Open-access transactions essential for Indian power market

Shiv Kaushik, Director of Business Development India, Climate Connect Technologies

“Electrification would enable powered irrigation, breathing new life into the ground”

Strengthening the transmission network by reducing grid-volatility will give us better predictability of renewable generation, says Shiv Kaushik, Director of Business Development India, Climate Connect Technologies.

Transformation in power sector
There is an intrinsic relationship between the power sector, national economic growth, and social development. A good showcase is the fall in power demand over the past few years during the economic slowdown. Several generation companies and independent power producers (IPPs) have had non-performing assets (NPAs).

The index of industrial production (IIP) has gone down, and so have revenues in line with it. Asset owners have been unable to service their debts, which has had a spill over impact on the banking sector. Because NPAs are a significant portion of GDP, with the percentage of power sector they being high compared to other sectors.

However, as the economy improves, and open access regulations become liberalised, industrial activity will increase and profitability will return. This will give access to better supply options and power prices, bringing down the overall cost to industry, and in turn attracting additional investment.

Electrification drives India’s growth
It is no coincidence that the regions of India that have the lowest electrification are also some of the most underdeveloped and impoverished. These include eastern UP and much of the north-eastern region amongst several others. If enough electrification and supply of power can be achieved, industries will flow to these far untapped areas. This will have positive knock-on effects to adjacent economic sectors, as well as on social development.

Their is an one example of growth potential is the farming sector, in the wide region straddling UP and Bihar. There, low rainfall means a huge amount of barren land, with no cultivation of crops. Electrification would enable powered irrigation, breathing new life into the ground. Along with also enabling large scale solar to be deployed. Together these would create new jobs for the local community, attract further investments, and help drive other development objectives.

Can you single out one such initiative that has proved beneficial for your sector and has been a game changer?
One such game changing programme over the past decade has been the implementation of open-access transactions in the Indian power market. This has been a major step towards full liberalisation of the market and has had positive knock-on effects for national development. Over time, this will encourage more competition and cheaper prices for the market.

The full benefits are yet to be realised, due to the recent economic downturn. However, as the economy recovers there will be an increase in demand, and so their revenues. Newer plants are also based on better, less polluting technologies than the previous generation. So they stand a better chance of continuation of service and operational lifetime.

Contribution towards renewable sector
We have helped to enable the pace of solar power additions to outstrip thermal and all others, including wind and hydro. All other generation types can be easily scheduled and controlled, whereas solar is far more challenging. Our AI-and-Machine-Learning (AI-and-ML) enabled generation forecasting and plant optimisation has supported the propagation of solar across the country. We are servicing over 3 GW of the country’s current total of 23 GW solar generations.

Because we enable much more accurate scheduling of generation, we are helping developers reduce their cost of production and lower the regulatory penalties they incur. This means lower tariff bids, leading to lower power prices, and so resulting in savings for end-consumers. We are also strengthening the transmission network by reducing grid-volatility through better predictability of renewable generation. This is one of the key challenges to address if we are to accelerate the integration of renewable onto the grid.

Potential of solar powered irrigation
It could be a massive game changer. In states with substantial agriculture, electricity for farmers is generally mandated to be free. This financial burden is borne by Discoms, and revenue lost from the power provided is estimated to be 100s of crores each year. To subsidise this, Discoms charge higher tariffs to industry and end-consumers.

Replacing existing pumps with solar powered ones will free up for sale the electricity that farmers are currently given at zero-price. Wide-scale subsidisation will then no longer be required, resulting in reduced tariffs to all end-user groups, as well as more investment from the savings realised, both by Discoms to improve their own infrastructure, and industry into new projects. It’s a win-win situation for all stakeholders. Furthermore, farming communities that setup small solar projects on their land in this way, can sell surplus power back to the grid, generating additional revenue for marginalised groups.

Target to reach
The success rate of solar power tenders issued at state-level compared to central government-level must be improved. Tenders through the centralised Solar Power Corporation of India have a payment security mechanism incorporated. So even if the end-buyer chooses not to buy, developers will be paid regardless. As such, large companies and developers prefer to participate in Central Government tenders.

Extending this assurance facility to all state-level tenders will boost confidence and participation. A related avenue is handling of electricity off-take. Sometimes states decline power, even after signing a PPA, resulting in losses for developers. If there can be no guarantee of off-take, or a buyer is no longer willing, then the developer should have the option to sell elsewhere. The REWA solar power park is a prominent example of where such favourable conditions were granted to great success. The process resulted in a record low bid of 2.97 per kwh.