-in-Box (UIB) IT solution? (phase wise Modules implemented, current deployment stage (whether LIVE), key features, hardware requirements, team size for setup and regular running, business engagement model (Capex vs. Opex based), next planned add-ons, etc.)

A) 

• Infosys UIB is a cloud based solution suitable for Utilities and Distribution Franchisees (DFs). The complete platform including hardware, software, data centre etc. is hosted and managed by Infosys and available on “pay as you go” (opex) model to the Utilities/DFs. Only network connectivity at site and office infrastructure (PCs, printers etc.) has to be procured by the Utility/DF. Infosys has already done capital investment in the state of the art centralized IT infrastructure, which can be shared by multiple DFs/Utilities. This helps DFs in two ways.
  • First, the CAPEX cost for IT is converted into recurring OPEX cost; this not only provides cash outflow predictability but also reduces the debt/equity investment by DFs.
  • Second, this common infrastructure is designed to be used by multiple DFs hence the cost of hardware, software and services cost are apportioned amongst multiple users. This allows DFs to use this infrastructure at the fraction of the cost that they would have to shell out if they buy such systems at their own.
• UIB has pre-configured, field tested and optimized processes complying with Indian regulatory requirements so it is fast to implement and can be made up and running in about 3 months either in a big bang or phased manner depending on the readiness of the Utility/DF. This allows DFs to save substantial cost and time. It covers all key utility processes such as Connection Management (New Connection, Change of Name, Meter Shifting, Reconnection, Load Enhancement), Meter to Cash (Meter Reading, Tariff Administration, Billing, Collection), Revenue Assurance and Recovery (Disconnection and Dismantling, Vigilance), Meter Data Acquisition and Energy Audit (Meter Data Acquisition, Meter Data Management, Validation, Estimation and Energy Audit), Customer Care, Work Asset Management and Maintenance Management.
• UIB is Smart Grid ready and the next avatar of UIB will have even more features to help Utilities/DFs realize the vision of Smart Grid without making huge investments in IT. Few of these features are – AMI based centralized prepayment, Remote connect/disconnect, Demand Response etc.

Q2) What specific challenges, if any, you see that DF client faces, which impact the IT solution framework, its implementation approach and business engagement model?What further change or clarity that you believe the DF industry should bring for reducing gestation and expediting operations?

A)

• By implementing modern IT systems such as UIB, DFs can add immense value to the whole ecosystem by providing cost effective services to consumers e.g. through innovative pricing structure and modern ways  of monitoring system performance e.g. remote theft detection and disconnection.
• UIB can identify loss making areas and even suspicious cases by correlating metering, billing and collection data with system meter data and consumer smart meter data (if available). UIB can also help in remote connect/disconnect if this feature is supported by the meters in field. But all this would need involvement of licensee and regulator.
• Regulators have to allow DFs to offer different tariff structure in their area of operation, which would need support and approval from licensee. So there is need to evolve simple, clear and equitable regulatory regime for DFs. This will help expedite decision making by DFs and help in creating win-win situation for all stakeholders (Consumer, Utility and DF).

Q3) Share your specific experiences and challenges in rolling out first billing from new IT system.

A)

• Rolling out first bill from any new IT system is challenging and needs very detailed planning and meticulous execution. There are several aspects that one should consider while planning such transition.
  • Firstly, getting accurate data dump (consumer and billing) from legacy system could be challenging and should not be underestimated. Even after getting this data, sanitization, cleansing and back-filling missing data can take substantial time and effort. This may even require field level validation in some cases and use of customer indexing data (if available).
  • Secondly, there could be difference between bills generated from the new and the legacy system due to interpretation of some rules and regulations. Here a highly skilled team from DF and SI should verify the logic of both the systems and then decide between the right and wrong instead of trying to match the output of the new system with the legacy system.
  • Most importantly, the new system could create confusion and anxiety amongst consumers so change management for consumers should also be part of the plan. Consumers should be informed about the timing of this change through direct communications and through other channels, special crack teams should be deployed at all customer care offices to handle rush of customers and backup plan should be always ready. Thankfully, we have predefined templates and standard operating procedures (SOP) as part of UIB to manage this transition.

