Hybrid renewable tariffs to be at a premium over standalone solar, new guidelines positive, says Ind Ra

V Rishi Kumar Hyderabad | Updated on January 11, 2021

Solar and wind hybrid power generation unit at Latha Mathavan College of Engineering in Madurai   -  The Hindu

It expects the overall composition of most hybrid plants to be skewed more towards solar

The upcoming wind-solar hybrid auctions are likely to command a premium over standalone solar projects.

According to India Ratings, technical complexities related to grid integration and inclusion of floor capacity proportion of wind projects (at least 33 per cent of the total contracted capacity) in the hybrid mix could weigh on the project economics and tariff assumptions.

This is despite the competitive bidding guidelines addressing many of the issues hampering the growth of hybrid projects in the past. On the contrary, standalone renewable auctions (especially solar) are likely to garner higher interest on account of developing comfort around photovoltaic technology, improving panel efficiency, lower volatility in generation, increasing economies of scale and decreasing operating costs.

The Ministry of New and Renewable Energy issued tariff-based competitive bidding guidelines for power procurement from grid-connected solar-wind hybrid projects during October 2020, for optimal and efficient utilisation of transmission infrastructure and land and thus reduce the variability in renewable power generation and achieve better grid stability.

Associated risks

It views the impact of some of the key clauses of these guidelines and their ability to address key risks associated with renewable projects as follows:

Given the cheaper cost of generation of solar power, the abundance of modules and module suppliers, less-complex nature of operations and considerably lower volatility in generation levels, Ind-Ra expects the overall composition of most hybrid plants to be skewed more towards solar.

Also read: 2021: India to garner Rs 1.75 lakh crore investment for renewable energy sector

While hybrid projects will enjoy the must-run status and shall be eligible for compensation at PPA tariff for any grid backdown, no generation compensation will be applicable if backdown is on account of grid safety. This caveat keeps hybrid projects exposed to the risk of permanent loss of revenue due to grid curtailment on occasions.

There are a limited number of independent power producers with equal capabilities to execute both solar and wind projects on this scale which reduces competition.

The recent solar tenders have been oversubscribed with the past five standalone solar tenders since August 2019, excluding manufacturing-linked capacity floated by SECI, receiving aggregate bids of 15.43GW for tenders of 6.67GW.

Also read: Structural factors pushing solar tariffs down: Ind-Ra

On the other hand, wind auctions have been relatively less frequent off late with the recent SECI standalone wind auctions remaining considerably under-subscribed.

The last five standalone wind auctions conducted by SECI have seen aggregate bids of 8.6GW for tenders of 7.4GW. However, the last two of these auctions, viz. tranches VII and VIII were under-subscribed by almost 62 per cent with bids received for 1.15GW against tendered capacity of 3GW.

Interest in hybrid projects seems to be picking up with SECI’s third tranche of auctions seeing tariffs falling by about 10 per cent to ₹2.41/kWh. Before this auction, SECI had awarded 1.56 GW of hybrid capacity against a tendered capacity of 3.7GW.

Published on January 11, 2021

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