NTPC eyeing merchant market as key revenue source for renewable energy

NTPC, which primarily has coal-fired power plants in its portfolio, is aiming for a RE generation capacity of 60 GW by 2032

India’s biggest electricity producer, NTPC Ltd, is going to commission a study to assess the potential of the merchant market as a significant source of revenue from the sale of renewable energy (RE) in future, senior officials from the Central Public Sector Undertaking (CPSU) told Moneycontrol.

India has set a target to add 500 gigawatt (GW) of RE by 2030 and has pledged to source 50 percent of its electrical energy needs from renewable sources by 2030. Due to this, a significant RE addition is predicted over the next few years. NTPC, which primarily has coal-fired power plants in its portfolio, is aiming for a RE generation capacity of 60 GW by 2032.

Since the penetration of renewable energy in India's energy mix is on a steady rise, customers such as distribution companies are now looking for a wind-solar hybrid with energy storage systems and round-the-clock (RTC) power to handle the variability and intermittency of renewable energy.

“Because of this, renewable energy developers need to oversize their RE capacity to deliver committed green energy as per the power purchase agreement (PPA) requirement, which results in surplus generation to be sold by the RE developer outside the PPA,” said a senior NTPC official on condition of anonymity. Surplus generation is the amount more than the contracted capacity.

The economic viability of such projects depends on the realisation from the surplus generation. This means the merchant market is becoming a crucial source of revenue for renewable energy projects to sell the surplus electricity from the oversized projects, the official added.

“Therefore, it is critical for an investor to have a clear idea about the revenue from the merchant sale of renewable electricity in the next 20 years. Further, these projects are also keeping avenues open to get additional revenue from market instruments like carbon credits, renewable energy certificates etc,” read the tender document floated to appoint a consultant for the study. The tender has been floated by NTPC Renewable Energy Limited (NTPC-REL), a subsidiary of the CPSU.

It also stated that the introduction of new technologies like green hydrogen and battery energy storage systems (BESS) would also affect prices as new arbitrage opportunities may be created in the system. Moreover, changes in global fuel prices, exchange rates, policy changes and other geopolitical events may also impact prices.

A realistic assessment of merchant electricity prices is vital to ensure that investors can make informed decisions and ensure that the projects remain financially viable, it said.

“Therefore, NTPC RE Ltd aims to assess the future evolution of merchant markets to get a consolidated view of the future power market landscape in India, identify factors that are most likely to impact the prices and simulate plausible trajectories of merchant price evolution for the next 20 years,” the document stated.