NTPC banks on renewable energy generation to minimise stranded asset risk

NTPC Ltd, the largest power producer, is looking to minimise its stranded asset risk while accelerating the integration of renewable energy generation capacity. The strategy is a win-win situation for NTPC shareholders, the government, electricity consumers, distribution companies (discoms), and the environment, says a report by US-based Institute for Energy Economics & Financial Analysis (IEEFA).

NTPC has agreed to share the fuel savings with the relevant discoms, providing the Maharatna company with enhanced overall returns and consumers with progressively lower cost electricity. The power giant already has some of the lowest cost and highest utilisation coal plants in the country such that it generates one of the highest returns on investment despite low average wholesale tariffs.

"Finally, in what may be a global first, NTPC Ltd is planning an auction for two GW of new wind and solar projects with the object of blending renewable electricity generation into its existing coal-fired power generation power purchase agreements (PPAs), noting that the renewable energy tariffs achieved in 2017 were cheaper than 92 per cent of all thermal power plant  produced electricity in India”, IEEFA said in its report titled 'Solar Continues to lead India's Electricity Generation Transition'.

According to the report, the only obvious losers are high-cost thermal power plants, particularly the ones running on imported thermal coal.

NTPC did not reply to an e-mail questionnaire by Business Standard till the time this report was filed.

In an earlier report of 2017, IEEFA had pointed out how NTPC was powering the energy transition in India from coal to solar. Apart from building its own portfolio of renewables, the Maharatna utility is emerging as the key off-taker of solar power projects by private developers whose aggressive bids backed by overseas investments have made solar tariff cheaper than coal-fired generation. It was NTPC's role as the key off-taker of solar power that primarily contributed to its plunging tariffs at auctions. 

"Despite its deep historical connection to coal-fired electricity generation technology, NTPC has recently moved to the forefront of India’s energy transition and stands to be the country’s key new energy enabler. NTPC stands to gain from an acceleration of its renewable energy roll-out and further facilitation of the Indian government’s ambitious renewable energy targets”, Tim Buckley, IEEFA's director for energy finance studies, Australasia had said in the previous report.

It was NTPC’s involvement as an off-taker that helped Engie’s Indian arm Solairedirect bid Rs 3.15 per unit for the Kadapa solar project in Andhra Pradesh, the lowest level tariff achieved in the country last year. Despite its strength in the traditional coal-fired generation, NTPC has been rapidly rolling out in-house, utility-scale solar projects, and it is signing PPAs for off-take of solar power from private solar operators.