Upper Tariff Ceiling of ₹3.25/kWh Set for 500 MW Solar Tender in Uttar Pradesh

Solar project developers in the country continue to face curtailment issues and when it comes to states like Tamil Nadu, Andhra Pradesh, Karnataka, among others, the issue of curtailment is more challenging, falling somewhere between 10 and 25 percent.

Curtailment is a reduction in the output of a generator, typically on an involuntary basis, from what it could otherwise produce given the resources available. Curtailment of electricity generation has long been a normal occurrence in the electric power industry and occur for a variety of reasons, including a lack of transmission access or transmission congestion.

Back in 2017, when issues first came to light, the Adani Group approached the Appellate Tribunal for Electricity (APTEL), which directed the Tamil Nadu Electricity Regulatory Commission (TNERC) to hear its plea. Later, TNERC  rejected its petitions.

A Mercom source at National Solar Energy Federation of India (NSEFI) said, “The problem of solar curtailment was very bad in 2017 and 2018 in Tamil Nadu, though it has improved in last 3-4 months. Many developers have filed writ petitions and they were accepted by the high court. But the decision of curtailment is a commercial decision. For example, average solar PPAs are around ₹6-7.95/unit (~$0.082-0.11/unit). In comparison, wind tariffs are close to ₹3/unit (~$ 0.041). DISCOMs see no incentive in buying costly power even if there are margins.”

He added, “This year, adequate coal availability for thermal power and a better wind season may also have driven solar curtailment. However, it is not difficult for DISCOMs to accommodate 2,000 MW of renewable energy into the grid. They can easily manage the technical limit of 55 percent in any case.”

Another services company told Mercom, “We are facing issues in Tamil Nadu. Once the project is completed, we need to inject power into the grid. This involves DISCOMs as they have to approve it. Ideally, it can be done in a day but usually it takes 30-60 days. Sometimes, it can take as long as five to six months. This delays the entire project. Unless the power is injected into the grid, the project is not finalized. These issues are in  southern states, especially in Tamil Nadu.”

The Ministry of Power (MoP) had also taken note of the issue of solar curtailment  and  proposed to set up a compensation mechanism for existing renewable energy projects which will enable them to protect cash flows to some extent from grid curtailments and will also ensure a favorable operational environment for the renewables sector.

The provisions in the proposal were only applicable to renewable power projects providing day-ahead forecast and schedule. Compensation, if provided in case of grid curtailment, is suggested to be part of the PPA provision for future projects. It also addresses compensation to incentivize grid operators and distribution utilities to reduce curtailments, help renewable energy developers in scheduling and forecasting, and enable  the integration of increasing renewable energy capacity.

A DISCOM official from Rajasthan said, “In Rajasthan, there is no problem. The government is purchasing all the power as per the Power Sale Agreement, so there is no issue. We aggregate the demand for a particular financial year and we agree to purchase the power through the bidding process. So, the bid is only issued when we feel there is demand for a particular financial year. We are also open to sell renewable power to other states to fulfill their RPOs.”

However, all utility companies are not very forthright discussing the issue of solar curtailment. When the Director of a South Indian state utility was contacted, he asked Mercom to file a Right to Information (RTI).

“While calculating generation and revenue, developers forecast 100 percent power sales of their solar projects which is not true as they don’t get paid 100 percent due to curtailment. Curtailment in southern states like Tamil Nadu and Karnataka are high. Of course, these are also site-specific. We also fear that Rajasthan and Maharashtra may follow these states in solar curtailment. If the demand improves in the upcoming months, then it is not an issue, otherwise we should be ready for higher curtailment”, said a solar power developer not wanting to be named.

“Solar curtailment should be clearly communicated in the power purchase agreements (PPAs). However, without increase in power demand, better transmission and improvement in DISCOM finances, curtailment is likely to be a problem for the foreseeable future, Said Raj Prabhu, CEO of Mercom Capital Group.

 

 

Nitin is a staff reporter at Mercomindia.com and writes on renewable energy and related sectors. Prior to Mercom, Nitin has worked for CNN IBN, India News, Agricultural Spectrum and Bureaucracy Today. He received his bachelor’s degree in Journalism & Communication from Manipal Institute of Communication at Manipal University and Master’s degree in International Relations from Jindal School of International Affairs. More articles from Nitin Kabeer