'Urgent reform needed to achieve energy sector transformation in India'
KOLKATA: The renewable sector is headed for trouble unless India adopts sweeping demand and supply side regulatory reforms for effective adoption of green power through grid management and long-term visibility to private sector investors feels Bridge to India.
According to BTI, the power sector is in early stages of transformation from coal-centric generation to variable renewable power generation. This transformation will pose several daunting commercial and technical challenges for both policy makers and market players. It will also inevitably result in growing incidence of grid curtailment of renewable power, as seen worldwide, for a variety of reasons.
BTI feels that as renewable capacity grows, capacity utilization for conventional power could start falling to 50% by 2021-22 assuming all renewable power output is evacuated.
“In an era of cheaper renewables, we need to move away from the ‘must run’ incentivized structure to a comprehensive reform of pricing, grid utilization and related ancillary services,” said Jasmeet Khurana, associate director at Bridge to India. As renewable power becomes more mainstream, it should stop expecting special advantages and compete on equal terms.
A back-of-the-paper calculation by BTI shows that if India realistically adds a combined wind and solar power capacity of 110 GW by 2021-22 and power demand grows by 5% annually, capacity utilization for conventional power fleet would drop below 50% at various times in a year, much lower than the critical rate of 55%. High growth in solar capacity addition in conjunction with India’s evening peak demand profile will add further to the woes of grid management.
There are several plans to enhance transmission infrastructure and introduce grid-level battery storage to address increasing renewable penetration. Current regulatory approach to tackling this risk is predicated almost entirely on providing ‘must run’ status – priority access to the grid – to renewables.
This simplistic approach has been very helpful to the renewable sector but is becoming untenable as it ignores the interests of conventional power generators, transmission companies and DISCOMs. There are already many instances of DISCOMs backing down renewable power for various commercial and technical reasons.
“In an era of cheaper renewables, we now need compensatory mechanisms for backing down and ramping up conventional power. Developing an effective and economically sound ancillary grid services market should also be a priority,” said Khurana.
Power tariff structures in India are rigid and need to evolve to ‘time of use’ pricing to shift customer behaviour. Backing down renewables may become unavoidable in future, so there is a growing clamour for renewable power to have a two-part tariff and do away with the ‘must run status’.
“However, this needs proper planning and consultation with private sector so as to avoid a repeat like the coal linkage mess that we saw in the thermal power sector recently,” he said. “As renewable power becomes more mainstream, it should stop expecting special advantages and compete on equal terms. Recent Rewa tender allows deemed generation compensation for evacuation risk beyond a specified limit. Sector regulators need to take the lead and work closely with the industry to develop more innovative and workable tariff structures for sustainable long-term growth of the sector.”
According to BTI, the power sector is in early stages of transformation from coal-centric generation to variable renewable power generation. This transformation will pose several daunting commercial and technical challenges for both policy makers and market players. It will also inevitably result in growing incidence of grid curtailment of renewable power, as seen worldwide, for a variety of reasons.
BTI feels that as renewable capacity grows, capacity utilization for conventional power could start falling to 50% by 2021-22 assuming all renewable power output is evacuated.
“In an era of cheaper renewables, we need to move away from the ‘must run’ incentivized structure to a comprehensive reform of pricing, grid utilization and related ancillary services,” said Jasmeet Khurana, associate director at Bridge to India. As renewable power becomes more mainstream, it should stop expecting special advantages and compete on equal terms.
A back-of-the-paper calculation by BTI shows that if India realistically adds a combined wind and solar power capacity of 110 GW by 2021-22 and power demand grows by 5% annually, capacity utilization for conventional power fleet would drop below 50% at various times in a year, much lower than the critical rate of 55%. High growth in solar capacity addition in conjunction with India’s evening peak demand profile will add further to the woes of grid management.
There are several plans to enhance transmission infrastructure and introduce grid-level battery storage to address increasing renewable penetration. Current regulatory approach to tackling this risk is predicated almost entirely on providing ‘must run’ status – priority access to the grid – to renewables.
This simplistic approach has been very helpful to the renewable sector but is becoming untenable as it ignores the interests of conventional power generators, transmission companies and DISCOMs. There are already many instances of DISCOMs backing down renewable power for various commercial and technical reasons.
“In an era of cheaper renewables, we now need compensatory mechanisms for backing down and ramping up conventional power. Developing an effective and economically sound ancillary grid services market should also be a priority,” said Khurana.
Power tariff structures in India are rigid and need to evolve to ‘time of use’ pricing to shift customer behaviour. Backing down renewables may become unavoidable in future, so there is a growing clamour for renewable power to have a two-part tariff and do away with the ‘must run status’.
“However, this needs proper planning and consultation with private sector so as to avoid a repeat like the coal linkage mess that we saw in the thermal power sector recently,” he said. “As renewable power becomes more mainstream, it should stop expecting special advantages and compete on equal terms. Recent Rewa tender allows deemed generation compensation for evacuation risk beyond a specified limit. Sector regulators need to take the lead and work closely with the industry to develop more innovative and workable tariff structures for sustainable long-term growth of the sector.”
