Govt asks states to start buying pooled power to meet rising demand

As per the government's power pooling scheme, the beneficiaries who participate in the scheme will have to enter a PPA of minimum of 5 years. Discoms not finding value in pooling will be able to opt-out from the pool after 5 years.

The Indian government has implemented a scheme of pooling electricity from coal and gas-based plants that are older than 25 years by asking states and distribution companies (discoms) to start buying the aggregated power.
The move is aimed at meeting growing power demand in the country and reducing peak power shortages by maximising the utilisation of electricity generation plants.

Central generating stations of a central public sector undertaking whose power purchase agreements (PPAs) have expired will be brought together in a pool, bundled with gas-based power and sold to buyers, the ministry said in a letter to stakeholders on September 11.

The pooled power programme includes old plants of NTPC, the largest state-owned power producer, such as Singrauli, Rihand-I, Unchahar-l, Dadri-l, Korba-l and II, Vindhyachal-l and Farakka-l and II.

“The rate of power will be fixed fairly and transparently and will be equal for every buyer from the pool,” the power ministry said in the note, which Moneycontrol reviewed. “The state/discom may place requisition for taking power from the pool after expiry of the current PPA, as per the provisions of the scheme issued by the ministry."

Delayed plan

The ministry also withdrew previous orders allowing states and discoms to buy electricity from thermal plants after their PPAs lapsed. This facility was allowed as a short-term solution in 2021 to meet increased power loads during the summers and monsoons.

To meet the growing demand for electricity, the government is trying to first unlock its old and underutilised energy resources instead of building new ones, which is a longer and more capital intensive process. This strategy also helps to optimally use gas-based power plants that have a total capacity of 25 GW, but are grossly underutilised due to a shortage of gas and high fuel prices.

The government first notified the pooling scheme for coal and gas-based power plants on April 20.The plan was to have been implemented in July, but was delayed to September as the preparatory work took longer than usual.

Moneycontrol was the first to report on March 6 that the government’s proposal to pool electricity from thermal and gas-based power plants older than 25 years would be laid out in April. At least 14 such power plants with a total capacity of 15,386 megawatts (MW) would be tapped through the scheme.

In its letter of September 11, the ministry said generating companies (gencos) had complained about the inequitable sale of the electricity they produced.

"It was noticed that some discoms stopped drawing power from those plants whose costs were high, while continuing to draw power from the cheaper plants," the ministry said.

The ministry said the gencos had been “left with a portfolio of costlier assets" while the benefits of cheaper assets were entirely utilised by discoms.

Only power for which PPAs have expired will be pooled. The government said that when a PPA expires, both parties are free from the obligations of supplying or purchasing power from each other and to decide whether they will get into another agreement with each other for purchase/sale of power. A genco could also decide to sell power on the exchange or to any other party and the discoms may buy power from any entity, the ministry said.

India met a record-breaking 239.9 GW (239,978 MW) peak power demand on September 1. But the unusual surge in demand also resulted in a spike in power shortage, recorded at 10.7 GW (10,745 MW) on the same day. In August, power demand was 23 percent higher than in the same month last year.