CHAPTER 1

INTRODUCTION
 POWER SECTOR IN INDIA

The process of electrification commenced in India almost with the developed

world, in the 1880s, with the establishment of a small hydroelectric power
station in Darjeeling. However, commercial production and distribution started in
1889, in Calcutta (now Kolkata). In the year 1947, the country had a power
generating capacity of 1,362 MW.Generation and distribution of electrical power
was carried out primarily by private utility companies such as Calcutta Electric.
Power was available only in a few urban centers; rural areas and villages did not
have electricity. After 1947, all new power generation, transmission and
distribution in the rural sector and the urban centers (which was not served by
private utilities) came under the purview of State and Central government
agencies. State Electricity Boards (SEBs) were formed in all the states.

Legal provisions to support and regulate the sector were put in place through the
Indian Electricity Act, 1910. Shortly after independence, a second Act - The
Electricity (Supply) Act, 1948 was formulated, paving the way for establishing
Electricity Boards in the states of the Union

In 1960s and 70s, enormous impetus was given for the expansion of distribution
of electricity in rural areas. It was thought by policy makers that as the private
players were small and did not have required resources for the massive
expansion drive, the production of power was reserved for the public sector in
the Industrial Policy Resolution of 1956. Since then, almost all new investment in
power generation, transmission and distribution has been made in the public
sector. Most of the private players were bought out by state electricity boards.

From the installed capacity of only 1,362mw in 1947, has increased to 97000
MW as on March 2000 which has since crossed 100,000 MW mark India has
become sixth largest producer and consumer of electricity in the world equaling
the capacities of UK and France combined. The number of consumers connected
to the Indian power grid exceeds is 75 million.

India 's power system today with its extensive regional grids maturing in to an
integrated national grid, has millions of kilometers of T & D lines criss -crossing
diverse topography of the country.

However, the achievements of India's power sector growth looks phony on the
face of huge gaps in supply and demand on one side and antediluvian generation
and distribution system on the verge of collapse having plagued by inefficiencies,
mismanagement, political interference and corruption for decades, on the other.
Indian power sector is at the cross road today. A paradigm shift is in escapable-
for better or may be for worse.

STRATEGIES

The various strategies followed to achieve the goal in power sector are:

Power Generation Strategy with focus on low cost generation, optimization of

capacity utilization, controlling the input cost, optimization of fuel mix,
Technology up gradation and utilization of Nonconventional energy sources .

Transmission Strategy with focus on development of National Grid including

Interstate connections, Technology up gradation & optimization of transmission
cost.

Distribution strategy to achieve Distribution Reforms with focus on System up

gradation, loss reduction, theft control, consumer service orientation, quality
power supply commercialization, Decentralized distributed generation and supply
for rural areas.

Regulation Strategy aimed at protecting Consumer interests and making the sector
commercially viable.
Financing Strategy is to generate resources for required growth of the power sector.
Conservation Strategy to optimize the utilization of electricity with focus on
Demand Side management, Load management and Technology up gradation to
provide energy efficient equipment gadgets.

Communication Strategy for political consensus with media support to

enhance the general public awareness.

GENERATION
In March 2009, the installed power generation capacity of India stood at 147000
MW while the per capita power consumption stood at 612 kWH . Power generation
has showcased a healthy growth rate which is steadily improving year after year.
The installed power generation capacity of India as of 31.05.2010 is 16429.42 MW
INVESTMENTS IN GENERATION
The total fund requirement for generation projects, during the Eleventh Plan
period is estimated at Rs. 4,108,960 million, with Rs. 2,020,670 million being
required for the central sector, Rs. 1,237,920 million being required for the state
sector and Rs. 850,370 million
being required for the private sector. The total fund requirement includes the
fund requirement estimated at Rs. 1,891,950 million for start-up generation
projects benefiting in the Twelfth Plan.

TRANSMISSION

Transmission of electricity is defined as bulk transfer of power over a long

distance at high voltage, generally of 132 kV. In India bulk transmission has
increased from 3708 ckm in 1950 to more than 256,000 ckm today.

