Building Synergies

Proper implementation of the hybrid policy to promote uptake

By Abhishek Munot, Partner, J. Sagar Associates, and Samikrith Rao Puskuri, Associate, J. Sagar Associates

India is fast emerging as a leader in the clean energy space, with renewables slated to contribute around 57 per cent to the total power mix by the year 2027. Cost parity has been the primary determinant behind regulatory actions until now, with interventions designed to enhance the use of renewables to drive down market costs to conventional energy levels. Having achieved this, the government is now striving for grid performance parity through its National Wind-Solar Hybrid Policy.

Since renewable energy sources such as wind and solar power are intermittent and infirm in nature, they arouse concerns with regard to grid stability. These characteristics also make renewable energy sources unsuitable for meeting baseload consumption, as they cannot adjust to the changing consumption patterns.

A solution is under way in the form of hybrid renewable power plants to harness both solar and wind energy. This aims to minimise infirm output, and optimally utilise land and transmission facilities. The said solution also envisages an energy storage mechanism to ensure firm base output. Reportedly, the levels of despatch in a hybrid plant are higher, at 70-80 per cent, as compared with the single-resource renewable energy plant, for which, it is typically in the range of 30-40 per cent.

With a strong commitment to develop the hybrid renewable energy sector, the Solar Energy Corporation of India (SECI) and other procurers have started issuing tenders. The aim of the move is to develop the renewable energy market and also to meet the increasing renewable purchase obligation (RPO) targets. To this end, commercial and regulatory clarity is being sought on issues relevant to hybrid renewable energy projects.

Wind-solar hybrid PPAs

Renewable energy in India can be sold under two modes – as renewable energy itself or through renewable energy certificates (RECs) for meeting the procurers’ RPO obligations. Renewable energy and RECs are currently divided into solar and non-solar. Thus, the categorisation of hybrid renewable energy vis-à-vis procurers’ solar/ non-solar requirement needs to be correctly identified.

The hybrid policy recognises tariff fixation by regulators. However, what remains unclear is the applicable norms for such tariff fixation. In view of the possibilities of setting up greenfield or brownfield projects, and the varying measures of solar/wind energy output (with different equipment/technologies required for areas with differing renewable energy potential), appropriate safeguard measures need to be enforced at both the regulatory and contractual levels to avoid future disputes.

The usage of energy storage mechanisms is essential for the deployment of wind-solar hybrid projects. However, such mechanisms have not yet been tested under the regulatory frameworks in respect of capital cost and operating expenditure. Thus, while power purchase agreements (PPAs) may mandate a firm minimum output of energy, developers must ensure adequate consideration of such factors for proper compensation.

Given the fact that the regulatory framework of wind-solar hybrid projects has not yet been firmed up, it is for the concerned parties to appropriately address pertinent factors in the PPAs, such as metering technology, forecasting, the RPO-REC mechanism, tariff determination, billing and security, change in law, and evacuation, to safeguard individual interests. This is crucial as such PPAs are subject to regulatory approvals.

The other major concern is regarding incentives. While the government has signalled the introduction of development programmes to provide tax relief and other concessions, including subsidies (as per clause 8 of the National Wind-Solar Hybrid Policy), Clause 3.1 of the Ministry of New and Renewable Energy (MNRE) guidelines state that any change in incentives will not be passed on to procurers. A case in point is the recent spate of withdrawals, midway through the tenure of PPAs, of incentives such as generation-based incentives, must-run status, and even guaranteed promotional tariffs. Thus, the concerned parties must be wary of factoring in any such incentives in their bids, considering the uncertainty in regulatory mechanisms.

It is necessary that the regulatory and contractual frameworks are in sync with the realities of this developing technology to ensure a mature renewable energy market for the benefit of consumers as well as developers. The indications from the government so far are heartening. However, the real test lies in the implementation of the wind-solar hybrid policy.

The views in this article are personal and do not reflect those of the organisation.

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