5 states for buying 3,000 MW from power plants sans PPAs

Gujarat, Maharashtra, Rajasthan, Bihar and Jharkhand together want to buy 3,000 MW of power under a government scheme to promote purchases from plants without PPAs.

Under the scheme, PFC Consulting will conduct the auction for 2,500 MW capacity and PTC India will sign three-year (mid-term) PPAs with successful bidders and contract with discoms to sell electricity.
The development comes at a time when states are buying more power from the spot markets, indicating a rise in demand. The Ministry of Power has recently suggested to make it mandatory for electricity distribution companies (discoms) to tie up long- or medium-term PPAs to meet their ‘annual average power requirement’ in their areas of supply.

Short-term power volumes grew 8% year-on-year to about 129 billion units, comprising about 15 GW capacity in FY18, and the spot market trading at the Indian Energy Exchange grew at 14%, trading more than 46 billion units from 5.3 GW of power plants.

Maharashtra, Tamil Nadu, Bihar, Gujarat and Uttar Pradesh were the largest buyers from the short-term market. As noted by analysts at SBI Caps, Bihar and Jharkhand sourced more than 20% of their total energy requirement in the short-term market, “clearly indicating that there is a pressing need for them to sign long-term PPAs”.

The Central Electricity Authority has reported that there was a more than 10% annual increase in electricity demand in Uttar Pradesh, Chhattisgarh, Telangana, Arunachal Pradesh, Manipur and Tripura in FY18.

The pilot plan proposes that a single entity, which quotes or matches the lowest bid in the auction, will be allocated a maximum capacity of 600 MW. A company cannot quote part capacity from different power stations in the same bid. If PTC procures power less than 55% of contracted capacity in a month, the plant would be paid compensation, the quantum of which would be linked to spot power prices at the Indian Energy Exchange.

Power companies which want to participate in the auctions are: RKM, IL&FS Tamil Nadu, SKS Power, Sembcorp, Jaypee Nigrie, Hindustan Powerprojects’ MB Power, Jindal India Thermal Power (JITPL) and Avantha Jhabua. ‘

These plants have together expressed interest to offer 2,200 MW cumulatively under the scheme. Of these, plants belonging to Jaypee, JITPL, RKM, Hindustan Power Projects, Avantha and SKS are already identified as stressed assets.

Respective lenders have put Avantha Group’s 600 MW Jhabua plant and SKS Power Generation’s 1,200 MW power plant in Chhattisgarh up for sale. NTPC has received proposals to take over JITPL’s 1,200 MW Derang plant and Jaypee’s 1,320 MW Nigrie plant.