India’s blueprint to transform the power sector into a digitally enabled ecosystem through smart grids is finally ready. In May this year, the government approved the much-awaited National Smart Grid Mission (NSGM) with a funding of around Rs 9.8 billion.
The launch of the NSGM is a significant move. With its own resources and funding mechanism, the mission will help bring in national-level support from ministries, institutions and state governments. It will facilitate coordination between state governments, utilities and other stakeholders for the roll-out of smart grid projects.
More importantly, it will build on ongoing policy efforts such as the Restructured Accelerated Power Development and Reforms Programme (R-APDRP), the pilot smart grid projects, and the newly launched Integrated Power Development Scheme. It will leverage the assets that have been created under these programmes so as to enable further progression to a smart grid at marginal costs. In line with the NSGM, state-level missions have also been proposed.
Several mechanisms are proposed to be put in place under the NSGM to ensure that implementation does not suffer delays like those encountered in previous policy initiatives. “The mission will serve as an institutional mechanism for planning, monitoring and implementing policies and programmes related to smart grids. It entails the implementation of a smart electrical grid based on state-of-the-art technology in the fields of automation, communications and IT systems that can monitor and control power flows from the point of generation to the point of consumption,” stated power minister Piyush Goyal in the Lok Sabha, announcing the launch of the mission.
Even as the specifications of the mission are in the process of being finalised, Power Line attempts to decode the NSGM and understand its proposed focus areas, likely benefits and funding methodology, among other things…
Context
For a developing market like India, a smart grid is considered an anchor infrastructure for other infrastructure domains such as water and gas. Most cities do not have a single owner for their services and, therefore, it is difficult to integrate all infrastructure and services on a common platform.
To begin with, the available digital platform of the power domain can be extended to offer services in other domains at marginal costs. For instance, a highway that is being built at a cost of Rs 10 billion will perhaps need only an additional Rs 0.5 billion-Rs 1 billion to modernise its infrastructure with IT and communication capabilities, which would help in traffic prediction, etc. That data can be analysed by other systems.
Based on this concept, one of the key ideas behind formulating the NSGM has been to oversee the development of smart grid activities that would facilitate building smart cities. More than 90 per cent of the outlay proposed under the NSGM is targeted towards the development of smart grids in smart cities. The geographic information system (GIS) is one such smart grid technology tool that is proposed to be leveraged under the NSGM. GIS mapping enables all electrical assets and consumers to be effectively captured on a digital map and regularly updated by discoms. The same map can be used by other infrastructure providers for planning as well as operation of their water supply systems, gas pipeline systems, telecom cables, etc. Therefore, a separate digital map is not required to be prepared for each infrastructure domain. Similarly, billing and collection systems for power will also be used for integrating a variety of services. Consumers today get multiple bills – electricity, water, house tax, internet, etc. These bills can be integrated through the modern billing and customer relationship management systems that are in place at the majority of discoms or are being developed under the R-APDRP. This will help reduce overall costs and facilitate timely payments.
Focus areas
Building smart grids in smart cities requires a host of activities. One of the first steps would be to underground all overhead distribution lines, at least in important areas of the cities. Undergrounding will ensure that the networks are safer, more reliable, have reduced operations and maintenance (O&M) expenses and result in lower damages in the event of a storm. Another important focus area for a smart city is the deployment of gas-insulated substations (GIS). Land availability for expanding substation capacity is becoming more challenging, with rising land prices, and long and cumbersome right-of-way acquisition processes.
GIS deployment would help overcome these challenges. GIS offers land savings as it requires 10 per cent of the comparable land required by a conventional air-insulated substation (AIS). It also has the advantage of low O&M expenditure as compared to conventional substations, besides providing high reliability. Hence, if an existing AIS is converted to a GIS, it will unlock the commercial value of the land and the available funds can be used to improve the entire district’s distribution infrastructure. All these activities would require taking stock of the current state of the network in each city. For example, a city like Gandhinagar in Gujarat has fairly modern grid infrastructure. In cities like Delhi and Mumbai too, private discoms have been making substantial investments to improve the distribution system. The cost of converting the existing infrastructure to a smart grid would be much less in these cities as compared to a town in a backward state where no investments have been made.
A key tool that would be used to see if the grid can support a smart city is the smart grid maturity model (SGMM) survey. This tool, which is being used globally, has eight domains described at five levels of maturity with more than 200 characteristics described for each domain-maturity level combination. SGMM surveys can be conducted by utilities to determine the requirements to achieve the next level of maturity from the current state, identify gaps between the current state and desired state, compare utilities, etc.
