Despite significant addition of renewable capacity to the grid in India, energy generation from renewable sources has not seen an equivalent increase. To increase the share of renewable energy, the country needs multipronged measures, says a report by the Institute of Energy Economics and Financial Analysis (IEEFA).  

The share of variable renewable energy (VRE) in the total installed capacity increased by 13.6 percentage points, from 15.9 per cent in 2016 to 29.5 per cent in 2022; whereas VRE’s share in total electricity generation increased only by 6.5 percentage points, from 5.7 per cent to 12.2 per cent.

The reasons for the low share of renewable energy are many. The existing coal power plants have long-term power purchase agreements (PPAs) with two-part tariffs — a fixed payment based on capacity availability; and a variable payment to cover variable fuel costs. The fixed portion of the contract is on a take-or-pay principle, wherein the electricity distribution company (discom) must pay the power plant even if it does not draw electricity. Hence, discoms prefer to use coal power to meet peak demand and keep overall costs low. 

The coal-fired power plants have to operate at a higher plant load factor to maintain the health of the equipment and, hence, they are less flexible. As a result, the grid is mostly fed by coal-fired electricity.

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Governments and industry must take rapid action to remove technological bottlenecks and create a supportive regulatory framework to achieve these goals, the report concludes.

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Also, the seasonality of wind power generation and the concentration of wind power generation assets in six states lead to grid congestion in the highgeneration season. This results in curtailment of wind power. 

The variable nature of solar and wind power makes them non-dispatchable power sources and, hence, not ideal for on-demand electricity supply unless supported by adequate energy storage capacity. 

Thus, the Indian power system needs a new structure, to accommodate higher shares of renewable energy. To increase the share of renewable energy, India has four key requirements: demand-side measures like time-of-use (also known as time-of-day) tariffs; a well-connected national grid; energy storage options for grid balancing services; and operational flexibility for the fossil-fuel powered fleet.

“Dynamic electricity prices coupled with a large, well-connected national grid would help integrate a higher share of VRE by matching supply and demand across regions at market-determined prices. Adequate transmission infrastructure will also help reduce the seasonal curtailment of VRE in some regions at present,” said Charith Konda, the author of the report and IEEFA’s Energy Finance Analyst.

Energy storage technologies such as PHS and BESS hold promise in providing grid-balancing services. However, India’s perception of energy storage needs to change from merely assets that allow round-the-clock supply of renewable energy to assets that provide various grid services. Widening the use of energy storage technologies requires a favourable policy and regulatory framework, financial support, and personnel training. 

Lastly, reorienting existing coal power plants to operate flexibly will ensure utilisation of the large existing fleet for load-balancing services and integrating a higher share of VRE. However, the conversion entails several technical, financial and contractual challenges. There is need for policy and regulatory changes to redesign coal power contracts and offer flexible services through market mechanisms.

India’s electricity generation grew from 1,376 billion units in FY19 to 1,624 billion units in FY23, at a compounded annual growth rate (CAGR) of 4.4, to meet the growing demand. The average annual power deficit (the gap between power generation and demand) was about 0.5 per cent, with the average peak deficit at about 1.4 per cent during the period. India’s peak power deficit reached a high of 4 per cent in FY23 as the country struggled to meet demand during summer.

Looking ahead, India’s Central Electricity Authority (CEA) expects the country’s electricity demand to grow at an annual rate of about 6 per cent in the next decade (2022-32).

“For India to meet the growing electricity demand while addressing climate concerns, increased integration of clean energy, including variable renewable energy, is essential,” adds Konda.

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