Free transmission of renewable electricity in India brings ‘short-term’ benefit to PV developers

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Indian government plans to waive transmission charges for electricity coming from renewable energy sources will benefit some PV developers in the “short term”, according to an Indian market consultant.

Jasmeet Khurana, senior consulting manager at analyst firm Bridge to India, told PV Tech that the majority of renewable power in India is consumed in the same state where it was produced, but for India to reach its target of 60GW utility-scale solar by 2022, some energy must be transported to other states.

The country has already invested heavily in building green energy corridors to transport electricity from states that are rich in renewable resources to power-hungry states such as Delhi and Maharashtra.

Some states with strong renewable resources cannot absorb the higher capacity of intermittent power in local load centres. Furthermore, long distance transmission of power can help ease the pressure of land cost and availability for solar projects, because less fertile land can be used for generation of power, said Khurana.

He added: “The role of interstate transmission of power will become crucial as the penetration increases.”

He warned, however, that this free transmission incentive from the government is for the “short-term” and the green energy corridors must be seen as a long-term investment. PV developers, for example, should not expect to get the benefits of free transmission for the entire life of their projects, because the free transmission investment will need to pay for itself eventually.

Khurana cited the state of Delhi as a potential beneficiary from the new policy, because land in Delhi is expensive and scarcely available. The power distribution companies of Delhi plan to buy solar power from projects set up in states such as Madhya Pradesh and Rajasthan, a state which has already approved an order in August to reduce transmission charges by 50% for open access solar projects.

Khurana said: “Typically, they would need to pay around INR0.50 (US$0.008) to INR0.60/kWh for transmission. If the transmission charges are waived off, the cost for procurement of power can come down by around 8-9%. That will be a significant saving.”

He added that large private power consumers across India will also benefit from this saving, because they can source their power using open access from renewable resource rich states.

Vineet Mittal, vice chairman of PV developer Welspun Renewables, told PV Tech: “This step by the government could be a defining moment in the journey of renewable energy in India, particularly for the solar sector.

“Since transmission is a crucial element of the power infrastructure and amounts for a significant portion of the cost, this will be a huge incentives to developers. This will bring down the solar tariff, which is at the cusp of attaining grid parity, substantially down. Overall, it is a win-win situation for all the stakeholders.

“In the current grid and transmission infrastructure, transmission losses are a big challenge for both the developers and the distribution companies. Waiving off the transmission charges will help both immensely in the long run.”

Indian newspaper Economic Times reported today that energy minister Piyush Goyal announced the waiving of the transmission charges.

Goyal said: “We are bringing out a legal framework where all inter-state transmission of renewable energy will be at zero cost.

“I have already started with INR380 billion (US$5.8 billion) of green energy corridors. We are identifying more areas and are urging states to come with area where we can expand renewable energy so that more transmission grids can be made which the central government is doing.”

This article has been updated to include comment from Welspun Renewables.

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