Is Maharashtra Ready For ‘Renewable Only’ Capacity Creation?

CERC Proposes Change In Norms Regulating Old Thermal Plants

The Coronavirus pandemic might have achieved what no amount of push from well meaning people did. Force one of India’s top Industrialised states, Maharashtra, to consider a full stop on fresh thermal energy capacity creation in the state.

A report in the Economic Times quotes Maharashtra Energy minister Nitin Raut saying that no more thermal power generation units would be set up in the state as there is a huge gap between supply and demand due to the coronavirus pandemic-induced recession. That demand-supply gap is proving to be expensive in more ways than one for the cash strapped government.

State distribution utility Maharashtra State Electricity Distribution Company Limited (MSEDCL), which has  has signed power purchase agreements (PPAs) for 35,000 MW, is purchasing only 14,500 MW due to low demand. But its problems don’t stop there. Thanks to its long term Power Purchase Agreements (PPA’s) and fixed charges, the utility is also forced to pay over Rs 4,000 crores per annum as fixed charges to mostly thermal plants it has committed purchases to.

The huge mismatch in purchase commitments versus actual demand, even in the pre-covid period was an issue that merited attention. Now, it is simply screaming too big to ignore or hide apparently. The mismatch also explains why the fledgling renewable energy projects required ‘must run’ status in the country, as Maharashtra is hardly the only state that has gone for illogical power purchase commitments with thermal projects, as compared to demand.

Combined with the PPA purchase price of this thermal power, the capacity charges paid to idle generators are also passed on to the states consumers eventually. With new renewable energy  projects coming in at prices that comfortably match or beat thermal energy costs, the state has decided to go only with renewable energy, when it comes to fresh capacity, it would seem. That makes sense, with a mandated sourcing of 25 percent from renewables by 2025.

The Maharashtra example is just one of many needed to ensure that the Covid crisis is not wasted. The huge demand mismatch indicates a deeper problem. A formal audit of historically inflated projections of demand, versus the actual demand now and projections for the next 5 years, is needed for the country to change its trajectory on thermal power. Of course, we appreciate that a surplus does not mean the elimination of shortages in the state. Seasonal variations in demand, as well as the generation mix can also lead to mismatch between supply and demand. But with a fast evolving power trading market, and fresh renewable capacity coming up all the time, it sounds incredible for a state to have PPA’s for demand that is over 135 percent of its existing requirement with thermal producers, as Maharashtra has!.

These are the situations which have lead to backward looking, or a freeze on policies like open access across states, as discom lobby to protect their customers from drifting away. That has meant a critical segment that has powered renewable energy growth in the rest of the world,  the commercial and industrial segment opting for renewable power supply on their own, is suffering anaemic growth in India. As for residential rooftop, less said the better. Total rooftop solar achievement of less than 15 percent of the target of 40 GW nationwide  by 2022 end  tells the story .