DISCOMs Should Purchase Power from Renewable Projects under REC at ₹2.67/kWh
So far, India has seen ₹2.44/kWh as the lowest solar tariff, while the L1 tariff for wind has been ₹2.43/kWh
The Rajasthan Electricity Regulatory Commission (RERC) has released a staff paper on projects registered under renewable energy certificate (REC) mechanism in the state. The paper analyzes the issues being faced by wind and solar generators which are registered under REC mechanism and have power purchase agreements (PPAs) with the state distribution companies (DISCOMs).
The paper suggests a path forward for the generators as well as DISCOMs.
Renewable energy generators have two options: either sell the renewable energy to DISCOMs at the preferential tariff fixed by the commission, or to opt for REC mechanism. Under REC mechanism, the environmental attribute can be exchanged in form of REC and electricity component (‘brown energy’) can be sold to DISCOMs.
Under the REC mechanism, at present the DISCOMs in Rajasthan have executed PPAs for 233.60 MW of solar capacity and 388.4 MW of wind capacity for the electricity component, according to the staff paper. The PPAs are due to expire on March 31, 2019. Almost all projects set up in the state under the REC mechanism are supplying electricity to Jodhpur Vidyut Vitran Nigam Limited.
The paper is open for comments and suggestions until November 6, 2018.
According to the staff paper, the pooled cost of power in Rajasthan has been increasing. At the same time, recent auction prices for solar and wind have shown a decreasing trend. These prices have gone even below the pooled cost notified for the DISCOMs (see chart below).
On account of this unprecedented situation, state DISCOMs will prefer to purchase renewable energy itself instead of continuing to purchase only the electricity component from such projects, which does not contribute to their RPO compliance.
The PPAs executed by DISCOMs with such projects for brown energy are due to expire on March 31, 2019, and due to this, DISCOMs may not be willing to extend them beyond March 31, 2019.
Several projects have been set up in Rajasthan under REC mechanism and a huge investment has already been made. In a situation in which the executed PPAs are not extended further, the capacity could stall, and huge investments made in the projects may be put at stake.
These projects have already been set up in the state. Considering the shortfall in meeting their RPO, if renewable energy (instead of just the electrical component) is purchased from these projects by the state DISCOMs, such projects will not only start contributing towards meeting their RPO targets, but will also help the state utilities in avoiding/minimizing their future investments to be made in addition/upgrading of the transmission system.
To protect the investment made in renewable energy projects already registered under the REC mechanism, it is necessary for state DISCOMs to extend projects and their PPAs for the length of the projects’ balance useful life.
To address concerns of such projects and also balancing the interests of the state DISCOMs, it is proposed that DISCOMs should purchase the renewable power generated from such projects at the lowest pooled cost notified by the RERC since 2010, that is ₹2.67 (~$0.035)/kWh.