Illuminating Andhra Pradesh

Bifurcation of a large state into two is never an easy process. While it comes with the dangers of split resources and lost synergies, it also comes with a small opportunity to shine in its own light. One such opportunity knocked on Andhra Pradesh’s doors in 2014 after Telangana split finally happened. Instead of being bogged down, the state leadership took charge of the reins and turned the state around into a beacon of best practices especially when it comes to the power sector, reports Team Inclusion


A reporting trip around Andhra Pradesh’s power belt took us through the mesmerising changes happening in the state which are not only illuminating from a power sector management perspective but are literally spreading light to people’s homes.

Even before the government launched its ‘Power for All’ initiative to electrify all households by 2019, Andhra Pradesh government achieved complete electrification in June, 2016, we were told. Not just this, the government even went ahead to publish an advertorial in the local newspapers in the state claiming 100 per cent electrification of all households and asked everyone to get their connection if they somehow missed out on the project.

The journey to these achievements, however, wasn’t easy at all.

The state was among the first one to start the reform process back in 1998. As part of the process, the erstwhile Andhra Pradesh State Electricity Board (APSEB) was unbundled into six entities which improved the focus on the core operations of power generation, power transmission and distribution. These entities also received significant investments which were provided to build generation capacity and improving the power supply quality.

By 2004, the energy deficit in Andhra Pradesh was brought down to 1.5 per cent  compared to the national average of 7.1 per cent  during 2003-2004. The state was ranked as No. 1 in 2003 by CRISIL in terms of performance.

However, the performance since 2004 did see a few bumps in the road.  The generation and transmission capacity addition in the state wasn’t commensurate with the increase in energy demand. Moreover, the energy deficit also widened to double digit figures after 2012 on the back of high lead time in setting up power plants, delays in acquiring funds, lack of allocation of fuel and shoddy implementation and planning, according to a white paper released by the state government itself.

Things, however, have started looking up. In the last four years, Andhra Pradesh has had a lot of achievements in the power sector that the state can be proud of.

The total installed capacity in the state now stands at nearly 23,051 MW from just 10,695 MW in 2004 in undivided erstwhile Andhra Pradesh. This represents a more than double increase in the utility power generation capacity for a state which underwent bifurcation in 2014.

At the same time, the transmission and distribution losses in the state have come down to single digits at around 9 per cent,  which is among the best in the country.

“We have already signed an agreement to provide 24×7 power in 2014 itself with the government of India and we are giving round the clock power to all, except agriculture, where we are giving 7 hours. Outages and everything else are now under control,” said Sri G. Adinarayana, Director, Finance & Commercial, Andhra Pradesh GENCO.

Adinarayana added that the state’s power generation company is in strong financial health and as a director of finance, he showed faith that financial troubles will soon be a thing of the past for the power sector.

“Our company has around R8,500 crore turnover. And we are meeting our requirements of the suppliers and all creditors. We have the financial institutions for short term requirements and working capital needs,” he said.

Meanwhile, the state’s marching ahead in other areas too. For instance, in the area of energy efficiency, Andhra Pradesh has become the leader in using more efficient LED lights on the streets. All roads in urban areas have been installed with LED panel lights and by the first half of 2019, the state government hopes to achieve the same in rural areas too making it the first to complete statewide LED lights installation.

“We were the first state to do this state-wide distribution of LEDs. Now we will become first state to complete street lights in rural areas as well. Thirty thousand street lights in all Gram Panchayats will be LEDs. So we will not have any street light that is not LED. It has led to drastic savings. All district courts have been made energy efficient,” said Ajay Jain, Principal Secretary, Department of Energy, Government of Andhra Pradesh.

In the thermal energy space, the state derives 12,290 MW from coal fired plants while another 7,976 MW come from gas-fuel power plants. NTPC operated Simhadri Super Thermal Power Plant is the biggest contributor with 2,000 MW of installed capacity. Now, the state is adding two supercritical units of 800 MW which are done and ready to function but lack of fuel linkages have hampered production. Another 800 MW are being commissioned which will be ready to function by the end of 2019 or early 2020, according to state government officials.

Focus on Renewables

The big win for Andhra Pradesh has, however, come in the space of renewables which is perhaps why the state claims to be the No. 1 in the country in terms of solar power generation. Renewable sources of energy include hydel power, solar power and wind energy.

In AP, there are 12 major hydro-electric plants which are all run by APGENCO and have 1797.60 MW in overall capacity. Compared to this, there are 4 major solar power plants which contribute about 1,200 MW of power to the state. Meanwhile, wind power contributes 54 MW through three major projects.

