RDSS-Smart Metering- Key Risks and a Lost opportunity for the Smart Grid

RDSS-Smart Metering- Key Risks and a Lost opportunity for the Smart Grid

Background

RDSS has been launched with a noble objective of enhancing the quality, reliability, and affordability of electricity delivery to consumers by fostering financial sustainability and operational efficiency within the Distribution Sector, achieve nationwide AT&C losses within the range of 12-15% by the fiscal year 2024-25 and attain a zero-gap between the ACoS and ARR by the fiscal year 2024-25. Since its launch, RDSS scheme & SBD have been amended several times to incorporate new conditions.

The scheme comprises of metering, Distribution infrastructure, project management and capacity building with an outlay of Rs.3.03 Lac Crore and GBS of Rs 97,631 Crore (around 32%). The primary emphasis of the program lies in Advanced Metering Infrastructure or smart metering, aiming to deploy 25 Crore pre-paid smart meters systematically under TOTEX (CAPEX+OPEX) under DBFOOT model by 2024-25 in all consumer premises, excluding Agriculture consumers. This directive is in accordance with the Ministry of Power Notification No. 23/35/2019-R&R dated August 17, 2021. In the scheme, the average unit meter cost has been provisioned as Rs.6000 with 15% subsidy capped at Rs.900 per unit making total provision more than 1.5 Lac Crore. The OPEX payment to AMISP (Advanced Metering Infrastructure Service Providers) by the discoms will be on successfully managing the system for 93 months after its installation. Besides AMI, the scheme also includes components relating to Distribution Infrastructure, Project Management and Capacity Building. Therefore, the success of the RDSS scheme primarily hinges in the success of smart metering rollout for consumers as well as Distribution Transformers.

Currently, there are 51 AMISP registered with most of them not having any experience of working with the discoms and are primarily aggregator/integrator of different components of the scheme. As per the National Smart Grid Mission, so far installation of around 17.5 Crore meters have been approved under RDSS scheme out of which orders have been placed for 7.26 Crores and deployment have not started in most states and signing of SLA is delayed due to various issues.

Benefits

Smart Metering offers tremendous technical advantages to the grid stakeholders. The discoms are benefitted by way of:

a)????? Improving Billing Quality.

b)????? Remote Disconnection/Reconnection for arrear recovery from defaulters.

c)?????? Real time information of Outage, resulting in timely redressal.

d)????? Remote intelligent data analysis (pinpoint irregularities

e)????? Identification of theft prone areas/consumers based on smart data analytics.

f)?????? Effective System health monitoring.

g)????? Better monitoring of Billing, Collection, and Supply Management etc. with more reliable and near real time data.

h)????? Feeder/DT wise energy accounting and better planning for reduction in AT&C Losses.

i)??????? Support for load forecasting and regulatory compliance

The Load Dispatch Centers (LDCs) derive several advantages through enhanced capabilities in demand analysis, energy forecasting, and peak load management. This leads to improved supply reliability, fostering better communication of energy and billing data to consumers. This upgraded supply system empowers consumers by enabling them to monitor consumption patterns, billing information, and provides opportunities to engage in incentive programs.

Regulators benefit from access to reliable statistics, which aids in efficient planning and tariff determination. This data is instrumental in designing innovative initiatives such as Demand Response, Storage, Time of Day (ToD), and Time of Use (ToU) tariffs. Additionally, regulators can easily monitor Standards of Performance, System Average Interruption Duration Index (SAIDI), and System Average Interruption Frequency Index (SAIFI). This robust information infrastructure facilitates the introduction of innovative services like peer-to-peer energy transactions and behind-the-meter services.

In essence, the AMI or smart metering and data-driven insights not only enhance the operational efficiency of LDCs but also empower consumers and regulators, fostering a more dynamic and responsive energy ecosystem.

Critical Assessment

While the technical and financial advantages of rolling out smart meters into the distribution sector are evident, the success of this initiative relies on a thorough process of identifying, assessing, quantifying, and mitigating all associated risks related to legal, technical and financial dimensions to ensure an acceptable cost-benefit ratio. Unfortunately, some significant risks still lack adequate mitigation measures. To illustrate these risks, I will delve into the specific statistics of Uttar Pradesh discoms to evaluate the likely success of the scheme.

1.?????? Exclusion of Smart Grid as an Objective

India has undertaken a National Determined Contribution (NDC) commitment to attain 50% of its installed capacity from non-fossil fuel-based energy sources by 2030. Simultaneously, it has set an ambitious Renewable Purchase Obligation (RPO) target, aiming to achieve 43.3% of its total energy from renewable sources by the same year through the installation of 500 gigawatts (GW) of renewable energy sources. Although there is a disconnect between the target of achieving 50% installed capacity as per NDC and 43.3% energy through RPO because the CUF of renewables is much lesser, but that aspect can be ignored for the time being .

