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Rakesh Sarin, Managing Director, Wartsila India

11 Oct 2011

While the Ministry of Power sets an ambitious target of adding 1,00,000 MW of capacity in the 12th Plan, the sector still reels under severe problems of fuel availability, land acquisition, T&D losses, etc.

In an interview with InfralineEnergy’s Chhavi Tyagi, Rakesh Sarin explains the concept of smart power generation and how it can help in bringing reliability, affordability and sustainability in the system.

Sarin advocates that the capital-intensive thermal plants should be used for operating base load and for meeting peak deficit, gas based smart generation plants should be deployed. However, for that to be a reality, he emphasises, that a peak tariff mechanism should be evolved first.

Wartsila started its operations in India in the early 1980s and provides complete lifecycle power solutions for the energy sector. A Chemical Engineer by education, Rakesh Sarin has 20 years of experience in the petroleum industry. He joined Wartsila in 1998 and has held various positions in the company before being appointed as the Managing Director of Wartsila India.

Edited Excerpts.

What are Wartsila’s key functional areas in the Indian power sector?

Wartsila undertakes systemic level studies for the power sector. For instance, our company has recently conducted a country level study of India for optimising the generation mix of the power generation system. The study looked in an integrated fashion into the power generation system as a whole. These studies have given us very useful insights into the power system like, the progress of countries from load-shedding zone to load-shedding free zone.

Another key aspect of our operations includes project level functions, which means project development, EPC and commissioning of the power plants. For example, in India, we have delivered over 275 power plants to the captive industry as well as to those which are parallel to the grid.

The third part of our operations is the life cycle support which involves servicing the commissioned power plants. We have contract management for the operational maintenance of the plants, which our clients outsource it to us. We have 60 such contracts in India when it comes to power plants.

How can smart power generation help the country’s power sector?

In today’s world, reliable, affordable and sustainable power should be treated as a fundamental right of all the citizens. And, the four elements of smart power generation can help in bringing reliability, affordability and sustainability to the Indian energy sector. Today, the modern energy infrastructure is changing in a big way. While in the 1990s, the industry had not even heard of 20 GW of solar or 10,000MW of wind turbine, but today the energy infrastructure is changing in a big way. The industry has set ambitious targets for the renewable energy. The question is how do we handle this amount of energy, as we don’t want blackouts every time the wind changes its course or it gets cloudy. This much needed transition and stability will be provided by smart power generation.

The second element involves a unique solution for flexible power generation so that power can be commanded at will.

The third element is that the energy should be able to operate in multiple modes without compromising on its efficiency. In other words, a plant should be able to operate at 100 percent PLF (plant load factor) or 10 percent of PLF without the efficiency going down due to the variations. Presently, the system cannot command 10 MW from say, a 100 MW frame.

"Operating the thermal-based plants on a continuous basis will provide the cheap power, however, investing INR six crore/MW capacity to operate for only six hours a day, i.e., the peak load in a situation of less capital, capacity and insufficient technology does not make sense."

The fourth aspect of smart power generation is that it improves system efficiency and solves variability challenges of wind and solar integration.

Since gas is a more expensive fuel than coal, will not these gas-based smart generation plants compromise on affordability?

There is a myth surrounding the price curve for these two different technologies involving gas-based smart generation plants and coal power plants. It is true that initially the power derived from coal power plants is cheaper than the gas-based smart generation plants due to a minimum cost of per unit, which is owing to a higher PLF and cheaper fuel. However, the capex for coal plants is INR five to six crore/MW, while capex for a smart generation plant is almost half of that of a coal plant. Though gas used in these smart generation plants is more expensive, the problem with coal-based plants starts when the PLF comes down while the capex is still on a higher side. Thus, in the longer run, the cost of power generation through coal becomes higher and the cost of power through gas becomes lower in the peak load part of the generation.

While the government’s focus is increasing on augmenting the base load, we are soon going to reach a situation when this power will not be dispatched round the clock as demand would still remain low in the off-peak time like late nights. Additionally, during the peak demand time, we will still have load shedding. All this would result in a double whammy with developers losing money as they would not find off taker of their power in off-peak time and consumers would still be losing money trying to arrange for off grid power during peak time.

Which fuel does the plants commissioned by Wartsila run on? Does it run on gas or diesel or on a combination of both? Can they also run on bio fuels?

Our plants run on HFO (High Furnace Oil), which is the cheapest amongst the liquid fuel. Additionally, our plants can also run on gas and liquid bio-fuel like palm oil. Moreover, our technology is a duel-fuel technology, which can run on both gas and liquid fuel depending on the fuel availability. Not just that, the technology employed in our plants provides a seamless switch. Therefore, if at some point there is no gas, the plants can easily switch to HFO. However, there are certain technologies, which take a longer time to respond as in the case of such technology one-third comes from the steam and the two-thirds come from the turbine. So, when the load is changing, the steam cannot be operated and the efficiency falls by 1/3rd of that claimed for base load.

