Greening of power

Updated on: Jun 24, 2022

HYDERABAD, TELANGANA, 28/05/2022: A view of a solar power farm on the outskirts of Hyderabad on Saturday, May 28, 2022, The State Government of Telangana plans to use solar power for farm sector to offset the huge losses it has accumulated towards payment to Discoms, by way of free 24 hours power. . Photo: NAGARA GOPAL / The Hindu | Photo Credit: NAGARA GOPAL

Norms to augment use of renewable power are laudable, provided the anomalies are addressed

A recent move to boost the output of renewables by relaxing the demand-side constraints could herald a landmark shift in the output and very nature of the renewables industry. Under this, a consumer of green power needs to enter into a minimum contract for just 100 kW, as against 1 MW at present. This applies to pure consumers who are not generating captive power, and it holds true for green power contracts they place with the discoms or any supplier. The move opens up the market for MSMEs who are keen to meet certain ESG goals in particular, adding to the generators’ incentive to produce green power. Second, these consumers must also lock in their contracts for at least a year, so that producers as well as discoms can plan ahead. It is important to note here that the one-year lock-in applies only with respect to the green power contracted, as against the entire power purchased by a consumer -- which is typically a combination of regular and renewables power. Therefore, it would be incorrect to assume that discoms, looking for stability of consumer base at a time when large consumers have been shuttling between them and the spot market, will be greatly helped by the new rules. Only about 12 per cent of the energy purchased and supplied by them is from renewables, for which this lock-in shall apply.

Perhaps, the most curious change pertains to consumers of captive power generated from a renewables plant. For this category, even the 100 kW minimum limit may not apply, going by a reading of para 5 of the order . After spelling out the 100 kW limit, the order says that “there shall be no limit of supply of power for the captive consumers taking power under Green Energy Open Access.” This can provide a great boost to captive power generation of renewables. It adds to the favourable regulatory regime in favour of captive-power-driven open access (renewables or otherwise), wherein wheeling and other charges have been waived. In contrast, the standalone open access consumer pays wheeling and hefty cross subsidy charges. However, this is an anomaly which needs to be addressed. The captive producer-consumers and other consumers of renewables should be placed on an even footing, with the 100 kW limit applying to both. In the absence of a clear, uniform threshold, there could be unpredictable variations both in the quality and quantity of power supplied, leading to grid management issues.

The three actors in the power sector – generators, discoms and consumers – have a varied incentive system. Generators, except for captive ones, may prefer to sell to the discoms as opposed to a fragmented bunch of consumers, as this will help them defray their costs. Discoms too would prefer to deal with large generators. But standalone large consumers can turn into mid-size generators, more so when the costs of setting up a renewables capacity is not daunting. Therefore, while a growing economy will ensure that generators can supply power to the discoms as well through open access, it is the discoms which face the prospect of dealing with a fickle consumer base. They too need to be assured of a lock-in period for all sources of power. This will, in turn, incentivise them to reduce levies. But finally, the move to boost the output of renewables through a demand-side fillip will put India on the path to achieving an installed capacity of 500 GW of renewables by 2030.

Published on June 24, 2022
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