Economy

Discom's purchasing cheaper power from exchanges, impacts solar power, says Mercom report

V Rishi Kumar Hyderabad | Updated on January 16, 2018 Published on September 21, 2016


Power distribution companies (Discoms) are purchasing cheaper power from the exchanges, resulting in curtailment issues for solar power.

Some Discoms, who are faced with financial issues, are simply resorting to power cuts as they cannot afford to even purchase power at low rates on the exchanges, according to consultancy firm Mercom Capital Group’s latest report, India Solar Quarterly Market Update.

While some states have surplus power but still don’t supply power 24/7 for fear of losses due to low tariffs from residential and agricultural customers.

The power deficit numbers in India do not paint the full picture. Though low power deficit and even a surplus situation is touted by a Central Electricity Authority (CEA) report, large populations in India are still without electricity and power cuts are still part of daily life in urban areas and more so in rural areas.

The reduction in the power deficit is largely due to a combination of a drop in power demand in the commercial and industrial sector, and the financial health of Discoms. Falling demand has led to record low prices on the power exchanges.

“Total new renewable energy capacity addition has increased to 30 per cent as of calendar year July 2016 with intermittent renewable energy capacity additions including wind and solar accounting for almost 28 percent (solar accounted for 16 per cent), a huge positive largely due to government’s push for renewables,” Raj Prabhu, CEO of Mercom Capital Group, said in a statement.

This increase in renewable energy addition has caused some solar power curtailment issues in Rajasthan and Tamil Nadu where Discoms have flouted the ‘must run’ status of solar power thereby negatively affecting developers.

However, curtailment is still not widespread, but the issue needs to be addressed immediately before it starts to hurt investor sentiments in the sector.

The problem is more pronounced in Tamil Nadu, especially in high wind energy density areas when wind and solar generation peak simultaneously.

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Published on September 21, 2016
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