The policy think tank of the Government of India NITI Aayog and the International Energy Agency (IEA) has released a report ‘Renewables Integration in India 2021’ providing valuable suggestions for the states to best manage the challenge of integrating renewables into the grid.
Pointing out that India is the third largest energy-consuming country globally, the study highlights three major challenges faced: how to expand reliable energy access and use while maintaining affordability for consumers and financial stability for the DISCOMs; how to integrate increasing share of renewable energy securely and reliably; and how to reduce emissions to achieve ambitious social and climate objectives while meeting economic goals.
The report mentions that India’s renewables-rich states such as Tamil Nadu, Karnataka, Gujarat, Rajasthan, Andhra Pradesh, Maharashtra, Madhya Pradesh, Telangana, Punjab, and Kerala already have a higher share of variable renewable energy than most countries globally. This has resulted in many states facing system integration challenges.
The report predicts that with the government planning to increase India’s renewable generating capacity from 175 GW in 2022 to 450 GW in 2030, the country’s power system is slated to undergo a sea change in the next ten years.
Several states are concerned about facing excess variable renewable energy generation and the need to increase power exports to other states, allow renewables to displace some coal power plants locally, or curtail solar and wind to ensure system security.
Current trends related to renewables integration challenges include the increasing variability of hourly demand, increasing ramping requirements due to the impact of solar on net demand, short-term frequency variations, and local voltage issues.
The report suggests that with future increases in solar and wind power, it will become imperative to monitor local system strength and inertia requirements.
The report highlights potential sources of power system flexibility in renewables-rich Indian states, including demand-side flexibility, power plant flexibility, storage (pumped-storage hydro and batteries), and grid flexibility. It further points to policy, market, and regulatory solutions that could be implemented in the short to medium term until the end of the decade.
The report also draws on two production cost models developed by the IEA to illustrate flexibility challenges and solutions: a five-region India Regional Power System Model and a Gujarat State Power System Model. Additionally, the study highlights the findings applicable to multiple states in India and globally.
The study points out that power system transformation in the country will be supported by the transformation of electricity demand from passive consumption to more proactive participation by demand sectors.
The report suggests that the power supply transformation will majorly change India’s CO2 emissions and climate targets. Carbon emissions from the energy sector increased from 0.9 Gt CO2 in 2000 to 2.5 Gt CO2 in 2019. Coal capacity expanded from 63 GW to 265 GW, but the power sector’s CO2 intensity declined by 11% to 725 g CO2/kWh. The report predicts the CO2 intensity of power would further fall to 336 g CO2/kWh by 2040, the level of the Organization for Economic Co-operation and Development’s average intensity in 2019. The decline is much steeper in the SDS, reaching 319 g CO2/kWh by 2030 and 59 g CO2/kWh by 2040.
Integrating renewables in India will require central and state cooperation. Since several government bodies are associated with the Indian power sector, these entities form a vast and complex framework for the power sector, the study noted.
The report’s state-level analysis draws on examples from Maharashtra, Gujarat, and Karnataka, owing to their sizeable renewable capacity.
It notes that Maharashtra has seen one of the highest renewables deployment curves in the country.
Gujarat and Karnataka are facing renewables integration challenges earlier than many other states. Gujarat, which has the third-largest solar and wind capacity in the country, aims to discontinue the commissioning of new coal-fired projects from 2022. These targets would increase its annual share of the country’s total solar and wind generation to almost 40% by 2030. With the highest annual solar and wind generation share in India, Karnataka has the third-highest solar and wind capacity. The report holds the state as an excellent example of befitting from agricultural demand response while facing emergency curtailment of its must-run solar and wind resources since 2019.
The IEA suggests six phases of system integration of renewables framework, showing how integration can be successfully managed in each phase. Most countries, globally, are in Phases 1 and 2 of system integration of renewables, and as such, experience minor system integration challenges. India as a whole and Maharashtra are in Phase 2 alongside the United States, China, and Mexico. Portugal, Germany, Spain, the United Kingdom, Italy, and the Indian states of Karnataka, Rajasthan, Tamil Nadu, Gujarat, and Telangana are in Phase 3 and are already facing challenges related to integrating high shares of variable renewable energy. The study notes that Karnataka, Tamil Nadu, and Rajasthan are fast approaching Phase 4, and are at the forefront of global integration experiences and already see periods (minutes, hours, or days) when solar and wind constitute almost all of the power generation.
