Industry
Green power is all the rage; so why are some of them not finding buyers?
Summary
- The pile-up of unsold power capacity comes at a time India has raised the target for tendering green power projects to 50 GW every year till FY28. Further delays could make power from older projects unattractive, as newer ones with lower tariffs keep coming online.
New Delhi: At a time of soaring ambitions in green power, renewable power capacity totalling nearly 30 GW has failed to find buyers, three people aware of the matter said, as the industry awaits the debut of uniform tariffs and better grid connectivity.
Capacity of at least 15GW is yet to find power purchase agreements (PPAs), while at least 14GW is awaiting power supply agreements (PSAs), the people cited above said on the condition of anonymity. Power developers sign PPAs with procurers, who further sign PSAs with distributors. Power procurers include companies such as state-run Solar Energy Corp. of India (SECI), NTPC Ltd or SJVN Ltd.
According to one of the three people cited above, older renewable projects, largely solar, have found it harder to find buyers. "For the projects which have come up in the past one year, the agreements have largely been signed," the person said on the condition of anonymity.
The pile-up of unsold power capacity comes at a time India has raised the target for tendering green power projects to 50 GW every year till FY28. On 15 August, Prime Minister Narendra Modi reaffirmed India's ambitious goal to achieve 500 GW of non-fossil-based energy capacity by 2030, up from about 197 GW now. Further delays in signing agreements could make power from older projects unattractive, as newer ones with lower tariffs keep coming online.
Queries sent to the Union ministry of new and renewable energy and SECI remained unanswered till press time.
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In the case of PPAs, the industry is awaiting to see the impact of uniform renewable energy tariffs on PPAs, which will price power in a standardized manner in a specific region. The new system, announced in October last year, envisages renewable power at uniform rates. Every month, an implementing agency will set a uniform tariff for power from central pools. An intermediary, say SECI, will sell power from the central pool to all end procurers (discoms) at the uniform tariff. The system is aimed to encourage discoms to sign PSAs.
Besides unsigned PSAs, another issue is the delay in transmission connectivity, said Sujoy Ghosh, vice-president & country managing director at First Solar. With plans to bid out 50 GW capacity annually, delays in signing PSAs, getting grid connectivity, and the eventual backlog, are key challenges, Ghosh said at the Mint Sustainability Summit in New Delhi, adding project developers and module manufacturers need to have a clear sight of the demand cycle to plan accordingly.
Normally, it takes about three to five months for signing PPAs and PSAs, an industry expert said. "In FY24, about 23 GW have already been bid out. As per the target of bidding out 50 GW capacity, about 12.5 GW would have to bid out in each quarter on an average. So, with a timeframe of three to five months, we would see this kind of capacity in the pipeline for which PPAs and PSAs would have to be signed. It's largely to do with the high quantum of bidding which we witnessed since last fiscal, which is unprecedented," the person added on the condition of anonymity.
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A top executive at another solar power developer said there is more demand for power from so-called firm and dispatchable renewable energy (FDRE) projects which help manage load at peak times, since they are linked to energy storage systems. FDRE capacity accounted for 14% of tenders issued in FY24, and its share is expected to go up in the current fiscal as more developers turn to energy storage systems, a report from JMK Research said.
Power remaining unsold is a concern, the executive cited above said, since with the continuous decline in tariffs, older capacities would soon be out of favour when power from newer projects are bid out. Uniform tariffs will lead to more PPAs being signed, he added.
"In case a project is bid out in January this year and the power is not tied up and another tender is floated in October and in the latter case the tariff is lower, power from which project would be more attractive for the buyers? So, for legacy projects, that is a concern," the developer added.
Responding to a question on unsigned PSAs at the Mint summit, Shivanand Nimbargi, MD & CEO, Ayana Renewable said: "There is going to be some challenge in this. That is getting addressed as we speak. What is now being discussed and hopefully getting aligned is the bidding trajectory and the offtaker trajectory being aligned, and we are looking at some kind of a blended tariff on a quarterly basis with an assured offtake."
