1. The new INOGATE Project Electricity & Gas: AHEF 53.AM John Swinscoe, Michael Emmerton Yerevan, August 2014 BUILDING PARTNERSHIPS FOR ENERGY SECURITY www.inogate.org

2. Scope AHEF 53.AM 2 To propose a tariff methodology that compensates ENA for avoidable losses caused by lower than normal power factors in the consumption of large consumers To make recommendations regarding enabling modifications to legislation To propose an approach that would lead to a reduction in the technical losses in the distribution system and consequent improvement in the security of supply

3. Agenda 3 Observations & Findings Reactive Power Tariff Options Implementation

4. Observations 4 ENA supplies 400 consumers at 33kV; 3,500 at 33kV; 16,000 large consumers at LV ENA has installed 5,268 interval meters Day / night energy rate tariffs apply to all consumer classes At present charges are not applied explicitly for reactive energy, power factor or capacity The PSRC has the power to implement tariffs without the need for changes to the law In addition to ToU energy charges, EU practice is to levy reactive energy charges and kW capacity charges – it could be reasonably expected that in time Armenia will follow EU practice

5. EU Network Tariffs 5 Fixed Charge Capacity Charge Energy Charge Reactive Energy Comment EuroEuro / kWEuro/kWhEuro/kVArh BEYes N.A. CHYes N.A. CZNoYes N.A. DENoYes Some utilitiesN.A. DKYesNoYesNoN.A. EENoYes N.A. ESNoYes N.A. FIYes Metering fee FRYes Exceeding of the contracted power GRNoYes Nocos phi ITNoYes NoN.A. LTNoYes NoN.A. NLYes Some utilitiesN.A. NOYes N.A. PLYes Exceeding of the contracted power PTNoYes ToU for energy and capacity charges SEYes N.A.

6. Findings 6 There are no technical barriers to introducing a kVA demand charge for 11kV and 33kV consumers – The charge could be applied according to a fixed rate of AMD 2 250kVA per month – The charge rate could be linked to a consumer’s kW consumption Low voltage consumers appear to be too small to consider for power factor correction incentive Power factor improvement is a benefit to the generation and transmission sectors Distribution technical losses could be reduced by up to 2.7% of ENA’s energy purchases

7. Reactive Power Tariff Options 7 Tariff Option 1: A day / night energy rate tariff with addition of a kVA demand charge 1st Step 2nd Step UK Power Networks33%90% Central Networks33%- Scottish Power33%- United Utilities33%- Scottish & Southern Energy -- Western Power Distribution 50%- CE Electric UK-- Tariff Option 2: A day / night energy rate tariff with a kVArh charge linked to the consumer’s kWh Note: 33% represents a power factor target of 0.95; 50% represents a target of 0.9

8. Tariff Analyses 8 Inputs 1.ENA’s annual load duration curve 2.ENA’s typical daily load profiles during the summer and winter peak period 3.The count of ENA’s large customers by voltage level customers 4.kWh, kVArh and power factor of ENA’s 11kV and 33kV customers (or a statistically valid sample) 5.A technical loss estimate for the distribution network In practice some limitations due to availability of data Sources ENA and from World Bank tariff study (2013) and USAID load forecast study (2012)

9. Tariff Analyses 9 Annual Load Duration Curve

10. Tariff Analyses 10 Daily Load Curves

11. Tariff Analyses 11 Input Assumptions by Tariff Class Input Assumptions by ToU GWhShareEst Revenue Average rate AMD / kWh Day118472.5% 44,160million AMD37.3 Night45027.5% 12,341million AMD27.4 1,634100.0% 56,500million AMD ToU ShareGWhRevenue Share Average rate AMD / kWh Peak25.64%41917,598million AMD42 Shoulder52.10%85229,807million AMD35 Off-Peak22.26%3649,095million AMD25 100.00%1,63456,500million AMD

