Specials

Renewable energy sector looks at storage for succour

M Ramesh | Updated on June 04, 2021

Large-scale solar is not doing too badly, though way short of target. As of end March 2021, India had 35.5 GW of large-scale solar plants   -  Blue Planet Studio

Only way out for the industry is to sell power directly to customers

Things are not all that good in the Indian renewable energy sector, a crucial industry for the country to meet its commitment at the Paris agreement of 2015. To know why, one needs to take a disaggregated view of the picture.

Renewable energy has three distinct segments, each with its unique features—large-scale solar, rooftop and distributed solar and wind. ‘Large-scale’ solar is not doing too badly, though way short of the target. At the end of March 2021, India had 35.5 GW of large-scale solar plants, with another 53.6 GW in the pipeline of which 24 GW had been tendered-out. Good, even if not great.

Target vs achievement

Rooftop and distributed solar is the sub-segment that can give the biggest bang for the buck, as it can produce energy right at the point of consumption and create massive employment—but it has tripped on regulatory impediments. Against the target of 40 GW to be achieved by the end of 2022, the country today has 5.5 GW of RTS/distributed solar; compared with the potential of about 130 GW, the performance is seen to be even more anemic. As for wind, the less said the better, because against the promise of a phenomenal growth, it is limping on bleeding limbs. Last year, the wind sector added a GW; only a couple of years ago, industry insiders used to believe that India is a 10 GW market.

If you start tracking the footprints, they will lead you to the doorstep of the electricity distribution companies, or discoms. Most of these are State government-owned and are in precarious financial health due to a number of legacy issues—essentially, they could neither keep their costs under control nor earn enough revenues. These discoms have been putting all kinds of hurdles in the path of wind and RTS, basically neither allowing them to operate in a free market nor paying them on time.

In the case of wind, States reserve their best sites that produce the cheapest power for themselves, not giving them for Central procurement projects; and also expecting ultra-low prices for wind power. As such, projects are not happening. Industry leaders, such as Tulsi Tanti, Chairman and Managing Director of Suzlon, have asked for a tapering fixed tariff of ₹3.25 a kWhr, reducing 5 paise every year and then staying fixed at ₹3 for 20 years—a suggestion that would have worked well for everybody because even a tariff of ₹3.25 - 3 is far lower than the average price that the discoms are paying today for their power purchases, which is typically around ₹4. However, States resist fixed tariffs. They also disfavour wind because of its intermittency.

As for RTS, discoms just do not like to see them happen as distributed solar plants threaten to take away discoms’ best customers. As such, the discoms have been playing spoilsport, refusing to buy surplus power from these plants except at very low prices.

By the looks of it, things will only get worse in the coming years. For solar, one has to see how things pan out once the basic customs duty kicks-in, which will raise solar power prices by least 50 paise; RTS perhaps more. The wind industry is facing “an unprecedented increase in cost of commodities” that go into the manufacture of turbines, by about ₹40-50 lakh a MW, according to Tanti.

The way out

So, what is the way out? The issue of discoms’ health is not going to miraculously disappear, but till that happens, they would want an easy ride on renewable energy’s tail. The only way out for the renewable energy industry is to sell their power directly to customers, either through bilateral agreements or through the energy exchanges. Of course, that will entail open access charges. However, even with the charges, customers will find it cheaper.

But for this to happen, it is essential that the cost of storage (battery) comes down. Wind can then hybrid itself with solar and battery and assure steady supply to customers. RTS can store any surplus power on its premises, cutting the discoms out of the picture. Good news is storage costs are coming down. The not-so-good news is it will take at least a couple of years for it to come within reach. One may expect renewable energy to see acche din then.

Published on June 04, 2021

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

  1. Comments will be moderated by The Hindu Business Line editorial team.
  2. Comments that are abusive, personal, incendiary or irrelevant cannot be published.
  3. Please write complete sentences. Do not type comments in all capital letters, or in all lower case letters, or using abbreviated text. (example: u cannot substitute for you, d is not 'the', n is not 'and').
  4. We may remove hyperlinks within comments.
  5. Please use a genuine email ID and provide your name, to avoid rejection.