EV - Battery as a Service

A battery is an important component in an Electrical Vehicle (EV).

The success or failure of EV largely depends upon battery technology. Also battery price is a significant component in EV pricing. 

EV manufacturers has two choices:

1. To sell EV as a monolithic item with battery in it
2. To sell EV without a battery. Third parties will provide Battery as a Service (BaaS).

Below is comparison of two approaches on various parameters from buyer’s point of view:

Parameter	Monolithic EV with battery	EV with BaaS
Capital cost while purchasing the EV	You have to pay more when you are buying a monolithic EV with a battery as you are paying for both — EV and a battery in it.	You have to pay less as compared to the Monolithic EV option as you don’t have to pay for battery capital cost.
Buying process	You can buy a monolithic EV from a dealer and start using it.	You have to first buy an EV from a dealer. Then rent the fully charged battery from the BaaS service provider.
Charging Station	You have to worry about charging stations on your way and plan your journey accordingly. Also battery charging would take considerable time.	You have to worry about swiping stations on your way and plan your journey accordingly. Battery swiping would take less time than battery charging.
Partial charging	You can visit a charging station and get your battery recharged even if it is not fully discharged. It is like filling a partially empty petrol tank in a traditional IC engine car.	Battery swiping model will be challenging for partially discharged batteries. You have to wait till the battery is fully discharged. For longer journeys you have to keep a spare battery ready with you, which is additional cost
Abnormal situations	One vendor will take complete responsibility for solving the problem.	EV manufacturer and battery manufacturer will blame each other.
Battery replacement	You have to bear the capital cost for buying a new battery after the end of life of the existing battery.	There is no need to buy a new battery.
Battery disposal	You have to take responsibility for battery disposal after the end of life.	You don’t have to worry about battery disposal.

Electrical Vehicles -- Challenges

Battery operated Electrical Vehicles (EVs) will soon replace traditional Internal Combustion (IC) Engine operated automobile vehicles -- cars, scooters, motorcycles. However, there are many challenges that are still not addressed. A few of them are listed below:
1. Alternating Current (AC) v/s Direct Current (DC)
The electric grid generates and distributes AC and we need DC for EV battery charging. One has to convert AC current into DC current using a converter. DC current generates harmonics and destabilizes the electric grid.
2. Charging Stations
The state has to erect charging stations at certain intervals (say per 3 KM). The state has to invest heavily in it. Return on Investment (ROI) will take more than 15 to 20 years.
3. Peak load on the grid
State electricity boards in India are encouraging farmers to run their water pumps at mid-night -- at off-peak hours. State electricity boards are offering discounted tariff for it.
Similarly, EV owners have to plan battery charging during off-peak hours to make sure that there is no additional load on the electric grid during peak hours. State electricity boards have to arrange a discounted tariff for it. 

4. Starting current v/s running current
The starting current will be higher than the running current because of Electric Motor inertia. If you frequently start-stop EV, the battery will discharge sooner. Also, when the battery is on the verge of discharge, it can only manage 'Run' phase of EV. It cannot start the EV from a standstill. In this case, you have to manually 'push start' EV.
5. Local v/s global manufacturing of batteries
One has to invest a considerable amount of money in manufacturing or assembling batteries locally. Local manufacturers will be reluctant in it if they don't see Return on Investment (ROI) in 3-5 years.
Importing batteries from other locations/countries will add to the cost of EV.
The state has to take initiative in encouraging local manufacturing and assembling of batteries required for EV.
6. Recycling v/s scrapping old batteries
The state has to plan for recycling or discarding of old batteries. Else, it would damage the environment.
7. Encourage buyer switching from traditional vehicle to EV
It is not easy to convince a buyer to scrap his existing car working on IC engine and buy a new EV.
The state has to arrange a 'scrap allowance' to encourage buyers to switch to EV.

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About Aggregate Technical and Commercial (AT&C) Losses

Central Electricity Authority of India has given guidelines about how to calculate Aggregate Technical and Commercial (AT&C) Losses (AT&C). Guidelines in scanned PDF version are available on NIC website. Below is HTML version of it.

