The centre is set to come up with rules to pool solar tariffs and is also aiming to increase bundling of renewable energy in existing thermal Power Purchase Agreements (PPAs) to boost the procurement of renewable energy, union power secretary Alok Kumar told the Indian Express. The government is aiming to boost installed renewable energy capacity to 500 GW (GigaWatts) by 2030.
“ The intention is to have a pool in which various procurements that are done over a year, two or three years, their tariffs are pooled so that there is no problem that (some tariffs are) 5 paise lower or 5 paise higher,” Kumar said on the issue of discoms (power distribution companies) waiting for solar tariffs to fall further before entering procurement agreements. Kumar noted that the power ministry was working with the MNRE and would release rules to address the issue.
Solar tariffs have fallen consistently over the past decade to a low of under Rs 2 per unit (1 unit = 1 kWh) in December 2020 due to the falling price of solar panels and lower financing cost. The trend of lower solar tariffs has led to many many players waiting on tariffs to fall further instead of entering into long term power procurement agreements.
“ Solar tariffs have fallen to as low as 3 cents or less than ?2.5 per kWh (kilowatt-hour) because solar panel prices have been falling for a very long time,” said Debasish Mishra partner and leader at Deloitte India noting that solar tariffs had recently begun to stagnate or fluctuate. Mishra said that SECI (Solar Energy Corporation of India Limited) was now “often finding it difficult to find buyers at discovered prices because discoms expect the tariffs will continue to fall even further and many of them have already met renewable purchase obligations.”
Mishra noted that a move to pool tariffs could help speed up procurement of solar power by addressing concerns among discoms of losing out on lower solar tariffs in the future.
Kumar also said that the government intended that about 10,000 MW of Renewable energy based power would be bundled with fossil fuel based power over the next 4-5 year and this would also help lower total cost of power procurement for certain discoms.
Mishra quoted above said “there are a a number of old thermal power projects that are unviable because of high variable costs and don’t get despatched in merit order,” adding that discoms are forced to pay fixed costs due to requirements under existing PPAs and that a move to bundle cheaper renewable energy under these PPAs would help discoms lower their average cost of power procurement.
The centre had in November 2021 issued guidelines which permitted thermal generation companies to supply power to customers from their renewable energy projects under the existing power purchase agreements (PPAs) for coal-based electricity with gains from the bundling of renewable energy to be shared between generators and (discoms) on a 50:50 basis.