As the fundamental structure of the grid transitions from the traditional base load and peak load based plants to a more flexible model involving Distributed Energy Resources (DERs) and Electric Vehicles (EVs) etc., there is a pressing need for large-scale integration of distributed renewable energy resources. Effectively managing this evolving grid requires the implementation of a smart grid, which incorporates intelligent components such as smart meters, Supervisory Control and Data Acquisition (SCADA) systems, sensors, and more. In essence, the deployment of a smart grid infrastructure becomes a critical enabler for achieving India's renewable energy targets. However, the RDSS scheme is focused on only reducing AT&C losses through smart pre-paid meters and includes only a small insignificant component for training / Smart Grid Knowledge Center by way of GBS of Rs. 30 Crore to CPSU Power Grid and does not encompass the broader scope of a smart grid even when a huge sum of more than 3 Lac crore is proposed for the scheme.

2.?????? Inadequate funding and no burden sharing amongst the stakeholder

The scheme outlines the installation of 25 crore meters with an average cost of Rs. 6000 per unit, including a GoI subsidy provisioned at Rs. 900. However, due to the compressed time frame and other conditions of the Standard Bidding Document (SBD), the discovered bidding prices have escalated by an average of 30%-35%. In the recent bidding for Uttar Pradesh's distribution companies (discoms), encompassing 9 clusters, the discovered prices ranged from Rs. 7307 to Rs. 8428 per unit. The total cost amounted to Rs. 29,612 Crores, surpassing the RDSS DPR estimate of Rs. 21,834 Crore by 35.66%. This additional expenditure of Rs. 7785 Crore, equivalent to about 3.5 years of admissible Return on Equity for the discoms, has to be funded by discoms itself as no financing is available from the scheme beyond the DPR. The discoms also face the challenge of being unable to pass on the smart meter costs to the consumers since regulators contend that consumers have already paid for the meters cost while taking connection and can’t be forced to pay again. Furthermore, a Ministry of Power letter (F.No.14/02/2021-UR&SI-II-Part(1)(E-258136) dated 16 Sept.23) exempts consumers from any payment towards smart metering costs.

GoI subsidy @ 15% with the ceiling of? Rs. 900 per unit, which discoms have to pay on the Operational Expenditure (Opex) to the AMISP works out to be less that the 18% GST it pays on the average cost of Rs. 8000 per unit. Consequently, the entire burden of increased smart metering costs has to be borne by the discoms, and its recovery through efficiency gains from improved billing and collection ratios may prove challenging.

3.?????? Disproportionate high Cost for only AT&C Reduction

The notion that smart pre-paid metering will effectively curb AT&C losses and yield financial benefits for discoms poses a significant challenge and is contingent upon the consumer’s consumption profile. In Uttar Pradesh (UP), under SAUBHGYA scheme, over 1.2 crore consumers were added, most of which falling into the Lifeline category. As per audited Trued up statements for FY 2021-22, the number of Lifeline consumers in UP is 1.45 Crore, constituting approximately 45.3% of the total consumer base of 3.21 Crores. The total energy consumption of these lifeline consumers was 11.893 billion units (12.68% of the discoms total energy consumption) with an average of 68 units per month and their average electricity bill remained below Rs. 300. Further, as per the discovered price through bidding, discoms are obligated to pay approximately Rs. 80 per meter per month, translating to more than 25% of the revenue collected from these Lifeline consumers who pay monthly bill of less than Rs.300 and constitute around 45.3% of discoms consumers. This is in stark contrast to the discoms' average AT&C loss, which was around 20%. So, in a way, if smart pre-paid meters are installed in these lifeline consumers’ premises, the cost of these meters will be more than 25% of revenue from these consumers. The issue is not unique to UP only as many states that have also added Lifeline consumers under the SAUBHGYA initiative and may encounter similar challenges, potentially jeopardizing the financial viability of the Advanced Metering Infrastructure (AMI) program.

If the primary objective is to instill financial discipline and mitigate AT&C losses through improved collection methods, traditional pre-paid meters, at a 1/4th of smart meter’s cost per unit, could have justified the cost benefit, however higher financial cost for the Advanced Metering Infrastructure can only be justified with the technical and economic benefits by the smart grid objectives and not merely with AT&C loss reduction.

4.?????? Gaps in Target categories and One Size Fits all Approach

The Ministry of Power (MoP) notification dated 17-Aug-2021 has granted an exemption to Agricultural consumers from the mandatory use of smart pre-paid meters. It is noteworthy that in many discoms partly camouflage higher AT&C losses by showing them as unmetered agricultural consumption to avail agriculture subsidies from the government. Metering agricultural consumers is necessary for energy accounting and targeted subsidy/DBT etc. Excluding agricultural consumers from the mandatory use of smart meters will only serve to perpetuate this anomaly. Moreover, as the scheme is centralized, it adopts a one-size-fits-all approach for discoms, despite variations in consumer profiles, load duration curves, capacities, and other factors influencing AT&C losses across different regions.