A	Input energy	Energy generated + energy purchased - auxiliary consumption - energy traded / interstate sale
B	Transmission Losses
C	Net Input Energy	A - B
D	Energy Sold	Energy Sold to all categories of consumers excluding units of Energy Traded/Inter-State Sales.
E	Revenue from Sale of Energy	Revenue from Sale of Energy to all categories of consumers (including Subsidy Booked) but excluding Revenue from Energy Traded /Inter-State Sales.
F	Adjusted Revenue from Sale of Energy on Subsidy Received basis	Revenue from Sale of Energy ( same as E above) minus Subsidy Booked plus Subsidy Received against subsidy booked during the year
G	Opening Debtors for Sale of Energy	Opening debtors for sale of Energy as shown in Receivable Schedule (Without deducting provisions for doubtful debtors). Unbilled Revenue shall not be considered as Debtors
H	Closing Debtors for Sale of Energy	i) Closing debtors for Sale of Energy as shown in Receivable Schedule (Without deducting provisions for doubtful debts). Unbilled Revenue shall not be considered as Debtors. ii) Any amount written off during the year directly from(i)
I	Adjusted Closing Debtors for sale of Energy	H (i+ii)
J	Collection Efficiency	(F+G-I)/E*100
K	Units Realized = Energy Sold*Collection efficiency	D*J/100
L	Units Unrealized = Net Input Energy - Units Realized	C-K
M	AT&C Losses (%) = Units Unrealized / Net Input Energy * 100	L/C *100

First three steps of calculations are clear and self explanatory. Transmission losses are clearly technical losses, which are considered as 'B' in the calculation. From step 3 onwards, instead of measuring distribution losses at different stages of supply chain, NIC (or whomsoever came up with the concept of AT&C) is adding following as 'losses'

• Difference between opening debtors and closing debtors
• Subsidy booked and subsidy received

While calculating AT&C losses 'M', distribution losses are not considered separately. They are not mentioned in above table. Distribution losses are getting 'tagged' as commercial losses in above calculation, which is incorrect.
This is happening because double entry bookkeeping masters (Chartered Accounts) are commercial managers. They are unable to model distribution losses as distribution losses are happening at different layers of supply chain -- cabling, distribution transformer, switch gear, control panels...They have taken simpler approach of mixing distribution losses into commercial losses.
Also, debtors and subsidy parameters are manipulative in nature.

Conclusion

• One has to report technical losses and commercial losses separately.
• One has to measure distribution losses at all levels (using smart metering??) for clear picture of leakages

Ujjwal Discom Assurance Yojna -- Chartered Accountant's approach to Uninterrupted power supply

Mr. Piyush Goyal is a Power minister in Narendra Modi's government.  He is Chartered Accountant by profession.
Please refer to Time of India news dated 12 January 2016 about his approach to Uninterrupted power supply -- Ujjwal Discom Assurance Yojna. This article shows limitations of his approach.
Mr. Goyal is suggesting a MoU to be signed by central government, state government and distribution company.  This MoU would turn each area in the network - called 'circle' in industry parlance - into a separate business unit.  The discom boss of the area, either an executive or superintending engineer, would be responsible for following:

• Meeting supply target
• Maintain and strength the distribution network to reduce down time and losses
• Check theft

Meeting supply target

Discom boss of the circle is not expected to generate electricity.  He would probably have more than one sources to buy electricity.  However, peak demand timings would be more or less same for all circles. Discom bosses of each circle would demand more power at the same time.  Some circle would not get electrical power as power generation is limited.  It cannot meet the peak demand of electricity.
It is incorrect to blame Discom boss for it as he is helpless. Number of units generated are not just sufficient to meet demand.
Similar strategy is used in corporate world.  Instead of solving problems at top level, people at operational level are expected to address it.

Maintain and strength the distribution network

You don't need a new scheme for it. It is a routine activity of distribution companies.

Check theft

You don't need a new scheme for it.  It is a routine activity of distribution companies.

Power Purchase Agreement. Do we need it?

A power purchase agreement (PPA) is a contract between a company that generates electricity (the seller) and one who is looking to purchase electricity (the supply-chain buyer).

Typically distribution company is a supply-chain (intermediate) buyer.  Distribution company commits a business to Generating company -- that it will buy all electricity produced by a generating company -- when distribution company is not sure about electricity demand from end buyers (consumers) of electricity. Distribution company takes a business risk.

This happens only in electrical power business -- that a link between supply chain is exposed to  business risk -- and not the original manufacturer.

Take an example of automobile industry.  Maruti Suzuki manufacture motors. Sai Services is sales and services agent of Maruti Suzuki. Maruti Suzuki takes complete ownership of its business and is exposed to business risk.  Sai Services never commits that it will buy all the motors produced by Maruti Suzuki. Picture shown below explains the situation.

Then why electrical power industry is different that automobile industry?  The only reason I see is to protect private players in power generation as majority of distribution companies are owned by state governments.

Why accounting books of a distribution company are not good?

I am writing this post with reference to Indian environment.  However, it is true for any other countries having similar set up.

Background

CAG audit of Delhi's power distribution companies

In January 2014, Aam Aadmi Party (AAP) government slashed power tariff in Delhi and asked the Comptroller and Auditor General (CAG) to audit the performance of Delhi's power distribution companies.

