1 Distributed Generation Key Note address by Mr. T L Sankar Roundtable Conference on World Energy Council & NTPC August 16, 2005

2 Distributed Generation – What it is and what it isn’t ! Distributed generation is NOT A Regression to Old Technology and Ideals A salutation to an ideology A temporary solution for a passing phase of shortages Distributed generation IS The application of the latest available technology To meet the needs of a specified area To meet the needs of a specialised nature To fulfill the needs with the resources available With a cost effective, lasting solution

3 Drivers for Distributed Generation Locally available resource - Fuel Load available- not connectable to grid Quality of Power in sensitive processes Co-generation Needs Disposal of waste The quantum of available fuel is so less that transporting it to the generation site may not be economically feasibile Greenfield Industrial activities which are close to input resources, but far off from power distribution centre, necessitating generation close to resource Process Industries, Software Technology parks, where the quality and availability are of utmost importance Processes which mandate generation of power due to steam needs of the industry or where cogen is as a result of input for power produced..viz. sugar industry Processes where disposal of Industrial or Municipal solid waste is mandated and power generation is a natural result of this requirement.

4 Economics of DG u Capital cost u Fuel cost u Operation and maintenance costs u Efficiency u Operating mode (hours) / Energy profile support u Power quality u Siting / environmental and other costs

5 Is there a single answer? Cost-effectiveness is site-specific and has to be judged in light of each site's options and values for availability, reliability, risk tolerance etc.

6 Why is DG better? Is it cheaper? u Economics is not the only driver for DG u power quality and integrity are major drivers for DG - energy managers. u Emerging Technology DGs offer lower maintenance costs than conventional gen sets. u Improvement in environmental performance. u Operating hours - base load Vs. peak shaving / standby u Shelter from high volatility in electricity prices u Combining two energy needs u Combining energy and non energy needs

7 Overall DG costs will come down when : u Modular design - pre-built packages u Lower T&D investment u Built in stages as demand grows u Situational advantage, using various technologies u Gain from reduced T&D line losses Market Potential for DG

8 Where is DG to be used? u On-site generation - at point-of-use Residential, commercial, industrial or institutional end- users u Part of the electric grid to enhance reliability and power quality u As an alternative to T&D facility investment

9 Applications of DG to realize cost-effectiveness u Isolated from the grid u Supported by the grid: continuous DG operation with grid standby u Support the grid: DG provides supplemental power for quality, peak shaving, back-up, stand-by, etc. u Combinations of above Customer profile defines the optimal method of DG use

10 Issues u Installed costs ØEconomies of scale vs. Economies of production u Operations and maintenance (O&M) costs u Levelized cost -- busbar -vs- delivered Economic Issues u Lack of proven performance by newer technologies u Lack of coordination with utility system operation u Lack of comprehensive list of DG environmental and safety standards Technical Issues Simplified, Low Cost Interconnection Capability will see a spurt in Distributed Generation

11 Legislative/ Policy Support New Electricity Act has envisaged a definite role of the Distributed Generation. u Captive Power generation defined as power produced from a plant set up by any person to generate electricity primarily for its own use or for a group of users. u Section 4 of EA 2003 mandates a national policy permitting power generation from standalone systems based on new or conventional energy sources u Section 5 of EA 2003, suggest that a national policy should be formulated for Rural electrification through rural user association and panchayats and franchisees u Section 6of EA 2003 suggests that all efforts should be made to supply electricity to ALL areas including villages and hamlets. u Section 9 of EA 2003 permits a person to construct maintain and operate a captive generation plant and dedicated transmission lines u Section 9 (2) gives the right to any such person producing electricity from captive generating plant to open access for purposes of carrying electricity from Captive generating plant to the destination of its use.

12 DG is a necessity - TODAY u To ensure materialisation of the lofty objectives of Electricity Act 2003, u To fulfill the target of total electrification of all villages and hamlets by 2007, u To achieve the goal of electrifying all households by 2012 u To bring modernity and increase productivity in rural areas u To enhance the quality of life in its true sense u To give a meaning to democratic way of life DG IS A NECESSITY IN MANY AREAS.

13 Case Study - KSK Energy Ventures Resource Driven DG Models RVK is a 21 MW Natural Gas based Merchant Power Plant setup at Machilipatnam, Andhra Pradesh 21 MW - Natural Gas based power plant in Andhra Pradesh Gas to the project comes from an isolated gas well of ONGC. Prior to utilization of gas by RVK, the well was capped, as GAIL didn’t find it a quantity fit to market the 1,00,000 SCM/day of gas Project is resource driven and is running for over 4 years. Its an engine based plant so utilizes the modular approach to capacity building. MMS is a 11 MW Natural Gas based Group Captive Power Plant setup at Naranamangalam, Tamil Nadu 11 MW- Natural Gas based power plant in Tamil Nadu The Plant is group Captive that serves the requirement of HT Consumers, with Energy being heeled through TNEB Grid Utilises a meager 55,000 SCM/day of gas allocation

14 Case Study - KSK Energy Ventures Load driven DG Model KPCL is a 21 MW, LSHS based Independent Power Plant (IPP) setup at Kasargod, Kerala 21 MW LSHS based power plant – IPP to Kerala SEB The project is located in northern tip of Kerala, where there are no base load plants. Excellent example of load driven Distributed generation to cater to the regional needs of power for industries

15 Thanks !!