The Government of India has an ambitious mission of `POWER FOR ALL BY

2012'. This mission would require that our installed generation capacity should
be at least 2, 00,000 MW by 2012 from the present level of 1, 14,000 MW. To be
able to reach this power to the entire country an expansion of the regional
transmission network and inter regional capacity to
transmit power would be essential. The latter is required because resources are
unevenly distributed in the country and power needs to be carried great
distances to areas where load centres exist.

Ability of the power system to safely withstand a contingency without generation

rescheduling or load-shedding was the main criteria for planning the
transmission system. However, due to various reasons such as spatial
development of load in the network, non-commissioning of load centre
generating units originally planned and deficit in reactive compensation, certain
pockets in the power system could not safely operate even under normal
conditions. This had necessitated backing down of generation and operating at a
lower load generation balance in the past. Transmission planning has therefore
moved away from the earlier generation evacuation system planning to
integrated system planning.

While the predominant technology for electricity transmission and distribution

has been Alternating Current (AC) technology, High Voltage Direct Current
(HVDC) technology has also been used for interconnection of all regional grids
across the country and for bulk transmission of power over long distances.

Certain provisions in the Electricity Act 2003 such as open access to the
transmission and distribution network, recognition of power trading as a distinct
activity, the liberal definition of a captive generating plant and provision for
supply in rural areas are expected to introduce and encourage competition in the
electricity sector. It is expected that all the above measures on the generation,
transmission and distribution front would result in formation of a robust
electricity grid in the country.

FUTURE PLANS FOR POWER FOR ALL BY 2012

The country's transmission perspective plan for eleventh plan focuses on the
strengthening of National Power Grid through addition of over 60,000 ckm of
Transmission Network by 2012. Such an integrated grid shall carry 60% of the
power generated in the country. The existing inter-regional power transfer
capacity is 20800 MW (2010), which is to be further enhanced to 37,000 MW by
2012 through creation of "Transmission Super Highways". Based on the
expected generation capacity addition in XI plan, an investment of about 75,000
Crore is envisaged in Central Sector and Rs. 65,000 Crore is envisaged in the
State Sector.
POWERGRID is working towards achieving its mission of "Establishment and
Operation of Regional and National Power Grids to facilitate transfer of power
within and across the regions with reliability, security and economy, on sound
commercial principles".

The exploitable energy resources in our country are unevenly distributed, like
Coal resources are abundant in Bihar/Jharkhand, Orissa, West Bengal and Hydro
Resources are mainly concentrated in Northern and North-Eastern Regions. As a
result, some regions do not have adequate natural resources for setting power
plants to meet their future requirements whereas
others have abundant natural resources. Demand for power continues to grow
unabated. This calls for optimal utilization of generating resources for
sustainable development. Thus, formation of National Power Grid is an effective
tool to achieve this as various countries have adopted the model of
interconnecting power grid not only at national level but also at international
level.

In the next phase, inter-regional connectivity is planned to be strengthened with

hybrid system consisting of high capacity EHV/UHV AC and HVDC links. Such a
National Power Grid is envisaged to disperse power not only from Mega sized
generation projects but also to enable transfer of bulk power from one part of
the country to another in different operational
scenarios say, in varying climatic conditions across the country: Summer,
Winter, Monsoon etc. Commissioning of links under this phase has already begun
with the commissioning of 2000 MW Talcher -II HVDC Bipole , Raipur - Rourkela
400kV D/C AC transmission line having Series Compensation, augmentation of
Gazuwaka HVDC (500MW) back to back link and Tala transmission system. The
inter-regional transfer capacity of 16,200 MW is available as on date. Further
strengthening of National Power Grid is envisaged through high capacity AC EHV
lines, 765 kV UHV AC lines/ HVDC lines. This phase is planned to be
implemented by 2012 when inter-regional power transfer capacity will be
enhanced to about 37,700 MW by the end of XI Plan, depending upon planned
growth of generation capacity.

DISTRIBUTION
According to the Ministry of Power, India 's total installed capacity as on March
31, 2010 is 159,398.49 mega watt (MW). Thermal power plants account for
102,453.98 MW, followed by hydro power plants with a capacity of 36,863.40
MW. Renewable energy sources provide 15,521.11 MW of power and the
remaining 4,560 MW comes from nuclear energy.

