Power Ministry’s 5-Year Plan Calls for Fair Share of Renewables and More Washed Coal

The Ministry of Power has issued a vision document which charts the way forward for India’s power sector. The document points out the problem areas and sets the timeline for every aspect of power generation, evacuation, and distribution.

The document, called “Vision 2024”, aims at developing a sustainable, viable, efficient, and competitive power sector to facilitate economic and social development. The report points out that the generation capacity in India has increased drastically in the past decade, but the sector is beset with falling plant load factor (PLF) and stressed assets.

According to Mercom’s market research, “Transmission is a huge problem for Indian renewable energy project developers. In many cases, renewable energy projects are ready to evacuate, but the evacuation infrastructure is not ready. In some other cases, due to the lack of proper transmission infrastructure, renewable energy has to be curtailed.”

While the country’s overall generation has been on the rise, especially with the growth in solar and wind projects, an adequate transmission has always been a challenge leading to grid congestion and curtailment. The lack of transmission capacity has been a growing concern for solar and wind companies, and Mercom has been reporting on this issue diligently. With a plethora of mega solar tenders announced in the solar sector, including interstate transmission system (ISTS) connected projects, the availability of the required evacuation infrastructure has been one of the biggest challenges.

Key Challenges Faced by the Indian power Market

Source: Ministry of Power Five-year Vision Document

The vision document states that capacity allocation of transmission infrastructure needs to be aligned with the growth in renewable energy projects. It mentions that transmission planning needs to be done one to two years ahead as the gestation period for renewable energy projects is lesser when compared to transmission projects.

The document also points out the fact that the construction time required for transmission projects is more due to outdated technologies being put into use. It suggests that the allocation of transmission costs of solar and wind projects need to be aligned to avoid overcharging market participants.

The vision document mentions that the accumulated losses of distribution companies (DISCOMs) have cast doubt on their financial viability. Recently, Mercom reported that Rajasthan Vidyut Utpadan Nigam Limited (RVUNL) did not renew the Power Purchase Agreements it had signed with wind generators, despite the Rajasthan Electricity Regulatory Commission passing an order to ensure continuity in renewable power purchases.

A similar issue was brought to light in a recent letter written by the Solar Power Developers Association (SPDA) to the Ministry of New and Renewable Energy (MNRE) regarding the overdue payments from Telangana state distribution companies to solar power developers.

Due to the bad financial situation of most state-run DISCOMs, payment delays and curtailment issues loom large over renewable energy projects in states with high renewable energy potential.

In May 2019, Mercom also reported how payment delays are becoming a problem for solar and wind project developers in India, especially in Andhra Pradesh, Tamil Nadu, and Telangana. Some instances in Madhya Pradesh and a DISCOM in Karnataka are also being blamed for long payment delays to developers.

Even the country’s largest power generator, the National Thermal Power Corporation (NTPC) has been affected by this issue. Mercom recently reported that the DISCOMs in Andhra Pradesh, Telangana, and Karnataka owe NTPC ₹18.84 billion (~$262.6 million) in dues for solar power supplied by projects under the National Solar Mission.

The vision document stresses on the modernization of generation and transmission, improvement in utilization of available transmission capacity, reduction in state-level congestion, facilitating the scaling up of renewable energy, elimination of curtailment, improvement in financial viability, and sustainability of the DISCOMs as its goals.

The document has underlined that to enable large-scale integration of renewable energy into the grid in the next five years, minimal technical limits should be brought to 55% across generation fleet, and ramp rates should be increased to 2% per minute across coal fleet.

It has also advised that to increase fuel availability at power projects, tie-ups with local agricultural producers for the supply of agricultural residue or biomass pellets for cofiring should be enabled within the next three years.

The document points out that to address the issue of non-performing assets, payment security mechanisms must be improved within the next three years.

In a recent meeting chaired by R.K. Singh, it was decided that the Ministry of New and Renewable Energy (MNRE) would follow up with the Reserve Bank of India for the removal of the priority sector lending limit for the renewable energy sector. This is expected to encourage the private sector banks to lend more to renewable energy projects and help developers with much-needed finance.

To improve transmission capacity utilization, integrated transmission planning approaches that incorporate conventional and renewable energy generation and dynamic load characteristics must be adopted in the next two years, the document further adds.

Image credit: Maharashtra Energy Development Agency