Renewable energy: Govt’s proposed ‘bundling’ scheme to aid power companies

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Published: January 23, 2020 3:15:03 AM

The scheme has been proposed at a time when cash-strapped discoms are delaying payments to renewable energy companies, hurting their debt servicing capabilities.

Renewable energy, power companies, MNRE, PPA, power purchase agreements, association of power producers, ICRA The scheme is seen to provide relief to the bankers as it would provide opportunity for stressed thermal assets to find buyers for their power, thereby reducing the quantum of non-performing assets.

The power industry feels that the ministry of new and renewable energy’s (MNRE’s) proposed scheme to supply round-the-clock (RTC) power from wind and solar plants would also be beneficial to stressed thermal power plants, which are stranded due to lack of power purchase agreements (PPAs). The scheme is seen to provide relief to the bankers as it would provide opportunity for stressed thermal assets to find buyers for their power, thereby reducing the quantum of non-performing assets.

The proposed scheme proposes to sell renewable energy and thermal power together in a ‘bundle’ so that buyers can get the assurance of receiving firm uninterrupted electricity supply. The aim of the scheme is to address the issues of intermittency, limited hours of supply and low capacity utilisations of renewable power plants and make them more attractive for state-owned power distribution companies (discoms).

Welcoming MNRE’s initiative, the association of power producers (APP) said the “scheme will also help with utilisation of untied thermal power capacity, especially since the new supercritical coal-based thermal power plants have quite high ramp rate which can be effectively utilised to provide combined renewable energy blended RTC power”.

Intermittent electricity generation from renewables increases the flexibility requirements of thermal power plants. The country expects to have an installed renewable capacity of 175 GW by 2022, when daily net load swings are expected to be as high as 80,000 MW, warranting higher ramp rates. Flexibility, or ramp rate, is the extent to which a power system can modify electricity production or consumption in response to variability.

According to industry sources, tariffs under the ‘bundling’ scheme is seen to be less than Rs 4/unit, or less than the cost of electricity from new coal power plants. Under the scheme, power generators need to supply at least 51% of electricity from renewable sources. The proportion of thermal tariff shall be adjusted to cover the possible changes in coal or gas prices. The composite tariff would consist of 51% renewable energy tariff, 30% thermal fuel cost and the remaining would account for fixed thermal tariff.

The scheme has been proposed at a time when cash-strapped discoms are delaying payments to renewable energy companies, hurting their debt servicing capabilities. The effective cost of renewable power comes to more than the rates on paper as states, under contractual obligation, have to continue paying fixed cost to thermal power plants even when they were not using this electricity to accommodate renewables. As pointed out in a recent paper jointly published by the India Energy Forum and and research agency Icra, despite, renewables having a ‘must run’ status, instances of curtailment have been observed in several states.

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