Could PSPCL Overcome Financial Strife With Solar Deals?

Punjab State Power Corporation Limited (PSPCL), the primary state discom that has been mired in losses due to a variety of reasons, seems to have latched on to solar power to extricate itself from some of the losses. Readers wouldn’t have failed to notice the higher frequency of solar tenders from the state entity in the past year, besides some PSAs it has signed with the Solar Energy Coporation of India (SECI) and Satluj Jal Vidyut Nigam (SJVN), among others.

The discom and generator, which has some of the highest power costs in the country due to a high dependence on thermal power that works out at a higher cost due to distance from coal mines for the power stations in the state, has been on a PPA signing spree in recent months with multiple government agencies and private players for solar power. At Rs 4.30 per unit, the state agency has set a target of signing up for 6000 MW of mostly solar power at what it hopes will be rates under Rs 2.60/unit to bring down its average costs. The move comes even as some of the power stations in the state are reaching or have reached end of life and could potentially be retired as well. (Notably the stage 1 units of Guru Hargobind Thermal Power Plant Lehra Mohabbat (Bhatinda)

In its ninth renewable power purchase agreement (PPA) in the past two years, PSPCL agreed to buy 300 MW from Solar Energy Corporation of India Limited (SECI) for Rs 2.43/unit.

The December 30 agreement was the last in 2023, in a process that started in 2022. That took the agreements signed to nine PPAs/PSAs for 2,800MW of solar power at an average rate of ₹2.51/ unit.  PSPCL has outstanding tenders for another 2,500 MW of power to be opened in this financial year. Improving financials mean that even private players are not as chary of signing PPA’s directly  directly as compared to 3 years back.

While older solar deals that were closed without bidding or even in the feed in tariff regime have led to an average cost of Rs 6.50 per unit, the new deals are expected to bring down the average cost quickly to below thermal levels, besides bringing the share of renewables higher in the state’s energy mix.  The focus for now is on using solar for the state’s much maligned free power scheme for farmers, which has delivered neither dependable power nor at the right time for the states farmers, while holding back solar growth in the state as well.

Improving financials due partly to lower renewable energy procurement have been the reason PSPCL shows a surplus of ₹1,558 crore against revenue requirement of ₹46,000 crores for the financial year 2024-25. With Rs 1,558 crore projected profit, the cumulative revenue deficit of PSPCL is expected to come down to Rs 5,420 crores during the period.

As of 2023-24, in the first six months till September, PSPCL earned a profit of over Rs 500 crore against a loss of Rs 1,800 crore during the corresponding period last year. PSPCL incurred a loss of ₹6,837 crore in 2022-23. The firm is heavily deoendent on state subsidy transfers to maintain operations.