Preparing For Next Power Crisis, Section11 Of The Electricity Act Invoked

The government has permitted imported coal-based power plants to sell any surplus electricity to other states. The emergency provision that was used in May of this year (2022) to get non-operational imported coal-based facilities to start generating electricity in the face of a substantial increase in demand has been clarified by the power ministry.

If the recipient states didn’t use all of the generated electricity, the power plant can sell the excess power on the power exchanges. The exemption is good till the end of October. However, all this is happening even as the power situation improves temporarily, on the back of the monsoons and greater hydro generation that is expected to follow. Prices on the power trading exchanges are already on a downward trend, not challenging the Rs 12 ceiling price that has been extended to September at all in June, for instance. In fact, average solar trading prices went as low as Rs 3.79/kWh in June on the IEX.

The situation could change as early as September, as the same monsoons could also cause a drop in thermal generation due to wet coal and lower mining output from coal mines. According to the dispensation issued last week, imported coal-based plants can sell the electricity to another distribution firm at an energy charge decided by the government panel plus a fixed cost if their customer states do not request supplies three days in advance for the following week.

States with power purchase agreements (PPAs) with the projects would be exempt from paying the fixed costs at that time.

“Some imported coal-based plants are neither able to sell power to PPA holders due to non-requisitioning nor able to sell power through the power exchanges owing to low rates,” the clarification said. “It leads to the capacity lying idle, while some states desire to tie up with such power for a specified duration against the uncertainty of volume getting cleared in the power exchange.”

According to the official, the explanation was released because low demand has caused power exchange rates to drop and power projects unable to function.

Seeing the rising power demand in the country and lack of coal in the power plants, this could come in handy as now the power plants can sell the surplus power outside of their PPA. Seeing the exponential rise in the power demand, Power Ministry invokes Section11 of the Electricity Act which defines that under extraordinary conditions, the power ministry can issue directions to the power generating stations.

By including all the renewable energy power plants in this clause, govt can enhance the results. Using the underutilised grids at night to sell stored power into grids, will encourage current plants to increase their storage capabilities. Compared to new ones for particular storage projects, the incremental CAPEX for building this storage capacity will be less.