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Current Affairs

Proposal to pool solar tariffs and bundle renewable energy

Date: 09 February 2022 Tags: Energy

Issue

Rules to pool tariffs will soon be introduced by the Union power ministry. This has been done to accelerate the procurement of solar power by power distribution companies. 

 

Details

  • There are also plans to boost bundling of renewable energy in existing thermal Power Purchase Agreements (PPAs).

  • All solar power procured during a period will be pooled and buyers will have to pay an average of all the tariffs that are contracted in a pooling period. 

  • During the next bid, if the prices are found to be lower than previous, they will be pooled again to arrive at the new price.

 

Need for pooling

  • Solar power tariffs are falling continuously due to reduction of solar panel prices. Discoms are waiting for prices to fall further rather than contracting them.

  • The Solar Energy Corporation is finding it difficult to find buyers at discovered prices because discoms expect the tariffs will continue to fall.

  • In addition, many discoms have already fulfilled the renewable energy obligations. Pooling tariffs could help speed up procurement of solar power.

 

Renewable Purchase Obligation (RPO)

Commitment made by all discoms to meet a minimum specified quantity of their requirements from renewable energy sources.

 

Renewable Energy Bundling

  • The government is planning to bundle renewable energy with thermal power under existing PPAs so as to supply power to customers from their renewable energy projects.

  • The profits earned from bundling renewable energy will be shared between generators and discoms on a 50:50 basis.

 

Benefits

  • Bundling renewable energy and thermal energy will particularly benefit old thermal power projects which have become unviable due to high variable cost.

  • Currently, discoms pay fixed costs for such plants under existing PPAs, even if no power is procured from these plants.

 

Future plans

The government plans to bundle 10,000 Megawatt of renewable energy with fossil fuel based power over the next 4-5 years.

 

Pooling

Polling is an activity in which multiple owners provide their resources to be combined and used collectively as a single entity.