Renewable Energy Generation: Betting on the green power market
December 11, 2020 6:00 AM
India’s recently launched real-time electricity market, coupled with the green market, offers a significant opportunity to integrate renewable energy in the most efficient and competitive manner
The green market has now launched two more options—daily and weekly, to facilitate the market participants in buying renewable energy from three-hours to 11-days ahead. (Representational image)
By V Subramanian
As a signatory to the Paris Climate Agreement, India is committed to increasing its share of renewable energy capacity to 450 GW by 2030. As of September 30, India has an installed renewable energy capacity of 89 GW. Recently, at the G20 summit, prime minister Narendra Modi said that India would not only meet its Paris Accord targets but will also exceed the targets. India has today become the most attractive destination for investment in the renewable sector and, during the last six years, has attracted over Rs 4.7 lakh crore of investment, including FDI of about Rs 42,700 crore. Waiver of inter-state transmission charges for the sale of solar and wind power, the renewable purchase obligation (RPO) trajectories for states, focus on maintaining the sanctity of contracts, permitting FDI in the renewable sector have accelerated the progress.
Renewable generation, at 138 billion units, has doubled in FY20, from 66 billion units in FY16. The country witnessed 20% CAGR growth in the renewable generation since FY16 while total electricity generation saw 4.3% growth in the same period. In other words, the rate of increase in generation from renewable sources has been much higher than the increase from other sources.
As per the International Energy Agency’s Renewables 2020 report, driven by China and the United States, net installed renewable capacity will grow by nearly 4% globally in 2020, reaching almost 200 GW. Globally, renewables are expected to overtake coal and become the largest source of electricity generation in 2025 and may supply one-third of the world’s electricity. Hence, this growing focus and shift towards renewable energy underline the relevance and importance of the green energy markets more than ever before.
Power is a commodity that needs to be consumed as it is generated. While conventional power plants—that are coal-based or large hydro—have the ability to vary the generation as per need, renewable generation is more at the mercy of nature. Nor are the buyers who are focused on commercial considerations keen to purchase renewable power. Given the seasonality and intermittency of renewable power, it is not easily susceptible to market intervention. But, a majority of the generated renewable power in European countries is traded through the power exchanges. With climate change emerging as a key risk confronting countries all over the world, the transition to renewable power becomes a necessary and compelling option. It is expected that investment in the sector will overtake the investment in oil & gas by 2021. The current levelised cost of energy (LCOE) for large scale solar in India is around Rs 2.5 per kWh, compared to ~Rs 12 in 2010. In the recent bidding, it came down to Rs 2.
Despite the challenges and demands of developing a market, it was a well thought out strategy to start trading in renewable power and approach the regulators. Most renewable power generation companies in India are committed to selling their power to consumers—mostly discoms and a few third-party consumers under the long-term Power Purchase Agreements (PPAs), with little prospect of excess generation to be offered on the exchange and the inability to schedule power supply. It is also a matter of gratification that most generation companies have adopted a robust system of forecasting and scheduling of power. It is in this context, the CERC was approached for creating a market for green energy. Ultimately, the CERC approved trading of renewable energy contracts under Green Term Ahead Market (GTAM) on the energy exchange. The green market commenced trade on August 21, in day-ahead contingency (DAC) and intra-day contracts in both solar and non-solar segments. In about just 90 days of commencement of trade, the market has achieved a cumulative traded volume of over 400 MUs, comprising 353 MU solar and about 50 MU in non-solar energy; this vindicates the confidence of the initiative.
The green market has now launched two more options—daily and weekly, to facilitate the market participants in buying renewable energy from three-hours to 11-days ahead. This will further strengthen the market and allow participants to buy green energy through contracts available for trade in all the segments. In intra-day and DAC segments, the bidding takes place on a 15-minute time-block wise MW basis, while in the daily and weekly contracts, bidding will take place in energy (MWh) basis. The energy will be delivered to the market participants leveraging the national, regional and state-level transmission and distribution network.
With robust value proposition such as transparency, competitive prices, flexibility, and payment security and financial savings that the exchange market offers, a pan-India green market has the potential to drive and facilitate the country to meet its renewable energy targets. The green market will ultimately encourage green generators to adopt multiple models of sale and trading.
With the increasing penetration of renewable power, a robust green market is required to address the intermittency issues linked with green power adoption. India’s recently launched real-time electricity market, coupled with the green market, offers a significant opportunity to integrate renewable energy in the most efficient and competitive manner. Going forward, the introduction of new segments such as green day-ahead market, long-duration green contracts, contract for difference (CfD), etc, will play a crucial role in furthering sustainability goals, and ensuring that all the renewable energy generated within the country is dispatched in the most efficient manner through a pan India wide exchange-based energy markets.
The author is former secretary, ministry of new and renewable energy, GoI. Views are personal