Q4) What customer side best services difference the new IT system will start bringing to DF? Any first results from UIB implementation already benchmarked with previous performance?

A)

• The most significant benefits for customers are enhanced convenience and transparency. Due to automation of business processes, service time for customer requests can be substantially reduced e.g. new connection can be released in 2-3 days in normal cases, payment updates happen in real-time avoiding any wrong billing or disconnections etc.
• Customers can get update on their requests/complaints anytime anywhere through call centre, web self-service portal or DF offices. Since UIB is a centralized system, customers get same information at all the touch points adding to the transparency and also helping build trust.
• UIB allows customers to manage all their interactions with DF such as bill payment, enquiries, applying for any services etc. through online self-service portal available on web and mobile devices thereby improving convenience.

Q5) How do you see pricing evolving for managed IT services within utilities and specially DF? (Many a times an IT Partner takes too many things on plate, while DF first needs only a good Billing and CRM solution. Does right incremental pricing will allow DF to harness best practices over time cost effectively, including adding GIS, SCADA, AMI, smart metering, etc?)

A)

• This is a very important point. DFs should choose IT solutions and do a phased adoption based on the expected business outcomes. As you rightly said, Billing, CRM and associated process should be targeted first, followed by asset management system. GIS, SCADA etc. can come later. However it’s important for DFs to prepare a clear roadmap for all these technologies along with the selected IT partner. This roadmap should consider several aspects e.g. Growth – Growth in number of customers either within DF or through acquisition of new DFs can alter the choice of technology.
• Diversification – The choice of promoters to enter into multiple utility services (electricity, water, gas) can have huge impact on the solution choice. Demographics and local situation – Local issues and other requirements of local people can also impact technology choice.
• A roadmap based on these blocks will allow DFs to absorb change in an incremental manner and also allow incremental pricing with the additional of new features and functionalities.

Q6) No one in India is offering GIS on cloud as Managed services, and it remains one critical component to rightly archive ‘Data’ and base Capex and O&M planning. What is your take?

A)

• No doubt GIS can help improve operational efficiency and planning but right now most of the DFs and Utilities are in a state where they have to set their house in order with basic IT systems such as CRM, billing, asset management etc.
• Once they are able to improve their performance by targeting “low hanging fruits” then they can move to GIS and other advanced systems for efficiency gains. However we do appreciate that DFs conduct customer indexing and asset mapping exercise before takeover and this data could be very helpful for a GIS implementation later on.
• DFs should initially maintain this data in asset management system and add GPS coordinates and other attributes to it whenever they plan to implement GIS. There would definitely be players in the market to offer such solutions on cloud when the market achieves this maturity.

Q7) Infosys earlier has supported in defining road-map for smarter Indian power distribution utilities. How much are we track on that, and where you see major divergence or lack?

A)

• We recommended a three step road-map over a period of 15 years for Indian power distribution sector to move to smart grid.
  • The realization of first step is happening through implementation of RAPDRP. Though the program is running a bit slow and there are some challenges in achieving complete benefits of R-APDRP but it’s a positive move in the right direction and will bear fruits in time to come.
  • We are also witnessing action on second step through 12 smart grid pilot projects supported by Ministry of Power. These pilot projects will definitely dovetail into larger smart grid projects over time.
  • Third step, which is about achieving a system that could support seamless and bidirectional flow of energy and data, will take some time to evolve. Overall things appear to be on track vis-à-vis the roadmap.

Some recent discussion on best practices at Linkedin Power Distribution Franchisee group have started discussing the role of Customers in helping reduce AT&C losses. Some key excerpts:

” …. I strongly feel that key factor for reduction of AT&C loss is very much linked with consumer care initiatives and winning consumer confidence. With the support of consumer group one can control the theft by providing new connections thr’ camps etc, one can initiate and execute loss reduction schemes in fast mode, one can get information about theft at particular location etc.” (Sr. utility professional with experience at one of biggest private utility) 