12. Tariff Analyses 12 Consumer Input Assumptions Typical 11kV / 33kV Consumer Peak DemandkVA300 Power Factor0.89 Power Factor (with PF correction)0.98 Load Factor%60.00% Peak ToU%25.64% Shoulder ToU%52.10% Off-peak ToU%22.26% Average monthly kVAkVA210 HV peak load losses%6.0% Loss Factor 1 0.766 1 The ‘Loss Factor’ is a conversion factor that is used to convert power loss (kW) to energy losses (kWh)

13. Tariff Analyses 13 Tariff Option 1: Consumer Perspective Units Without PF correction With PF correction Saving Energy ConsumedGWh1.40 Peak DemandkVA300272 kW267 Power Factorp.u.0.890.98 Load Factor%60% Time-of-Use DayGWh1.02 %72.45% NightGWh0.39 %27.55% ToU tariff (blended) DayAMD/kWh37.3 NightAMD/kWh27.4 Demand ChargekVA/month2,250 Annual Costs & Savings DayAMD'm37.9 NightAMD'm10.6 TotalAMD'm48.5 kVA chargesAMD'm5.675.150.521 % of energy charge%11.69%10.61% Note that the day / night tariff rates have not been adjusted to soften the impact of a kVA charge on the consumers bill; in practice this would need to be considered.

14. Tariff Analyses 14 Tariff Option 1: ENA Perspective Without PF correction With PF correction Saving Peak demandkW267 kVA30027228 kVAr1375483 Power factorp.u.0.890.98 Load currentAmp5.24.8 HV peak load loss%6.0% kW16.0213.212.81 Annual energyGWh1.40 17.5% Loss factor0.766 Average energy loss%4.60% GWh0.060.0530.011 Time of Use Day72.45% Night27.55% BST (blended) DayAMD/kWh31.7 NightAMD/kWh25.5 Annual savingsAMD'm0.339

15. Tariff Analyses 15 Tariff Option 1: Savings & Costs Savings Large CustomersENA AMD/kVA/month AMD'm 12500.2890.339 15000.3470.407 17500.4050.475 20000.4630.542 22500.5210.610 $/kVAr58 Exchange Rate406.9 AMD / kVAr23,437 kVAr82.6 AMD'm1.94 Power factor correction costs for the typical consumer

16. Tariff Analyses 16 Tariff Option 1: Payback As kVA charge is increased … YearCostSaving Simple Payback NPV Payback 01.94-1.94 10.52-1.41 20.52-0.89-0.95 30.52-0.37-0.53 40.520.15-0.16 50.520.670.17 Monthly charge of AMD 2 250 per kVA achieves payback within 5 years kVA Charge Payback on Capacitors NPV Payback (15% Discount Rate) kVA Charges 0.98 PF Incremental kVA Charges Proportion of kWh Charges AMD / kVA / monthYears AMD'm p.a. % 1 2507122.86-5.9% 1 500683.430.577.1% 1 750574.011.158.3% 2 000564.581.729.4% 2 250455.152.2910.6%

17. Tariff Analyses 17 Tariff Option 2: kVArh charges Typical Consumer kVa300 kW267 kVAr137 kVArh718,959 kWh1,403,352 33% of kWh463,106 Chargeable kVArh255,852 AMD per kVArh20.13 All Tariff Option 1 assumptions are the same The payback period is the same as for Option 1 For this tariff option the kVA charges have been computed as a kVArh rate (using a base of 33% of kWh consumption)

18. Tariff Analyses 18 Proportional Charges for High Load Factor

19. Implementation 19 ENA can improve on the accuracy of the assumptions used to demonstrate kVA tariffs through load research before a PSRC submission The penetration of interval meters covers all 33kV and 11kV consumers and supports kVA charging Billing system changes will be required for kVA or kVArh charge; proportional charges for high LF a complication to deal with Consumer awareness and public relations will be challenging …

20. Thank You !