Homeviews News

Power sector reforms central to meeting India’s 450 GW renewable ambitions

Power sector reforms central to meeting India’s 450 GW renewable ambitions

Power sector reforms central to meeting India’s 450 GW renewable ambitions
Profile image

By CNBCTV18.com Contributor May 21, 2021 11:56:37 AM IST (Updated)

Scaling up to 450 GW—a highly ambitious target—will require India's power sector to be more flexible, transparent, and market-based

India has rapidly scaled up renewable energy (RE) in the last eight years. To accelerate its energy transition, it now aims to install 450 GW by 2030 at a compound annual growth rate of nearly 20 percent. Further, research by the Council on Energy, Environment and Water (CEEW) shows that if the country were to choose to reach net-zero greenhouse gas emissions by 2050, it would need to increase the share of non-hydro renewables in its electricity generation from the current 10 percent to a staggering 83 percent.

Recommended Articles

View All

What should India do to bring about the sea change it requires in its RE capacity? We suggest that policymakers focus on driving change in three key areas: transforming bulk power procurement, stimulating demand, and building effective institutions.
Transforming bulk power procurement
Tariff-based competitive bidding has so far driven RE procurement in India. This approach, however, has its limits. For example, nearly 19 GW of tendered RE capacity remains unsold. Infrastructural delays have affected commissioning timelines. Several discoms have attempted to reduce tariffs by renegotiating contracts.
Further, investors currently prefer banking on long-term power purchase agreements (PPAs) for assured returns. But this neither lets market participants benefit fully from technological advances in RE nor allows the optimal growth of new market avenues like the Green Term Ahead Market (GTAM) and the Real-Time Market (RTM). This is unfortunate since new technologies and market mechanisms are essential for managing variability in RE generation and eventually increasing its share in the energy mix.
Procurement models must change to allow buyers to do more short and medium-term procurement. Also, transmission regulations must favour short-term procurement, and market mechanisms must enable project developers or system operators to balance RE deviations from schedules. This evolution of power markets is natural and necessary, as shown by the experiences of more advanced electricity markets in North America and Europe.
Stimulating demand
India’s current strategy for increasing demand for RE is based on mandates given to power distributors to obtain a part of their electricity requirement from renewable sources (known as Renewable Purchase Obligations, or RPOs) and penalties for non-compliance. But the failure of even RE-rich states like Maharashtra, Gujarat, and Telangana to meet their RPO targets shows how this approach has had limited success in accounting for the costs and benefits of adding new RE capacity. The cost burden of integrating new capacity falls on host states, making them more likely to restrict deployment to meet their internal needs rather than maximising capacity for export. For perspective, only four states—Andhra Pradesh, Rajasthan, Karnataka, and Tamil Nadu—met or surpassed their RPOs in FY 2020.
The shortfalls of the RE certificate (REC) mechanism—which continues to be suspended due to litigation on floor and ceiling prices—offer further proof that we need to rethink how we stimulate demand. While RECs are expected to enable RE-deficit states to comply with their RPOs, data from the Power System Operation Corporation Limited (POSOCO) show that RE-rich states are more active in REC markets instead.
Going forward, we need to generate a clear account of RE's true costs and benefits to encourage states to make investments beyond their visible requirements. Greater Centre-state alignment can help ensure that the policymaking process takes such considerations into account. In fact, in 2020, CEEW proposed creating a National Electricity Council to enhance coordination between state and central bodies involved in the power sector in multiple areas, including grid planning and RE integration.
Building effective institutions with clear roles and accountability
Integrating RE and transitioning to a fully functional power market will require India to increase its focus on resource planning, efficient forecasting and scheduling, optimising dispatch, and leveraging grid balancing resources across the country. It will also require discoms, whose primary role is to supply electricity to consumers, to focus mainly on managing distribution network operations. But we do not yet have a clear roadmap for these inevitable transitions. For example, there is not enough data to help us detect reasons for renewable energy curtailment or build a project-specific understanding of generation and technology selection.
To address these pitfalls, we must redefine our agencies’ current roles and responsibilities, enhance institutional capacity and accountability standards, improve data collection, bolster management and sharing protocols, and implement robust monitoring and reporting practices. To achieve this, the Centre could take the lead in developing and disseminating guiding frameworks, toolkits, and processes. States could invest in customisation, implementation and building capacity.
The last ten years of India’s RE transition give us plenty of reasons to look to the future with optimism. But scaling up to 450 GW—a highly ambitious target—will require our power sector to be more flexible, transparent, and market-based.
—The authors, Harsha V. Rao is a Research Analyst and Disha Agarwal is a Programme Lead at the Council on Energy, Environment and Water (CEEW). The views expressed in the article are their own
Check out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!

Most Read

Market Movers

View All
Top GainersTop Losers