Increasing Role of Utility Service Providers for Industries and Smart Cities

February 19, 2019

There are two sides to a business’s energy balance sheet, demand and supply.

On the demand side, energy needs vary across businesses, in terms of direct contribution to the product or services that they sell like electricity for running the machines or indirect contribution like office lightning, chilling, transportation fuel etc.

On the supply side, electricity is provided by the Distribution Company, onsite generators (solar, diesel, gas), power exchange and offsite open access projects. Heat is generated mostly from fossil fuels, and sometimes as the by-product of a process, say the sleeve heat from a gas engine.

Today, one can buy power from the power exchange or open access projects on short term or long term basis. Day – ahead power to 25 year contracts, everything is available in the market. This gives the consumer the power to decide and save money. It can buy green energy directly from the supplier, from onsite solar plants or from offsite RE plants that transport electricity through the grid by paying a rental.

Tomorrow, electric vehicles may replace a major part of the fossil fuel fleet. They may as well act as your batteries for storing electricity.

The first step a business needs to take is to start recording its energy (electricity, heat, fuel) consumption, in as much granularity as possible and in any case automatically. The reason for latter is that we have seen collection of a lot of data manually which when needed is never available in a analyse-able form and has errors. With a lot of IOT startups across the country, and low cost of IOT hardware, it has become very easy to install sensors across your business and collect real time data.

Next comes the supply side data. The Discom bill has fixed charges and variable charges. Fixed charges in turn have contracted load linked charges and electricity duty. Variable charges are Time-of-Day adjusted. Similarly, cost of electricity from the grid, fuel price for the transportation fleet are all data points.

Once you overlay the supply and demand data points, one may decide to change its supplier of electricity for a certain period of the day or replace a portion of its transportation fleet to electric vehicles or supplement the DG sets with batteries.

Electricity is a heavily regulated sector and with the incumbent Discom’s universal supply obligations, tariffs are skewed for the businesses, with commercial and industrial consumers cross subsidising residential and agricultural consumers. With businesses exploring alternate sources of power eg., open access, power exchange, the Discoms are bound to use protectionary measures to prevent the high paying customers from going away. However, as has been the case with TV viewing or cab hailing or mobile number portability, customer’s need for decision making runs supreme. In electricity also, we will see this happen. However, for this to happen, the customer, i.e, businesses should participate in the regulatory process. Each state has a State Electricity Regulatory Commission which invites all stakeholders, the Discoms, the Transmission Company, the electricity generators and the consumers for discussions on various issues, including the electricity tariffs, customer’s right to open access, i.e, right to buy from sources other than the incumbent. Recently, certain states have used protectionary tactics like increasing the fixed charge, disallowing net metering for rooftop solar plants for businesses, levying additional charges on open access transactions. It is important that the consumers get themselves heard at the SERC’s consultations and lay across their changing energy needs. This can motivate the Discoms to look afresh at their businesses and as is the key to any successful business, build it with the customer at the core. Discoms are today laden with long term power purchase agreements of RTC (round – the – clock) power. They supplement this with flexible purchase from the power exchanges and other short term swaps and contracts. Unfortunately, a significant part of the energy is lost in the transit, either due to technical reasons or stolen. Next comes collection for the energy that is sold. At the end, Discoms make losses. Everyone associated with the power sector, knows the immediate need of rationalising tariffs and reducing losses but no one dares touch it. As suggested above for businesses, we also suggest data collection for Discoms, as much as possible and all automatic. This will help Discoms and SERC analyse the problem with data and without basing them on the stories of the past. Worldwide, Discoms come out with multiple tariff plans, in the same way as a telecom service provider does in India. The key is data and the analytics that tells the Discom the churn propensity of its customer and the need for offering something that suits a specific customer, more GB, less talk time, better price for night electricity.