Renewable Power competes with Thermal Power in Spot Energy Market

India Solar Energy 2019 Capacity (1)

Renewable energy has steadily and quietly crossed a major landmark  recently as it started competing directly with electricity generated by Thermal Power plants in the spot energy market, intensifying competition in the energy sector. ReNew Power has become the first renewable power company in India to compete with thermal (coal-based) plants in the spot market as it has received better tariffs than those discovered in the auction process.

ReNew Clean Energy Pvt Ltd, a project SPV developed by ReNew Power with installed capacity of 51 MW, located at Rajgarh district of Madhya Pradesh, has been selling solar power in day-ahead market of the India Energy Exchange (IEX). This was revealed by Rajesh K Mediratta, director for business development at IEX. ReNew Power has declined comment on the development.

The plant has realised an average price of Rs 3.80 per unit from the exchange. Though the net realisation to the company will be lower after considering transmission charges and deviation charges. However, this tariff is still higher than the prices discovered through auctions in solar projects. Solar tariffs discovered through auctions have touched a record low of Rs 2.44 per unit in May 2017 and range between Rs 2.50 and Rs 3.50 per unit.  Merchant solar plants selling power through day-ahead market are also eligible to receive renewable energy certificates (RECs), which entitle them to receive an additional minimum Rs 1 per unit.

However, the industry experts said renewable energy companies are not keen on setting up plants exclusively for short-term trade and the renewables sector is not likely to see companies setting up solar or wind power plants purely for sale on the power exchange and the case of ReNew Power as an exception. This is because of demand side uncertainties. There seems to be surplus power availability and power is trading on the exchanges at Rs 3.00-3.50 levels. Banks are also unlikely to lend to such projects. The uncertain generation from these projects also makes it difficult to trade renewable power on exchanges.

However, renewable energy generators have an immense opportunity to consider commercial ways to sell solar energy through exchange at competitively delivered market prices, beyond the conventional PPA and REC framework and the precedence set by Re-New Power indeed indicates the opportunity for renewable energy generators to sell through exchange at competitively discovered market prices.

Source: Economic Times