Power sector reforms: emerging generation markets and externalities

Abstract

The objective of the thesis is to analyze the effects of electricity sector reforms on the generation markets and corresponding externalities. The study answer the following questions: I ) What arc the new electricity generating structures/ entries that have evolved since commencement of power sector reforms in India'? 2) What factors have contributed to the higher growth or captive power plants? 3) How electricity reforms have impacted environment'? 4) What would be the future emissions from the power sector? What are the strategies to mitigate emission from power sector? In this thesis, the dynamics of the generation market is examined through intensive interviews of experts from industry and academics, backed by literature survey. Case study of Gujarat is conducted for analyzing the reasons of high growth of captive power plants. Primary data of captive plants is collected through questionnaire surveys. Data is also collected from government sources for triangulation. The questionnaire survey is complemented by interviews of the plant managers, electricity industry experts and experts from academics. The effect of Indian power plants on externalities is calculated using internationally recommended methodology. Time series data for power plants is collected for this purpose. The future power sector emissions are estimated using energy-environment optimization model. The sources of these emissions are geographically plotted and studied using spatial analysis techniques. The following insights emerge from the thesis. With reforms, the generation market is fragmented. New generation structures like co-operative plants and hybrid plants have shown higher growth, the primary reasons being: policy pushes, higher costs of industrial electricity and other benefits (for example co-generation of electricity and steam). For these varied reasons, different categories of captive plants have emerged with time. Captive plants can be segmented into different categories – back-up; multi-benefit; quality electricity and lower cost. Among the positive externalities, electricity reforms have contributed to the reduction in emissions. Although the total emissions from the power plants for both global and local pollutants show an increasing trend, the emissions per kWh of thermal power generated (thermal emission baseline) of carbon (global pollutant), sulphur and suspended particles (local pollutant) show a declining trend from 1991 to 2002. There are differences in the national, regional and state emission baselines. The main reasons for these differences are different plant efficiencies, varied vintages, renovation and modernization costs and differences in operational practices. Also, the baselines vary across ownership. The marginal emission baseline shows a much steeper decline than the average baselines. This shows that the newer plants are more efficient than the older plants. In the future, there is a disjoint in the dynamics of global and local emissions from power sector. Though the total global emissions shows increase till 2030, the local emissions start decreasing after 2020. The research contributes by examining the power sector reforms at the micro level, from the firm’s perspective. The study enhances the database on the captive power plants, power utilities and emissions inventory. The power sector externalities are calculated and spatial analysis is carried out, this research has been development in close interaction with Indian policy makers and industry. Electricity regulators, government policy makers, experts from private, state and national electricity utilities, ex-perts working in non-utilities, consultants and academicians have provided their valuable inputs and also helped in validating the results. Some of the research output and recommendations have been tested and used by the regulators and policy makers. Other research outputs are expected to be useful to policy makers, analysts, industry experts, researchers and consultants.