Transformation of India’s Power Grid. Part 2: A New Era beckons | ft. Vishal Pandya

[Podcast intro]

Welcome to the season five of the India Energy Hour podcast. This podcast explores the most pressing hurdles and promising opportunities of India energy transition through an in depth discussion on policies, financial markets, social movements and science. Your hosts for this episode are Shreya Jai, Delhi based energy and climate journalist and Dr. Sandeep Pai, Washington based energy transition researcher and author. The show is produced by 101 reporters, a pan India network of grassroots reporters that produces original stories from rural India. If you like our podcast, please rate us on Spotify, Apple Podcasts or the platform where you listen to our podcast. Your support will help us reach a larger audience.

The evolution of India’s electricity grid reflects the ever-changing dynamics of the country’s economic and infrastructure growth. Built as a backbone to coal-based power, the grid is now upgrading itself to handle green electricity, give space to energy storage and be flexible to fluctuating demand-supply scenarios.

The India Energy Hour brings a special series on the progress of the grid in India, how far it has come in last the 78 years and what the future looks like as we aim to be a net carbon zero economy in the next two decades. From policy to technology, the series scans all aspects of the country’s electricity grid.

In the second part, we spoke with tech-entrepreneur Vishal Pandya, co-founder, REConnect Energy, a Bengaluru based digital energy platform. REConnect builds AI and grid automation software products for energy utilities, and provides tech solutions for electricity market products and renewable energy management.

[end]

[Podcast interview]

Shreya Jai: Hello, and welcome to the India Energy Hour, Vishal. Thank you so much for joining us here. We have been wanting to get you for some time for all the interesting work that you’re doing behind the scenes for India’s electricity grid and renewable integration. And we are very excited to know about your journey, about the work that RE Connect Energy has been doing for, what, I must say, fifteen years. So thanks again for joining us here at the india energy hour.

Vishal Pandya: Thank you, Shaya. Thank you, Sandeep, for having me here and excited to have a good conversation.

Shreya Jai: Lovely. So are we. And, we would love to know, what all that you do, what all that you’re doing. But before that, we would want you to, you know, dig a little bit into your past. Where are you from? What did you study? How did you stumble into the sector? Can you tell us a little about yourself?

Vishal Pandya:  Yeah. Sure. So I’m an engineer. And to be more specific, I’m a power system engineer. So my story is not like I stumbled upon this. I belong here. Right. And and, I mean, right from my graduation days, electrical engineering days, always loud power systems. Back then, I wanted to be in the core field, do core engineering, and I ended up with L and T, this ECC division engineering construction. So I was part of substation designing. This was 2005-2006, right after my engineering. I joined there as a graduate engineer training. And my job there was to help my team design substations. So different busbar schemes and protection schemes and then lightning, light you know, the lighting system, protection system, so and so forth. And there I realized that, while the work is exciting, you just follow the protocols because these are, like, very tightly defined systems where so many standards you must comply with all the time. And that work, I realized that could pretty much be automated. You don’t need a lot of manpower and intelligence. Well, all you have to do is just comply. Right? It’s more of a procurement and, you know, system integration game. And I was back then, was applying and, you know, studying for GATE, and I could get into, like, some of the IITs. And IIT Madras was offering high voltage systems, and, IIT Bombay had power systems and power electronics. And that’s how I ended up in IIT Bombay. And, my thesis back then was also into transmission pricing. So in IIT Bombay, because the curriculum was power electronics and power systems both, in the batch of about 24, just two of us were in the power system. The market was more, you know, inclined towards electronics because the job offers were a lot more electronics than in power systems. But I followed my interest back then, and, and that translated into the thesis as well. Right. So my minor project was on electrical vehicles, electric vehicles, different drive systems for EVs. This was 2007-2008. And, my major thesis was on transmission pricing. And around that point in time, the exchanges were evolving. My faculty, Professor Kapade, who is still a mentor to me, he was, on the advisory board of IEX. And around that time, the conversations around the renewable energy market started. RE was still like a new concept. Right? This was 2007-2008 where, only Tamil Nadu used to a lot of RE. Almost 60 -70% of India’s win was in Tamil Nadu. And, the role there was to study international markets, how the renewable energy markets are designed, more of a certificate trading scheme. And that’s where I came across different schemes across Europe, Australia. The US was still fragmented, but Europe was a lot more mature. And we did a study project, presented it to IEX, presented it to MNRE while I was at IIT Bombay. And, subsequently, the campus placement happened with Tata Motors, but I wanted to be in the markets knowing that the core engineering I don’t want to do. I belong or rather I love power systems and power markets. And markets being markets, they’re always dynamic. So I ended up with IEX, you know, in 2009, and that’s how the power market sales journey started. And, there my role was more into business development, interacting with utilities, and also many large and small consumers who would come to exchange. It was a very new phenomenon back then. And, it was a very exciting time at IEX. It’s a formidable kind of, you know, organization, foundationally, very, very strong. People also I mean, a great set of people to kind of work with. I learned a lot from there. And, subsequently, while for IX also, the REC market design was part of the schema. And, that’s where I met Vibab, through LinkedIn. So while I was running organ this, conferences on behalf of IX, all the regions, he reached out over LinkedIn saying, you know, can we connect? I have some ideas. And back then, CRC was formulating the REC market design. And, we interacted, and he opened up saying I’m working in carbon. This is looking like an exciting market which would open up. And, domestic compliance credits, like, you know, mini carbon market, India would create. And then I always had in mind that I’ll start something, and that was also a disclaimer to my wife now. We were dating even back in IIT Bombay that while I’m joining, maybe a few years down the line, I I would want to start something. And the original idea was work for five, six years, see the world, and then decide. And this came up, right within the first year of job and within a few quarters of marriage. So, we kind of, you know, agreed that, okay. We’ll try for a few years. If it doesn’t work out, we’ll go back to, you know, hunting some job. And, with Vivo, we kind of ended up spending six to nine months interacting, discussing what role you can play, what role I can play. So it was a good combo. He was a CA MBA from Columbia. I was an engineer, worked with energy markets. His domain expertise, he worked quite extensively in carbon. So he had a lot of connect in the carbon side of it. I was coming from power markets. So we felt, you know, the synergies are there, the vibes were matching, and, then we decided to put our papers and start reconnect. Now it’s been about fifteen years.

