- Power generation companies can be broadly classified as thermal, nuclear, hydro and renewable. Thermal Power Plants are further classified as either coal based or gas based, depending on the fuel used for power generation.
- The thermal power generation in India contributes almost 85 percent of the total energy supply in India.
- In the recent years, capacity utilization of coal based thermal plant has witnessed sizeable improvement owing to sharp increase in peak power demand and less than envisaged renewable generation.
- The Power sector is governed by Central Electricity Regulatory Commission (CERC) at the central Level and various State Electricity Regulatory Commission (SERC) at the state level. The CERC is responsible for determining tariff for the central sector utilities where interstate sale and transmission of power is involved. The SERCs are responsible for framing regulations governing the generation, transmission and distribution of electricity at the state level as well as determining the tariff for state utilities and the tariff payable by the consumer to the distribution utility.
- A power purchase agreement is a crucial document outlining the right and responsibility of the power producer. PPAs can be long term, medium term and short term in nature. Tenor of the contract is crucial element to assess the visibility of the revenue. The revenue and profitability of the project is dependent on the nature of the PPA as well as cost of the fuel. Power off takers(purchasers) are generally state distribution companies, nodal agencies having back to back selling arrangement with discoms and industrial consumers.
- Certain important terms that are crucial to understand PPAs are
- Plant Availability: The percentage of time a power plant is operational and capable of producing electricity over a given period.
- Heat Rate: Heat rate is a measure of the efficiency of a power plant in converting fuel into electricity. It is defined as the amount of energy used by the plant to generate one kilowatt-hour (kWh) of electricity. A lower heat rate indicates a more efficient power plant, as less fuel is needed to produce the same amount of electricity.
- Auxiliary Consumption: Auxiliary consumption refers to the portion of the generated electrical energy that is consumed by the power plant’s auxiliary equipment. Lower auxiliary consumption indicates more of the generated power is available for sale or use on the grid, which improves the overall efficiency of the plant.
- Plant Load Factor (PLF): PLF is a measure of the efficiency and utilization of a power plant. It indicates how well the plant’s capacity is being utilized over a specific period. PLF is expressed as a percentage and is calculated by comparing the actual output of the plant to its maximum possible output over that period.
- The long term PPAs on a cost plus basis are more favourable than long term PPAs on a competitively bid basis followed by medium term and short term PPAs.
- The power projects that sell power on short-term basis at spot tariff rates remain expose to vagaries of price fluctuation and quantum of power off-take and bears the highest sales risk.
- Adequate availability of fuel, coal in case of coal based thermal power plant and natural gas for gas-based station is a crucial factor in assessing the operating capacity of Power projects. Evaluation of fuel supply risk involves source of supply, distance from the source, price and contractual obligation of seller. The power distribution companies (Discoms) are required to procure thermal power based on a merit order despatch,wherein the power plants with the highest variable costs are given least priority. In such a scenario, lower fuel costs ensure higher priority in merit order thereby contributing to higher actual generation.
• Some of the leading thermal power producer companies in India are Tata Power, Adani Power, Reliance Power, NTPC Limited, JSW Energy amongst others.
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