Electricity Act 2003

Before year 2003, There was only one company per state called respective state electricity board -- for example Maharashtra State Electricity Board (MSEB).  MSEB was looking after everything -- generation, transmission and distribution of electricity. There was one Profit and Loss account covering all three activities.
As per electricity Act 2003, Maharashtra State Government restructured Maharashtra State Electricity Board in 4 companies w.e.f. 06 June 2005:

1. M.S.E.B. Holding Co.Ltd
2. Maharashtra State Power Generation Co. Ltd. (MahaGenco) -- Generates electricity
3. Maharashtra State Transmission Co.Ltd (MahaTranco) -- Looks after transmission of electricity
4. Maharashtra State  Distribution Co. Ltd (MahaDiscom) -- Looks of distribution of electricity

Problem analysis

June 2005 onwards, MahaDiscom company is purchasing power from MahaGenCo by signing a Power Purchase Agreement (PPA). PPA is signed by both parties before the power is actually generated. MahaDiscom company is then selling electricity to end users and bills them for used electrical units.
Everything looks good and rational till this point. However, the catch is electricity cannot be stored. MahaDiscom never gets a 'delivery' of electricity it purchased from MahaGenco. Then MahaDiscom never supplies electricity to end users. End users get electricity directly from MahaGenco using transmission and distribution infrastructure of MahaTranco and MahaDiscom. Accounting books of a distribution company are not in good shape as it is trying to do something abnormal. It is trading electricity:

• Which is not generated by them And
• Which cannot be stored -- distribution company never gets a 'delivery' of electricity

Conclusion

1. One cannot trade electricity as it cannot be stored.
2. End users should pay electricity bill directly to MahaGenco. MahaGenco will then pay some amount of it to MahaTranco and MahaDiscom for using their infrastructure.

Electrical Power Economics

Introduction

Electrical power is necessary for industrial and overall growth of a nation as most of the industries are directly / indirectly dependent on electricity. Hence it is necessary to study electrical power system and its economics.
Electrical power industry is different compere to other industries in following:

• Electricity cannot be stored. One has to generate electricity instantaneously to meet end customers' demands. 
• Electrical power demand is fluctuating. It is difficult to predict demand with ~ 100% accuracy, based on past data. 

Terms and their meaning

Base load and peak load of power grid
Base load is constant or permanent load on power grid. Peak load is maximum load on power grid.
Base load and peak load terms are also used for power stations. In this document we are using these terms with reference to power grid.
Capital expenditure and Operational expenditure
A capital expenditure (Capex) is money invested by a company to acquire or upgrade fixed, physical and non-consumable asset such as building, generator, turbines, boiler, transmission lines, transformers etc.
An operational expenditure (Opex) is the money a company spends on an ongoing, day-to-day basis in order to run a power system. Fuel cost, employee salaries, cost associated with transmission and distribution losses are few examples of Opex.
Generation, Transmission and Distribution
Electrical power activities can be broadly divided in these three categories. Power stations generate electricity. Typically, power stations are away from civilisation.
Transmission lines carry power from power stations to substations at higher voltage. Distribution lines carry power from substation to end customers of electricity at lower voltage.
Power station load factor
Power station load factor in a given duration is defined as number of units generated divided by maximum units plant can generate. For example if 100MW power station generates 2400 MWH power in one day, power station load factor is 100% for that day. Power companies are interested in ~100% power station load factor.

Electrical power supply and associated economics 

All the power stations are connected to electrical power grid and they together supply electrical power to all end customers.
In a supply chain, distribution company buys power from generation company and sells it to end customer. Distribution company then collects revenue from end customer for units consumed by him.
In fluctuating electrical demand, all generation companies are interested in supplying base load and not peak load of power grid. Base load supply ensures that their power station load factor is better, which further ensures better Return on Investment (ROI) on Capex.
However, all the power stations cannot be designed to supply base load. Some power stations has to take peak load. Load factor for power stations dealing with peak load would be much less compare to power stations dealing with base load.
Also, all types of power stations cannot act as a peak load power stations. Thermal power station and nuclear power station cannot act as a peak load power stations as it takes lot of time to switch on and switch off these types of power stations.
Another challenge is distance between power station and distribution substation as transmission losses are directly proportional to this distance -- more distance, more transmission losses.
Companies involved in transmission and distribution of electrical power are also interested only in base load. Base load ensures better Return on Investment (ROI) on their Capex.
End customer is not interested in all these things. He demands continuos supply of electricity and prefers paying only for electrical units he is consuming.

Conclusion

Currently end customer is charged based on his electrical consumption. He should also be charged for his maximum demand in peak hours. Charges associated with maximum demand should be ~50% of total bill.