Sandeep Pai: What an interesting, what an interesting story. First, I wanna ask a quick follow-up about LinkedIn and how people start organizations and companies. And I mean I mean, this is kudos to the power of social media for all its criticism. So, yeah, like, if you wanna tell, like, how did you feel, like, okay, this is a good connect. I’m sure you continue to and perhaps even then used to get a lot of LinkedIn messages. So how did you pass through and, like, kind of tell us more about the LinkedIn story, and then we’ll move you in the RE connect direction.

Vishal Pandya: Yeah. I mean, so the first conversation was, like, you know, very, very arms length. Somebody’s calling as a, you know, job description involved, explain REC market. How is it going to evolve your own perception about it? And, when he opened up saying he wants to start, I also, you know, kind of responded back saying, yes. I’m I was also thinking, but not maybe immediately. We met, two, three times after that. So, of course, the LinkedIn was a foundation to kind of start with, but I think the decisions were more around, should we start now? I mean, there was more from my perspective. And also how do we finance? Who brings in what on table? What is the structure that you can look at, right, in terms of ownership, in terms of capitalization? Because for me, it was, you know, like, right out of college, first job, barely any savings. And for him also, he had studied in US, worked in the UK for some time, and had moved to India recently. And, his wife, Shachi, she was also on maternity. So it was like a leap of faith for both of us. I think the broad idea was that how do we validate and how do we start? Do we start together? So starting together, I think after a few conversations, we both felt that, okay, there is a fair rationality on both ends because we had no common connects. Right? No university linkage, no, you know, family connection, no friends, no common friends also. Right? Zero. In a way, I think it’s good there were no baggage, no, you know, presumption based, judgments in terms of you would behave this way, that way. So I think that worked. So starting together, I think it was a quick decision. The Huddl decision was how do we start. And because we both were on, you know, different companies, we were having our own obligations. We could not reach out to a client directly and say that, you know, you can think of working with them. And, even to do a a brief, you know, dipstick approach to the market because it was a trading function. Network was required to trade RECs on exchanges as a member. The team was required to be build the client connection. Also, the validation in terms of whether people would want to work with someone as new as us. Right? So one interesting thing we did there was, so having arrived at agreement, I mean, we both met my wife, Tamanna, Shachi. We all kind of, you know, met in Hyderabad. So there was a time where we felt that, okay. We can start. And post that, we decided how do we start. And, Shachi was on a long leave. And, so we used her name, kind of asked her only to, you know, prepare something, created a small newsletter. We did not have a company name. All of that was kind of open. But the idea was that how do we even probe whether clients would want to have some services around this and an interest in this market. So we put together a few names, put one summary of the draft regulation, send it across, with a note that if you are interested, you know, kindly reach out. And we gave Shachi’s number. And, we in fact got a couple of calls saying, you know, you come and meet us. We have so and so type of assets. The very first one was, from our hydro plants in Himachal. They’re still our client. Right? I mean and some of those clients are still with us. Right? It’s been fifteen years, and they have put new assets. And for new assets, also, they are with us. So it’s, you know, that, kind of longer and deeper connection. And same way from Tamil Nadu, we got a couple of biomass, you know, companies. They reached out saying, can you come and meet? And, we had no one to go and travel. So then we had to put a disclosure that this was, you know, like, an approach to make an outreach and understand if there is an interest. By so and so date, we are getting relieved, and after that, we’ll come and meet.

But Shashi can’t come and meet. Right. So there, we realized that, yes, there is going to be an interest. While the design was simpler, the aspects around the regulations, the approval process, you have to get approvals from state and then at a national level and then trade at power exchanges, and the exchanges are also new. So we realized that, okay, we can think of starting. Then our original plan was that if we close 100 megawatt, we might be in the money in terms of cash flow. And, if the certificate start trading, we would be able to sustain team of five, ten people. In reality, what happened, we started sometime around September 2010. I think by next March or so, we had a closure of almost eight hundred, nine hundred megahertz. Right? But the cash flow didn’t start. Right? So a lot of work, that happens in terms of, you know, interacting with these clients, networking. So the hypothesis turned out to be true. How to start was solved.

How to fund was still kind of open. So we also had, you know, like, founders agreement, with capitalization plan that, you know, by this quarter, you bring in this much money. And if it runs short, then you also have kind of, you know, obligation to bag and borrow from your friends and family. And, you’re still putting someone. Right? So we didn’t get to that stage, of course, but cash flow was kind of distorted. The clients would pay when you hit those milestone. The trading took time. The first trading happened sometime around March 11 because the regulations were out. The procedures, you know, also took some time.

And then having the digital kind of interface in terms of REC registry, all of that took time. And but we built a good portfolio and also a small team to start with about four, five people. And, we are very confident that, okay, we have built in a good kind of, you know, portfolio and very close connect with all those clients. Right? Because it was like a first venture.

Convincing client was tougher because we were competing with likes of Tata Power Trading, PTC, bunch of new traders who had started in the power markets. So many carbon consultants. The big names back then were, Ernst and Young, EVI. EVI is no longer active, but it was a very big name in the carbon space back then. Gensol, for example. So they started with carbon then moved into right. So we had almost, like, very crowded market, and everybody was excited. Like, this is going to be a revolutionary, like, what we are seeing the excitement for electricity derivatives today. Right? Completely new segment, too many, you know, wild vREables, and you don’t know what’s going to happen. And but I think the clients could see that we are a lot more knowledge centric in terms of understanding about market approach. And and I think that being a founder and having direct presence also helped convince some of the large player. So Orient Green, for example, was the first public listed IPP in the country, and everybody was chasing them. They had almost one fifty megawatt of portfolio in wind and biomass. Right? And entirely under open access. There is no other client like that in India who could, you know, come up with such a large volume directly into REC. And, we met the MD and even to a chairman level, there was one meeting saying that, this much, you know, revenue potential it could have. And, because when money comes in, everybody at management level wants to, you know, look at very closely. How is it going to come?

