In its Economic Survey 2023-2024 presented to the Parliament by Finance Minister Nirmala Sitaraman, the Union Government has said round-the-clock (RTC) renewable energy products designed for the present demand pattern may have to be revised as such projects face several deployment challenges.

RTC supply aims to match the buyer’s energy demand curve through renewable energy power projects with energy storage systems.

However, recent RTC projects in India have discovered higher tariffs than those for solar and wind projects without energy storage, reflecting the internalization of externalities related to intermittent power generation.

The Economic Survey said RTC renewable energy is at a nascent stage. Its deployment faces several challenges, such as the dynamic requirements of the utilities and growing energy demands, especially in the context of programs like the SAUBHAGYA program for universal electrification, agricultural feeder segregation, the Time of Day mechanism, promotion of rooftop solar and changes in consumer behavior.

The least cost solutions can be derived by combining solar and wind projects from multiple projects spanning across states. This, however, poses a challenge in terms of arranging long-term power purchase agreements with multiple generators, obtaining transmission access at multiple locations, and setting up remote control centers for real-time control.

Higher upfront costs, technology risks, longer payback periods, and limited access to critical and rare earth minerals required for battery storage technology also pose serious challenges. In this context, pump storage-based energy storage solutions can be utilized to reduce system costs, owing to their longer lifetimes compared to battery energy storage systems.

Last September, the then Minister of Power and New & Renewable Energy R.K.Singh said that the future of RTC renewable energy could be remarkably affordable, costing just about ₹6 (~$0.07)/kWh when utilizing green hydrogen for storage.

The Survey said renewable energy faces intermittency and discontinuous supply, impacting grid stability without battery storage. Energy demand is expected to increase substantially, and a concomitant rise in renewable capacity may lead to a decline in base load efficiency as the supply composition changes. Large-scale phasing-in of renewables poses several risks associated with intermittency and dispatchability in the energy system.

Addressing the issue is critical for the more significant deployment of renewable energy. Some estimates suggest that the Levelized Cost of Electricity (LCOE) for renewables such as solar has fallen below that of fossil fuels in India and other countries.

“From an investor’s perspective, the LCOE represents the total cost of building and operating the asset per unit of electricity generated over an assumed lifetime. Investing in the project may be viable if the LCOE is lower than the electricity tariff. However, even as the LCOE for renewables has been falling, it does not reflect the total cost the economy faces,” the Survey said.

“The metric of LCOE ignores the costs associated with intermittency and dispatchability. Renewable power needs to be backed up by a stable power source when the sun is not shining, and the wind is not blowing. If the producer is not mandated to make the power dispatchable, then energy procurement at LCOE reflects an implicit subsidy for the producer. One way to resolve this is to have RTC renewable energy supply contracts, which allow the internalization of risks related to intermittency and dispatchability,” the Survey suggested.

It said that along with the integration of renewables, thermal power, especially coal-based power plants, plays a significant role in providing a base-load to support large-scale deployment of renewables.

Representatives of India’s solar and other clean energy sectors have a long wishlist from the Union Budget 2024 to be presented by Nirmala Sitaraman on July 23, 2024.