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The Power Ministry will create a common pool of efficiently-operated coal and gas-based power plants operated by CPSUs, which have completed 25 years of operations and whose power purchase agreements (PPAs) have expired.
“ln view of long gestation period required for construction of new thermal capacities and impending retirement of old inefficient thermal plants, it would be prudent to continue to operate existing efficient thermal capacities of CPSUs whose PPAs have expired, but have remaining operational life, deferring capital expenditure required for creation of new capacities,” the Ministry said.
Power plants of 25 plus years, which have their capex recovered, are fully depreciated, debt free with Fuel Supply Agreement (FSAs) in place, and are well-maintained, can be utilised to offer electricity at competitive tariffs, it added.
The scheme, which will be implemented from July 1, is aimed at ensuring resource adequacy, conserving capex and utilising capacity available in the grid.
Pooling electricity
It has been decided to pool power from all Central Generating Station (CGSs) whose PPAs have expired, and this pooled power shall be made available to willing beneficiaries, Power Ministry said.
The beneficiaries will have to enter PPAs for a minimum of 5 years. Discoms not finding value in pooling will be able to opt out from the pool after 5 years. It will ensure availability of adequate resources in the grid for peaking, balancing & flexing and re-distributing benefits such as reliability, cost-effectiveness among beneficiaries, it added.
A Central sector Genco-wise common pool of thermal generating stations (coal and gas-based) will be created. States and Discoms can requisition electricity through a single window system. They can submit their willingness for power allocation (quantum and period) within 15 days from the formation of the pool.
The States procuring power from this pool will be billed a uniform energy charge based on station-wise weighted average pooled monthly energy charge rate (ECR) and final implemented schedule.
Rationale
The Ministry pointed out that during April-May 2022 challenges were faced in meeting increasing demand, which was met with the support of all stakeholders. However, systems need to be restructured to meet future challenges.
“At this stage of energy transition, it will not be wise to let go of the resources that are already available in hand and whose capex has been substantially recovered,” it added.
India’s cumulative installed capacity is around 412 gigawatts (GW), while the peak demand in this season is expected at 230 GW. Even with this much generation capacity, the demand-supply situation becomes tight for some periods in the crunch months (April-June).
Despite the significant quantum of renewables in the grid, it would be difficult to meet peak demand without conventional sources, in near future, the Ministry explained.
For better integration of RE in the grid, storage systems in huge quantities are required. At present, 4,750 MW of pumped storage (PSP) and 37 megawatt hour (MWh) of battery energy storage systems (BESS) is available. Besides, storage is very costly at present.
Coal and gas-based generation provides major support to grid balancing and RE integration. Therefore, until adequate storage capacity develops, the generation load balancing must be carried out in the usual manner.
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