What is the magnitude? Who do you deal with when such kind of money comes in? And it took some bit of convincing, but we could prevail in terms of, you know, differentiating ourselves in terms of the knowledge, in terms of the presence. And by then, we had also built a team which was spread between Mumbai, Delhi, and Bangalore. And, we did not have office for about initial nine to ten months. So it was like work from coffee day, or you work from home. Right? So that’s how the whole, you know, setup was born.

Shreya Jai: Very interesting journey, and and I like all the Jugar aspects of it. I also, you know, quickly want to speak in a question about RDCs because we have to talk about the crash in the REC market that happened, which kind of, you know, upended the whole industry. But it actually spurred you to look at other options in the market. You kind of broadened the company’s vision. So can you address both of these things, that particular, crash? And then did it lead you to look at other avenues, or was it always in your vision board?

Vishal Pandya: So it is both ways. Right? So while I was working at IEX, my job was to interact with utilities. And the daily questions will be, what would be tomorrow’s cleREng price? Where should I bid? Because sometimes prices go up, sometimes prices go down. You don’t want to put a zero price as a seller, and you also don’t want to put a max price as a buyer because the culmination of all buy bids and sell bids determine the resulting price. So the utilities will always be conscious that you place a bid around in and around the market price. Sometimes you have urgency, so you want to go a little over the board and clear. Sometimes you want to play your best effort basis, you try to procure. And some of the questions would be linked with parameters like, what is going to be the demand? Who is buying, who is selling, how is the weather. Right? If it’s raining in Rajasthan, if Rajasthan is a big buyer, that volume will go away. Then the prices you will see, you know, are softening by, you know, a few tens of pesos immediately on the next day. Similarly, if a large seller coming in or, you know, there is a transmission constraint, like Eastern Region and Southern region, we’re extremely constrained. How is the, you know, corridor availability? Can we secure volume even if you are willing to pay 20 rupee a unit? Back then, the price peak price, which was kept by regulator, was 20 rupee a unit. And the last part of Tamil Nadu, the open access consumer as well as TNEB, would buy power at 20 rupee a unit in evening hours, right, because of congestion and so many other factors. There I realized that there is a need to bring some intelligence in terms of decision making.

How do you analyze the demand supply moment? How do you analyze and, you know, carry forward, understanding on the price impact and the moment of price? And and lot of them were linked with weather. So the idea when I started discussing with Vivo was that there is also going to be analytical layer which would be needed. So REC for us was always a start.

And right around 2011- 2012, we also wanted to go on the digital spectrum. Because as an engineer, I mean, I never liked, you know, only brokerage and as an advisory member, but it was a entry point to access the market, build some social capital within the professional circles so that you are known for your good work, and from there, you can build on. So in fact, 2012, we participated in a boot camp by Infuse Ventures. And there, we pitched this idea that this whole REC market, it started with a flying start, and then the enforcement of RPO was nowhere to be seen. So it also kind of, you know, detached quite fast in terms of liquidity.

And, but while we had a slightly different idea that the renewable asset owners are selling under FIT, lot of them are also wanting to sell directly to the consumer. And some of the big consulting firms were also running the advisory services, on enabling buyers to interact with sellers and make a structured PPS. So we wanted to digitalize that primREly on the basis of the fact that exchanges have a very standardized products. Every unit you sell in the day head market has to go to regional periphery. On hourly basis, you bid.

There is no price commitment. There is no volume commitment. Whereas the PPA, if a new renewable asset has to come up, they will need a need a PPA upfront. Right? So earlier, the practice, even the large thermal power player would do is sign a PPA with a trader. And the trader will sign a PPA, get some money, but the PPA will not be kind of, you know, put in place. The generator will use it just to finance the project. But for renewable even, that was not available. And there were a lot of offline transactions happening. Tamil Nadu was, like, a fertile ground. When there was no electricity available in Tamil Nadu, I have seen you can call it brokers or consultants making 20 paisa unit, 30 paisa unit margin. Right. You are not a trader. You still take $20.30 paisa unit for arranging power supply because the industry was so desperate. And some of the, you know, brokers or advisers in Tamil Nadu, I know they started building their own mini power plants. Five megawatt biomass, 10 megawatt biomass. And the information arbitrage was so much. Right? So that’s where we pitched this idea to infuse that. We have some presence in renewable.

The supply side, and within two years, we had a portfolio of almost 3,000 megawatt. Liquidity was one side, but at least on the commitment side, we had a very large portfolio. And for first ten years, 45% of India’s racks on the supply side, we would feed in the market between solar and wind. Right? And lot of sessions, we would have larger volume from the net clearance point of view than one of the exchanges. Right? So that was the kind of, you know, depth we could build and the hypothesis for this digital platform. So the idea of click power where the buyers can transact directly and the whole OTC platform came from there. Infuse liked that idea. We built a quick business plan.

They did their own diligence and all of that. In the boot camp, they shortlisted some 12 entities, and of the 12 entities, 4entities were selected. So one more name which will be very interesting for you, Sheya, would be the fourth partner. So REConnect and a fourth partner were funded by Infuse in that boot camp. This was 2,000 and, I think, 2012-2013 The funding came in a little later by 2014, but that’s how it started.

Sandeep Pai: Great. This is really helpful, Vishal. But I wanna just go back one step and then take it forward. Just for my understanding and for the listeners’ understanding who may not be from this field, or this specific field. Can you give a broad overview of the India’s electricity sector, from the lens of technology as well as, like, what products, how does the electricity kind of sector work? Not from a generation side, but from a, you know, demand side. And what are some key tech based solutions that are in the play currently?

