Both the solar and wind power segments have evolved over the years and are well established in the country. However, growth in the segments has plateaued in the past one year on account of policy issues, and land and transmission constraints. A combination of the two technologies, that is, wind-solar hybrid, can help address some of these critical challenges. The co-location of solar photovoltaic (PV) and wind leads to significant synergies in land, evacuation infrastructure and project costs. To develop this technology and scale up its deployment, the Ministry of New and Renewable Energy (MNRE) issued the National Wind-Solar Hybrid Policy in 2018, envisaging an installed capacity target of 10 GW by 2022. Industry experts talk about the opportunities, challenges and outlook for the wind-solar hybrid market in India…
What kind of tariffs, PPAs and growth trajectory can be expected for hybrid power?
The MNRE policy on wind-solar hybrids has retained the reverse auction process with a ceiling tariff. Ideally, the tariff for hybrids should be somewhere around the average of tariffs for wind and solar components. Based on the last round of bidding, the solar tariff was Rs 2.65 per kWh and wind was Rs 2.80 per kWh. The hybrid tariff discovered was Rs 2.70 per kWh. The same structure of single-part tariff will be followed for these projects as well, based on the request for selection document being developed for greenfield projects.
The policy for hybridisation of existing wind or solar projects (brownfield) has not been released yet. The power purchase agreement (PPA) for the first wind-solar hybrid project, to be commissioned in 2018, was slightly different as it was originally drafted for a wind power project to which the solar component was later added. As a result, wind and solar components have separate PPAs, as opposed to the new policy that proposes a single PPA for composite hybrid projects. Post the release of the MNRE policy for hybridisation of existing projects, PPAs will most certainly need to be amended. For a typical hybrid project, there will be one PPA and a single evacuation route.
The entire evacuation and metering arrangement envisaged by the MNRE is expected to be different for wind-solar hybrid projects. Both wind and solar units will have individual transmission lines coming in, converging at the sub-pooling substation. The substation will have two separate meters where the individual injection for both components will be calculated. The sub-pooling substation will be connected to the higher voltage transmission utility substation.
The capacity utilisation factor (CUF) of wind-solar hybrid projects is higher than that of pure-play wind or solar projects. This may be because of the different generation levels at various times of the day. As a result, the total output from a hybrid project may be higher as compared to that from a stand-alone solar or wind project. The growth trajectory of hybrid power projects depends on the MNRE’s policy for hybridisation of existing plants. There is a huge potential in this space. The hybridisation of existing solar/wind plants will help in better utilisation of land as compared to greenfield projects. It would also make sense for captive projects for commercial and industrial users. In addition, if power storage could be added to these hybrid projects, there would be a huge demand for this reliable power.
If the existing solar and wind projects are viable at their current respective rates discovered in individual auctions, utilities can expect solar-wind hybrid tariffs also to be in the same range. We lack market mechanisms to price the value stack that hybrids offer. Until markets mature, hybrid power may not be able to command pricing premiums over the combined wind and solar pricing. PPAs have become formulaic over a period of time. We need to move away from the standard Rs per kWh pricing model of legacy PPAs to more innovative structures that can accommodate curtailment pricing, time-of-day pricing, time-of-day CUFs; and to those tailored for capacity markets. A bigger issue is whether the job of hybridising is that of the grid operator or the discom at the grid operations level or whether it is for developers to achieve this at the point of injection. This needs to be resolved. If markets and PPA structures evolve, we can expect to see some vibrant growth in hybrids. Both solar and wind have zero marginal cost with full capex being incurred upfront, and hence have a single-part tariff. Since hybrids are similar, they too will have a single-part tariff.
The tariffs for wind-solar hybrid projects are expected to be slightly higher than the concurrent tariffs for wind power. However, the tariffs for hybrid power are still expected to be in the competitive range. Composite PPAs will be drafted for wind-solar hybrid power projects with separate clauses for the solar and wind components as well as clauses that link the two components.
While hybrid power plants are increasingly gaining a presence across the country, only two states, Gujarat (in June 2018) and Andhra Pradesh (in January 2019), have so far notified policies for the implementation of such projects. The Gujarat wind-solar hybrid policy envisages the purchase of hybrid power at the tariff discovered through competitive bidding undertaken by state discoms. The Andhra Pradesh wind-solar hybrid policy stipulates the purchase of power either at a project-specific tariff determined by the Andhra Pradesh Electricity Regulatory Commission or at a tariff discovered through a transparent bidding process with bidding parameters such as capacity delivered, effective CUF and per unit price of electricity.
What issues and challenges is the wind-solar hybrid segment likely to face?
