BSES Discoms 510 MW Hybrid Purchase Signals Demand Recovery For Renewables

The decision by the Delhi BSES discoms, BRPL and BYPL, to enter an agreement with SECI to purchase 510 MW of solar plus wind power signals a welcome return to demand recovery for renewable projects awaiting PPA’s.

This is on the back of two key events, one that has happened, and another, that might be in place soon.

First was the CERC (Central Electricity Regulatory Commission) decision to allow discoms to exit PPA’s where the thermal power supply plant has existed beyond 25 years. Within a year. In other words, exit agreements, or an obligation to renew agreements, with older thermal power plants. BSES is doing just that, exiting its PPA with NTPC’s Dadri 1 thermal power plant. Besides 6 other thermal plants around the city which are more than 25 years old.

Second is the imminent passage of the Electricity (Amendment) Act in the current session of parliament. Should that happen, then much stricter laws will come into force as far as renewable purchase obligations go (RPO), as well as penalties linked to failing to met those.

India’s large metros with their own dedicated discoms have a special obligation to set the standards, to to say, and that is what we might be seeing with the BSES move too. Of course, it is also a fact that much like neighbouring Punjab, say, Delhi had one of the higher power purchase costs, thanks to high cost thermal, and renewable options today offer a more than competitive option, helping drive down costs in fact. Going forward, the pressure on costs might actually come from Hydro Purchase obligations, as Hydropower costs  have been far more sticky above Rs 3-4 than wind and solar energy.

The Reliance Infrastructure-owned  BSES discoms — BRPL and BYPL — are the first in Delhi to ink an agreement for hybrid power

The solar and hybrid power PPA is also for 25 years, and expected to be available 18 months after signing of the agreement at a very competitive tariff of Rs 2.44 per unit for solar and Rs 2.48 per unit for hybrid.

A BSES spokesperson confirmed that these were replacing thermal power priced at Rs 5.50/kWh.

Keep in mind that due to capacity utilisation differences, chances are every MW of thermal capacity that is replaced will need firm deals for 4-5 MW of renewable power capacity. A serious shift in India’s biggest cities could comfortably create space for the 16 plus GW of well priced renewable projects that were last reportedly awaiting  PPA’s.

With some of the largest renewable players like the Adani Group, Tata Power running distribution in cities like Mumbai and Delhi, the trend should only pick speed soon.