The Indian electricity sector is a vast and complex system, powering homes, industries, and businesses across the nation. This complexity also extends to the understanding of the various technical terms associated with it. So, let’s take a look and understand some terms essential to understanding our power sector. Now, we have covered the basic topics like generation, transmission, and distribution in a previous article, take a look at it here. In this article, we will be looking in detail at the many other terminologies that are present in our electricity sector.
1. Peak Demand: As the name suggests, it is the highest electricity demand recorded over a period of time. Currently, we can see the peak demand during summer time, with intense heat conditions in the country, compounded by factors such as the widespread adoption of remote work practices.
2. Load factor: It is a way to measure how efficiently electricity is used over a period of time. It is the ratio of the average load, which is the average amount of electricity used over a certain period to the peak load, which is the highest amount of electricity used at any given time.
3. Plant Load Factor (PLF): Like load factor, this is also used to measure the efficiency, but of a powerplant. It is the actual electricity produced by the power plant over a specific period divided by how much the plant could have generated if it worked at full capacity all the time.
4. Real-Time Market (RTM): It is kind of like a stock market for electricity, a platform for buying and selling electricity for immediate delivery (within 1 hour). In India, electricity demand fluctuates throughout the day. Sometimes power plants produce more electricity than is required, while other times there is a shortage. RTM serves to balance these oscillations by allowing purchasers (such as state utilities and large companies) to purchase electricity in real-time, resulting in a constant supply.
5. Day-Ahead Market (DAM): It is a platform that allows market participants to buy and sell electricity for the next day. The prices and quantity of electricity to be traded are determined through a double-sided closed auction bidding process.
6. Term-Ahead Market (TAM): It enables buyers and sellers to trade power for up to 90 days in advance. This allows power firms and industries to manage their electricity consumption and prevent last-minute shortages or high pricing.
7. Green Term–Ahead Market (GTAM): It is a power trading platform that was introduced to help bulk electricity buyers, such as discoms and large corporate consumers (with a contracted load of 1 MW or more), purchase renewable energy (RE) on a short-term basis. This allows buyers to source RE from merchant RE projects or discoms with surplus renewable energy beyond their Renewable Purchase Obligations (RPOs).
8. Renewable Purchase Obligation (RPO): It is a regulation that was set by the Central or State Regulatory Commission, which requires certain entities to source a portion of their electricity from renewable energy. It applies to power distribution companies (DISCOMs), open access consumers that purchase electricity from exchanges, traders, or agreements, and captive consumers, such as industries in cement, steel, and chemical sectors that generate their own power from coal or natural gas. This mandate ensures a specific percentage of their electricity consumption comes from renewable sources.
9. Power Purchase Agreement (PPA): As the name suggests, it is a contractual agreement between energy buyers and sellers. They come together and agree to buy and sell an amount of energy that is or will be generated by a renewable energy source. PPAs are usually signed for a long-term period between 10-20 years.
10. Renewable Energy Certificate (REC): It is issued when electricity is generated from renewable energy sources. RECs certify that 1 MWh of electricity was generated from a renewable source and fed into the grid, enabling the REC owner to claim the environmental benefits, such as reduced carbon footprint of that clean energy generated.
11. Open Access: It provides consumers with heavy usage, usually more than 1 MW connected load to buy cheap power from the open market. This is to allow the customers to choose from a number of competitive power companies, rather than being forced to buy power from the local utility monopoly. Open access helps consumers meet their Renewable Purchase Obligations (RPOs) as well.
12. Deemed Generation: It describes the electricity that a power plant could have produced but was unable to because of uncontrollable circumstances like transmission limitations, system outages, or governmental prohibitions. The power producer may receive appropriate compensation in such circumstances.
13. Cross-Subsidy: It is an extra fee charged to consumers who buy electricity from sources other than their local power distributor. This is intended to make up for the money that the distribution company loses when large consumers, such as corporations or industries, move to other power providers. The surcharge helps balance costs so that smaller consumers, who often pay lower electricity rates, are not affected.
14. Grid Stability: The ability of the power grid to maintain a steady supply of electricity despite changes in demand or supply.
15. Grid Frequency: It is the rate at which an electrical grid's AC (Alternating Current) power supply changes the direction. It is typically represented in Hertz (Hz). In India, it is maintained at 50 Hz.
16. Inter-State Transmission System (ISTS): It is the transport of electricity generated from any kind of energy source, across state boundaries through grid transmission lines. This allows areas with abundant energy resources to share their excess electricity with other regions that may have a higher demand for electricity but lack access to energy sources.
17. Intra-State Transmission System (InSTS): It is the network of electricity transmission lines and substations that operate solely within the boundaries of a single state.
18. Load Shedding: It is the deliberate shutdown of electricity supply to manage grid demand, to avoid overloading the grid, which can lead to blackouts.
19. Feed-in Tariff (FiT): It was designed to promote the uptake of renewable and low-carbon electricity generation. In a feed-in tariff scheme, providers of energy from renewable sources, such as solar and wind receive a price for what they produce based on the generation costs. FiT's aim is to make renewable energy projects financially attractive by providing long-term contracts and fixed prices, which help reduce the risks associated with these investments.
20. Ancillary Services: Ancillary services refer to functions that help grid operators maintain a reliable electricity system. Ancillary services maintain the proper flow and direction of electricity, address imbalances between supply and demand, and help the system recover after a power system event. In systems with significant variable renewable energy (RE) penetration, additional ancillary services may be required to manage increased variability and uncertainty.
Frequently Asked Questions:
1. Why would a company choose a VPPA over a physical PPA?
A company might choose a VPPA if they can’t install renewable energy systems at their site, or if they want to support clean energy projects in other locations while still getting credit for it.
2. What are RECs (Renewable Energy Certificates) in VPPAs?
RECs are proof that electricity was made from renewable sources. In a VPPA, the buyer gets RECs to show their support for green energy, even if they don't use that power directly.
3. Are On-Site PPAs only for solar energy?
No, while solar is the most common, On-Site PPAs can also be used for wind, biomass, or other renewable systems—depending on what's suitable for the location.
4. What are the benefits of Off-Site PPAs?
Off-Site PPAs give buyers access to clean energy from large projects, let them lock in stable prices, and help meet sustainability goals—even if their building isn’t suited for solar panels or turbines.