Renewable Energy Generation: Betting on the green power market

ENERGY/ ECONOMY/ ENVIRONMENT

Topic: General Studies 3:

• Infrastructure: Energy, Ports, Roads, Railways etc.
• Indian Economy and issues relating to planning, mobilization, of resources, 

Renewable Energy Generation: Betting on the green power market

Context: India’s recently launched real-time electricity market, coupled with the green market, offers a significant opportunity to integrate renewable energy in the most efficient and competitive manner.

Potential of Renewable Energy across Globe

• As per the International Energy Agency’s Renewables 2020 report, driven by China and the United States, net installed renewable capacity will grow by nearly 4% globally in 2020, reaching almost 200 GW. 
• Globally, renewables are expected to overtake coal and become the largest source of electricity generation in 2025 and may supply one-third of the world’s electricity.

Do You Know?

• As a signatory to the Paris Climate Agreement, India is committed to increasing its share of renewable energy capacity to 450 GW by 2030. 
• As of September 30, India has an installed renewable energy capacity of 89 GW.
• During the last six years, renewable sector has attracted over Rs 4.7 lakh crore of investment, including FDI of about Rs 42,700 crore. 

Growth of Renewable Energy Sector in India

• Doubled generation capacity: Renewable generation, at 138 billion units, has doubled in FY20, from 66 billion units in FY16. 
• Robust growth of sector: The country witnessed 20% CAGR growth in the renewable generation since FY16 while total electricity generation saw 4.3% growth in the same period. 
• Decreasing Cost: The current levelised cost of energy (LCOE) for large scale solar in India is around Rs 2.5 per kWh, compared to ~Rs 12 in 2010. In the recent bidding, it came down to Rs 2.

Measures taken by government that accelerated the progress in renewable sector: 

• Waiver of inter-state transmission charges for the sale of solar and wind power
• The renewable purchase obligation (RPO) trajectories for states
• Focus on maintaining the sanctity of contracts
• Permitting FDI in the renewable sector

Challenges w.r.t Renewable Energy

• Vulnerable to Weather Conditions: While conventional power plants—that are coal-based or large hydro—have the ability to vary the generation as per need, renewable generation is more at the mercy of nature. Nor are the buyers who are focused on commercial considerations keen to purchase renewable power.
• Challenges of Market Intervention: Given the seasonality and intermittency of renewable power, it is not easily susceptible to market intervention. 
• Weak participation in electricity exchanges: Most renewable power generation companies in India are committed to selling their power to consumers—mostly discoms and a few third-party consumers under the long-term Power Purchase Agreements (PPAs), with little prospect of excess generation to be offered on the exchange and the inability to schedule power supply

It is in the above context, the Central Electricity Regulatory Commission (CERC) approved trading of renewable energy contracts under Green Term Ahead Market (GTAM) on the energy exchange

• GTAM is an alternative new model introduced for selling off the power by the renewable developers in the open market without getting into long term PPAs
• Transactions through GTAM will be bilateral in nature with clear identification of corresponding buyers and sellers, there will not be any difficulty in accounting for Renewable Purchase Obligations (RPO).
• Positive Start to GTAM: The green market commenced trade on August 21 and in about just 90 days of commencement of trade, the market has achieved a cumulative traded volume of over 400 million units reflecting the confidence of the initiative.
• More Options under GTAM: The green market has now launched two more options—daily and weekly, to facilitate the market participants in buying renewable energy from three-hours to 11-days ahead.  This will further strengthen the market and allow participants to buy green energy through contracts available for trade in all the segments. 

Significance and benefits of GTAM initiative:

• Benefit to Producer: GTAM platform will benefit renewable energy producers by providing access to pan- India market. The green market will ultimately encourage green generators to adopt multiple models of sale and trading.
• Benefit to Buyer: It will benefit buyers of Renewable Energy through competitive prices and transparent and flexible procurement.
• Incentivises State Governments: It would lessen the burden on Renewable Energy-rich States and incentivize them to develop RE capacity beyond their own RPO.
• Strengthens RE Market: With robust value proposition such as transparency, competitive prices, flexibility, and payment security and financial savings that the exchange market offers, a pan-India green market has the potential to make the renewable energy market robust by increasing the number of participants in the sector. 
• Helps achieve National Targets: The transparent platform would help in achieving RE capacity addition targets of the country. The Government has a target of 175 GW RE Capacity by 2022.

Conclusion

Steps like GTAM will play a crucial role in furthering sustainability goals, and ensuring that all the renewable energy generated within the country is dispatched in the most efficient manner through a pan India wide exchange-based energy markets.