04th April 2013, www.lankabusinessonline.com
Sri Lanka should push harder on cutting peak power demand as 'average' costs are meaningless and trimming the most expensive 5.0 percent of energy has the potential to eliminate losses at Ceylon Electricity Board, a think tank has said.
About 17 percent of the generation costs of state-run Ceylon Electricity Board went towards the most expensive last five percent of energy purchased, LirneAsia, a regional think tank said in public consultation called by the Public Utilities Commission of Sri Lanka.
The CEB also spent 17 percent of its costs on the least expensive energy, which amounted to 50 percent of the total energy purchased.
"Thus, if energy purchases could be reduced by 5 per cent, it is possible that the losses of the CEB could be eliminated," LirneAsia chair Rohan Samarajiva said.
"This is the importance of managing demand. Not all the demand needs to be reduced in absolute amounts. Shifting it to off-peak, (when the sole base load coal plant, producing inexpensive energy is asked to back down) could also provide substantial relief.
"If peak demand is lowered, the overall costs of supplying electricity will be reduced."
Costs range from less than 5.0 rupees a unit of electricity for hydro to around 30 rupees for thermal energy. Average costs have been determined by the regulator at around 20 rupees based on a tariff proposal filed by the CEB, after disallowing at least three thermal plants.
Sri Lanka CEB cost curve
In a power grid where different sources of energy have different costs, 'average' costs are meaningless and are simply driven by peaks and which types of plants are used and for how long.
"The cost models that underlie the tariff proposal are based on assumptions of levels of use that may change because of the radical redesign of the tariff structure," Samarajiva said.
"If demand is lower than projected, especially at the peak, it is possible that the proposed tariff will yield excessive earnings."
Some of the most expensive power is used during the late evening peak from around 7.00 to 9.00 pm local time, when households light up and demand goes up to 2000MegaWatts
The cheapest large hydros are also used during that time as peaking plants. Hydro is also vital as load following plants to balance generation with fluctuating demand, but the most expensive energy including gas turbines are switched on at that time.
The cost of delivering power at different times therefore is radically different.
But from around midnight to early morning, when Sri Lanka's power demand plunges to about 1,000 MegaWatts, a 300MW coal plant is operated below full output to accommodate a rule that says a single plant should not be more than 20 percent of total load.
The rule has been put in place to prevent the grid from failing when a large plant goes out of the system. But sources at the CEB say the floor could now be improved to 25 percent or more with load management techniques which has been already developed.
Samarajiva said CEB could also set up a pump storage system, where late night and early morning coal power (where the incremental energy charge is around 8.30 rupees, compared to average costs of 20 rupees) water is pumped back to a reservoir.
Selling energy to India through a proposed cable could also achieve the same effect.
Sri Lanka has cascade reservoirs where such a pump storage system could be set up.
A flatter daily demand curve could substantially cut overall costs, bringing down average costs even with the existing plants.
Samarajiva says investments should be made in demand management. Investments in demand management could be the same as building completely new plants.
Samarajiva said the proposed tariffs for 2013 where, households are charged at the highest rated block instead of slabs will give an incentive to conserve energy but CEB should communicate better through mass media and text messages to tell people how to save energy.
"In particular, targeted messages printed on the electricity bill of high-consumption households stating that they are paying X rupees more than similar households have proven to be effective in several countries," Samarajiva said.
"A redesigned and more informative electricity bill appears a necessity."
Smart meters where even domestic customers could benefit by shifting activity to off-peak cheaper power (such as running a washing machine cycle), should be promoted.
"For example, it should be mandated that CEB/LECO install smart meters in all new condominium towers with immediate effect," Samarajiva said.
"Next, it should be mandated that the distributors should install smart meters in at least 50% of currently-high-consumption households (possibly defined as those using above 180 units per month) within the next 24-36 months.
"Such metering would enable subtle, yet sophisticated programs that change consumer consumption patterns."
"More importantly, such meters would also enable more sophisticated policy solutions, such as time-of-day pricing and other alternative tariff structures that enable cost-reflective pricing in the future."
CEB has already proposed low rates for the late night off-peak especially for industries, who could potentially operate a late night to morning production run.
Samarajiva said subsidies could be directed at those who most needed them, perhaps by increasing payments to the poorest Samurdhi receivers.
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