A Study on ‘Mechanisms for Coping with Power Outages’ 2009 24 November 2018 A Study on Mechanisms for Coping with Power Outages

Primary Research Summary An extensive study has been conducted in 21 cities across the country covering ~1500 respondents Geographical Coverage – 21 Cities Respondent Categories Number of Respondents Residential Users 647 Commercial Users 748 Industrial 65 Power Backup Equipment OEMs/Dealers 43 Power Utilities 8 Total 1511 Ludhiana Noida Gurgaon Delhi Kanpur Faridabad Lucknow Vadodra Bhopal Indore Rajkot Mumbai Navi Mumbai Pune Visakhapatnam Hyderabad Bangalore Mysore Chennai Coimbatore Madurai Cities covered for the study Source: UC Analysis 24 November 2018 A Study on Mechanisms for Coping with Power Outage

Parameters for Assessing Backup Power Cost To assess the power outage coping mechanisms and their related costs, we have analyzed multiple scenarios based on the following parameters Parameters Residential Users Commercial Users Monthly consumption is an outcome of income levels and size of household Varies from 0-100-200-400-600 Monthly consumption is an outcome of establishment size, business segment and income level Varies from 0-500-1500-4000 Average Monthly Consumption Depends upon severity of outage, frequency of outage, timing of outage and income levels Depends upon needs of the business, severity of outage, frequency of outage, income levels Usage of Backup Equipments Across cities, the tariff varies based on monthly consumption levels, connected load and type of connection (Residential vs. Commercial) Grid tariffs considered do not include state taxes and fuel adjustment charges Grid Power Tariff Slabs Type of Backup Used Depends predominantly on load/appliances to be run during outage followed by duration of outage Inverter (600 VA, 800 VA, 1400 VA) Generator (7.5 KVA, 15 KVA, 250 KVA) Size/Capacity of Backup Used Source: UC Analysis 24 November 2018 A Study on Mechanisms for Coping with Power Outage

Outage hours (per day) for peak season Power Backup Mechanism - Inverter Power Backup Mechanism - Inverter The premium for an 800 VA inverter ranges from Rs 0.67 to Rs 2.85; The battery capex accounts for a large portion of the premium Break-up of Premium Over Grid Power (For a 800 VA inverter) The cost of backup power can be split into its individual components Operating expenses This refers to the expense on the grid power that is used to charge the inverter batteries. This is thus constant irrespective of the average outage duration Battery maintenance This is a small component and reduces with increase in average outage as the expenses gets spread across a larger number of generated units Battery capex This is the largest expense component for backup power For a given number of batteries, this reduces with increase in average outage duration as the cost is spread over a larger number of units generated e.g. Battery capex cost per unit reduces from 1 hr outage to 3 hr outage as a single battery can suffice up to 3 hours However, with increase in number of batteries, this component adds to the cost of power per unit significantly (e.g. 2 batteries required instead of 1 for a 4 hour outage) Inverter capex This component reduces with increase in outage duration as the cost gets spread across a larger number of units generated Rs per unit Operating expenses AMC cost Battery capex Inverter capex Outage hours (per day) for peak season Source: UC Analysis 24 November 2018 A Study on Mechanisms for Coping with Power Outage

Outage hours (per day) for peak season Power Backup Mechanism - Generator The premium for a 15 KVA genset ranges from Rs 0.57 to Rs 3.38; The operating cost (fuel expense) accounts for a large portion of the premium Cost of back-up power w.r.t outage hours per day (For a 15 KVA Diesel Genset) The cost of backup power can be split into its individual components Operating expenses This refers to the expense on the diesel fuel This is the largest contributor to the cost of backup power Genset capex This component reduces with increase in average outage duration as the cost gets spread across a larger number of units generated Maintenance expenses Refers to regular servicing that is required once every 250 to 300 operating hours Also includes the overhauling expenses that are required after ~ 6000 hours for a mid size genset Cost of back-up power (in Rs per unit) Operating Expenses AMC cost Genset capex Outage hours (per day) for peak season Source: UC Analysis 24 November 2018 A Study on Mechanisms for Coping with Power Outage

