Site icon Pakistan & Gulf Economist

Nepra’s state of industry report 2021

Nepra’s state of industry report 2021

National Electric Power Regulatory Authority (NEPRA) has recently issued its flagship annual State of Industry Report 2021 (SIR21). The purpose of such reports by a regulator generally is to provide an overview of the regulated business, summarize major developments during a previous period, state its own position on key issues, and offer insight into its approach to regulating this business in the future. NEPRA has done a good job as SIR21 is much improved and comprehensive than this report’s previous editions. The SIR21 also identifies some key issues and challenges facing the power industry in Pakistan and offers recommendations for dealing with them. On some issues, we find NEPRA’s stances questionable, and in the ensuing paragraphs, discuss why the Authority must reconsider its position and prescription to handling these challenges.

First and foremost, reading the SIR21, one cannot help feeling that on most issues, NEPRA has taken an entirely hands-off approach. “Arm’s length” or “light-handed” regulation is arguably more desirable than a “command and control” or “micro-management” approach to dealing with the regulated industry, but not to the extent of making it just an annual ritual of lamenting, “We ordered them to improve but they did not comply”. If the regulated entities were not implementing the suggested reforms, NEPRA should have engaged these entities actively to understand their genuine difficulties and helped them in overcoming these. It would be nice, if in the future, NEPRA could provide a summary of the efforts it made to engage these entities actively to assist them in resolving some critical issues they faced.

In the SIR21, NEPRA characterizes hydroelectric and bagasse-based power generation plants as “intermittent” and at multiple places asserts that their addition into the grid necessitates keeping of an equal amount of backup from conventional plants. We take exception to both of these assertions. Power from solar and wind power plants is characterized intermittent because it can drop from nominal rating to almost zero in a matter of moments if a thick cloud blocks the sun over solar panels or wind stops blowing across wind turbines. The available water resource for hydroelectric plants and biomass for bagasse-based plants may be limited in magnitude but these limitations are of a different nature and planners can predict to a large extent the pattern of their availability through analytic efforts. Even run-of-the-river type hydro plants cannot be characterized as intermittent.

The assertion that renewable (solar or wind) power plants invariably require an equal amount of backup in the grid is also not correct. At low shares in the grid, like the 4 to 5% we currently have in Pakistan, no extra backup is required in the system to manage their intermittency and variability. Energy production from these plants is generally treated as a “negative load” at such low penetration levels, and the conventional grid is quite capable of handling some extra fluctuations in consumer demand. It’s true that as the share of these plants in the grid increase beyond certain levels, they start to stress the grid in terms of backup requirements and higher than normal ramping up/down duties from other plants. But, even at such higher shares, the assertion that these plants necessitate 100% backup by conventional power plants is not true.

Numerous options exist on the supply side as well as on the demand side to develop and deploy these plants in the grid in such a manner that their negative impacts on the grid are minimized while their contributions to the system are maximized. For instance, this can be achieved by building some additional flexibility in the conventional generation fleet with small investment, building some storage facilities (batteries, pumped hydro, compressed air, flywheels, etc.), building or improving local, regional, or international interconnections, dispersing their deployment around the country, incentivizing demand shifting to align it with the patterns of renewable plants’ availability, to name but just a few of such potential options.

At multiple places in the SIR21, NEPRA accuses the NTDC for not strictly adhering to Economic Merit Order (EMO) in the dispatch of generators in its system as if EMO were the sole criteria for dispatch. In reality, many factors and operational considerations compel system operators (NTDC for now) to deviate from the EMO, when scheduling as well as during dispatch. This fact is clearly established in the Scheduling and Dispatch parts of the Grid Code. Section SDC 1.4.3 which specifies the scheduling process is quite clear on this issue. Clause SDC specifies Merit Order as a starting point for scheduling and the very next clause, SDC, lists 14 additional factors that can influence the tentative dispatch schedule. In fact, SDC concludes by noting that:

Due to taking into account of and the application of the factors stated in SDC shall mean that, in general, the strict Merit Order as stated in SDC may not necessarily be the final outcome in the shape of “Final Generation Schedule“.

Even after preparation of the above schedule but before its release, the Grid Code (SDC empowers the system operator to make adjustment, if necessary, for a variety of issues listed in this clause. NTDC may have deviated from the Merit Order during its scheduling and dispatch and NEPRA has every right to verify that these deviations were for genuine reasons, but declaring without proper investigation all such deviations as “violation of the Merit Order” is a bit harsh and unjustified.

NEPRA’s efforts to deploy a state-of-the-art supervisory control and data acquisition (SCADA) system in the country is appreciable and must be pursued on a top priority. However, SCADA system alone may not suffice and we will need an equally modern automatic generation control (AGC) system embedded in an energy management system (EMS) to equip the system operator in properly dealing with perhaps one of the most difficult issue in power utility industry. These systems will help to automate the process of unit commitment, scheduling and dispatch, and system control to a large extent, and also will minimize intervention from the operator.