Within the thermal power plants, coal-based power plants have an installed
capacity of 84,198.38 MW, gas-based have a capacity of 17,055.85 MW and
diesel-based have a capacity of 1,199.75 MW.

However, due to lack of adequate investment on transmission and distribution

(T&D) works, the T&D losses have been consistently on higher side, and reached
to the level of 32.86% in the year 2000-01.The reduction of these losses was
essential to bring economic viability to the State Utilities.

As the T&D loss was not able to capture all the losses in the net work, concept of
Aggregate Technical and Commercial (AT&C) loss was introduced. AT&C loss
captures technical as well as commercial losses in the network and is a true
indicator of total losses in the system.

High technical losses in the system are primarily due to inadequate investments
over the years for system improvement works, which has resulted in unplanned
extensions of the distribution lines, overloading of the system elements like
transformers and conductors, and lack of adequate reactive power support.

The commercial losses are mainly due to low metering efficiency, theft &
pilferages. This may be eliminated by improving metering efficiency, proper
energy accounting & auditing and improved billing & collection efficiency. Fixing
of accountability of the personnel / feeder managers may help considerably in
reduction of AT&C loss.

With the initiative of the Government of India and of the States, the Accelerated
Power Development & Reform Programme (APDRP) was launched in 2001, for
the strengthening of Sub – Transmission and Distribution network and reduction
in AT&C losses.

The main objective of the programme was to bring Aggregate Technical &
Commercial (AT&C) losses below 15% in five years in urban and in high-density
areas. The programme , along with other initiatives of the Government of India
and of the States, has led to reduction in the overall AT&C loss from 38.86% in
2001-02 to 34.54% in 2005-06. The commercial loss of the State Power Utilities
reduced significantly during this period from Rs. 29331 Crore to Rs. 19546
Crore . The loss as percentage of turnover was reduced from 33% in 2000-01 to
16.60% in 2005-06.

OBJECTIVES OF STUDY

1. To get a comprehensive and apparent knowledge of the power sector

2. To study the changes in power sector over a period of time there by
analyzing various aspects of the power sector.

METHODOLOGY

The methodology used in report includes comparative analysis of the top 5 and
bottom 5 companies of the sector. The Porter's five forces analysis, Ratio
analysis are used to analyze the industry of power sector.
 CHAPTER 2
SEGMENTS IN POWER GENERATION
SEGMENTS IN POWER GENERATION

THERMAL:

Thermal power plants account for 103448.98MW, which is 64.11% of total

installed capacity. The government in the current plan (2007-2012) has
envisaged a capacity addition of 78,700 MW, of which 59693 MW shall be in the
form of thermal power.

➢ Current installed base of coal based thermal power is 85193.38 MW,

which comes to 52.8% of total installed base i.e 82.35% of total thermal
base.

➢ Current installed base of gas based thermal power is 17055.85 MV,which

is 10.5% of total installed base i.e 16.49% of total thermal base.

➢ Current installed base of oil based thermal power is 1199.75 which is

0.7% of total installed base i.e 1.16% of total thermal base.

Maharashtra is the largest producer of thermal power in the country.

The following graph shows the percentage value of each type of thermal power
generation.

HYDRO POWER:

India is blessed with immense amount of hydro-electric potential and ranks 5th
in terms of exploitable hydro-potential on global scenario. As per assessment
made by CEA, India is endowed with economically exploitable hydro-power
potential to the tune of 1 48 700 MW of installed capacity.

India has 3 major rivers: the Indus, the Brahmaputra, and the Ganga . It also
has three major river systems Central Indian, west flowing rivers of south India ,
and east flowing rivers of south India with a total of 48 river basins. The total
potential from these river basins is 600TWh (Terawatt Hours) of electricity.

The basin wise assessed potential is as under : -

Basin/Rivers Probable Installed Capacity (MW)
Indus Basin 33,832
Ganga Basin 20,711
Central Indian River system 4,152
Western Flowing Rivers of southern
9,430
India
Eastern Flowing Rivers of southern
14,511
India
Brahmaputra Basin 66,065
Total 1,48,701

Source: http://www.nhpc.gov.in/English/Scripts/Hydro_Scenario.aspx

A large hydro has four main advantages.