Type of back up equipment Scenarios - Cost of Back up Power We have therefore modeled the cost of backup power for the following scenarios Scenario Type of User Scenarios Monthly Consumption (in Units) Type of back up equipment Equipment Load Rating 1a 200 Inverter 600 VA Residential 1 1b 400 Inverter 800 VA 1c 600 Inverter 1400 VA 2a 500 Inverter 800 VA 2b 1500 Inverter 1400 VA Commercial 2 2c 1500 Generator 7.5 kVA 2d 4000 Generator 15 kVA Scenarios explained in detail in this presentation Source: UC Analysis 24 November 2018 A Study on Mechanisms for Coping with Power Outage

Scenario – Cost of Backup Power - Residential Consumers in cities with outage pay a premium ranging from 17% to 79% over the grid power 1b Overall Cost Borne by Residential Consumers – 400 Units Monthly Consumption Rs./kWh ` Grid Power cost Grid Power cost for 24x7 supply Premium for using back up Outage trend Hrs/ day 1.5 2.5 0.7 2 2 5 5 1 2 7 3 4 2 2.5 2 5 3 2 2 2 Days/month 30 30 30 30 20 30 30 30 30 30 30 30 30 30 30 30 30 2 2 30 Duration of peak season (in months) 3 4 4 5 3 3 12 3 12 12 3 12 5 3 3 3 3 3 3 3 Source: Primary Research, UC analysis 24 November 2018 A Study on Mechanisms for Coping with Power Outage

Scenario – Cost of Backup Power - Residential The premium paid is highly correlated with the typical daily outage duration and the duration of the peak outage season 1b Premium Over Grid Power Borne by Residential Consumers – 400 Units Monthly Consumption Rs./kWh Premium borne for using back up Outage trend Hrs/ day 1.5 2.5 0.7 2 2 5 5 1 2 7 3 4 2 2.5 2 5 3 2 2 2 Days/month 30 30 30 30 20 30 30 30 30 30 30 30 30 30 30 30 30 2 2 30 Duration of peak season (in months) 3 4 4 5 3 3 12 3 12 12 3 12 5 3 3 3 3 3 3 3 Source: Primary Research, UC analysis 24 November 2018 A Study on Mechanisms for Coping with Power Outage

Scenario – Cost of Backup Power - Residential There is a 16 to 19% increase in premium owing to the opportunity loss on capital expense 1b Premium including Opportunity Loss on Capital Expense – 400 Units Monthly Consumption Premium for using back up Opportunity loss on capital expense Rs./kWh Outage trend Hrs/ day 1.5 2.5 0.7 2 2 5 5 1 2 7 3 4 2 2.5 2 5 3 2 2 2 Days/month 30 30 30 30 20 30 30 30 30 30 30 30 30 30 30 30 30 2 2 30 Duration of peak season (in months) 3 4 4 5 3 3 12 3 12 12 3 12 5 3 3 3 3 3 3 3 Source: Primary Research, UC analysis 24 November 2018 A Study on Mechanisms for Coping with Power Outage

Scenario – Cost of Backup Power - Commercial Consumers (using genset) in cities with outage pay a premium ranging from 11% to 149% over the grid power 2c Overall Cost Borne by Commercial Consumers – 1500 Units Monthly Consumption – with Genset Rs./kWh ` Grid Power cost Grid Power cost for 24x7 supply Premium for using back up Outage trend Hrs/ day 1.5 2.5 0.7 2 2 5 5 1 2 7 3 4 2 2.5 2 5 3 2 2 2 Days/month 30 30 30 30 20 30 30 30 30 30 30 30 30 30 30 30 30 2 2 30 Duration of peak season (in months) 3 4 4 5 3 3 12 3 12 12 3 12 5 3 3 3 3 3 3 3 Source: Primary Research, UC analysis 24 November 2018 A Study on Mechanisms for Coping with Power Outage

Scenario – Cost of Backup Power - Commercial The premium paid is highly correlated with the typical daily outage duration and the duration of the peak outage season 2c Premium Over Grid Power Borne by Commercial Consumers – 1500 Units Monthly Consumption Rs./kWh Premium borne for using back up Outage trend Hrs/ day 1.5 2.5 0.7 2 2 5 5 1 2 7 3 4 2 2.5 2 5 3 2 2 2 Days/month 30 30 30 30 20 30 30 30 30 30 30 30 30 30 30 30 30 2 2 30 Duration of peak season (in months) 3 4 4 5 3 3 12 3 12 12 3 12 5 3 3 3 3 3 3 3 Source: Primary Research, UC analysis 24 November 2018 A Study on Mechanisms for Coping with Power Outage

