Understanding the Evolving Discourse of Resource Adequacy in India

To ensure reliability of power in the country, the Government of India took the first step by mandating the issuance of Resource Adequacy guidelines in the Electricity (Amendment) Rules 2022. Thereafter, the Resource Adequacy Guidelines were issued by the GoI in consultation with CEA in June 2023.

October 07, 2024. By News Bureau

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Details of Resource Adequacy

The peak demand of India has grown at a CAGR of around 5.5% from FY 2009-10 to FY 2023-24. The trend of the growth in peak can be seen in the chart below.

During the same period, India has seen its peak deficit & energy deficit reduce from 12.7% & 10.1% to 1.4% and 0.3% respectively. When seen against the historical deficit numbers, the deficit has come down significantly. However, when seen in the backdrop of the ambitious goals set by the Government of India and the need to provide access of electricity to every individual in the country, the impact of any power/energy deficit in the country needs to be seen vis-à-vis the economic loss caused by such reduction in power supply. Siddiqui et al. in their paper on ‘Economic impact of power outage on GDP of India’ (2015)¹ quantified such loss to an approximate of 5% of GDP on India for 2014 i.e., around Rs. 4 lakh cr. in 2014.

Introducing Resource Adequacy planning in place of the existing planning approach
In the above context, and to ensure reliability of power in the country, the Government of India (GoI) took the first step by mandating the issuance of Resource Adequacy guidelines in the Electricity (Amendment) Rules 2022. Thereafter, the Resource Adequacy Guidelines were issued by the GoI in consultation with Central Electricity Authority (CEA) in June 2023. The Resource Adequacy Guidelines lay down a framework of reaching a resource adequate situation to be able to meet the increasing peak demand in the country. The RA Guidelines define Resource Adequacy as tying up sufficient capacity to reliably serve expected demand of the consumers in the DISCOM’s license area in a cost-effective manner.

As against the present practice of planning based on the estimates of CEA, the new RA framework mandates planning to adhere to the state coincident peak fulfilment as well as the state’s own peak fulfilment. While the current approach is to do it voluntarily, the new RA based planning incorporates a mandatory outline and parameters to be followed. Through this brief, we aim to discuss the approach of national RA framework and the way states have taken cue from it to come up with their own regulations.

Details of the Resource Adequacy (RA) framework
As we write this brief, we come across several documents issued by the sector authorities at national and state level which provides different aspects of RA. The RA framework as per the documents²available can be summarised as below -

As seen, the framework consists of four stages –

Demand assessment & forecasting includes long/medium/short term demand forecast at licensee level and subsequent aggregation at the state level.
Generation resource planning means determining the generation capacity optimally available with Discom. The key guiding parameters of the Generation resource planning are:

Loss of Load Probability (LoLP)- Probability that a system’s load will exceed the generation and firm power contracts available to meet that load in a year.
Expected Energy Not Served (EENS)- means the expected amount of load (MWh) that may not be served for each year within the time horizon for Resource Adequacy planning.
Capacity Credit- a percentage of a resource’s name plate capacity that can be counted towards resource adequacy requirements. For this, each type of resource is accredited with a capacity credit based on their contribution in the system. Three methods for capacity crediting are as follows:

Top demand hours method uses the approximate historical contribution of generation class during peak hours.
Top net load hours method uses the average contribution of generation class during top net load hours i.e., stress hours when the peak demand coincides with low RE contribution.
Expected Load Carrying Capacity (ELCC) method is a computation intensive method that assesses the contribution of each generation source & corresponding load capability by maintaining the reliability parameter.

The CEA guidelines have proposed usage of Top net load hours’ approach to measure the capacity credit.

Planning Reserve Margin (PRM)- a specified percentage of available capacity above peak demand as may be stipulated by Authority or Commission for the purpose of generation resource planning.

3. Procurement planning requires determining the shortfall and firming up the procurement mix, tenure etc.

4. Monitoring is to be done by SERCs for compliance with RA requirements.The framework being proposed by the states as contained in the SERC regulations is largely aligned with the CEA framework. The NLDC operating procedure consists of the planning framework to be done in a shorter timeframe.

ILLUSTRATION
Using the above parameters, the resource adequacy requirement for a Discom can typically be illustrated as below -

Peak demand forecast for FY 2026= say, 1000 MW
Reliability target by CEA: LoLP= 0.2%; NENS=0.05%
Capacity credit for different resources= say, as per the technology usage, assuming RE capacity credit @20%, Coal/gas/hydro/nuclear/ @ 100%
RPO@33% also needs to be factored in the capacity mix
Using the above values, PRM will be determined based on optimisation studies to meet the projected peak demand; say PRM comes to be 15%
The above PRM means a capacity requirement of Peak*(1+PRM) = 1000*(1+15%) = 1500 MW will be required to adhere to the RA requirements
The above capacity can be optimally tied up as- Long term= 1125 MW (75%), Medium term= 150 MW (10%), Short term (bilateral/Power Exchange) = 225 MW (15%)
The mix can appear as below-

The timelines for coming up with a plan to bridge the deficit of RA can be represented as below –

The states and centre need to coordinate to adhere to the above timelines. There are however few differences in the considerations at the state level and those at the central level.

Timeframe: While the CEA talks about the long-term and short-term RA planning which spans 10 years and 1-year period, the states like Haryana, Odisha, Meghalaya also refer to the planning for a medium-term timeframe. Odisha, for instance, refers to the long-term plan as 10 years, medium term as 5 years and short term as 1 year.
RA non-compliance charge: While the guidelines did not quantify the non-compliance charge, states such as Maharashtra, Jharkhand, Tamil Nadu have specified the non-compliance charge as equivalent to 1.1 times the Marginal Capacity Charge (Rs/ kW/ month) or 1.25 times the Average Capacity Charge (Rs/ kW/ month), whichever is higher.
Objective of preparing a DRAP by distribution licensee: The understanding from CEA guidelines is that the DRAP will be guided by the NRAP and discom will aim to meet its peak in the DRAP while the NRAP will assist discoms to meet their coincident peak. However, states do not seem to have included the same inference as above.
Role of SERCs: While the RA plans have to be vetted by CEA, the ultimate authority to approve the plan lies with the SERCs. What remains to be seen is if the SERCs tweak the State plans, there may be impact on the national level RA planning by CEA which may also impact the RA plans of the other States.
Short term Resource Adequacy plan compliance (up to 1 year): The CEA guidelines and SERC Regulations provides for short term RA planning and this planning will majorly be driven by the NLDC procedure for RA which further bifurcates this planning to yearly, monthly, weekly and daily basis. However, the guidelines are not clear regarding the options available for Discoms to meet this short-term RA requirement. Therefore, to facilitate the short-term RA compliance for up to one year, the short-term contracts (say from 1 week to 1-year period) through Power Exchanges or DEEP platform may be qualified for the compliance of Short term RA requirement.

Conclusion
Resource adequacy has been conceptualized to ensure the reliability of power as per the guidelines issued under the Electricity (Rights of Consumers) Rules. It will lead to capacity addition in the system. Globally, there are examples of successful models of Resource Adequacy as well as models that required multiple iterations to produce the most optimal results. While navigating our way to have an adequately resourceful system we must focus on the addition of new capacity and also consider the existing resources, including the demand response as a tool to meet Resource Adequacy requirements.

- Saurabh Srivastava, Senior Manager - Regulatory Affairs; Gaurav Maheshwari, Assistant Vice President, IEX