Interview with Ajay Mishra

“Telangana has decided to procure power through SECI, instead of auctions”

Ajay Mishra, Special Chief Secretary, Energy Department, Government of Telangana

Over 20 per cent of the installed power capacity in Telangana comprise renewable energy. The state, which was formed only four yearss ago, has already become a front runner in terms of the total installed solar capacity. In an interview with Renewable Watch, Ajay Mishra, special chief secretary, energy department, Government of Telangana, speaks about the various initiatives taken by the state in this area and the progress made so far. Excerpts…

What is the current state of the power sector in Telangana? What have been the key developments in the recent past?

Telangana’s total contracted power capacity was in the range of 4,500 MW around the time of the state’s formation. Its total consumption potential was around 6,500 MW. At that time, there was a two-day industrial holiday every week with no industry getting power supply during those two days in the entire state. The agricultural sector was also getting power supply for only five to six hours per day. Continuous power supply was rare and power cuts were quite frequent everywhere in Telangana, except in Hyderabad. In fact, the power situation was so bad at the time of the state’s formation that it was labelled a “black state”. However, the state government’s political will and commitment to priorities at the highest level have led to a rapid change in the power situation in the state.

From only 4,500 MW of average contracted power demand in 2014, the daily average peak power demand is now around 10,500 MW. The state agencies have succeeded in reducing the frequency of power cuts. Even in the agricultural sector, power availability has increased from five to six hours to seven to nine hours, and this year it went up to 24 hours. This agricultural power was provided free of cost to farmers using pump sets of 5 horsepower or less. In fact, Telangana has among the highest annual per capita energy consumption in the country, as per the latest statistics, with demand increasing every year.

What has been the role of renewable energy in transforming Telangana’s power sector?

Telangana has been able to improve its power supply situation significantly through a combination of measures such as an increase in the power generation capacity and the adoption of energy efficiency measures. Solar power deployment on a large scale was one of the major steps taken in this direction. Solar power is helping the state fulfil its commitments towards clean energy with the added advantage of a shorter gestation time than other power sources. It is also more widely available throughout the state than the location-specific hydropower and wind power.

Telangana decided to follow the distributed solar generation approach. For this a detailed analysis was carried out at the distribution as well as the transmission utility levels. Areas with a power-demand supply gap were mapped out and matched with areas with surplus transmission and distribution (T&D) capacity. This led to a significant reduction in the state’s T&D losses as the solar power being generated in a particular location was being consumed in the same location.

What have been the key initiatives and achievements in this sector?

Telangana has tendered about 3,500 MW of solar plants for private players through competitive bidding. Many other states have also auctioned large solar capacities. However, there is a basic difference between Telangana’s programme and that of other states. Most of these states have carried out bids for projects to be set up in solar parks. However, due to the difficulties faced in the implementation of the first solar park, the state agencies of Telangana decided not to attempt it a second time. Instead, the distributed solar generation methodology was used across the state and tenders were launched for capacities ranging from 50 MW to 200 MW, leading to a total capacity of 3,500 MW.

As a result, the state utilities could gain savings worth Rs 500 million per annum. Since solar power was not required to be transported over large distances, significant investments worth Rs 4.5 billion could be deferred as no immediate augmentation of the T&D infrastructure was required.

How is the state planning to achieve its target of 5 GW of renewable energy capacity by the year 2019?

Telangana was given a target to commission 5 GW of renewable energy by 2021-22. Of this, about 4 GW has been commissioned in a short span of time. Despite its small size, Telangana ranks second in terms of the installed solar capacity amongst all the states, with 3.5 GW of installed solar capacity. The state agencies are planning to procure about 500 MW of additional solar projects. Apart from solar, Telangana also has about 500 MW of wind power and bioenergy. Hence, the state is well on its way to achieving its set target of 5 GW of renewable energy.

Along with that, the state agencies are encouraging the widespread deployment of rooftop solar systems. Two years ago, only 18-20 MW of rooftop solar capacity had been installed in the state. However, in the past two years, about 24 MW has been installed, and there are plans to install 24 MW in the coming year too. The state has a policy of two-way metering or net metering, which is encouraging the uptake of rooftop solar in the state.

What measures are being taken to avoid delays in commissioning upcoming renewable energy projects?

To avoid any delays in project commissioning, the state agencies take advance action in the development of transmission infrastructure. Telangana already has T&D infrastructure ready for about 15,000 MW of power capacity to take care of capacities coming up till 2021-22. Of this only 10,500 MW is being used right now. The rest is readily available for the upcoming capacity.

What is your outlook on renewable energy tariff trends and RPOs in the state?

The present solar tariffs are quite attractive and are likely to come down marginally in the future, which will help in further capacity addition. As far as the renewable purchase obligations (RPOs) are concerned, the state agencies are not in favour of having more than a 30 per cent renewable energy share in their energy consumption mix. While the state may generate more renewable energy, it is not wise to have more than 30 per cent share of renewables due to its infirm nature. Unless energy storage becomes cost effective, 100 per cent renewable energy is not feasible.

What provisions does the state have to promote open access and third-party sale? What is your outlook on the challenges and bottlenecks for such projects?

Telangana has a few hundred MW of renewable-based open access projects, which have been implemented in a calibrated manner. Most of these projects are meant for captive consumption, under which a particular capacity is permitted based on the load demand of the facility, provided it is on the same premises as where power is being consumed. However, group captive and third-party sale is not encouraged a lot due to countermeasures from the same agencies that are supposed to implement them.

We need to take into account the uncertainty associated with renewable energy generation. As renewable energy is available only for certain time periods during the day, the plant load factor will go down for the state units during the periods of unavailability. This is not acceptable to state utilities, which have a universal obligation to provide power to all consumer categories – not just in a few industries but also in villages. Private players do not have this obligation; hence, open access is more feasible for them while discoms cannot be selective in providing power. Since open access caters to power supply for only a few hours during the day, its tariffs are much lower than grid power tariffs. However, when the same power is ensured for 24 hours, its cost will surely increase.

What is your outlook for renewable energy in Telangana?

Telangana is a small state with a small population and already has 3,400 MW of solar power installed. Hence, it should move slowly and steadily in the future in terms of capacity addition as prices are expected to drop further. Consequently, the state has decided to procure power through the Solar Energy Corporation of India (SECI) now, instead of auctions. Through SECI, solar power will be procured at a low tariff of Rs 2.66 per unit. However, if there are possibilities of even lower tariffs through an auction, Telangana will surely explore those in the state’s overall interest.

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