Incorporating learnings from past experience
While the charter for the NSGM is still under preparation, it will take into account the issues encountered during previous smart grid initiatives. For instance, in Part A of the R-APDRP, one of the key issues was the delay in the award of contracts. Each state discom carried out separate bidding for projects as opposed to common bidding that would have been completed in a much shorter time frame (12-18 months). (A comprehensive software requirement specification document was devised for common bidding, wherein all works to be undertaken by discoms were clearly defined. But this was not implemented.)
Besides delays, the process resulted in project re-tendering (at least two to three times) in many states. Also, the process of participating in multiple tenders increased the cost of doing business for companies.
In fact, even the 14 pilot projects did not follow a centralised bidding process. As a result, these projects too are facing delays. Of the 14 projects that were announced in July 2012, only six to seven have been awarded till date. In addition, the projects failed to garner much interest from international companies. Many refrained from the tendering process owing to the extremely stringent clauses contained in the tender documents.
The NSGM intends to take care of these issues when the next phase of smart grid projects is awarded under it. The model request for proposal and model detailed project report documents that address industry and utility concerns are at the final stages of preparation by the India Smart Grid Forum (ISGF); thereafter, they will be put up for stakeholder comments.
Further, a relook at the current practice of awarding projects through the conventional L1 bidding process is proposed. One of the key ways of revamping the system is by adopting the methodology for awarding smart grid projects in developed markets such as the US, Japan and Korea. In these countries, projects are awarded through a participatory approach wherein the utility partners with a research institute for the selection of a technology company and the three entities then apply jointly for the government grant.
Structure of the NSGM
The NSGM is proposed to come under the Ministry of Power (MoP). The three-tier structure envisaged for the mission comprises a governing council, an empowered committee and a technical committee. The governing council will provide approvals and guidance for policies, programme reviews, targets, programmes and funds. The council will have full functional and financial autonomy, and include secretary-level officers of the concerned ministries as members.
At the next level, the NSGM will have an empowered committee, which would be chaired by the power secretary with joint secretary-level officers of the concerned ministries as members. This committee will provide policy inputs to the governing council and approve, monitor and review specific projects.
The third tier of the NSGM will have a technical committee to support the empowered committee, chaired by the chairperson of the Central Electricity Authority. The committee’s objectives would include the development of standards and technology selection guidelines, and the review of technical and commercial aspects of projects, activities and the promotion of capacity building.
For managing day-to-day operations, the NSGM is proposed to have a National Project Management Unit (NPMU) to be headed by a mission director. It will come under the purview of Power Grid Corporation of India Limited (Powergrid). The NPMU will be the implementing agency for operationalising smart grid activities in the country. Although it will be an arm of Powergrid, it will retain its functional and financial autonomy and report directly to the empowered committee and the governing council. The India Smart Grid Task Force (ISGTF) will be merged with the NPMU.
Funding
While the mission is likely to be implemented over the Twelfth and Thirteenth Plan periods, a funding of Rs 9.84 billion has so far been sanctioned for the Twelfth Plan. Up to 30 per cent of the project cost for most components will be provided as government budgetary support, with the remaining to be provided by the utility or raised through bank loans. For selected components such as training and capacity building, the funding will be 100 per cent grant-based. Funds for building smart grid infrastructure in the first set of smart cities will essentially come from the NSGM.
The World Bank has already committed around $160 million for the mission. Meanwhile, the power ministry has held a consultative meeting with multilateral agencies such as the New Energy and Industrial Development Organzation and the Asian Development Bank. More funding support is expected from these multilateral agencies once there is greater clarity on the targets and proposals by cities.
Next milestones
The first set of showcase projects to be taken up under the NSGM is expected to be announced by September 2015. In addition, of the 100 smart cities that are proposed by the Ministry of Urban Development (MoUD), smart grid infrastructure is envisaged to be built in around 30. The list of these 30 cities is yet to be finalised; however, there may be a convergence of these projects with the first 20 smart cities that will be taken up by the MoUD.
In sum, the NSGM has set the policy stage for scaling up the ongoing smart grid efforts and projects to help integrate the existing systems for future smart grid deployments. Further, it signifies the strong intent of policymakers to overcome the current challenges faced by the grid by adopting smart grid solutions on a large scale.
Reya Ramdev with inputs from the ISGF
