“Wind and solar power projects are powered by natural sources and hence their tariffs should be low”, is a general statement you would have heard often. In the last couple of years in India, the penetration of renewable energy has seen an increase and the spot market prices, the rates at which electricity is bought and sold in the commodity market has seen a constant decline. The major sellers in the electricity market are Independent Power Producers including wind and solar developers who are not tied with contracts to public utilities to sell power and on the other hand a buyer can be any electrical consumer with a contract demand of generally over 1MW. Like in any general market dynamics, the price of electricity in the open market is determined by the supply-demand scenario. In the last few years owing to increase in development of power projects particularly wind and solar power plants the supply side of the market was strengthened. On the contrary demand growth has not been able to match the supply scenario and hence the spot electricity market prices were declining. If you have been closely tracking the updates from Indian Power Ministry’s ‘Vidyut Pravah’, an online platform that shows the instantaneous power availability and prices for every 15 min time block, you would have seen prices between INR 2-3/unit i.e. below 5 Cents/kWh. Since September 2017 India has managed to achieve ‘One Grid, One price‘ with the spot market price same throughout the country for every individual time blocks.
The daily average price was in fact lower in the summer of 2017 compared to 2016 while the prices have just gone one way ever since. A closer look in the months of September and October 2017 will reveal the prices have doubled year on year. During a few 15 min time blocks the spot price has also touched INR 7/kWh.
In the last few months however, the market prices have scaled new highs. They have doubled on average for every 15 min time block with peak price nearly tripling from the average for the same time last year. Why is this happening in spite of India’s Renewable Energy deployment increasing faster than ever?
Listen to this episode from Emerging Tech Radio to find out the reasons in detail.
The reasons range from increased buying from DISCOMs in the spot market moving from long term contracts to lack of availability coal across power plants in the country.
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