Tariff policy and renewables trading to boost India's renewable PPA market

Cross-subsidy charges on private renewable energy procurement may be slashed.

Some initiatives planned by the Indian government could likely help boost the country’s corporate renewable power purchase agreement (PPA) market, according to a World Business Council for Sustainable Development (WBCSD) report.

The country’s Union Cabinet is planning for a new tariff policy and amendments to the Electricity Act, which aims to allow consumers to choose their power supplier. The government is also mulling a direct transfer of benefits from the government to the bank accounts of customers eligible for subsidies.

Notably, there may be a proposal in the new tariff policy or an amended Electricity Act to remove cross-subsidy charges levied on private renewable energy procurement.

“This should help eliminate the maze of subsidies and market inefficiencies that currently influence how tariffs are set and reduce the unpredictability around cross-subsidization of tariffs,” WBSCD said.

The market may also stand to gain from the planned Green Term Ahead Market (GTAM), which would allow spot trading of renewable energy through power exchanges, giving access for corporate consumers to buy renewable power without entering into a PPA agreement.

As of May 2019, the Central Electricity Regulatory Commission (CERC) has ordered the Indian Energy Exchange (IEX) to seek comments and feedback on the initiative from all stakeholders before approval.

India has a development pipeline of nearly 2 GW for corporate renewable PPAs, although a small part of this will come online in FY 19-20, leading to lower capacity addition this year as compared to last year.

However, this pipeline is expected to expand and a significant proportion of this to be installed in FY 20-21, resulting in a bounce back.