THERMAL POWER PURCHASE AGREEMENTS

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• The centre is set to come up with rules to pool solar tariffs and is also aiming to increase bundling of renewable energy in existing thermal Power Purchase Agreements (PPAs) to boost the procurement of renewable energy.
• The government is aiming to boost installed renewable energy capacity to 500 GW (GigaWatts) by 2030.
• A Power Purchase Agreement (PPA), or electricity power agreement, is a contract between two parties, one which generates electricity (power generating companies (gencos)) and one which is looking to purchase electricity (Discoms).
• Solar tariffs have fallen consistently over the past decade to a low of under Rs 2 per unit (1 unit = 1 kWh) in December 2020 due to the falling price of solar panels and lower financing cost.
• The trend of lower solar tariffs has led to many many players waiting on tariffs to fall further instead of entering into long term power procurement agreements.
• A move to pool tariffs could help speed up procurement of solar power by addressing concerns among discoms of losing out on lower solar tariffs in the future.
• The government is planning to pool all solar power procurement in a given period and ask that all buyers pay an average of all the tariffs that are contracted in a pooling period.
• The government’s step to bundle about 10,000 MW of Renewable energy based power with fossil fuel based power over the next 4-5 year would also help lower total cost of power procurement for certain discoms.
• There are a number of old thermal power projects that are unviable because of high variable costs and don’t get dispatched in merit order and that discoms are forced to pay fixed costs due to requirements under existing PPAs.
• The centre had in November 2021 issued guidelines which permitted thermal generation companies to supply power to customers from their renewable energy projects under the existing Power Purchase Agreements (PPAs) for coal-based electricity with gains from the bundling of renewable energy to be shared between generators and (discoms) on a 50:50 basis.
• The country’s installed Renewable Energy (RE) capacity stands at 150.54 GW (solar: 48.55 GW, wind: 40.03 GW, Small hydro Power: 4.83, Bio-power: 10.62, Large Hydro: 46.51 GW) as on 30th Nov. 2021 while its nuclear energy based installed electricity capacity stands at 6.78 GW.
• India has the 4th largest wind power capacity in the world.
• This brings the total non-fossil based installed energy capacity to 157.32 GW which is 40.1% of the total installed electricity capacity of 392.01 GW.

Way Forward

• Identification of Areas: Renewable resources specially wind cannot be set up everywhere, they require specific location.
• Identification of these specific locations, integrating them with the main grid and distribution of powers, a combination of these three is what will take India forward.

SOURCE: THE HINDU,THE ECONOMIC TIMES,MINT