"The investors must understand that investing in a 24/7 gas-based plant is not a clever idea, but investing in gas-based plants which operate for the peak load, is the requirement of the country. However, in order to have specific plants those six hours of assured power in peak time, there is a need to have a peak tariff mechanism."

For such load following, you need an open cycle, which enables the plant to operate at 100 percent load and at the same time, within minutes, it can be stopped just like a car engine. For instance, you can operate the plant at 100 percent for four hours in the evening when the demand is the highest. Then when it starts to come down, you start turning off the units. These smart generation plants ensure 45 percent efficiency even when a 100MW plant is running at 10MW.

So, in case of a smart generation plant, whether the requirement is large or small or the PLF is small or big, the efficiency doesn't suffer.

How can smart power generation address the issue of fuel availability?

The availability of gas is a big question mark. However, the biggest advantage that the fuel offers is its choice of fuels. The bone of contention is the EGoM’s decision to allocate natural gas to plants based on a 24/7 operation basis. We think that 100MW of equivalent of gas should be made available to 400MW of peaking capacity because of several reasons. First, it is not possible to always run natural gas plants on a 24/7 full load basis as gas-based plants get backed down in merit order despatch during off peak hours. Combined cycle gas turbines plants, the moment they are asked to back down, their efficiency takes a hit. Therefore, it does not make sense to invest large capex for only serving part load operations.

"It would be favourable for large developers to operate low capex gas-based plants for time of the day, say six hours as load following & peak plants, where his off take is guaranteed rather than investing in a 24-hour expensive plant, whose off take is not assured."

Also, there is a looming gap in the peak load generation capacity, which would result in a power deficit of 10 to 12 percent for the next 5-10 years. Taking these factors into consideration, we have a very commonsensical proposition. By allocating gas to 400MW plants, which operate for six hours a day instead of allocating to 100MW for full load operation, we get multi-fold benefits. While low capex capacity is deployed for time of the day operation, at the same time, the generation capacity increase is four-fold to bridge the peak capacity gap with same quantity of gas. In this way investors also get assured return on their money. Depending on the quantity of the gas available, we can deploy four times of the capacity on the ground. Apart from hydro which has its own limitations, gas is the only fuel which provides for flexible generation essential for peaking power. All these are included in a recently concluded study done by Centre of Energy Studies of IIT Delhi.

Why don’t the IPPs supplying the base load also have small power plants based on the principles of smart power generation technology in order to respond to the peak power demand?

I agree with the thought. However, the reason, it is not happening is because the entire tariff structure is based on the base load. The country does not have peak tariff structure available and there is no gas allocation priority for such plants. Today, for instance, developers are looking for big gas-based plants for 1000s of MW on base load operation. I have my reservation regarding the economics of such projects. I don’t think that the investors in this plant would be a happy after a couple of years. Dispatching such plants would be a serious issue when compared to coal-based plants for a 24/7 despatch.

The factor helping them today is the insufficiency of the base load capacity, but soon it is going to be more than sufficient and in such a scenario, consumers will prefer coal-based cheaper power over gas-based power.

Thus, it would be favourable for any major Power generator to operate his gas-based plants for time of the day, say six to ten hours a day, where his off take is guaranteed rather than investing in a base load gas plant, where the off take could be a question mark. However, the reason, developers are going for 24-hour plants, is because of the peak tariff mechanism not being in place.

Though CERC has plans of introducing peak tariff mechanism, somehow, the proposal is only in the draft stages.

Therefore, we feel strongly that the mandate for the regulators in the next Plan should be to see the reasonableness of the price and the affordability of the service provider.

Apart from peak tariff, what other policy or regulatory level initiative you are expecting the government to look into?
There are basically three things that we are looking for optimising the power sector on generation side. The most important is the 24/7 obligation of the discoms to provide electricity to all the consumers. The regulators should ensure that the discoms adhere to that. The second demand would be the creation of a policy framework that the three categories of MWs (base load, peak load and renewable energy) come in the right proportion. Furthermore, this peak demand should then also be divided into further categories of hydro and gas.
What are your comments on Essar’s initiative for gas-based Ultra Mega Power Plants (UMPPs) in India?
It is very simple. If any developer can get gas at $2-$3 per mmbtu delivered to their plant, they will be in the game. On the other hand, if they are getting the gas at $4.5-$10 per mmbtu, they will only provide time of the day supply. The price of coal and gas is very different. The power from these gas-based UMPP will no doubt be sustainable, reliable, but may not be affordable.

(InfralineEnergy thanks Rakesh Sarin, Managing Director, Wartsila India for sharing his valuable insights with our readers. The column In Conversation is a platform to engage experts from various sectors to share their views on the different transformations in the Indian energy sector.)