Challenging Times: Covid-19 impact and opportunities for power sector utilities

Covid-19 impact and opportunities for power sector utilities

The Covid-19 pandemic is the most unprecedented challenge facing the world in this century. While the long-term impact of the crisis cannot be ascertained accurately, it has already caused disruptions in electricity demand, workforce supply chain and economic growth in the near term. On the positive side, the crisis has led power utilities to adopt new technologies such as smart metering, cloud computing and predictive maintenance. Smart Utilities takes a look at the impact of the pandemic on the Indian power sector and key initiatives taken by utilities to tide over the crisis…

Covid-19 impact

The most serious impact of the Covid-19 crisis and the subsequent lockdowns has been the fall in power demand, which declined by 25-30 per cent during the initial days of the lockdown. With the shutdown of commercial and industrial (C&I) activities and the railways, the demand for power reduced substantially. As a result, the demand from consumer segments that cross-subsidise decreased while the demand from consumer segments that are cross-subsidised increased (but not enough to compensate for discoms’ revenue losses from high-paying C&I consumers). As a result, the gap between revenue realised by discoms and the cost of supply has widened, leading to further losses for discoms. Further, there were delays in collection with no physical meter reading, leading to a financial crunch for the distribution utilities, which faltered in their payments to gencos. In addition, under-construction projects across the generation, transmission and distribution (T&D) segments suffered delays due to bottlenecks in the supply chain.

The power demand has still not recovered to pre-Covid levels. During April-June 2020, the energy requirement stood at 293,238 MUs as against 349,799 MUs in the corresponding period in 2019, a decline of 16 per cent. Meanwhile, the peak demand stood at 167 GW versus 184 GW, indicating a decline of 9.2 per cent.

Further, as power generation adjusted to compensate for reduced consumption, the plant load factors (PLFs) of thermal power plants declined from 60.11 per cent in February 2020 to 51.25 per cent in March 2020. The corresponding PLFs in March 2019 stood at 62.73 per cent. This has had a bearing on the overall PLF for financial year 2020, which declined to 56.08 per cent from 60.3 per cent in the previous year. According to India Ratings and Research, PLFs could fall below 55 per cent in 2020-21, closer to the technical minimum standard.

The fall in demand has further delayed payments from discoms to gencos. Discoms are already reeling under large payment dues of over Rs 946 billion as of March 2020, which have increased to Rs 1,199 billion as of June 2020. There have been cases where discoms have invoked the force majeure clause against IPPs and withheld payments. In order to prevent the situation from spiralling out of control, the central government announced a Rs 900 billion liquidity infusion package in May 2020 to help discoms clear their outstanding dues. Under the package, the Power Finance Corporation and REC Limited are providing loans to discoms against state government guarantees to enable them to clear their outstanding dues to transmission and generation firms. Many states have availed of funds under the scheme and there are plans to increase the outlay to Rs 1.25 trillion.

The government has also waived/deferred the fixed charges and interstate transmission charges by central public sector enterprises for the period from March 24 to May 17, 2020. Besides, the Central Electricity Regulatory Commission has reduced the late payment surcharge (LPS) payable by discoms to gencos. If a delayed payment by a discom to a generating company or an interstate transmission licensees beyond 45 days from the date of the presentation of the bills falls, between March 24, 2020 and June 30, 2020, the concerned discom will make the payment with the LPS at the reduced rate of 12 per cent per annum, which translates into 1 per cent per month.

Utility initiatives

Technology and automation have immensely helped utilities in these testing times. Smart meters have provided significant benefits to distribution utilities in terms of energy consumption monitoring and billing. So far, Energy Efficiency Services Limited (EESL) has completed the installation of 1.24 million smart meters in Uttar Pradesh (984,000 smart meters), Haryana (123,000), the NDMC area (57,000) and Bihar (28,000). Discoms in these states have achieved 95 per cent billing efficiency (for consumers with smart meters) and a 15-20 per cent average increase in monthly revenue per consumer even during the Covid crisis. Of these states, Bihar has about 25,000 prepaid meters (out of 28,000 smart meters), which have helped the discoms earn a daily revenue of nearly Rs 500,000 through consumer recharges (considering an average recharge with a credit balance of Rs 20 daily). Looking at the benefits of smart meters, several states/UTs such as Delhi and West Bengal have evinced interest in smart metering.

