1. R&M OF THERMAL POWER PLANTS- A REGULATORY PERSPECTIVE Sukanta Gupta Deputy Chief (Engg) CERC 04.04.2016 4/4/2016CERC 1

2. 4/4/2016 CERC 2 Power Sector of India – A snap shot

3. Fuel-wise & Sector-wise Capacities Thermal201360.04 69.76 Coal175857.88 60.92 Gas24508.63 8.49 Diesel993.53 0.34 Hydro42703.42 14.79 Nuclear 5,780 2.00 Renewable38821.51 13.45 TOTAL288664.97 100.00 10/1/2016 CERC 3 Fuel wise break-up (MW) Sector wise break-up (MW) Total generation Till 31.3.2016-- 1107070.69MU (As on 31.03.2016, captive generation is not included in total) (Source-CEA)

4. 10/1/2016CERC 4 Energy Mix Energy Mix for Electricity Generation of India in Year 2013 (Actual) and in Year 2030 (Projected)

5. 10/1/2016CERC 5 Trend in power capacity additions during the Five Year plan periods:

6. 10/1/2016CERC 6 Power Supply Position (Energy & Peak) in February 2016 RegionEnergy (MU)Deficit (%) All India RequirementAvailability `Feb’’15`Feb’’16`Feb’’15`Feb’’16 79502887877749987317-2.5-1.7 Power (MW)Deficit (%) Peak DemandPeak Met `Feb’’15`Feb’’16`Feb’’15`Feb’’16 139380142146135201140346-3.0-1.3

7. Energy Efficient R&M (EE R&M) EE R&M along with Life Extension is an economical option for addressing the growing power demand As per Energy Mix up to 2030 coal fired steam turbine power plants shall play major role in meeting growing power demand. Execution of new power plants becoming more & more difficult as availability of fuel, land and water constraint. 60000 MW of aging capacity. 200/210 MW LMZ & KWU units and 500 MW KWU units reaching end of their life and needs R&M for LE. Prime candidates for extension of life with improvement in availability, reliability and environmental conditions. Govt. of India emphasised for R&M of about 50000 MW by the end of 12 th 5 Year Plan (2012-17) 10/1/2016CERC 7

8. R&M/LE Achievements 10/1/2016CERC 8 during 11th Plan (2007 – 12) R&M/LE works completed No. of UnitsCapacity (MW) Total7216146 during 12th Plan (up to 31.12.2015) Total27 (identified 135) 3192.26 (29367) (Source- CEA Quarterly Review of R&M Oct-Dec,2015) 9919338.26

9. Enabling Provisions in Government Policies National Electricity Policy Renovation and Modernization (R&M) 5.2.21 One of the major achievements of the power sector has been a significant increase in availability and plant load factor of thermal power stations specially over the last few years. Renovation and modernization for achieving higher efficiency levels needs to be pursued vigorously and all existing generation capacity should be brought to minimum acceptable standards. The Govt. of India is providing financial support for this purpose. 10/1/2016CERC 9 Source-CEA)

10. Enabling Provisions – contd….. 5.2.22 For projects performing below acceptable standards, R&M should be undertaken as per well-defined plans featuring necessary cost-benefit analysis. If economic operation does not appear feasible through R&M, then there may be no alternative to closure of such plants as the last resort. 5.2.23 In cases of plants with poor O&M record and persisting operational problems, alternative strategies including change of management may need to be considered so as to improve the efficiency to acceptable levels of these power stations 10/1/2016CERC 10

11. Enabling Provisions – contd….. Para 5(g) of Tariff Policy,2006 provides that Renovation and Modernisation Renovation and modernization (it shall not include periodic overhauls) for higher efficiency levels needs to be encouraged. A multi-year tariff (MYT) framework may be prescribed which should also cover capital investments necessary for renovation and modernization and an incentive framework to share the benefits of efficiency improvement between the utilities and the beneficiaries with reference to revised and specific performance norms to be fixed by the Appropriate Commission. Appropriate capital costs required for pre-determined efficiency gains and/or for sustenance of high level performance would need to be assessed by the Appropriate Commission. 10/1/2016CERC 11

12. R&M R&M is generally concurrent with major overhauls and can happen before the notional useful life but eventually must be done progressively. 10/1/2016CERC 12

13. 10/1/2016CERC 13 R&M with Life Extension R&M plan with definite life extension is a dicey concept, but for the purpose of taking loan and repayment, life extension has to be assessed in each case. It is more relevant for revival plan of neglected plants.

14. 10/1/2016CERC 14 Nature of R&M Owing to obsolescence, technological advancement, modernisation- For sustaining efficiency & performance level & may not contribute to significant capacity & efficiency improvements Arising out of change of laws, court/regulator’s order etc. eg. R&M in Singrauli, Ramagundam etc on environment and safety considerations- may not contribute to significant capacity & efficiency improvement For revival of old projects- Accompanied with significant capacity and efficiency improvement Giving rise to extended life of the unit/station beyond useful life- may contribute to marginal or substantial gains in capacity, performance and efficiency. Actual R&M is generally hybrid of above.

