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Photo: Bloomberg
Photo: Bloomberg

NTPC keen to get outside PPA comfort zone

  • The move comes at a time when merchant trading in power has increased and state government utilities struggle to pay power bills that they are locked into
  • One of its first projects where NTPC will go without PPAs is a planned 5,000MW solar park in Kutch, Gujarat

NTPC Ltd, India’s largest power generator, will explore setting up new generation capacity without signing long-term power purchase agreements (PPAs).

The move comes at a time when merchant trading in power has increased and state government utilities struggle to pay power bills that they are locked into.

“Till now, all of NTPC’s capacity is tied up with long-term PPAs," Gurdeep Singh, chairman and managing director, NTPC, said at a press conference. NTPC has installed power capacity of 55,000MW.

“But this financial year, we will start looking at setting up net capacity even without PPAs. Our strategy needs to keep evolving as the market evolves. We will see if NTPC can create capacity for the merchant (exchange-traded power) business."

One of its first projects where NTPC will go without PPAs is a planned 5,000MW solar park in Kutch, Gujarat. “We’re doing feasibility studies for this project and we have narrowed down 2-3 likely sites. The government has accepted our viewpoint for this proposal," Singh said. “We will evaluate how to set this up, partly with long-term PPAs and partly without. We might even invite other developers to install their units at the park."

NTPC expects the park to cost about 20,000 crore, a cost of about 4 crore per MW. Work will begin this fiscal. “We are also evaluating another ultra megawatt solar park project in Rajasthan," Singh said.

About 11% of electricity generated in India is bought and sold through power exchanges. This share of merchant power trades has stayed more or less flat as a percentage of the electricity market. However, the absolute units traded doubled from 65.90 billion units in 2009-10 to 127.62 billion units in 2017-18, according to data from the Central Electricity Regulatory Commission. Large power traders include companies like Tata Power, Adani Enterprises, RPG Power Trading and JSW Power Trading. Selling in the merchant market has long been seen as the only option for private generators unable to sign long-term contracts with state consumers. So, this will be a bold move for NTPC to keep its power sales options open.

NTPC added 2180MW of capacity in 2018-19, and aims to add about 2.5-3GW every year. “We have lots of land available at our existing plants, so we don’t need to do any greenfield projects and there is sufficient land for brownfield expansion. This year, we will add about 5GW of new capacity. We generate about 23% of the country’s electricity and we want to increase our market share."

For the June 2019 quarter, NTPC reported net profit of 2840.28 crore, on revenue of 25931.11 crore. Singh also said that the company is exploring opportunities in waste-to-energy plants and has an operational pilot project in Varanasi of 214kW. NTPC has signed an MoU to set up a larger plant in Surat, Gujarat, which it hopes to commission within 30 months.

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