➢ It is a source of green energy.

➢ It has low variable cost.
➢ It is grid friendly.
➢ It can also can sub serve other purposes by irrigation, flood control, etc.

Hydroelectric projects can be classified on the basis of purpose, hydraulic

features, capacity, head, constructional features, mode of operation, etc. The
main types are

➢ ROR (Run of River) There are not large reservoirs; a part of water flow is
diverted to the plant which is adjacent to the river. After generation the
flow is diverted back to the main flow through the tail race. This type of
hydro plants requires a diversion dam and has unregulated water flow.

➢ Dam Storage In these types of hydro plants, large reservoirs are created
by the construction a sizeable dam across the river and the plants is
situated at the toe of the dam. Here, water could be regulated to
generate electricity depending upon the demand.

➢ Pumped Storage These types of plants have two reservoirs, one at the
upstream of the power plant and one at the downstream. When there is
low peak demand, the water from the reservoir situated downstream is
pumped0020back to the upstream reservoir.
As of today, the total identified hydro potential is 148701 MW. According to the
list of hydro electric projects in the country, a total of 36913.4 MW, 22.88% of
the total of the total has been harnessed and 13286 MW is under construction.

Various initiatives for accelerated development have been taken up by the central
government to harness the hydro potential in India . Some of these are

➢ Hydro Power Policy (1998)

➢ 50000 MW initiative

➢ Preparation of viable models for private sector participation

➢ Ranking of projects

➢ R&M up gradation and life extension programmes

➢ Facilitation for trading and co-operation with other countries

➢ Execution of projects with interstate aspects by Central Public Sector

Units

NUCLEAR POWER GENERATION:

Nuclear power is the fourth-largest source of electricity in India after thermal ,
hydro and renewable sources of electricity. As of 2010, India has 19 nuclear
power plants in operation generating 4,560 MW while 4 other are under
construction and are expected to generate an additional 2,720 MW. India is also
involved in the development of fusion reactors through its participation in the
ITER project.

Since early 1990s, Russia has been a major source of nuclear fuel to India. Due
to dwindling domestic uranium reserves, electricity generation from nuclear
power in India declined by 12.83% from 2006 to 2008.Following a waiver from
the Nuclear Suppliers Group in September 2008 which allowed it to commence
international nuclear trade,India has signed nuclear deals with several other
countries including France , United States , United Kingdom , Canada , Namibia ,
Mongolia , Argentina , Kazakhstan . In February 2009, India also signed a $700
million deal with Russia for the supply of 2000 tons nuclear fuel.

India now envisages to increase the contribution of nuclear power to overall

electricity generation capacity from 4.2% to 9% within 25 years. In 2010,
India 's installed nuclear power generation capacity will increase to 6,000 MW. As
of 2009, India stands 9th in the world in terms of number of operational nuclear
power reactors and is constructing 9 more, including two EPRs being constructed
by France 's Areva . Indigenous atomic reactors include TAPS-3, and -4, both of
which are 540 MW reactors. India 's $717 million fast breeder reactor project is
expected to be operational by 2010.

Currently, nineteen nuclear power reactors produce 4,560.00 MW (2.9% of total

installed base).

Power Total capacity

Operator State Type Units
station (MW)
Kaiga NPCIL Karnataka PHWR 220 x 3 660
Kakrapar NPCIL Gujarat PHWR 220 x 2 440
Kalpakkam NPCIL Tamil Nadu PHWR 220 x 2 440
Narora NPCIL Uttar Pradesh PHWR 220 x 2 440
100 x 1
Rawatbhata NPCIL Rajasthan PHWR 200 x 1 1180
220 x 4
160 x 2
Tarapur NPCIL Maharashtra BWR (PHWR ) 1400
540 x 2
Total 19 4560
The projects under construction are:

Total capacity
Power station Operator State Type Units
(MW)
Kaiga NPCIL Karnataka PHWR 220 x 1 220
Kudankulam NPCIL Tamil Nadu VVER-1000 1000 x 2 2000
Kalpakkam NPCIL Tamil Nadu PFBR 500 x 1 500
Total 4 2720
SOLAR:
India ’s energy demand is increasing with the robust growth in economy. A
steady forecasted growth for manufacturing sector would need more power
generation in future. Govt of India has put special emphasis on the usage of
clean energy by declaring incentives on renewable energy (wind, solar) which
will play a great role in India ’s energy map. Carbon emission reduction in terms
of carbon credit will attract lots of investment in the renewable energy especially
solar and wind energy.

