Ministry Allows Bundling Renewables To Replace Thermal Power Under Existing PPAs

The Ministry of Power (MoP) and Ministry of New and Renewable Energy (MNRE) have issued revised guidelines for thermal power generation companies to either set up renewable energy generation capacities themselves or through developers by inviting bids and supply power to consumers under existing power purchase agreements (PPAs).

The new guidelines are expected to replace fossil fuel-based energy with renewables under the existing PPAs.

According to MoP, the benefits of bundling renewable energy with thermal will be shared between the generator and distribution companies (DISCOMs) or other procurers on a 50:50 basis.

As renewable energy will be balanced with thermal energy, the DISCOMs will not need to acquire a separate capacity for balancing renewable energy. The ministry said that this was a significant step towards achieving the goal of 500 GW of non-fossil fuel capacity by 2030.

DISCOMs will count the renewable energy supplied under the program towards their renewable purchase obligation (RPO) without the financial burden of a separate PPA. This step will lead to a faster energy transition and benefit both the generators and DISCOMs.

At the recently concluded COP26 Summit, Prime Minister Narendra Modi had said that India aims to become a net-zero economy by 2070 and has set a target of installing a non-fossil energy capacity of 500 GW by 2030. He also said that India would meet 50% of its electricity requirements from renewable energy by 2030.

In August this year, India’s installed renewable energy capacity excluding hydropower projects crossed 100 GW. To add 300 GW capacity by 2030, India needs to install 28 GW of new solar capacity annually from 2022, three times higher than the capacity installed in any given year. Solar developers believe India needs to have clear execution plans, long-term policy stability, and financial infrastructure to achieve the 2030 target.

According to Mercom’s Q2 2021 India Solar Market Update, India added 4.57 GW of solar capacity in the first half (1H) of 2021, a 251% year-over-year growth. The country’s cumulative solar capacity stood at 43.6 GW at the end of June 2021.

India’s installed renewable energy (including large hydro projects) capacity stood at 143.9 GW, accounting for a share of 37.4% in the overall power mix at the end of Q2 2021, according to preliminary data from the Central Electricity Authority (CEA), Ministry of New and Renewable Energy (MNRE) and Mercom’s India Solar Project Tracker.