Vishal Pandya: Right. So when it comes to the sector as a whole, the foundational layers are your generation. There is transmission. There is distribution. And in between, there is a grid operations. The roles are predefined. Of course, there is a regulator and then the policymaker who brings in a lot of interventions to promote certain technologies. And from the technological landscape point of view, if you start with generation, we had coal from normal coal to supercritical coal power plants driven by efficiency, lower carbon emission. From that, we moved to, FIT based wind and micro, or small scale hydro and later on solar. And once the technology is matured, now we are also giving similar incentives for domestic production for modules. Battery energy storage is now newer technology, which needs some sort of promotion, and eventually, it will again be commoditized like rest all, you know, has been commoditized. The transmission, I think the technology has remained the same. It’s, you know, a lot of metal and a lot of cables, but the management of that has changed in terms of what more you can do in operating and managing the technology. So a lot of space based tech and a lot of AI has started coming in there. I’ll come to the grid operation at the last. The distribution side where a lot of disruptions have happened, from the how you manage electricity. Some of the interventions you would have seen that what to procure and when to procure. Earlier, it was left to the, you know, distribution licenses, sometimes to politicians, you decide. Now the resource adequacy framework has come up. And the reason for that is from the energy system point of view, there has been a foundational change. What was a vertically integrated utility, the same entity is generating, transmitting, and distributing. The electricity act 2003 changed it where the privatization of transmission happened, the privatization of generation happened en masse. The privatization of distribution hasn’t happened at that scale, and the grid operation, of course, remains a natural monopoly. The generation mix started changing after 2010, going more and more deeper into renewables. The demand behavior also started changing because the climate has also started changing fast. And there came need for having more low carbon emission technologies, and those don’t need any description. The vREability and the fluctuations, because the markets also if you look at the long term price average, the election years, the prices tend to pick.

When exchanges started, I remember many power plants in Chhattisgarh, they were under PPA with the state. They broke the PPA, came to market. The realization in 2010, the average realization was 10 rupees. This PPA was no more than 2 and a half, 3 rupee. So people started sensing that, yes, there is great opportunity when the markets are there. And the same way the DISCOMS also started realizing that at least I can get power even if it is expensive. Right? And also get much cheaper call it I mean, cheaper rate power. And after that, the rates kind of started stabilizing in the range of 2 to 3 rupees. The grid operations is where a lot of interventions started coming in because managing the grid became more and more complex. What changed a major change rather came after the 2011, grid outage. So if you recall, we had a entire northern grid, went into a blackout stage. The reason for the blackout, 6 of 5. Was overall. So some of the states, so we have a UI mechanism. Back then, it was called unscheduled interchange. So you schedule thousand megahertz, but you may draw 500 or 1,500 or 2,000, and you pay some penalty. So the utilities are okay to use that as a trading mechanism. Don’t go to market. Buy in real time not buy, but draw in real time and you settle later on using the penalty mechanism. And those penalties also, you can pretty much default and say I’ll continue because I am a state. And the blackout was a trigger point where the first thing that happened right after that was the grid started kind of tightening. So the frequency band where we had half a hertz band where the frequency could go all the way to fifty point five and forty nine point five, that started tightening. It started, it got reduced to, I think, 49.85 and then 50.15. And now we operate in point zero five hertz band. How they tighten it? By way of putting more and more stringent deviation settlement charges. So earlier, what was UI, it became DSM. And last three years, if you look at the DSM numbers, there is a 103% growth in terms of DSM charges that the distribution companies, the renewable asset owners, and the generators who are connected at the national grid, ISDS network, they’re paying. What was 2.8 rupees became almost, 5.1 or 5.3 rupees a unit. Right? So the mechanism to govern and ensure quality power is delivered started happening way back in 2011. And with more renewables coming in, there was also a realization that the visibility of renewable has to be there. Earlier, if you look at those power supply position reports by CA, until recently, you know, four, five years ago, if you saw see those PSP reports, you will not find the mention of renewable. The report will mention generation in MU from thermal, generation in MU from hydro, major hydro and thermal shutdown or tripping, and then total demand from a state. No mention of solar, no mention of wind. Everything else will fold into other other sources. And even though the states like Tamil Nadu, they had very good energy mix from the renewable point of view, a lot of, wind and Karnataka, a lot of hydro, you’ll not find a mention of these resources. So the and then the reason for that is the states also did not have a visibility. Right? Distributed assets, hundreds of wind and solar farms, we still call them farms. Right? They are not fun. They are bigger than thermal power plants. Right? 5,000 megawatt, 30,000 megawatt. You don’t see a 30,000 megawatt thermal power plant at one place. We are planning 30 to 40,000 megawatt wind and solar and battery storage plants in. Right? So the world has changed, but the nomenclature has still remained. Right? The wind farm is still a wind farm. However modern and technologically advanced it is, it’s still a farm. So the whole nomenclature and the context, you know, change how we see the generation kind of getting added to the grid, how the distribution gets impacted because of that, how the grid management gets impacted. And with the recent last three, four years, if you see the distributed solar has picked up quite well. Right? Gujarat, for example, has almost 5,000 plus megawatt of solar assets. Rooftop solar, I’m talking about. And these are all behind meter. Some of the problems which has started kind of becoming a challenge. Right? Earlier, the visibility of RE was a challenge. So REMC was conceptualized around that. How do we get to see the asset, their characteristics, and their generation right from state to region and region to center? Sitting in Delhi, somebody wanted to see, I want to have a full scan of renewable assets. What’s happening with them? What is the production? What is the actual? Forecasting, you know, was, of course, a key element. But the first aspect was visibility, which was not present at all. The planning became kind of, you know, very, very crucial there. Same way now the distribution side, the newer challenge which is coming is behind meter, what is the visibility? You have rooftop solar. You have electric vehicles. When is what load our generation going to hit you? The utilities would be required to know because there are load generation balance issues. There are load flow issues at a distribution level. So I know for a fact some of the utilities are struggling to evacuate surplus solar, which is coming from distribution pockets. So you’ll see congestion happening at a DT level, distribution transformer level. So a lot of things have changed in last ten, twelve years, and lot many more changes we are anticipating in next five years because of the scale at which the grid is already operating.

