MNRE Plans To Bundle Thermal with Solar and Wind for Round-the-Clock Power Supply
Solar and wind tariffs are cheaper than the cost of thermal power
January 6, 2020
The Ministry of New and Renewable Energy (MNRE) has come up with a draft plan to supply round-the-clock (RTC) power from renewable (solar, wind, and hydro) projects, which will be complemented with power from thermal projects.
The MNRE has asked for feedback from various stakeholders, including the Ministry of Power (MoP), renewable energy associations, and state governments and their power distribution companies (DISCOMs), among others.
The first phase of JNNSM provided for the ‘bundling’ facility, where solar power could be bundled with the comparatively cheap thermal power from the unallocated quota generated at National Thermal Power Corporation (NTPC) coal-based stations. This was to provide a boost for grid-connected solar projects.
Over the period, the de-risking of renewable energy sector, coupled with the advancement of technologies, resulted in bringing down the tariffs of solar and wind power to below the ₹3.00 ($0.042)/kWh level, which is cheaper than the cost of thermal power, paving the way for a wider adoption of renewable energy across the country.
But a drawback that goes against renewable energy is its intermittency, making it difficult for DISCOMs to maintain a stable and steady flow of power. The challenge is more pronounced in large projects where the DISCOMs have to balance power to maintain grid stability and meet the requirements in hours when renewable energy is not available.
All these factors have led to the concept of ‘reverse bundling’ wherein high-cost thermal power is bundled with cheaper renewable energy to provide round-the-clock power supply to the DISCOMs.
As per the proposed plan, the power producer will supply renewable power bundled with thermal energy and maintain at least 80% availability on an annual basis. The generator has to supply the power where at least 51% of the total power provided annually is from renewable sources, and the balance can come from thermal generation sources.
As far as the tariff is concerned, a single composite tariff for renewable energy, complemented with thermal energy, will need to be quoted by the bidders.
The draft document notes that the tariff should be quoted at the delivery point, which will be at the central transmission utility interconnection point and the DISCOMs will bear all transmission-related charges and losses from the delivery point onwards.
It is important to note that the tariffs for renewable power are set for the entire period of the PPA, which is not the case with the thermal power as it is indexed with the prices of coal to adjust with the change in prices of fuel. Since the generator will be responsible for supplying the composite power, the tariff will be adjusted to cover the possible increase or decrease in coal prices as per the index to be notified by the regulatory commission.
According to the draft document, the bidders will have to specify the composite fixed charges as well as the composite variable charges. The composite fixed charges will apply for renewable power, whereas the composite variable charges will be reflective of the variable component of energy charges for thermal power.
The bids should be evaluated for the composite levelized tariffs. The index to be adopted for increasing or decreasing the variable charges will be specified in the request for selection (RfS).
As it is up to the bidder to choose the type of thermal power to be supplied with renewable energy, the procurer may specify the escalation and de-escalation indices for both the international and domestic fuel in the RfS. Based on the variable charges quoted and the type of fuel used, the levelized composite tariff may be calculated.
Another tariff alternative proposed is the ‘normative composite fixed charges’ and the ‘normative composite variable charges.’ As the generator has to supply at least 51% of annual energy from renewable sources, it is assumed that 51% of the tariff is represented by renewable component and the remaining 49% as the thermal component. Further, in the new coal-based thermal tariffs, the average variable cost to fixed cost ratio is in the range of 70:30. So, for the normative approach under this plan, the total composite tariff should be considered to be comprising of 51% of the renewable tariff, 30% variable thermal tariff, and 19% fixed thermal tariff.
The draft document also mentions that if the annual availability of power falls below 80%, a penalty may be charged, corresponding to this shortfall in energy, at 25% of the PPA tariff.
The renewable energy component under this program will also be considered eligible for RPO compliance, and the bidding process would be carried out by SECI, NTPC, or any other procurer authorized by the government.
The selection of the bidder will be through a transparent bidding process, and the PPA will be valid for 25 years. SECI or NTPC or any other intermediary procurer authorized by the government, will be allowed to charge a trading margin.
A few days ago, SECI invited an expression of interest from power generators involved in hydro, pumped storage, gas, battery storage, and thermal generating stations to supply power to SECI, which it would then blend with different renewable sources. The aim is to meet the challenges posed by the intermittent nature of renewable energy sources, which need to be supplemented with other conventional sources of power. The deadline for the submission of the EoI is January 31, 2019. The main objective of this tender was also to provide round the clock supply to consumers to meet their base-load and enhance renewable penetration at DISCOMs.