Four states show interest in buying power sans PPAs

By: | Published: September 14, 2018 5:25 AM

Four states — Telangana, Bihar, Tamil Nadu and Haryana — have evinced interest to buy power under a government scheme to promote purchases from plants without power purchase agreements (PPAs), sources said.

PPA,  Telangana, Bihar, Tamil Nadu, Haryana, RKM Powergen, Indian Energy ExchangeA senior official said that states are reluctant on agreeing to buy power at that cost, which would be fixed for three years as per the scheme. (Reuters)

Four states — Telangana, Bihar, Tamil Nadu and Haryana — have evinced interest to buy power under a government scheme to promote purchases from plants without power purchase agreements (PPAs), sources said. The scheme was launched earlier this year to provide assured electricity offtake for 2,500 MW of stressed independent power plants (IPPs).While Telangana and Bihar has agreed to buy 500 MW and 200 MW, respectively, through this scheme, discussions are underway with Tamil Nadu and Haryana for 500 MW and 400 MW each, a person with knowledge of the developments said.

Tepid response from buyers for power under the scheme follows similar reaction from electricity generators, with only seven power plants with combined capacity of 1,900 MW agreeing to sell electricity in this mode. States and IPPs are shying away from the scheme even as nearly 20,000 MW of commissioned units are currently under stress due to lack of PPAs, while states are increasingly sourcing power from the short-term markets. Only 1.4 GW of long-term PPAs were signed in the last four years.

As reported earlier by FE, RKM Powergen has quoted the lowest bid of Rs 4.24/unit, which all the remaining power companies have agreed to match. PTC India would sign three-year (mid-term) PPAs with successful bidders and contracts with state-owned power distribution companies to sell electricity.

A senior official said that states are reluctant on agreeing to buy power at that cost, which would be fixed for three years as per the scheme. The average cost at which states buy non-renewable power is Rs 3.53/unit. Spot power price has also been below `4/unit on an average till date this year. Additionally, if a discom procures power less than 55% of contracted capacity in a month, it would have to pay a compensation linked to spot power prices at the Indian Energy Exchange.

Volume in short-term power trade grew 8% year-on-year to about 129 billion units in FY18. As noted earlier 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”. Experts have said that power producers without PPAs were not encouraged to participate in the scheme because it does not allow tariff escalations even with rise in fuel costs.

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