The government’s recent focus on achieving renewable energy targets through various schemes and programmes has spotlighted India’s growing role in the renewable energy sector. In particular, the government’s forthcoming rules to pool solar tariffs and increase bundling of renewable energy in existing thermal Power Purchase Agreements (PPAs) have garnered significant attention.
Understanding Renewable Energy and Power Purchase Agreements
Renewable energy is energy generated from natural resources like sunlight, wind, and water. It is sustainable and can be continuously replenished. To facilitate and regulate this process, Power Purchase Agreements (PPAs) come into play. These are contracts between two parties – generating companies and Discoms – made to purchase electricity. The present aim of the government is to boost installed renewable energy capacity to a remarkable 500 GW (GigaWatts) by 2030.
The Current Drop in Solar Tariffs
Over the past decade, solar tariffs have consistently gone down, hitting a low of under Rs 2 per unit in December 2020. This drop is largely attributed to the decreasing price of solar panels and lower financing cost. Such a trend has led to many players waiting for tariffs to further decline before committing to long term power procurement agreements.
How Pooling Tariffs Can Accelerate Solar Power Procurement
To accelerate the procurement of solar power, the government is proposing to pool solar tariffs. This move would address concerns among Discoms about potentially missing out on lower future solar tariffs. The idea is to pool all solar power procurement within a given timeframe and ensure that all buyers pay an average of all tariffs contracted during that period.
Government Initiatives for Lowering Power Procurement Cost
In addition to pooling tariffs, the government’s initiative to bundle about 10,000 MW of Renewable energy-based power with fossil fuel-based power over the next 4-5 years can significantly lower total power procurement cost for certain Discoms. This tactic would be especially beneficial to unprofitable thermal power projects that have high variable costs and don’t get dispatched in merit order under existing PPAs. In November 2021, guidelines were issued allowing thermal generation companies to supply power from their renewable energy projects under existing coal-based electricity PPAs, with gains from renewable energy bundling shared equally between generators and Discoms.
State of India’s Solar Sector and the Budget 2022-23
India currently boasts the world’s 4th largest wind power capacity. As of 30th November 2021, the country’s installed Renewable Energy (RE) capacity stands at 150.54 GW. The push towards RE in the Budget 2022-23 has been instrumental in promoting domestic manufacturing to achieve an ambitious goal of 280 GW of installed solar capacity by 2030.
Challenges and Initiatives in Solar Energy Manufacturing
Despite notable efforts, challenges remain in the country’s solar energy manufacturing sector. A lack of quality in solar PhotoVoltaic (PV) modules has been a significant issue over the years. Enhancing research and development related to technological aspects of fully integrated manufacturing units could help address this challenge. However, no separate allocation for such R&D has yet been announced.
Promising Alternatives and the Future of Renewable Energy
Innovative initiatives like Kisan Urja Suraksha evam Utthaan Mahabhiyan (PM-KUSUM), International Solar Alliance, One Sun, One World, One Grid (OSOWOG), National Solar Mission, National Offshore Wind Energy Policy, Roof Top Solar programme Phase-II, National Wind-Solar Hybrid Policy 2018 and Hydrogen Based Fuel Cells Vehicles represent possibilities for the future of renewable energy in India.
Taking this forward would require identifying suitable locations for renewable resource setup, integrating them with the main grid, and distributing power effectively. More storage solutions need exploration, agricultural subsidies need adjustment to ensure only required energy is consumed, and shifting towards renewable energy sources through options like Hydrogen Fuel Cell-Based Vehicles and Electric Vehicles will be crucial to the success of the endeavour.