India’s renewables integration challenges
The IEA and NITI Aayog have collaborated with state-level stakeholders, particularly in Maharashtra, Gujarat, and Karnataka, to identify and prioritize a set of renewables integration challenges that affect Indian states and their potential solutions. There is a lack of reliable long-term demand projections and forecasts at the state level, noted the study. Regulations often allow for forecast errors of +/-15%, which for Karnataka may lead to more than 1 000 MW renewable generation deviation at certain times.
The current and future curtailment of solar and wind is both a challenge and a solution for managing the system in emergencies. While solar and wind have must-run status in most states, this can be secondary to the priority given to hydropower or coal generators in some states at certain times.
There is a lack of coordination among state-level transmission planners and central planning agencies such as the Power Grid Corporation of India. A unified planning model across the country is absent.
The long-term contracts for conventional power plants create a long-term economic burden and other challenges due to their requirement for capacity payments (fixed cost of tariff) alongside the energy payments (variable costs).
Renewables integration affects the financial stability (costs and revenue streams) of the DISCOMs, which need to pay the fixed charges of coal plants bound by long-term power purchase agreements (PPAs) even when using solar and wind, while also being bound by national renewable purchase obligations.
There has been increasing solar and wind curtailment in Karnataka since 2019. In 2019 and 2020, the curtailment rose to 10% and 25% for both wind and solar projects in the name of grid security during the middle of the day in June, July, August, and September. The Center for Study of Science, Technology, and Policy analysis indicates that variable renewable energy curtailment could increase further by 2030.
Gujarat had zero curtailments of variable renewable energy generation in 2020 and is expected to remain negligible in 2022. However, by 2030, curtailment would increase to around 7% of annual solar and wind generation.
Rooftop solar systems need to be monitored and managed
The study stresses the need to manage rooftop solar systems, showing how these could be system-friendly assets. The report suggests stipulating the registration of individual plans through connection codes to improve the visibility of rooftop solar assets in India. Having all rooftop solar customers on time-of-use tariffs can help mitigate the revenue loss suffered by distribution companies (DISCOMs) while also balancing the shift in costs between consumers with rooftop solar and those without.
Time-of-use tariffs to drive demand-side flexibility
Currently, time-of-use tariffs are implemented by most states in India and apply to large industrial and commercial consumers. In some states, these are referred to as time-of-day tariffs. Depending on the state, the surcharge for consumption in peak hours varies from 10% to 20% compared to rebates that vary from 15% to 25% in off-peak hours.
Time-of-use tariffs are a critical policy requirement for tapping into flexibility from industry, buildings (including cooling demand), water heating demand, and other household electricity use, and electric vehicle smart charging. Additionally, tariff reforms can help move from the current practice of agricultural demand shifting, where agricultural users play a passive role, to proactive agricultural demand response, where farmers respond to a price signal and benefit financially from providing flexibility.
Barriers for interstate trading
India has made significant progress over the past decade in wholesale power market design. From a market design perspective, three broad areas are relevant to establishing a robust wholesale power market. There are still significant barriers hindering a large increase in interstate trade. These include the lack of transmission capacity available for interstate trade, the low level of liquidity in wholesale markets, and the rigid contractual structures, including long-term physical PPAs between the DISCOMs and generators.
The report suggests that with the shift towards clean energy, government institutions, markets, and regulatory frameworks at both the national and state-level need an overhaul.
An ongoing policy dialogue on the future of solar and wind must-run status is imperative to improve investor confidence surrounding curtailment risk. It is also advisable to make curtailment data (annual, monthly solar, and wind curtailment for each state) transparent and publicly available. More specific reasons need to be provided for the curtailment decisions made by state load despatch centers (SLDCs).
The report recommends that state regulators appoint an entity to develop a distributed solar registry platform that will be available to state DISCOMs. The registry data should ideally be publicly available in an anonymous format. Data should also be made available by the DISCOMs to the SLDC. A solar registry platform would improve the visibility of rooftop solar assets in India.
To enable greater demand-side flexibility in India, implementing tariff reforms that revise electricity tariff design and options is crucial. These reforms would shift significant user volume from times of low solar output to times when solar output is higher and thus save system-level costs that could lead to greater affordability.
IEA, in its Global Energy Review 2021, stated that India’s solar photovoltaic market is expected to recover rapidly in 2021, after experiencing a significant decline in new capacity additions in 2020, due to Covid-19 related delays. IEA had also mentioned that solar energy would witness exponential growth and match coal’s share in the Indian power generation mix by 2040 or earlier.
According to Mercom’s Q1 2021 India Solar Market Update, the country currently has a cumulative installed solar capacity of 41 GW. India’s large-scale solar project pipeline stands at 53.6 GW, with another 24.1 GW tendered and pending auctions.