Shreya Jai: Right. Absolutely. Thank you for talking about this whole supply chain. And, I would now like to come to the company because you’re sitting in the middle of all this in a very sweet spot, offering a lot of products. Let’s first start with something that you mentioned, renewable energy management centers, REMCs. I think you have set up around 11 REMCs across the country. So what are these? What do you do with them? And what is the technology behind it? And, you know, how did this all come around?

Vishal Pandya: Yeah. So the concept around REMC originated from the problem statement of curtailment. So the UPA two, the target was 20 gigawatt and a lot of, you know, pitches were being made that India needs investment in renewable. The government is offering very attractive feed in tREffs. But the challenges at hand we had was, back then, Rajasthan, Tamil Nadu, Gujarat, and Madhya Pradesh, and to an extent, Maharashtra. Very large grid and, of course, sizable capacity, but percentage penetration was not very large in Maharashtra. So barring Gujarat, the curtailment was a serious issue, way back in 2013- 2014-2015. And, this was prominent in pockets like Tamil Nadu, Rajasthan had started. And this was making news all over the country. Right? And there was also a very interesting report in 2014. Tamil Nadu’s curtailment of wind, the magnitude was so much, it could power entire Sri Lanka for three to four months. Right. The curtailment volume alone. Right.

And, this challenge was also driven by a fact that state would say I do not have visibility of these assets. Data feed was not that you know proper. State had that visibility at regional level, national level there was zero visibility. The second aspect was this is vREable energy. I don’t know what is going to come. And that’s where the discussion around forecasting started. If you look at the grid code, the word forecasting for renewable was mentioned in 2010. Grid code, which was published by CRC in May. We got incorporated in February. Lot of clients when we reached out to them in 2013-2014 saying that the forecasting needs to be done. We also got a meeting saying you are the one who are going and telling forecasting can be done for renewable. Right? Whereas it’s God’s gift. There is no control that we have as an asset owner, and we cannot forecast. Right? So we cannot be penalized for inaccuracies here. We can, of course, forecast, but there cannot be a penalty. So the visibility is where the questions around bringing IoT sensors and get those assets online from state’s point of view. If you start forecasting, then at least you can start benchmarking. What is the accuracy? Can you forecast to a reasonable degree of extent? And that is where g I zed, via KFW’s fund, almost billion dollar billion euros were earmarked for, renewable centric grid. €800,000,000 for transmission where the RE centric transmission can be made, and about €200,000,000 were earmarked as a it was a debt which was funded, not like a freebie, which will go into the developmental, work. The REMC as a concept was mooted by MNRE, along with good support from ZIZ and bunch of consulting organizations who put their brains together saying, what we need to see, RE. Right? The challenges were two, three fold. One is that, how do we reduce curtailment? Cattlement, the reasonings were there were commercial reasons also, but we’ll not discuss in this forum. The operational reasons were, I do not know what is coming to the grid. How can I plan my procurement? I’ll buy thermal. And even if a thousand megahertz renewable comes up, I would already bought thermal for thousand megahertz. Right? Because I need it for the entire day. So I’ll not consider renewable. It’s a freewheeling source. Whenever it comes, if we can absorb, we’ll absorb. If not, I’ll curtail it. And that’s how some of the grid, you know, operated. And this is the problem ministry wanted to solve by bringing visibility level one, which started with SCADA. So the recommendation from the ministry and the GAZ appointed consultant was that the REMC as a construct needs to be developed as a separate control center. The control center will have three components, SCADA, forecasting, and scheduling. So the framework was set. Scheduling, why so? Because around the same time, the whole DSM regulations for RE were coming in, and they wanted unified framework for scheduling for RE so that you get a national level visibility in terms of what is happening with the renew. So the approach and the vision, I think, even in UPA to administer level was that that RE will become mainstream. And the 20 gigahertz became 100 gigahertz, and then now we are talking 500 gigahertz. All of that happened in the span of, you know, like, no more than fourteen, fifteen years. So commendable, you know, kind of thought process from the policy makers point of view, including their own vision. Once the concept was noted, the budget was assigned by ministry of power saying, you know, take this much money and, implement this. And the basis for that was bringing some large, you know, companies like Subsiemens or GE or, you know, Hitachi’s of the world who can take ownership of this because they are pretty strong in the grid management space, right, especially on SCADA. And they want a dedicated SCADA for renewable. And that’s how the concept of REMC evolved, with completely different infrastructure starting with IT hardware, the networking, the SCADA system dedicated for RE, the forecasting system. Again, multiple forecasters will be fading forecast so that you are not dependent on a particular forecaster. And then the optimization of the forecast.

So the system should also be intelligent enough where you have three or four forecasts. The system should be able to dynamically assign weightage and see which forecast is a good good quality, which forecast is a bad quality for every substation that is registered in REMC so that you get the most stable forecast, you know, at REMC level. And then comes the scheduling. So the forecast data goes to scheduling, and the stakeholder who wants to schedule will also have a reference forecast available. And they can use that forecast or they can have their own independent forecast based on the regulation and start dispatching. So that’s how the concept was put together, and the auctions were kind of carried out, in three packages, south, west, and north. And south went to OSI, west went to Siemens, north again went to OSI. And then there was one more mini system in Andaman called energy management system. Forecasting was a very small element that went to GE. So the whole digitalization of renewable asset from the governance point of view started, you know, due to the events like lot of curtailment and, you know, investor becoming jittery around, you know, how are you handling RE.

Sandeep Pai: Right. So, clearly, REMC has a role that it has played. What role do you think it’ll play for a 500 gigawatt, you know, RE scenREo in the future? I also ask this because many people are concerned as you can understand what it will do to the grid. So, like yeah. Like, your insights on, like, to what degree can it, like, help with better integration of RE?