Most tenders have received a lukewarm response from the industry leading to the downsizing of tender. For instance, the SECI tender for the development of 2.5 GW of hybrid plants was reduced to 1.2 GW and even after that it remained undersubscribed by 150 MW. This indicates that the development of hybrid projects, despite the advantages that they offer (decrease in the variability of energy generation, better land utilisation and reduced cost of common evacuation infrastructure), is not receiving investor interest as had been contemplated. However, if the above issues concerning the policy regime for hybridisation of existing projects, availability of energy storage solutions (both technically and legally as a concept), and transmission infrastructure are addressed appropriately, hybrid projects could have a robust future.
P. Vinay Kumar
It will be difficult to convince the utilities that a blended solar and wind model will be better than the existing disparate solar and wind models, and demand a premium over the pricing for pure-play solar/wind projects. Getting a premium on wind-solar hybrid may prove to be difficult for SECI, which, in turn, will have an impact on the ceiling tariffs. A market reform will be needed to further facilitate growth in this segment. There is a need for mature mechanisms for pricing the stack of services that a wind-solar hybrid offers for the hybrid ecosystem to thrive. Location also poses a problem in the context of wind, since it has more siting restrictions when compared with solar. The good wind sites will also be favourable for wind-solar hybrids. However, most wind sites have been exhausted. If other locations are considered, lower wind CUFs will require higher tariffs, even for hybrids.
Pawan Kumar Verma
Retrofitting solar in the existing wind farms will be a challenge, since the added solar component will have to be accommodated in a certain way. While greenfield projects do not face such problems, there are other issues such as limited availability of good wind sites and putting in place an entirely new infrastructure. Moreover, there is lack of experience in this field in India, since very few projects have been operational. Further, these projects have not been in operation long enough to derive enough lessons from them. Financing of wind-solar hybrid projects can also be a problem due to the lack of funds for projects with high upfront costs.
Poonam Verma and Aparajita Upadhyay
The response to hybrid power tenders in recent times has been rather underwhelming. Due to the lack of interest shown by bidders, SECI has been forced to extend the bidding deadline for a number of hybrid power tenders. This is partly because, in order to procure renewable power, discoms have to back down power procurement from conventional sources such as thermal power. This is an expensive deal for the discoms as the tariff for thermal power is paid in two parts – fixed charges and variable charges. So, even when a discom is not procuring power from a thermal power plant, it still has to pay the fixed charge to the thermal power developer, in addition to paying the cost for solar/wind power.
What is the outlook for this segment in India?
At a conceptual level, the outlook for the sector is good. Ever since the introduction of the hybrid policy by the MNRE, SECI and a number of states have issued tenders for the development of hybrid projects. However, it will need to be seen in practice, especially in view of the lukewarm response received for recent solar and wind bids issued by SECI.
P. Vinay Kumar
Wind-solar hybrids will begin to make far more sense if we blend energy storage with these systems. In the absence of a market that can send out price signals for ancillary services offered by energy storage technologies, much of the energy storage additions in the near term will be grid owned. There will be more grid-owned storage with capacity coming up on the back of a strong EPC contract pipeline as opposed to business models with energy storage hybrids as a service. If the penal regime under the deviation settlement mechanism for scheduling and forecasting becomes severe, it may make business case for blending energy storage with solar/wind systems. Penalty regimes have so far been very benign. If there is higher penalty, there will be more incentive to avoid deviation from schedule.
In terms of energy storage, the most viable option in the short run will be pumped hydro energy storage. Pumped storage is an appropriate choice, unless tenders specifically ask for adding a battery component. Energy storage tenders should ideally be agnostic to underlying technology. Battery storage is currently a costly option. However, if the battery price falls below $100 per kWh, it will become an attractive solution for short-term energy storage, especially for a grid operator’s switching requirements.
Pawan Kumar Verma
Wind-solar hybrids provide a good opportunity for utilising land potential. First, micro-siting for wind must be undertaken followed by solar layout optimisation. This will ensure that an appropriate site is identified for the hybrid project in order to properly utilise the site’s renewable energy potential.
Poonam Verma and Aparajita Upadhyay
Owing to the unpredictable nature of solar and wind power, the country’s energy needs cannot be completely fulfilled by a single renewable energy source. We still rely on thermal power plants for most of our energy requirements. In such a scenario, hybrid power systems can be a near perfect solution to the variable energy needs of the country. Solar and wind energy work in perfect harmony with each other during different times of the day. And adding battery storage to this arrangement makes hybrid power even more reliable. So much so that, if implemented properly, our reliance on thermal power can gradually be eliminated.
“The hybridisation of existing solar/wind plants will help in better utilisation of land vis-à-vis greenfield projects.”
“If markets and PPA structures evolve, we can expect to see some vibrant growth in the hybrid segment.”
P. Vinay Kumar
“Financing of wind-solar hybrid projects could be a problem due to the lack of funds for projects that have high upfront costs.”
Pawan Kumar Verma
“Solar and wind energy work in perfect harmony with each other at different times of the day. Adding storage to it makes hybrid power even more reliable.”
P. Verma and A. Upadhyay