Double Standards? Thermal Power Auctions At Rs 4.41

In news that will cause a lot of heartburn among solar developers, news agency PTI has reported the cancellation of a 2500 mw auction to source power for a three year period. The bids were being conducted by state agency Power finance Corporation’s Consultancy arm.The amount being offered? Rs 4.41 per unit.

The fact that the bid had to be cancelled due to lack of interest from state power utilities should be no consolation, as the same utilities are very likely to accept a price closer to the Rs 4.20 range, a price that is the stuff of dreams for utility scale renewable developers now.

It doesn’t stop there. Designed to bail out stranded thermal plants stuck without fuel agreements in the absence of a PPA (power purchase agreement), the auction was hoping to help these plants get PPA’s in place on the basis of their deals here at the bid price.

While this scheme, called Pilot Scheme -2 stays in abeyance, the previous version of the Scheme called Pilot scheme 1, which was also aggregated by the NHPC had discovered a price of Rs 4.24, for which power purchase agreements for an aggregate of 1900 MW were signed in October, 2019.

What these numbers show us is that the government will always be guided by factors well beyond just the growth and quality of the renewables sector, or even its green commitments, when it comes to energy. With massive investments in thermal energy still stuck, and the ready availability of coal, the combination will continue to get preference as a more politically feasible option for some time. With the threat of defaults in an already stretched banking system, readers can be sure that the thermal power producers, will be in no hurry to return their loans, focusing instead on negotiating longer term ‘protection’ in the form of PPA’s and fuel linkages.

By Arrangement with Iamrenew.com