Vishal Pandya: Yeah. So the visibility was addressed instantly. The data quality also started improvising because the moment you say forecast is where we go after and say where is the actual data because you forecast for 100% capacity, actual is missing. So that feedback loop started, you know, involving all the stakeholders and then focusing on data improvement data quality improvement. So so that has happened. The forecast quality, what are REMC started, we started with 7% error band. Right? As an acceptable error band to start with, which got reduced to 5% within two, three years when the new REMC started coming. So, like, for example, Ladakh, on which we are working, the error band got reduced, to 5%. And even before that, the Telangana REMC, which came up, that also started with five. From the grid operations point of view, five is not enough now. So the expectations are now going around two, two and a half percent error levels. And there, again, there is a fragmentation in terms of what is the systemic need. So the newer contracts that we are getting from some of the grid operators is give me day ahead accuracy because this is where my impact is the most from the planning point of view. Because normally, you measure the error after intraday revisions. Even in DSM, you measure your DSM after all the intraday revision. You make 50 revision, 100 revision. Even at DISCOM level, it happens that way. So you’re allowed to revise in real time because knowing that there will always be some uncertainty both at the generation end as well as the demand end, and that is permissible. But from the planning point of view now, the requirements have started becoming a lot more stringent on twofold. One is that intraday, I need under 3% error levels. And on day ahead basis, I also need, you know, 5% error level. So what we were getting on after intraday, after 24 revisions or 16 revisions, the expectation is that lot better accuracy is needed on day head basis. The same thing is translating on the demand side as well. The reason, again, goes back to tightening of grid. The frequency band was wider. The deviations were wider. The moment the frequency band started getting tighter, it started impacting the DSM numbers. Right? And the moment the DSM number goes up, the financial sensitivity starts coming in. And that same thing has happened in renewables. On the generation side, the 15% permissible error band from which we started in 2014 got reduced at the central level to 10% for solar. And starting twenty six April, the mandate is it will reduce to 5%. Right? And so the there is a systemic squeeze in terms of how the grid needs to evolve. What is the technology, side intervention you can do? So earlier, the forecast, what we used to make was only a function of weather and single weather and SCADA data, real time data. It changed immediately within a few years to multiple weather to improve reliability, multiple levels of data coming in. And further down, we started tapping satellite images to see if every fifteen minutes if there is a satellite image coming in. So we partner with ISRO. We partner with some of the European satellite company, got the satellite feed. Couple of years, we worked on building, you know, AI layer. So it’s a fusion of computer vision and time series data. Right? And lot of data. Every fifteen minute, you get a low resolution but high frequency satellite image. And you run it as a movie, you will see that the clouds are moving. And you get a very pixelated kind of information there. The job for us there is from the pixel, can you figure out hour down the line how the cloud is going to move and whether that cloud is going to cast a shadow on your asset. So right now where we are in terms purely in terms of technologies, half an hour down the line, one hour down the line, we are pretty accurate in terms of estimating. The challenge comes what happens after two hours. Right? And there, the improvement is there, but the computational resources needed to predict that lot more accurately doesn’t gel well with the, you know, current commercial set. With the ’26 coming in, I’m very sure there will be a sizable demand to get there because the generator today where the DSM impact is about two to 4% of revenue. So if you’re operating at a 15% IRA, two to 4% of revenue going purely into this is a killer. Right? So there we are clearly seeing a transition that accuracy aspect or other, you know, in a layman’s time if we put in ability to peek into future lot more accurately has a tremendous value. Tremendous value from the grid operations point of view, even larger value from the financial markets point of view because now the derivatives are about to start. Right? So what happens to weather? What is the translation of that into renewable? What is the translation of that into the demand? And the translation of that into a price. And the price moment to the futures contract where a lot of volume could be traded, there is a huge interplay in terms of the intelligence.

Shreya Jai: This is so fascinating to listen, that something called, something like power or electricity or renewable can be talked in terms of a commodity. I’ve covered commodities, markets. So we are talking it almost felt like we’re talking about wheat or sugar Yes. Markets where we are thinking about, you know, forecasting the supply chain and you’re talking about derivatives. I’ll come to derivatives, because that is something in the future. But let me continue with the tech part a bit. Vishal Pandya: There’s another product of yours called Grid Connect, which is a decision support system as you have tried to explain to me multiple times, which has a complex stack of linking your spatial level data to AI models. So I want you to, you know, in a very comprehensive way, explain what Grid Connect is and how it is, you know, simplifying, grid operations for you and your clients.  Right. So, I mean, the journey again at the product level has been fragmented. Right? So we started, you know, putting together forecasting layer, then came, you know, state level forecasting. So we worked with GEBCO, three year contract. We wanted and also delivered, met those accuracy criteria, then came REMC. So multiple forecast on prem application. So we were working only on cloud back then. Then to going, you know, deploying directly at a control center level, the scheduling and automation around that, was also kind of an important layer. In terms of technology streams, if you split grid connect, there is an AI layer which predicts your renewable, which predicts your demand, your price, and an optimization layer. If you are a utility, you have multiple streams of contracts. How do you dispatch optimally putting all those mathematical constraints into a dispatch model? And there you compare what is the price, what’s your contract, what are the ramp up, ramp down constraints. Put all of that and it tells you, you know, what is the optimal dispatch mix. Should you back down your own generation and buy from market? And, of course, the decision remains with the utility. So the decision support is more driven around AI and optimization. The next leg is which is a lot more comprehensive where the objective is, can we synchronize flow of electrons, flow of transactions, and flow of money? Because this is where the grid operates. Right? And all three layers are kind of very, very important. So the prediction tells you how the flow of electrons is going to happen. The dispatch will tell you or dispatch automation will tell you, how the flow of transactions is happening. You are a generator. I’m a buyer. There is a grid operator. They need to map you and me together and then also settle the transaction with reference to, again, deviation with reference to the contractual obligation. So this is where, again, forum of regulators in 2016 came up with a concept called Samast. So scheduling, accounting, metering, and, you know, transmission, Samas, it’s a very long, you know, name. In short form is kind of Samas. Then the recommendation was that we have a lot of hurry coming in. We need the grid operations to be digitalized. So I remember when I was at IEX, if open access is to be filed, there were, you know, two, three forms mandated in, electricity act. So those form, the generator will fill up, take an affidavit, submit it physically to the state utility, and say, give me open access. They will take a month to approve. Right? So all the physical paperwork started getting translated into digital stream because the need was if somebody wants to transact, they need a faster approval. They need faster visibility. They need a faster payment. Right? So all the payment gateway integration, all these approvals, the manual process that was getting carried out, a lot of such manual processes started kind of getting digitalized into this framework called Samas. So multiple states have now implemented. We are handling two states right now, Haryana and Kerela. Both are under implementation. Work is pretty much done, about to go live in terms of the software and the acceptance and all. But the broad idea there is every stakeholder in a state, if they want to schedule, they will come to this framework, the system. They will start dispatching. If they want to transact, say, between their generation to exchange, they will have the ability to do it digitally. Once it is transacted, the DSM will be calculated, again via the system. The energy accounting will be calculated. The pay in payout will be calculated by system. The AMR will be integrated into the system. So full digital stack where you synchronize all three systems, the electrons, the transactions, and money flow through a single system. And, of course, there is a lot more scope for improvement there. This is the first layer. So, like the REMCs, the new requirements are a lot more comprehensive and going deeper. I’m sure this whole, you know, digital framework that is being created for Samas, the next layer will be far more comprehensive.