In the energy mix, renewables now contribute almost 20 per cent to the power demand which is expected to go up to 30 per cent by 2022, depending on grid constants. This is in addition to 6,200 MW added in renewables in the state in just the last four years. Out of these, 4,000 MW has been added in wind and about 2,500 MW in solar power. More solar power projects are being commissioned even as the state currently operates world’s largest solar park with 1,000 MW installed capacity at Kurnool district.

“We are now developing 4 solar parks with total capacity of 4,000 MW. We have completed 1,000 MW in one place that is the world’s largest solar park at one place. Then we have also commissioned 600 MW at Anantapur solar park. And we will be commissioning another 400 MW by December and then we will be commissioning the balance by the middle of next year,” informed G Adiseshu, CEO, Andhra Pradesh Solar Power Corporation Limited.

Adiseshu added that 4,000 MW will be completed by the end of next year. The state is also in the process of acquiring land from the government at a fixed rate. APSPCL will develop the land, create infrastructure like roads etc and then internal evacuation will take place. The government pays one time development charges towards land and internal evacuation and APSPCL also gets R12 lakh per MW as grant from the government of India for development of the solar park and R8 lakh per MW for external evacuation.

Evacuation is the process of providing power to the grid immediately as soon as it is generated.

On the solar front, the state is also making some striking public behaviour changes. For instance, the new upcoming city of Amaravathi – capital of Andhra Pradesh – will have mandatory solar rooftops on many buildings. At the same time, CM Chandrababu Naidu is also looking at the viability of solar powered bus stops and wind powered roads based on China’s progress.

However, storage costs are still very much a trouble for the state and it’s hoping that some lowering of storage costs will bring about the much anticipated revolution in the sector which will make solar power a household name.

On experimental basis, Renewables Energy Corporation of India is developing 160 MW plant with 20 MW battery at Anantapur where the work is yet to start. But, this plant is one of its kind with 120 MW of solar, 40 MW of wind and 20 MW of battery. The land is already acquired for the same and the World Bank is giving grant for the battery and loan for the balance part. This project will be the first one in the country to develop with the battery.

Financially, the cost of solar is coming down heavily in the state. It has reduced from R5.96 per unit in 2016 to R2.70 in recent tenders that have been floated. The drop has been massive from R5.96 per unit to R3.66 in subsequent tenders. The government is expecting further marginal fall in the rates but it is not likely to be substantial considering that there’s a safeguard and other duties in place to prevent the prices from falling even after taking into account the falling panel cost.

Furthermore, the state is seeing a huge interest from MNCs in developing solar and hybrid projects but Indian companies have somewhat gone missing from the action. This has largely happened due to cost of funds being lower for MNCs. State officials said that they expect Indian companies to participate if the sector receives more funding and low-cost funds are available.

Challenges Ahead

However, the story of Andhra Pradesh power sector is not yet complete. Even with its glittering achievements, the state has to grapple with some major challenges in the sector which threaten its objective of becoming the first state in the country with smart power all around.

The first key challenge according to Jain is availability of fuel. The problem of fuel linkages in Andhra Pradesh is not the state’s own problem alone but something that is felt in a lot of other states especially in Southern India which are far from the mines.

“It is a problem everywhere not only in GENCO. Earlier they said that domestic coal is available and asked us to stop the import of coal. Now they are asking us to import. And number of rakes are also not available. Our stations are far from the mines, almost all 1,600-2,000 km away from  the mines. Also, gas is not there. 30 per cent gas is available and units are running with that,” said Adinarayana.

The state government has approached the central government and different arms including Coal India Limited and Indian Railways to sort out this problem and a solution to this effect is expected soon.

Meanwhile, another problem for the state is its high cost of power which is leading to a tariff gap. For instance, Andhra Pradesh power purchase/production cost is the highest in the country at R3.91 per KwH, which is among the highest in the country.

However, the state government is severely cash strapped and it has even approached NCLT to recover its dues from the Telangana government which received power as per the older Power Purchase Agreement.

“Financial trouble is only the tariff because the tariff gap is there. Day by day railways are increasing their tariff and coal companies are increasing their tariff and overheads are increasing and the regulatory commission is fixing the tariff but the government has to give subsidy. If there’s any gap then there will be cash payment problems,” summed up Adinarayana.

Going forward, however, the state seems set to rely more on renewables even as coal cannot be ignored as a source of energy. In fact, CM Naidu recently visited Amaravathi and gave a challenge to all bureaucrats that they should aim to make the new capital an energy-positive city, i.e., one which doesn’t consume energy from outside and actually generates more energy than it consumes.

Jain is positive that the whole state is going the Amaravathi way. 

“We have made some good progress and we are going to see 10 per cent  power demand rise year-on-year which is very good,” he said.

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