India is endowed with rich solar energy resource. India is endowed with rich
solar energy resource (300 sunny days / year) i.e. Over 5,000 trillion kilowatts
of solar energy in a year. The average intensity of solar radiation received on
India is 200MW/km square (megawatt per kilometer square).

Jawaharlal Nehru National Solar Mission (JNNSM) – Target of 20GW of Solar

Power by 2022. The current installed capacity is only 9500 MW; giving vast
opportunity for exploitation of renewable energy sources. The Government is
striving hard to push the solar power industry to make India a global leader by
introducing grid based incentives and concessions in various duties in the recent
budget (2010-11)

WIND:

Wind power has become one of the prominent power generation technologies
amongst the renewable energy technologies

The sun's energy falling on the earth produces large-scale motions of the
atmosphere causing winds, which are also influenced by small scale flows caused
by local conditions such as nature of terrain, buildings, water bodies, etc. Wind
energy is extracted by turbines to convert the energy into electricity.

Use of wind energy started long ago when it was used for grinding. The
commercial use of wind energy for electrical power generation started in 1970s.
Horizontal axis wind turbines are most commonly used for power generation,
although some vertical axis wind turbine designs has been developed and tested.
The vertical axis turbines have structural as well as aerodynamic limitations and,
hence, are not commercially used.

A small-scale and large-scale wind industry exists globally. The small-scale wind
industry caters for urban settings where a wind farm is not feasible and also
where there is a need for household electricity generation. The large-scale
industry is directed towards contributing to countrywide energy supply.

By 2010, the World Wind Energy Association expects 160 GW of capacity to be

installed worldwide, up from 73.9 GW at the end of 2006, implying an
anticipated net growth rate of more than 21% per year.

India ranks 5th in the world with a total wind power capacity of 10,925 MW in
2009, or 3% of all electricity produced in India . The World Wind Energy
Conference in New Delhi in November 2006 has given additional impetus to the
Indian wind industry. Muppandal village in Tamil Nadu state, India , has several
wind turbine farms in its vicinity, and is one of the major wind energy harnessing
centres in India led by majors like Suzlon , Vestas , Micon among others.

SMALL HYDRO:

The word hydro comes from a Greek word meaning water. The energy from
water has been harnessed to produce electricity since long. It is the first
renewable energy source to be tapped essentially to produce electricity

Hydropower currently suffices one fifth of the global electricity supply, also
improving the electrical system reliability and stability throughout the world. It
also substantially avoids the green house gas emissions, thus complimenting the
measures taken towards the climate change issues

Hydro projects below a specified capacity are known as small hydro. The
defmition of small hydro differs from country to country, depending on the
resources available and the prevalent national perspective. The small hydro atlas
shows that the largest of the projects (30 MW) is in US and Canada . Small hydro
power has emerged as one of the least cost options of harnessing green energy
amongst all the renewable energy technologies.

According to the power generated, small hydro power is classified into small,
mini/micro and Mico hydro.

In India , it is being classified as follows.

➢ Small hydro -2MW-30 MW

➢ Mini - 100 kW - 2 MW

➢ Micro - 10 kW - 100 kW

➢ Mico hydro - 1 kW - 10 kW
 CHAPTER 3

STUDY OF SELECTED COMPANIES

STUDY OF SELECTED COMPANIES

To study and analyze the power sector better, the comparative and analytical
study of the Top 5 and Bottom 5 listed firms of power sector in India are done.
The firms are chosen based on their market capitalization, ROE and experts
opinions from Central Bank of India . The below are the firms selected by us for
the study,

Top 5

1. NTPC

2. Power Grid Corpn .

3. Reliance Energy Limited

4. NHPC Ltd.

5. Tata Power Co.