A top NTPC official recently said the company plans to use this scheme for plants where fuel costs are high – like generation units which are situated more than 500 km from coal pits.
The new scheme of the power ministry allowing thermal power generation companies to blend renewable energy to meet their existing contractual supply obligations may raise returns on equity (RoEs) for implementing power plants by 100-200 basis points.
In a recent research note, SBICAP Securities pointed out that coal-dominated portfolios such as NTPC would benefit from it by neutralising the perceived threat competitive renewable power.
Since the scheme is not applicable for plants which sell power at prices discovered via competitive bidding, NTPC should gain more from the move as most of its power purchase agreements are on a ‘cost-plus’ basis, contrary to its private sector counterparts which have shifted largely to competitive bidding for tariff discovery.
A top NTPC official recently said the company plans to use this scheme for plants where fuel costs are high – like generation units which are situated more than 500 km from coal pits. Current fuel charge for NTPC’s Badarpur power plant is as high as Rs 4.28/unit, while renewable prices are trending below Rs 3/unit.
Electricity distribution companies (discoms) are expected to gain from the scheme as any savings (difference between the tariff offered by the renewable plant and the actual energy charge billed) will be shared equally by discoms and developers, SBICAP said.
There are also no inter-state transmission system charges for renewables, making it more attractive for discoms.