Ensuring Grid Reliability in India

A beginner’s guide to understanding resource adequacy in India’s power sector.

India, the third-largest global electricity consumer, witnessed a record peak electricity demand of 240 GW in September 2023, driven by rapid economic growth. Coupled with this demand, India has made commendable progress in renewable energy growth, boasting over 150 GW of installed capacity and an ambitious goal to achieve 50 percent non-fossil generation capacity by 2030. Nevertheless, the reliability of the power grid and ensuring the availability of adequate resources for 24×7 power supply remains a challenge. Despite a surge of recent solar additions — 275 percent cumulative growth over the past five years — which have mitigated the risk of power outages during the daytime, India faces an increased risk of power shortfalls during the nighttime. To prepare for the risk of summer power supply shortfalls, the Indian Ministry of Power invoked emergency rules the past two summers to keep coal plants operating at full capacity on imported coal, despite the unfavorable economics of them doing so.

Amid these challenges, the Indian power sector has seen market reforms to cater to growing demands, ensure energy security, maintain reliability, and integrate renewable sources. One notable initiative is the Resource Adequacy Planning Framework (RA Framework) by the Ministry of Power, released in June 2023. Resource adequacy (RA) and its close relationship with the capacity market has been an essential tool across the United States and European grid operators to maintain system reliability and ensure adequate resource availability. However, understanding RA planning and its implementation is still in the early stages for Indian power sector stakeholders.

What is resource adequacy?

Resource adequacy is a power system planning concept that minimizes the risk of blackouts or brownouts while balancing the costs of maintaining a reliable power system. Resource adequacy is just one of the pillars of power sector reliability, which also includes transmission stability, distribution reliability, operational reliability, and resilience.

In planning for a resource adequate system, planners must be able to answer the following questions: How reliable do I want my system to be? How should I build and operate a system to achieve resource adequacy, as well as other reliability or policy objectives at the lowest cost? Answering these questions is not easy, but fortunately, decades of resource adequacy planning in other regions has equipped grid planners with the tools they need to answer them.

How reliable does the system need to be?

Grid planners or oversight entities typically establish resource adequacy criteria to balance cost and reliability objectives. If a system “meets” these criteria, then the system is considered resource adequate. The RA Framework by the Ministry of Power focuses on two criteria for resource adequacy: the frequency of outages and the magnitude of outages. It does this through two components: loss of load probability (LOLP) and normalized energy not served (NENS).

• LOLP represents the likelihood that a system will experience a “loss of load,” or outage, event each year.
• NENS represents the expected total energy shortfall during outage events divided (or “normalized”) by the total annual load.

Using multiple resource adequacy criteria is an emerging practice among planners, allowing them to design a system while controlling for the expected frequency, duration, and magnitude of outages. The target 0.2 percent LOLP and 0.05 percent NENS values are considered by the Central Electricity Authority (CEA) in creating the National Electricity Plan.

Exhibit 1: Resource Adequacy Planning using Loss of Load Probability (LOLP) and Normalized Energy Not Served (NENS) metrics.

How do you build and operate a system to achieve resource adequacy?

Grid planning has the objective of meeting the resource adequacy criteria in the most economically efficient way possible while achieving other policy considerations such as clean energy targets. To achieve this, grid planners rely on generation planning models, also known as capacity expansion models. These models use optimization software to select the least-cost generation mix that can reliably meet demand while considering resource investment and operational costs; performance characteristics such as a power plant’s efficiency, ramping capabilities, and fuel costs; availability profiles for variable resources such as wind, solar, and hydro; and additional constraints based on policy and reliability considerations. This modeling exercise is a key component of integrated resource planning (IRP) or long-term planning, which evaluates electric system investment and retirement needs from a few years to 10–15 years in the future.

One important resource performance characteristic relevant to resource adequacy is capacity credit. Capacity credits reflect what percentage of a resource’s installed capacity can be depended on during periods at high risk of outages. For thermal resources such as coal and natural gas, a plant’s forced outage rate is typically an important factor in determining its capacity credit; for variable renewable energy resources such as wind and solar, expected weather conditions during periods of high demand or netload play a central role.

A resource’s capacity credit multiplied by its nameplate capacity is called its accredited capacity. Accredited capacity enforces a key reliability constraint commonly included in generation planning models — the planning reserve margin (PRM). The PRM constraint, represented as a percentage of peak load, requires that the system has enough existing or new accredited capacity to meet or exceed peak load times one plus the PRM value.