In an official release, Saurabh Kumar, managing director, EESL, said, “The current situation has only served to reinforce the efficacy of smart meters, by completely eliminating manual interventions. Smart metering is poised to be the launch pad for comprehensive reforms in the power sector. The benefits of smart metering, beginning with a seamless online billing process, real-time tracking of electricity usage, and reduction of billing errors has cascaded down the energy value chain to the consumers as well.”

Tata Power Delhi Distribution Limited (TPDDL) raised 350,000 bills with actual readings instead of provisional ones during the lockdown period between April and May 2020 with the help of smart meters. The installation of smart meters, has prevented over 150,000 visits per month to consumer premises during the lockdown period. So far, the company has installed 200,000 meters across its consumer segments – domestic, industrial and commercial – under its advanced metering infrastructure (AMI) project with a radio frequency canopy network. In an official release, Ganesh Srinivasan, CEO, TPDDL, said, “The installation of smart meters is proving to be of great help during the ongoing pandemic as it provides a win-win platform for both the utility and the consumers through very tangible benefits such as remote meter reading, improved billing and collection efficiency, mitigation of power thefts, reduction in AT&C losses, energy conservation incentives and easy bill payments.”

Distribution utilities have also seen a surge in digital payment of electricity bills amidst the lockdown. For instance, TPDDL recorded over 90 per cent digital bill payments during the lockdown as against 65 per cent earlier. Meanwhile, the BSES discoms – BSES Rajdhani Power Limited and BSES Yamuna Power Limited – received 90 per cent of bill payments through the digital mode and only about 10 per cent through cheques and demand drafts. Before the pandemic, about 72 per cent consumers used to pay online and around 22 per cent through cheques and drafts.

Future focus areas

The pandemic has compelled utilities to take digitalisation initiatives more seriously. More and more energy utilities are now considering cloud computing for business continuity with the Covid-19 crisis pushing millions of people to work from home. The ability to allow businesses/utilities to work remotely without compromising on efficiency is just one of the many benefits of cloud computing. It essentially entails the delivery of scalable computing resources from applications to data centres as a service over the internet or intranet on a flexible pay-as-you-use model. The advantages of cloud solutions for energy utilities are aplenty. Energy utilities, especially in the distribution segment, are often under pressure to reduce costs, while investing in modernising their power supply infrastructure. Cloud computing has the potential to help utilities increase their operational efficiency and simplify processes, while achieving higher revenue growth and reducing operational costs.

With growing digitalisation and cloud computing, T&D utilities are also expected to take steps to ensure the cybersecurity of networks. The Ministry of Power has also recently issued an order in this regard, stating that vulnerabilities in the power system mainly arise out of cyberattacks through malware embedded in the imported equipment. Accordingly, all equipment, components and parts imported for use in the power supply system and network will be tested in the country to check for any kind of embedded malware/trojans/cyberthreats and for adherence to Indian standards.

Smart metering will remain a key focus area for utilities especially given the central government’s repeated mandates to switch to smart prepaid meters in the next three years. Discoms are expected to step up their implementation efforts. EESL is implementing the Smart Metering National Programme to replace 250 million meters with smart ones. Other government programmes such as the Integrated Power Development Scheme and the National Smart Grid Mission also lay considerable emphasis on smart metering.

Transmission utilities are also actively looking at technologies that enable remote monitoring and operation of assets. Augmented reality/Virtual reality-based operations and maintenance (O&M) practices and manpower training are also likely to gain traction. For instance, in the transmission segment, digital substations are likely to witness a significant growth in the coming years. Equipped with smart transformers, these substations independently regulate voltage and maintain contact with the grid in order to allow remote administration and give real-time feedback on power supply parameters. Furthermore, AR and digital twin technology can help utilities get in touch with original equipment manufacturers to troubleshoot O&M issues in a substation/plant without field visits, thereby resolving issues in an expeditious manner.

To conclude, the technology landscape in the power sector is expected to witness a sea change in the coming years as utilities take steps to become more resilient in times of crises like these.

Neha Bhatnagar