CII ask power ministry for TOD tariff to reduce peak demand
TNN, 30 August 2009

While suggesting that the ministry focus on adding peak supply, Tuli advised that the ministry would do well to raise tariffs during peak hours
Confederation of Indian Industry (CII) has advised Power ministry to focus on long-term peak power demand by rasing power tariff during peak hours by implementing Time of day (TOD) tariff system. It is almost sure that power ministry will miss its 100-day and 11th Plan capacity addition targets by an estimated 7,000 MW or more. While capacity addition is the simplest solution to a supply shortfall, CII has suggested that the ministry raise tariffs during peak demand hours in an effort to reduce peak demand while maximising profits.

Battling a peaking deficit currently as high as 16 per cent, CII warns that if the current projections are followed for the next decade, power shortfalls will almost certainly occur when the country needs it most.

In a report titled “Accelerating Power Sector Growth” released today, CII provided key recommendations for addressing the challenges facing the sector. Among the numbers provided to power minister Sushilkumar Shinde and power secretary H S Brahma, CII said that by 2017, India would have a base surplus of 14 per cent but a peak deficit of 20 per cent.
“So building base load capacity alone will not be sufficient to address the country’s overall power shortage,” said Vipul Tuli, director, McKinsey & Company. “Instead, the focus should be on building peak power capacity.”

Currently, the base surplus stands at five per cent, according to the CII report. That number will sustain through 2012 before nearly tripling by 2017. Concurrently, the peak deficit will jump from 16 to 25 and then to more than 20 per cent by 2017 if capacity additions jump from 101 GW now to 255 GW in 2017. The demand is slated to jump up from 120 GW to 315 GW.

While suggesting that the ministry focus on adding peak supply, Tuli advised that the ministry would do well to raise tariffs during peak hours since “evidentially, users are willing to pay for reliable power,” he said. To make the most of consumers’ willingness to pay for power, Tuli advised that the ministry implement a multi-year time-of-day tariff for generators across states. Responding to the argument that peak requirements may be met through the cycling of coal plants, Tuli said such action would run against the long-term reliability of power capacity. “Even the coal capacity being built will not be sufficient to meet both base and peak demand,” he said.