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Two hurdles in the transition from coal-based power to renewable energy

Andhra Pradesh chief minister Y Jaganmohan Reddy has made more news in the renewable energy space this year than the developers of projects. Yet, even as he forced renegotiations of the escalation clause in the future prices of renewables, he forgot to use a far easier option. One of the reasons prices of renewables have an upward revision built in is because of an inherited problem from the coal-dependent electricity distribution system.

As 2019 draws to a close, one of the reasons renewable energy has not done better this year, is this sense of policy uncertainty. “Give us five years of consistent policy in the sector,” says Sunil Jain, CEO of Hero Future Energies. He says renewables are plagued by too many policies that often  contradict each other, like this one. “Renewables can do without subsidies if policy is straightforward,” he adds. 

As in the case of inter-state sales, it is a policy conundrum. No matter whatever the source, state governments insist that once it imports a unit of power, it will price it the same irrespective of whether it is from coal, nuclear or solar. Unless the producer has a long term power purchase agreement with the importer in a state, as in case of Delhi Metro, which buys renewable energy from Rewa, the inter state transmission charges (ISTS) will apply. 

Would conditions improve in 2020? The national electricity regulator, Central Electricity Regulatory Commission, has issued a draft regulation that says transmission charges have to be shared among the designated ISTS customers on an annual basis. But it does not remove the ISTS charges, levied by the electricity distribution companies, which cumulatively have run up a loss of Rs 2.6 trillion. “If we allow open access and producers to sell captive power more flexibly, then 99 per cent of the commercial organisations will opt for renewable energy,” said Anand Kumar, secretary, ministry of renewable energy at the South Asia Green Energy summit organised jointly by Asia Foundation and RIS. 

This is a difficult call to take for state electricity distribution companies (discoms) and, on their behalf, by the state governments. It might seem obvious that since prices of renewables have fallen, it should be easy for the discoms to substitute costlier coal-based power with it. It does not happen so easily because of two problems. The first is an engineering one. To feed in larger renewables, the discoms and the load despatch centres (which manage the grid) would sometimes need to lower production from some of the coal-based plants to manage grid discipline. This is often a ticklish issue, as no power supplier would want to be the chosen one, since their production would dip. The second is a contractual one. Most discoms accustomed to shortages have signed on to large capacity supply agreements. In Andhra Pradesh, for instance, the state-run AP GENCO has power purchase agreements with nine units each promising a plant load factor (PLF) of 80 per cent. So their capacity is running ahead of need. Most states have projected an ambitious growth rate of state domestic product and the consequent growth of manufacturing that is getting belied. To the AP state electricity regulatory commission the state power utilities have projected a cumulative annual growth rate of demand of 9 per cent till 2030. It is a steep one. Praveen Gupta, chief engineer, at Central Electricity Authority said to make renewable energy environment stable it was necessary for the coal-fired stations to operate at a PLF of 55 per cent. The lower offtake balances the system and allows for green energy to pick up the slack. 

However there is room for optimism. To ensure balance in the renewables, experts recommend more play for rooftop solar power. According to a report of Bridge to India quoted by Business Standard, a renewable energy consultancy, the country is estimated to have added a record 1,836 Mw (1,000 Mw = 1 Gw) of rooftop solar capacity in FY 2019, taking the total to 4,375 Mw. This is still just 15 per cent of solar power generation but year on year it has registered a growth rate of 61 per cent. In contrast, the same report shows capacity addition in utility-scale grid-connected solar fell to 4,810 Mw in FY2019, a steep fall of 47 per cent over the previous year.  Shuvendu Bose, senior energy specialist at IFC said this was a welcome development. “To give stability to the renewable grid, one needs a sort of decentralised storage facility, which roof tops fill in. Given a chance I would plant a roof top solar on every house”. 

Anand Kumar also says going going green is easiest way to provide universal energy access. India, he said has promised a target of 450 Gw of renewable energy by 2030. It is on the way. Partially because of a growth slow down India in 2019 will add only a 2 per cent growth in carbon emissions in 2019—its lowest rate in the 21st century. 

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