Sandeep Pai: Right. I just wanna ask quickly about what role do you think AI will play? This is something not just connected to Adi, but, like, what role do you think AI will play in India’s grid management going forward?

Vishal Pandya: So at a very macro level, if you see after health care, the greatest amount of data if any subsystem has, that is electricity. The foundational commodity there itself is electron and which is digital and always measured. And the entire network is full of sensors. And this is something, you know, which came up from Sunisa long ago in 2012-2013 when we used to go and meet on REC. And all this data and AI, the forecasting bit, we were showing them, you know, how the results are, what is the demo. And his comment was that all of these has to be delivered as a service because the utility cannot think of owning the software which will run for seven years the way it used to happen in SCADA. And the data richness is so much in the sector, and it is further multiplying. Right? So the role for AI is many, many fold in the entire sector, and and we see the impact of that. Right? The moment the forecasting started happening en masse, the notion of RE’s unforecastable started vanishing. The accountability on the grid management side came up, you know, became manifold because the state could not hide behind, you know, this unknown and say that I do not know what is coming. With REMC coming in, we are able to quantify what is the average error that is coming, which some states are finding it very difficult to quantify that for demand. Right? And and these arguments, we have also made in certain public forum. Like, one of the regulators, the state was arguing that RE is the reason why my grid is not stable. I want much tighter control over RE. I need, you know, visibility and curtailment rights, and the it was around DSM regulation. And then aggregation should not be there. We should penalize RE a lot more because I am losing because you know, purely because of RE. Our counterargument to the commission was that there are REMCs. We have data. My average error for entire state is about 175 megawatt on a intraday basis and about 225 megawatt on a daily basis on a state grid of about 14,000 megawatt and the RE being about ten, eleven thousand megawatt. Where is the data on the demand side? Right. Show me your average error for demand. Equate that with RE, and you will find that your average error in RE is a lot lesser than what you are getting in demand. Right? So the data starts speaking for itself, and the impact you see in many, many fold. The state regulator, they I mean, they’re phenomenal, right, in terms of immediately asking, can you give us the data? Right? We shared the data, and then they permitted a lot of provisions which were friendly to the ARES owner. The aggregation was retained, whereas the utility or the grid operator was not very happy about it. Their objective was you penalize more, more accuracy will come. It’s not like that. There is a network. Can you leverage the network? Can you leverage the AI? Of course, you ask for tighter, you know, accuracy. Right? But don’t penalize the generators just for the sake of penalizing. Right? Because the greed is tightening for everyone. The DISCOMs are also paying DSM. The generators are also paying DSM. So it helps in terms of quantifying. As far as the role of AI goes, the demands are also again it’s it’s a lot of demand forecasting is driven by AI.

Transmission, we were speaking about. Now the computer vision has started playing serious role, one in terms of planning, second in terms of monitoring. Now you cannot fly drones all over. So can you start using low earth orbit satellites and start, you know, deciphering the information from it and say, is there a vegetation growth? Are there, you know, risk that I’m looking at?

We had one contract, very short pilot we did with one grid operator. Every monsoon at a power grid level, this number came from, you know, anecdotal conversations that about 200 to 300 towers are lost each month, you know, each year because of vREous issues. Sometime it is cyclone, extreme weather event. The insurer won’t cover unless you prove that there is an extreme weather event. How do you prove?

So you go back to the physical modeling. We did, you know, some assignments. At particular location, what was the weather event? What was the turbulence? Again, you know, physics of weather we did and quantify.

But purely in terms of information gaps, if you stitch together whether with the location with the satellite, there is so much to be protected in terms of your asset management. There is so much to be optimized like the line flows. This transmission you know, there is a TTC and ATC. Right? The the load carrying capacity of transmission.

So if you don’t do not know the temperature at that region, sitting at one location having network of transmission lines span India, you may not be able to assess the risk that you may have on your network. So a lot of intelligence can be built in using data and AI, also the scenREo in terms of planning. And same applies for distribution. Smart meter, the data has start just started flowing in. Can you design better tREffs for your consumer?

Can you enable consumer to respond in real time? Of course, driven by sensors and some commercial mechanism where there is a lot of worry or market is going zero, their consumer can start consuming more and they have an incentive. So a lot of role in terms of interconnected system and the data will play, and AI can enable this transition much faster and democratize the energy markets and access to energy markets even at a residential level.

Shreya Jai: So, basically, it is data that is playing god to all those arguments that, you know, nature based, power generation sources cannot be controlled. Finally, here’s data in AI to solve that problem. And I’m very happy that you have mentioned so many people in during this conversation who have appeared in our podcast. This is a very shameless plug. We had Vivek from Port Partner. We had mister from IEX. We also recorded with mister Sonee, and it should be out, I think before yours. So, yes,

Vishal Pandya: I could put encyclopedia of, you know, grid management.