” …. The whole problem with Utilities & Consumers relationship whether the utility be govt controlled, pvt utilities, Joint venture or DF, is the major trust deficit. Any utility ownership change when it come to DF or complete Pvt, utilities starts its business with an approach that all consumers are stealing so should start with dent on it whereas consumers always thinks of Utilities as somebody there like a Police which is there to unnecessary harass consumers…” (Mgmt. Consultant in Utility domain) 

“…. Real work can be started somewhere after Oct and with this they will get around 5 months to get ready for next summer peak. In this 5 months, they can focus on low hanging fruits for reducing losses and enhancing recovery along with work of increasing confidence in consumers by starting customer centres, call centres etc. With this they will get almost 7 months to positive brand image before next summer peak or storm winds ( which are generally in last Feb early March) in Chambal River areas….” (Sr. utility professional with experience at one of biggest private utility)

“…. In common nature, the employees of MPSEB will do the maintenance work half heartedly. It results, the failure of Distribution Transformers, Power Transformers and Breskdowns of 33, 11KV & LT lines. So the DF’s Material department have to plan for procurement of materials and appointing Contractors for the above activities. Otherwise, the harassment from consumers will be faced by field officers on large scale”  (Sr. utility professional with experience at one of operating Distribution Franchisee)

The above comments bring interesting set of related questions:

1. Are forced customer behaviors (like theft, aggression, default, late payment) resulting from poor utility service quality and delivery, or inherent human behavior?
2. Can improved ‘Customer co-operation’ help utilities to expeditedly undertake AT&C loss reduction?

In Indian utilities, there is still not much appreciation of ‘Customer Engagement’ and its role to reduce ‘AT&C losses’, which is core for all Distribution reforms (including the emerging Distribution Franchisee business model). One definite reason for this overlook is the regulated and monopolistic utility market structure in our country.

There has always exist a gap between the Customer ‘perception’ (how he sees service delivered to him) and their ‘expectations’ (what he wants from the service). The wider the gap and more its overlooked, there will be increased occurrences of forced customer behaviors, which accounts for significant AT&C loss.

At pManifold, we see following connection as how AT&C losses can be influenced through improved ‘Customer Engagement’:

• AT&C loss reduction is core to Utility (Discom, full privatized or Distribution Franchisee) success
• Commercial losses form significant part of AT&C losses
• Commercial losses contributed by customer’s ‘forced behavior’
• Managing customer’s ‘Perception’ is key to reduce forced behaviors
• Building ‘positive brand image’ is necessary to manage Perception
• Listening to customers & Engaging them positively will build positive brand image
• This Customer Engagement will drive overall ‘Performance’ (Customer, Operational and Financial) enhancement through internal process refinement
• Continuity in Customer Engagement and Monitoring essential for effective utility Life Cycle Management

Your comments on our hypothesis are welcomed. One of our broad aim through this work with Utilities is to support a Customer driven Governance & Transformation in Indian utilities, and position Customer Engagement as one of the important tool for success of Franchisee business.

Source: Mr. Hemant Diddee, Heta DataIn

Operating Distribution Franchisee are of the opinion that there is need of strong technical due diligence of Distribution network and equipment to arrive at realistic estimation of investment needed in infrastructure & assets. Some recent discussion points in this regard are:

“…..Due-Diligence is of utmost important, as in case of Agra, the AT&C losses were of the magnitude of 51-52%(On paper) before Torrent Power took over the charge in April’10. However these losses has risen to 58% after takeover. Now, it is realized that the PVVNL’s baseline data were all wrong and holds no significance, the actual losses were of the order of 64-65%.” (Power DF LinkedIn Group Member)

“…..Spanco, Nagpur faced several infrastructure issues like Transformer Breakdown/Failure, Meters not working, etc. since the evaluation of assets and losses was done approximately and not accurately.” (See our earlier blog from Mr. Rajinder Kachroo, Business Head, Spanco)

The above comments raised an important question:

Why is it necessary to do a technical due diligence of Distribution network and equipment?

