An Analysis of Microeconomic Factors Affecting Thermal Power

That’s why to avoid wrong moves and contradictions, it is said very much that the electricity is a very peculiar commodity. . Indian power industry before 2003 The power sector is one of the most prominent sectors of an economy and a growth in this sector definitely fuels the growth of the economy. The power sector has received adequate importance ever since the process of planned development started after the Independence. The generation of Thermal power started with the construction of first thermal power unit (1 MM) at Calcutta in the year 1898.

Back then, generation and distribution of electric power was carried out by private entities like Calcutta electric which is still existent. Electric power was limited to few urban places ND the rural places were devoid of any power till independence. But, after Independence the entire power Industry, which constitutes the Generation, the Transmission and the Distribution departments came under the control of the government authorities.

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State Electricity boards were formed with complete authority of generating, transmitting and distributing the power along with a central board which ensured the planning and development of power system in the country. To ensure integrated power grid operations, Regional Electricity boards were developed by the Central board which was followed by the creation of central generating impasses for development of super thermal power station which lead to the creation to N C etc Witt the installation to such power stations, the installed capacity has increased from 1713 MM in 1950 to 90,MUMMY in 2000.

As the entire power industry was under the government, private entities never played an important role in the early years. When you consider the demand and supply of power Industry, it is slightly different when compared with other industries. The generation plant will supply only that much amount of power that will be consumed and hence supply and demand are completely dependent on each other. For example, in a region A, the amount of power consumption is MUMMY and Reliance is the distributor in that area.

The power generation unit, NNTP will supply Reliance with exactly mummy of power. When a consumer needs more amount of power than normally consumed, he contacts the substation regarding the need who informs this to the power grid. Power grid calculates the overall demand and communicates this to the power generation department; the power generation department generates the required amount of power and supplies this. 3. 003 Electricity Act The 2003 electricity act replaces the three existing legislations governing the power sector, namely Indian Electricity Act, 1910, the Electricity (Supply) Act, 1948 and the Electricity Regulatory Commissions Act, 1998. The Act is aimed at providing an investor friendly environment for potential developers in the power sector by removing administrative hurdles in the development of power projects and shall provide impetus to distribution reform to be undertaken in India.

Provisions like De- licensing of thermal generation, open access and multiple licensing; no surcharge for captive generation shall be the basis for a competitive environment in the Indian power sector. Provisions of open access would be instrumental in the development of competitive power markets, and multilayer tariffs shall bring in necessary incentives for performance improvement and to reduce regulatory risk. Introduction of competition is the main feature of the new legislation – nondiscriminatory open access in transmission has introduced competition amongst the generators at the outset.

This entails that the generators can choose any distributors and distributors their suppliers with the transmission wires providers obliged to give non- discriminatory open access for transmission of electricity from generator to supplier n payment of transmission charges which would lead to the emergence of the Multi Buyer Model (MBA) markets in the near future. Competition on the distribution end had also been introduced by providing for open access in distribution and by allowing more than one licensee in the same area of the supply. Open access in distribution shall pave way for the consumer to have choice of supplier.

The concept of have more than one licensee in same area shall also give the consumers choice to choose their supplier. 4. Changes in Market Structures Before the electricity act of 2003 the power market was controlled by the government wrought natural monopolies formed by law. * Power Generation was an oligopoly between NNTP and NIPPLE * PACING had a monopoly in power transmission * Power Distribution was under local state electricity board which were having monopolies in their states The Electricity Act 2003 permitted private players like Reliance Power and Data Power to enter the market.

The dynamics of the market post 2003 is explained below. 5. 1. Power Generation Currently in the Power Generation Sector there are 349 players in India So the characteristics of this market are * Large number of players * High cost of entry/exit A few major players like NNTP, NIPPLE, Data Power and Reliance Power. This can also been seen from the chart that Just 5% of the 349 companies have a turnover of greater than 1000 Cry. So, we can conclude that the market is an oligopoly. 5. 2. Power transmission Power Grid Corporation of India Ltd. PACING) is a central agency responsible for Transmission of Power throughout the country. This market is a monopoly of PACING. The following steps are taken by PACING in order to keep its monopoly * Upgrading of Voltage PACING is upgrading its line from 400 kobo 765 xv as the transmission losses reduce with an increase in voltage. It is also testing for substation of 1200 xv * HAVOC Lines For Transmission of Power for a distance greater than 800 km the losses in DC Transmission are less than AC Transmission 5. 3. Power distribution The power distribution sector in India is divided based on the states.