Shreya Jai: Yes. He is. I called him the grid man, and he was, almost blushing, but he is. He’s been the man behind grid modernization. So this brings me to my last question, and it is about something very exciting that will happen in the future. The market is very excited. There is finally some movement happening in the power derivatives market. Right. So you have been in the thick of it in the discussions, and I’m sure you would be an active player as well. Yes. So if, you know, in a very, lucid manner, can you explain, what this power derivative market would be and I, as a consumer, or, you know, important stakeholders in the sector can look forward to in that?

Vishal Pandya: Yeah. So derivatives, if we simply put, the first question is why do we need it? So if 90% of power purchase agreements are long term, What is the need for derivative? Right. So it starts from there. Right? Mhmm. Why do we need it? Second is there is a spot market. Good amount of liquidity is there where about, I think, 10 to 15,000 megahertz are traded every hour each day at exchanges. The future trend, if we look at more in terms of how the market will evolve, there was a very interesting, I would not call it research paper, but rather, you know, an approach by the ministry of power about a year ago, how they contextualize market to evolve over next five years, over next ten years. And two, three things, you know, stood out quite clearly. The very first thing was the 6-7% what is there in the exchanges needs to go deeper. High double digit, it’s needed because one large player moving in or moving out will shake the price. Right? How do we make it deeper? They are they started talking about embed and coupling, and coupling some process progress has happened. The second aspect is there is also a strong push to promote market based renewable because finding buyer long term buyer for PPA is getting tougher. Right? And and you have seen that even at Secchi level, the news report says that 30-40 thousand megawatt of assets, they are still kind of searching for buyers. Right? Which is not a good sign when you wanna auction 50 gigawatt a year. Now that carries a serious market risk. And how do you hedge that risk? And before I go there, there is also an big moving chunk, which is called FDI. What was plain vanilla renewable five, seven years ago, it it no longer exists. The new tenders are coming more in terms of different types of FDI. RTC of different types, firm load or peak load. Right? And there, the generator has an option that you oversize your renewable, put some storage, base load is guaranteed, rest you sell in market. But for rest also, if you have gone aggressive, you need some financial hedging. Right? So purely in terms of enabling supplier with the confidence of getting some offtake and derisking that, price risk, the financial market is important. So the hedging remains the very first element where the financial market can play a role. How can it play a role? Today, say you agree to supply power to a buyer. Right? The exchange rates are fluctuating. The buyer is there when the rates are lower. Otherwise, the buyer will go to a utility. So you do not have a perpetual buyer. But imagine a buyer wants to go with you because you are renewable, you are a new capacity, and they want to promote renewable, and, of course, get it at a slightly discounted price than utility. Can we enable it via physical transfer alone, which was the older regime? It’s constrained by so many parameters. Your demand is pretty much like RTC. Your renewable is vREable in nature. Five megawatt consumer can consume 10 megawatt renewable. Can the conventional dispatch at an interstate level allow that to happen? It will never allow that to happen. You have five megawatt consumption. You cannot schedule more than five. So there is a need to kind of virtualize this and allow buyer, to and seller to transact. Second thing is also the price differentiation. What if there is an offtake, but the price doesn’t, you know, stay within the regime? So that is where you have seen that not only the derivatives, the virtual power, PPA agreements have started, you know, coming up. And CRC has come up with amendment to the power market regulation now, which is again a sizable amendment, enabling, you know, all these layers to stitch together quite well. So the financial securities, kind of, I would not call it guaranteed, but you can financially structure your contract where market rate goes up. If you have a financial position in the derivatives against your price movement, you may, you know, lose in the financial market, you will gain in the physical market. Same way you take a so you always take a counter position. Your revenue realization is kind of assured. So that is, you know, an important layer to derisk your cash flow. Right? So that is from the hedging point of view.The second important player is, of course, the, you know, speculator where you want to bet for or against market. Globally, the speculators are the ones who bring lot of liquidity. The liquidity helps you to have a price stability. Right? So that is a theoretical construct. The raw construct there is it’s a sector market. Right? What happens in FNO derivatives or oil and gas derivatives? Our oil import per annum is about $150,000,000,000. Electricity market nationwide consumption, if you translate into average power purchase cost and dollar value, we are at about $125,000,000,000 market. MCX, which is, very liquid and largest commodity trading platform, guess how much volume of contracts they’re transacting in oil f n? Any guess you make? Wild guess. Put some billion dollars. Sandeep, you wanna try? 100.

Shreya Jai: 500,000,000,000. I’m sorry if it’s a very embarrassing answer that I’ve given, but yeah.

Vishal Pandya: 2,000,000,000,000.

Sandeep Pai: For you, we’re close. Yeah. Well, not close in the same order, I guess.

Vishal Pandya: Close to 2,000,000,000,000 is the value of FNO contracts in, MCX and, the futures. So the FNO has futures and options. Options is even a wilder kind of, you know, game where very little margin you put and you can start trading huge volumes. The futures in that is roughly about, I think, a 100,000,000,000 or so. Right? So what is your physical market? Your futures have gone to a 70% of, you know, trade value there. The options are at a multiple of 10 to 15. So there is a, you know, interesting proverb in the financial market that the tails start wagging the dog. So the FNO segment eventually becomes, you know, that proverbial tail which starts, you know, waging the dog. So what happens in the future starts reflecting in the, you know, physical market. And all commodities have gone through that cycle, and electricity also will see that cycle will start playing out once the liquidity starts, you know, happening in the futures market.

Shreya Jai: Very interesting. Thank you so much. And I can’t wait for this derivatives market to come up. And, obviously, I’ll visit your office and your center to understand that because who else are there? Because you explained it so well. Thank you so much for doing that. And, there’s so much to unpack. There’s still so much left to unpack, so I hope we can get you again and this time with mister Sonnee. But thanks again.

Vishal Pandya: Absolutely. Yes.

Sandeep Pai: Thank you. Thank you, Vishal.

Vishal Pandya: Guru to a lot of people and, a lot to learn from him.

Shreya Jai: Absolutely.

Sandeep Pai: Thank you so much, Vishal. I also learned a lot. It was great to interact.

Vishal Pandya: Thank you, Sandeep. Thank you, Sheya. Amazing conversation, and very excited to see the podcast coming out.

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