• To form a realistic Base line data: The data available or provided in RFPs is not very accurate because of the fluid nature of the distribution network. Example: The distribution network connected to a transformer will / may vary with time, and end of month / year reports have lacks foundation.
• Input on Technical losses: The technical losses are due to energy dissipated in the conductors and equipment used for transmission, transformation, sub- transmission and distribution of power. These technical losses are inherent in a system and can be reduced to an optimum level.
  • Losses in Sub-transmission system & step-down to distribution voltage level vary from 2% to 4.5%
  • Losses in Distribution lines and service connections vary from 3% to 7%.
• Input on Commercial losses: Theft and pilferage account forms a substantial part of the high commercial losses in India. Unmetered energy consumption, defective meters, errors in meter reading, etc also accounts for considerable portion of losses. Most of the methods employed by SEBs for estimating commercial losses are:
  • Load Factor based estimation
  • Estimation based on feeder wise theoretical calculation of losses
  • Estimation based on readings of meters installed at all the Distribution Transformers located on a feeder

However, above methods do not provide correct estimation of unmetered consumption.

Thus, a clear understanding on the magnitude of technical and commercial losses is the first step in the direction of reducing T&D losses.

In an effort to address the above, pManifold, with its partner base, has started a new service offering to perform ‘measurement base’ technical due diligence at the site. We will integrate other primary and secondary information from key opinion leaders, utility grounds team, socio-economic indicators, and other sources to help bidders estimate the capex, opex, true AT&C losses, load growth and other key bid parameters, with higher confidence.

Bhiwandi, Maharashtra saw the first successful pilot of Power Distribution Franchisee (DF), with Torrent Power Ltd. (TPL) as selected Franchisee and MSEDCL the original licensee.

The model adopted was Input based franchisee – with TPL agreeing to purchase power from MSEDCL at the input point to Bhiwandi circle at year-wise fixed input energy rate (Rs./kWh) for a contract period of 10 years and executing distribution responsibilities including metering, billing, revenue collection, repair, maintenance, O&M cost of network, consumer service, capital expenditure, allocating new connections etc.

With operations commenced from 26th Jan 2007, TPL has completed a successful milestone of 3 years of its operations with ATC loss reduction from 58% to now 18.5%.

Pre-DF & Post-DF Performance Benchmarking

The table below summarizes the status on Key Performance Indicators (KPI’s) in Pre & Post Distribution Franchisee.

Power Distribution Franchisee – Bhiwandi Performance Data (Source: From M.Kele’s presentation @ IIES)

Improved management, consumer & repair services, collection efficiency led to increase in revenue from Rs. 272 cr. in FY2007 to Rs. 618 cr. in FY2009. A Customer Satisfaction Survey conducted by Prayas Energy Group revealed that approximately 68% of the representative consumers felt satisfied with the quality of supply due to system improvements under Distribution Franchisee.

Key findings going forward with Distribution Franchisee

Prayas Energy Group, Pune published a research report reviewing performance of Bhiwandi Franchisee operations and brought some considerations going forward to scale the model

1. Improved quality of base line data is essential for to provide confidence to prospective bidders & expect rationale bidding. This will also increase accountability of licensee as well as of successful bidder for post franchisee performance.
2. To support smooth and effective change management from utility to Franchisee and raise confidence in end-consumers on franchisee operations, a strongly enforced regulatory framework of performance monitoring and audits are very essential including the correctness of new meters and billing.

Surely, Bhiwandi model has many things to be improved upon, but it has set an inital right tone in all stakeholders – utility, businesses and end-consumers about Distribution Franchisee. MSEDCL has repeated with improvements similar model in Nagpur, Jalgaon, Shil, Mumbra and Kalwa. Many other states like Uttar Pradesh, Madhya Pradesh, Haryana, Gujarat, etc are considering this option & are at different stages of execution. Our earlier blog has covered these opportunities.

Please share your opinion on performance metrics you perceive important for evaluating Power Distribution Franchisee through comments.

Post by: Kunjan Bagdia @ pManifold

There are ongoing lot of controversies about Power Distribution Franchisee (DF) applications and transparency of businesses running them. While some of them are definitely right and need to be intervened, but many of them are arising from missing information. Our earlier blog ‘Lack of good baseline data & reporting leads to irrational Power Franchisee bidding‘ discussed the impact of this missing information on all stakeholders connected to Distribution Franchisee.