It is worth emphasizing, however, that the availability of SCADA, AGC, and EMS will not eliminate the critical role of the professional sitting behind the console in the control room. Not infrequently, he or she has to exercise judgement in overriding the automated system, and such judgments may not always prove correct in hindsight. People learn from experience and so do system operators. Therefore, NEPRA should not smell foul-play on every occasion that the system operator deviates from the Merit Order.

In section 2.3.6 (Annual Dependable Capability Tests) of the SIR21, NEPRA notes that despite repeated directives by it, CPPA-G did not carry out the requisite testing for several generating plants to verify their declared capability. This is undoubtedly a serious lapse since the whole power sector is sinking under the burgeoning capacity payments to generators. Their dependable capacity is the essential parameter for working out capacity payments to them. Generators, for obvious reasons, will always shy away from such periodic testing and feel happy receiving a regular stream of capacity payments on their once declared capacity. It was NEPRA’s obligation to ensure that such testing took place regularly and also properly. NEPRA’s assigning this responsibility to CPPA-G is also strange because this function belongs more naturally to system operator (NTDC). CPPA-G who essentially is responsible for commercial issues may not even have the technical capability to conduct such testing.

As a matter of fact, Operating Code 12 in the Grid Code clearly assigns this responsibility to system operator (NTDC) and goes on to specify the detailed procedure NTDC is to follow for conducting such testing and also define the criteria to verify generators’ compliance with their committed performance parameters including the dependable capability. It’s also strange that on scheduling and dispatch issues, NEPRA wants NTDC to follow the Grid Code, but on dependable capability verification it has ignored the standing rules.

Chapter 2 of the SIR21 provides an overview of the generation, transmission, and distribution systems of the power industry and identifies key issues under each function as if these were distinct from each other. NEPRA concludes this chapter with a set of 35 recommendations, neatly pigeon-holing these into different compartments. In reality, the issues are highly complex and also cut across these functional boundaries. Their solutions will also be complex and span multiple functions. Some of these may not even have their origin in the power industry. NEPRA, therefore, must look deeper into the origin and causes of these issues and offer concrete and definitive solutions to those that have their bases exclusively within this sector. For issues that have their origin elsewhere, NEPRA should take up the cases for their resolution with other relevant quarters. We take one example below, from the many others, just to illustrate the above point.

SIR21 identifies Electric Vehicles (EVs) as an emerging trend for the role these vehicles can play to combat pollution in the country and mitigate the threat of global climate change. NEPRA envisions its own role in promoting the EVs uptake in the country only to the extent of setting of tariffs for EV charging stations (EVCS) and ensuring that DISCOs provide EVCSs connection on priority, in particular along highways and motorways. It’s like buying and using a Ferrari for grocery errands.

EVs and battery storages technologies these have spawned is a disruptive market trend that will have far-reaching implications on the supply as well as demand sides of the power industry. Improperly planned and unguided adoption of EVs in the country can seriously hurt the government’s effort to restructure the power industry along viable and sustainable lines. If most EV charging takes place during the peak hours in our fossil-fuel dominant generation system, it will further exacerbate an already critical situation in the power sector and will just shift the pollution from one sector of the country to another.

Electricity requirements for charging battery-packs of the EVs is a completely new type of demand. If used intelligently, the energy stored in EV battery-packs can also be used as a source of supply during peak hours and can also support maintaining stability and security of the grid. It’s a case of cultivating electricity demand in the country to align it with the government’s strategic objectives in the power sector. Ministry of Energy and NEPRA will have a critical role to play in promoting EVs’ adoption in the country in a grid-friendly manner. The former in coordinating with other ministries and adding requisite incentives in the National Electricity Policy for the above purpose and the latter in developing an enabling regulatory framework and a set of incentives to guide EVs’ grid-friendly uptake in the country.

The SIR21 goes in considerable detail on the Authority’s activities on Health, Safety, and Environment (HSE) and Corporate Social Responsibility (CSR) fronts, and in particular its new initiative under the banner “Power with Prosperity”. It’s worth reiterating that NEPRA’s primary duty is to ensure that affordable and reliable electric power remains available to the people and economy of this country. NEPRA must, therefore, keep its efforts focused on accomplishing these twin objectives, and not waste its energy and funds on issues like HSE or CSR that are tangential to its primary duty. The best way NEPRA can contribute to the country’s prosperity is by powering its economy with affordable and reliable electric power. NEPRA’s motto should, therefore, be “Power to Prosperity” and not “Power with Prosperity”.

[box type=”note” align=”” class=”” width=””]The writer is a freelance consultant specializing in sustainable energy and power system planning and development. He can be reached via email at:[/box]

Exit mobile version