An open field for renewable energy

India's target of having 500 GW of installed renewable energy (RE) capacity by 2030 depends on establishing a strong value proposition through open access for commercial and industrial (C&I) consumers.

- RAKESH SINGH & SUDIP SURAL

As the cost of round-the-clock (RTC) renewable generation declines, states will have to progressively lower open-access charges to encourage RE adoption in industry. The advantages of reduced power costs for businesses shall outweigh any potential strain on power distribution companies (discoms) resulting from these charge reductions.

A quick assessment of what is in place now shows that annual installations must accelerate to around 55 GW to reach the 2030 goal, compared to just 58 GW added in three years. This monumental scaling requires dismantling barriers that have slowed adoption despite falling costs and growing industrial demand for green energy. Long-term power purchase agreements (PPAs) for firm and dispatchable RE (FDRE) and solar-plus-storage projects have gained traction in the past six months, but several interstate transmission projects are experiencing delays and may threaten timely commissioning of capacities planned.

At the same time, non-solar hour deficits may worsen as expansion of coal-based thermal capacities trail demand. To address this issue in the near term, discoms will have to rely on increased short-term power purchase arrangements. That will include buying electricity on power exchanges and entering into bilateral agreements through power traders, especially for their evening-hour requirements. However, these procurements are likely to be costly as prices during these times are expected to remain high, averaging between ₹6 and ₹8 per unit.

The economic case for RE is compelling. The average power procurement cost (APPC) for six of the top eight power-consuming states was ₹5.5/unit or more in FY24. In comparison, the FDRE tariffs ranged between ₹4.5 and ₹5 per unit, or 10-20 per cent lower.

The tariffs are attractive compared to new coal plants, whose variable costs are subject to escalations and range ₹6-7 per unit.