Exhibit 2: Illustrative Example of Capacity Accreditation for Different Resources 

How is resource adequacy planning currently proposed to be implemented in India?

The RA Framework places significant responsibilities on the CEA, which builds upon its traditional role of publishing the National Electricity Plan every five years. Under the RA Framework, the CEA must annually develop a 10-year look ahead under the Long-term National Resource Adequacy Plan (LT-NRAP). The LT-NRAP will include the optimal PRM at the national level, a projected optimal generation mix for the coming decade, regional capacity credits for various resources, and the required contribution of each state and union territory to the national peak capacity. Simultaneously, the National Load Dispatch Center (NLDC) is expected to issue an annual Short-term National Resource Adequacy Plan (ST-NRAP), focusing on the upcoming year's hourly demand forecasts, resource availability, maintenance schedules, outage rates, and decommissioning plans. This information is vital for creating RA plans at both national and distribution utility (Discom) levels.

The state load dispatch centers (SLDCs) are expected to allocate the state-level peak shares from the LT-NRAP to respective Discoms in a state, which formulates their resource adequacy requirement (RAR). Discoms are then required to demonstrate the RAR compliance to their respective state energy regulatory commissions (SERCs), by contracting enough accredited capacity to meet their allocated share of the national-peak (for example, 100 percent contracting of the RAR in the first year and at least 90 percent in the second). In addition, Discoms are expected to undertake a 10-year horizon long-term Distribution Licensee Resource Adequacy Plan (LT-DRAP). These LT-DRAPs are to be vetted by the CEA and submitted to the respective SERC for their approval.

Exhibit 3: Implementation of the RA Framework — central, state, and Discom’s roles and responsibilities

What does the Resource Adequacy Framework mean for India’s Discoms?

The RA Framework guidelines from the Ministry of Power are expected to provide appropriate procurement signals at the national, state, and Discom level for contracting resources to meet national and state-level peak demands and ensuring grid reliability. Moreover, the long-term planning studies proposed under the framework present an opportunity for Discoms to achieve benefits beyond resource adequacy. The RA Framework calls these assessments LT-DRAPs, and each LT-DRAP is a 10-year horizon look ahead plan intended to ensure Discoms meet their own peak and electrical energy requirements. These studies are reminiscent of the IRP processes common in the United States, where grid planners prepare forward-looking plans to anticipate grid needs over the next 10–20 years. The IRP or LT-DRAP exercise could provide Discoms foresight into key planning topics, such as:

• Understanding tradeoffs between in-state generation versus electricity imports over time with increasing state demand, load peakiness, and growth of renewable resources
• Preventing investments in new generators that could become stranded assets due to underutilization or poor cost competitiveness
• Planning and executing large projects that require a long development lead time before the anticipated need becomes critical

Although IRP best practices continue to evolve, decades of resource planning in the United States and EU regions have led to the development of a robust community of practice and a range of software tools to support this process. Complying with the new RA Framework presents an opportunity for India’s Discoms to leap ahead and adopt IRP best practices:

• Incorporate advanced planning tools to meet their obligations under the new RA regulations, including a growing number of free and open-source planning tools that are available at zero financial cost.
• Identify and leverage opportunities for training and support. Discoms need more than just access to planning software, which often has steep learning curves; they also need access to training and support to build internal expertise for these tools.
• Develop robust data pipelines. Generation planning models are only as good as the inputs and assumptions used in them, so it is especially important that Discoms have access to accurate data. The RA Framework lays out specific requirements for future scenario planning that considers demand variation, hydro conditions, outages, renewable energy resource availability, and more, and Discoms must be able to access and effectively utilize the necessary data to develop these assumptions and perform robust scenario analysis. Central entities such as CEA and NLDC could consider creating a central data portal that enables and streamlines the Discoms RA planning studies.
• Think beyond resource adequacy. The processes outlined in the RA Frameworks provide insights beyond resource adequacy. The same generation planning tools and scenario analysis proscribed in the regulations can help Discoms identify cost-effective investment pathways that are robust to a range of future uncertainties.

Complying with the RA Framework guidelines will require new processes, new skills, new tools, new data, and a new understanding of sophisticated resource planning concepts. But this hard work will pay off in the form of a more reliable, robust, clean, and lower-cost Indian grid.