Scenario – Cost of Backup Power - Commercial There is a 12 to 14% increase in premium owing to the opportunity loss on capital expense 2c Premium including Opportunity Loss on Capital Expense – 1500 Units Monthly Consumption Rs./kWh Premium for using back up Opportunity loss on capital expense Outage trend Hrs/ day 1.5 2.5 0.7 2 2 5 5 1 2 7 3 4 2 2.5 2 5 3 2 2 2 Days/month 30 30 30 30 20 30 30 30 30 30 30 30 30 30 30 30 30 2 2 30 Duration of peak season (in months) 3 4 4 5 3 3 12 3 12 12 3 12 5 3 3 3 3 3 3 3 Source: Primary Research, UC analysis 24 November 2018 A Study on Mechanisms for Coping with Power Outage

Premium over the Grid Power (in Rs) Scenario – Cost of Backup Power Summary Residential consumers pay a premium ranging from 17% to132% while commercial consumers pay a premium ranging from 6% to 149% over the grid cost Premium Paid over Grid Rates Type of back up equipment Units consumed per month (kWh) Residential Inverter Inverter Commercial Generator Premium over the Grid Power (in Rs) Source: UC Analysis 24 November 2018 A Study on Mechanisms for Coping with Power Outage

Capital and Operating Expenses for Backup Power Generation ~ Rs 98,000 crore is estimated to have been invested in various power backup equipments with an additional ~Rs 30,000 crore per annum spent as operational expenses Capital Investments in Backup Power Equipment Annual Operational Expenses for Backup Power Generation Rs crore Rs. Crore Rs 98,011 crore Life of Equipment (in years) Rs 30,261 crore Battery Maintenance Expenses Operating Expense for Inverter Efficiency Losses Genset 15 Inverter and Battery Systems Residential and small commercial establishments have installed inverters with battery storage as a mechanism to provide power backup during outages The installed base of inverters can be estimated to be ~ 43 mn units This translates to an investment of ~ Rs 22,000 crore in inverters and another Rs 24,000 crore for the batteries used for storage Generator Sets Diesel generators are the most common type of generators used by mid to large commercial establishments as well as by industrial segments to cope with power outages This investment can be estimated to be ~ Rs 52,000 crore over the last 15 years Diesel Consumption An estimated 6.6 million metric tonnes of diesel was used for the purpose of power generation in 2007-08 This translates to ~ Rs 27,000 crore at the consumer level only as fuel expenses for generating backup power Inverter Efficiency Related Losses An inverter battery system has an efficiency loss factor associated which means that not all the grid power used up in charging a battery is actually available for usage during an outage This loss can be estimated to be Rs 1560 crore annually for the current installed base of inverters Battery 3 Expense on High Speed Diesel Consumption Inverter 8 Note: Annual Sales Values (2006-07) - Genset ~ Rs 5200 crore, Inverters ~ Rs 3634 crore, Batteries ~ 5033 crore Source: UC Analysis 24 November 2018 A Study on Mechanisms for Coping with Power Outage

Inverter System Efficiency CO2 Emissions Further, the usage of power backup equipment is environmentally damaging and results in an additional 1.9 million tonnes of CO2 release on a yearly basis CO2 Emissions because of Backup Equipment Usage Combination Inverter set Prevalence Inverter System Efficiency Inverter Battery 1 Branded High 70-80% 2 Local Medium 60-70% 3 Low 50-60% 4 40-50% Million Tonnes of CO2 Inverter Efficiency Loss related The inverter system has an efficiency loss factor associated which means that not all the grid power used up in charging is actually available for usage during an outage This means that the usage of inverters adds to the CO2 emissions to the extent of its efficiency loss This additional CO2 emissions can be estimated to be ~ 1.9 million tonnes annually based on the installed capacity of the inverter systems in the country Source: www.cea.ni~in, www.unfcc~int, UC Analysis 24 November 2018 A Study on Mechanisms for Coping with Power Outage