Govt proposes pool of old thermal power units to balance more renewable

Pool to address grid balancing concern as states relinquish costly thermal power to procure more RE

The Union Ministry of Power has proposed creating a pool of efficient thermal power units that are more than 25 years old to act as a balancing source for the increasing share of renewable energy in the electricity grid.

The move comes in the wake of several states/power distribution companies (discoms) relinquishing costlier power purchase agreements (PPAs) seeing that they have surplus power and want to increase their renewable energy purchase.

If implemented, this will benefit the country’s oldest state-owned power generator NTPC, which has been at the receiving end of the PPA renouncement.

“The emergence of cheaper renewable energy, especially solar, has attracted everyone’s attention. Today, procurers are scouting for cheaper power and hesitant about entering long-term PPAs, anticipating further reduction in power prices,” said the concept note by the ministry.

The ministry will form a pool of coal- and gas-based units that are 25 years old and more, but are following efficient operation practices. The note said the cost of electricity from these plants will also be low.

According to the note, if a state or a discom needs to relinquish a PPA with a 25-year-old power unit, it will be allowed to do so, but will be allotted a comparative quantity at an average cost from the pool. The allocation will be in line with the cumulative generation capacity of the pool. If any power capacity in the pool remains unallocated, it will be allowed to be sold on power exchanges.

As India aims for 500 gigawatt of non-fossil fuel energy by the end of the decade, the ministry is of the view that lack of battery storage or insufficient thermal capacity will disrupt the grid as the share of intermittent renewables increases. 

“Until the time adequate storage capacity develops in the grid, the generation load balancing must be carried out in the usual manner through the conventional load-following generating stations, such as coal and gas thermal plants, thus, ensuring continued operation of the plants that have already completed 25 years of operation will be in the interests of the electrical grid, taking care of balancing needs until development of adequate storage capacity,” stated the note.

In March this year, the ministry allowed states to exit PPAs with central power sector utilities after a period of 25 years. It was done after several states approached the power ministry for relinquishing old PPAs. Most states said they had ample generation capacity, renewable PPAs were coming cheaper, and the spot market was offering low tariffs.

The note has been sent to stakeholders inviting comments within 21 days.