5.?????? Legal Risks- No Choice to the consumers and takes away their? grievance rights

The Smart Pre-Paid metering system under RDSS faces risks associated with specific provisions of the Electricity Act 2003 that remain un-mitigated. For instance, Section 47(5) includes a provision implying consumer consent for pre-paid metering, stating, "if the consumer is prepared to take supply through pre-payment meter." However, both the Ministry of Power (MoP) notification and the Scheme have removed the consumer's option of choosing "pre-payment" and instead made it mandatory. It is noteworthy that businesses in distribution, such as telecom, typically provide consumers with the choice in this regard.

Likewise, the provision for mandatory prepaid meters installation also conflicts with Section 56 of the Act, which mandates a minimum 15 days' notice before disconnection even in case of non-payment of bill. This essential feature is currently absent in the scheme. Denying consumers this right would impede their ability to dispute erroneous bills, a right expressly granted under the Act. Besides these, the technical and regulatory challenges exist in providing net metering connections to the consumers under rooftop solar schemes through compulsory pre-paid smart meter mode.

6.?????? High Financial Risk for AMISP

Although Rs. 1.5 Lac Crore has been earmarked under RDSS for smart metering, the unit prices discovered in the bidding process suggest that the anticipated project cost for installing 25 Crore meters will exceed Rs. 2 Lac Crore. AMISPs have to provide this on DBFOOT model for around 10 years concession period.? Thus, the AMISPs are exposed to a long duration of financial risk related to steeper penalties for their non- performance of long list of obligations, faulty meters under warranty etc.. It may be noted that while BIS provides of manufacturer warranty of 5.5 years, RDSS demands warranty for the duration of concession i.e. around 10 years adding on to the cost of project.

Moreover, a significant number of AMISPs possess a limited equity base and are resorting to higher leveraging. The inadequate financial capacity or lack of willingness of consumers especially the lifeline consumers? to meet their payment obligations may result in the disconnection of their supply, pose a risk of shrinking revenue streams of discoms and, consequently, to the AMISPs, as no supply translates to no payment. This situation could potentially expose their lenders to non-performing assets.

7.?????? Technology Risk for AMISP

The cost of smart meters supply is only an event in the overall project, with the predominant focus on the process of operation and maintenance of associated IT infrastructure over the concession period. In this regard, the role of IT especially the telecom plays an important role. The diminishing footprint of GPRS technology raises concerns about its effectiveness, and the initial lower cost of 2G communication may give rise to operational challenges in the future. With approximately 60 crore smartphones, characterized by high Average Revenue Per User (ARPU), dominating the spectrum usage, the introduction of an additional 25 crore GPRS/GSM/VoLTE/5G based smart meters could lead to heightened competition for spectrum resources, potentially escalating communication charges. Moreover, a parallel development observed in Europe underscores the risk of hidden costs related to Intellectual Property Rights (IPR) fees, with technology companies claiming ownership of IPRs in 3G, 4G, 5G, and NB IoT technologies and thereby exposing AMISPs to these risks.

As grid operations evolve towards increased flexibility and real-time responsiveness, the true advantage of smart meters lies in retrieving consumer data every 15 minutes, if not every 5 minutes. However, with 25 Crore consumers, even at a 15-minute interval, a substantial volume of data will be generated. Effectively managing this vast dataset while complying with the data privacy laws and ensuring robust cybersecurity measures will present a formidable challenge for AMISPs in fulfilling their obligations.

Conclusion

In conclusion, the objectives of RDSS Smart meters should go beyond only reducing AT&C losses, as these gains are achievable through conventional pre-paid meters as well at a much lower cost. The objectives should encompass smart grid to justify the high cost with associated higher benefits of smart grid. The smart grid will facilitate flexible generation, distributed renewable energy source integration, and effective load management. The rollout should strive to unlock the full spectrum of smart grid features, providing technical advantages for discoms, consumers, grid operators, and regulators, contributing to the overall efficiency, reliability, and sustainability of the electrical grid.

The limited supply of meters and a shortage of technically proficient personnel, the expedited smart meter rollout within a condensed timeframe has led to increased costs, making the cost-benefit ratio unviable. Therefore, it is recommended to extend the rollout duration to effectively address these challenges and reduce the implementation cost and enhance the technical benefits.

Smart meters offer potential for targeted subsidization, but the current grant allocation is insufficient. It is crucial for the State/Central Government Grant to be increased, covering a minimum of 50% of the cost. This augmentation is essential to align with the National Determined Commitment of de-carbonization through renewable integration, extending funding beyond ratepayers to include taxpayers. Lastly, to ensure inclusivity, comprehensive coverage should be extended to all consumer categories without any data exclusions and private discoms should also be deemed eligible under RDSS to achieve complete coverage and maintain a fair playing field.

Article Written By Raj Pratap Singh(Lucknow)

https://rpsingh1958.blogspot.com/2023/11/rdss-smart-metering-key-risks-and-lost.html