A perspective ‘What’s there in Distribution Power Franchisee?‘ was shared earlier. In line to that and at an abstraction level of a model, DF is about driving Measurements & Analytics, establishing baseline and monitoring performance to excel baseline and set a new one. The transition to a private ownership is one approach, which is believed to yield faster results. But it is not impossible to drive efficiency through state utilities by strict enforcement of driving interventions based on Measurements and Analytics. R-APDRP is one such attempt, but the gaps in handling the associated change management has led to increasing questions on real impact of the scheme – ‘R-APDRP: Missing understanding on usability of technology by utility people‘

Below is a visualization of positives that could come in the Indian power distribution sector through deeper acceptance and embedding of philosophy of measurements, analytics and monitoring.

For Utility:

• Demonstrable benefits to the utilities in terms of increased revenue and setting on overall profit track.
• Better integration of R-APDRP funding for building IT infra and use real-time information of network and load consumption to exert better control in terms of load management and sourcing of power.
• With better signaling of load consumption and consolidation of information – improved load management techniques (DSM) and optimal sourcing techniques (including from external purchase or also Distributed Generation under DGBFD model) could be developed furthering utility profits.
• Satisfaction and delight of end-consumers

For End-consumers:

• Better quality and choice of power (conventional vs. renewables) at affordable tariffs for the end consumers.
• Easy self-consumption monitoring of electricity would drive awareness and efficiency in consumption
• An integrated model of DGBFD (Distributed Generation Based Franchisee for Electricity Distribution) could come live, changing the game for rural electrification in India.

Its above System benefits that drive passion in pManifold team to contribute to improving and scaling-up reforms in Indian Power Distribution sector.

Post by: Rahul Bagdia @ pManifold

The current approach to furnish baseline information for Distribution Franchisee (DF) RFP undertaken by the utility has following limitations:

1. Very high level indicators (on distribution losses; collection efficiencies; customer mix and connected load distribution, arrear’s for each consumer class, brief count of network assets) are shared with no systematic causal analysis to allow bidders to diagnose network’s status-quo for capital investment projection. This hampers calculated and informed bidding to happen.
2. With highly fragmented databases and lack of integrated measurements & good practices on utility’s side, the integrity of the top-level data provided is looked upon with doubt, thus making it highly risky investment for the bidders.
3. In lack of measurements and system level analysis before bidding, the utilities themselves do not have right judgment about the required expenditure and potential revenue increase the area could give under able DF project time. The arising low confidence let them compromise on various aspects of good contract design and post monitoring and not able to get full benefits of the DF model.
4. Under missing information, the contract is not aptly designed thereby risking future violation or controversies endangering end-customer interests. Some elements of existing poor design:
   • Competitive bidding done purely on the basis of one parameter only – the input rate (purchase price per unit of power from the utility valid for one full year), completely missing upon the aspect of innovations that each bidder could bring and sharing those benefits with the utility
   • The benchmarked input rates quoted by the utility is function of projected AT&C loss reductions over years only and does not account for utility’s own cost of supply and time plan of invested capital expenditure and arising benefits.
   • Subsidy benefit from government is passed on completely to the franchisee increasing their revenue share. Under this the DF will be incentivized to sell more power to the subsidized customers to increase its revenue share.
   • Since DF revenue is based upon number of units used/sold, it does not have incentive to take upon DSM or load management activities and signal appropriately to the utility to help him with optimal sourcing and also support lower/no load shedding in DF area
   • Both utility and bidders do not have clear projected returns from this engagement over the project years. A clear risk-return analysis for both involved parties does not exist.

It is suggested that the utility appoints a third party to do a good baseline data preparation – integrating real-time measurements and all secondary data already with the utility. This information could go as common information to all interested bidders (at separately charged fees by third party vendor or made inclusive of utility application fees) to avoid each of them trying to secure some insiders information through parallel means. In any case with winning bidder, utility takes up a parallel joint audit for validating baseline and it is just that this process could be done before the bidding.

pManifold’s Distribution Franchisee practice could offer such DF site-intelligence report to better estimate load growth, capex roll out plan, and investment viability.

Post by: Rahul Bagdia @ pManifold.