15. 10/1/2016CERC 15 Nature of Capex in R&M during notional useful life & beyond Continuous  Necessary to take care of obsolescence, ageing of parts & equipments, technological advancement, modernisation.  These could be relating to roads, buildings, hospitals, schools, club, batteries, computers, telecoms, additional pumps, instruments, tools, spares, air conditioners, fans, coolers, conveyors, relays etc.  There could be, as time passes, replacements with decapitalisation. With LE  R&M with definite life extension beyond notional useful life

16. Separate Provision made in CERC Tariff Regulations No separate provision in Tariff Regulations till 31.3.2009 Need based R&M expenditure allowed as a part of additional capital expenditure along with life extension Made a separate provision in 2009-14 Regulations For meeting expenditure for the purpose of extension of useful life beyond the normal useful life Alternative provision in the form of “Special Allowance” as Rs. Lakh/MW/year in lieu of R&M 10/1/2016CERC 16

17. 10/1/2016CERC 17 Provisions of R&M in CERC Tariff Regulations, 2014 Regulation 15. Renovation and Modernisation for extension of life after expiry of useful life of 25 years A Detailed Project Report giving complete scope & justification, Cost-benefit analysis, Estimated life extension from a reference date, Phasing of expenditure schedule of completion, Reference price level, Estimated completion cost including foreign component, if any. Deduction of accumulated depreciation recovered

18. 10/1/2016CERC 18 Renovation & Modernisation a “ Special Allowance” in lieu of R&M Regulation 16. Special AllowanceFor a coal based/lignite fired thermal generating station – Option to generator – For availing a special allowance instead of R&M – @ Rs. 7.5 lakh/MW/year in 2014-15 and – Thereafter, escalated @ 6.35% every year – Unit-wise – From the next financial year from the respective date of the completion of useful life of 25 years with reference to COD of Unit.

19. Why Special Allowance in lieu of R&M ? Benefits available from a power plant to customers Peak hour support and Energy Availability based Tariff (ABT) takes care of this principle. However, some fine-tuning is required in permitting maintenance expenditure for motivating the generator to continue operation of the plant after its rated useful life. Therefore, to incentivise generator Alternative provision of Special Allowance in Rs.lak/MW/year 10/1/2016CERC 19

20. How norms of 5 lakh/ MW/year in 2009-14 decided Poorly maintained plants like Tanda & Talcher TPS which were taken over by NTPC, the R&M expenditure is worked out as follows : 10/1/2016CERC 20 Name of StationTanda TPSTalcher TPS Capacity (MW)440460 Date of Take Over15.1.20001.4.1996 R&M expenditure up to 2006 229.06431.50 R&M in Rs. Lakh/MW/year 8.689.38

21. Norm of Special Allowance, contd… R&M expenditure is phased in 8-10 years. CEA R&M guidelines provide norm of Rs. 0.8 to 1.25 Crore/MW for plants with PLF < 40%, translates into Rs.8 to 12.5 lakh /MW over 10 year period. For a well maintained station, Rs. 5 lakh/MW/year would be reasonable. Considering the increase in R&M cost over a period of time, the Commission proposed to increase Special Allowance to Rs. 7.5 lakh/MW/year during Tariff Period 2014-19. 10/1/2016CERC 21

22. Case Study - 1 TANDA and TALCHAR TPS Both the stations were taken over by NTPC Ltd. from erstwhile UPSEB and OSEB. After taken over extensive R&M have been done on the requirement of systems and equipments. There was gradual improvement in the performance of TANDA and TALCHAR TPS with life extension after R&M. 10/1/2016CERC 22

23. 10/1/2016CERC 23 R&M in Tanda & Talcher TPS Name of StationTanda TPSTalcher TPS Capacity (MW)440460 Cost as on15.1.20001.4.1996 Admitted Capital Cost574.36340.18 R&M Expenditure Envisaged Ph-I &II437.00505.5 Ph-III229.00 Total R&M (Envisaged )666.00663.31 R&M in Rs. Crore/MW (Envisaged)1.511.44 R&M Expenditure up to 2014 (Admitted) 557.88687.20 R&M in Rs. Crore/MW (Admitted)1.271.49 Capital Cost as on 31.3.2014 1158.641001.59

24. 10/1/2016CERC 24 Gradual improvement in Operational Parameters due to R&M Tanda TPSTalcher TPSBadarpur TPS Capacity (MW) 440460705 PLF 21.5980.93 (2015- 16) 38.3093.20 (2015- 16) 31.9436.22 (2015- 16) Highest PLF Achieved 92.6194.2289.12 All India PLF (%) 62.13 (2015-16 till Feb.) SHR (kcal/kWh) 37542732 (2750) 36942851 (2850) 34352749 (2750) APC (%) 19.7311.52 (12.00) 12.9310.56 (10.50) 12.128.76 (8.50) SFC (ml/kWh) 38.950.7 (0.5) 10.670.52 (0.5) 26.10 0.81 (0.5)

25. 10/1/2016CERC 25 Case Study -2 (KBUNL) Kanti Bijlee TPS Capacity (MW) 110 PLF 35.0080.05 (2014-15) SHR (kcal/kWh) 48003087 APC (%) 14.0011.89 SFC (ml/kWh) 8.3873.23 Gradual improvement in Operational Parameters of Unit No.1 (110 MW) Kanti Bijlee due to R&M

26. Thanks 10/1/2016CERC 26