The Ministry of Power has issued an order instructing all states, distribution companies (discoms), and generating companies (gencos) to implement a new scheme for pooling electricity from old power plants owned by the Centre, which are also known as Central Generating Stations. This scheme is set to begin on July 1 of this year.
"It has been decided to pool power from all Central Generating Station (CGSs) whose power purchase agreements (PPAs) have expired, and such pooled power shall be made available to willing beneficiaries... All the concerned organisations shall take necessary action to implement the scheme w.e.f. July 1, 2023," read the order accessed by Moneycontrol.
At present, the annual electricity demand and the peak demand in the country is around 1,400 billion units (BUs) and 215 GW, respectively, and the peak demand is growing at an annual rate of around 6 percent.
To meet India’s increasing electricity demand, the government is trying to first unlock its old and underutilised energy resources instead of building new ones. This is because setting up a new power generating station, say a thermal or a gas-based power plant, takes much longer and is more capital-intensive.
On March 6, Moneycontrol was the first to report that the government’s proposal to pool electricity from thermal and gas-based power plants that are older than 25 years is likely to be rolled out in April. At least 14 such power plants with a total capacity of 15,386 megawatts (MW) are likely to be tapped once the scheme comes into force.
As per the government's April 20 order, 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.
"It is noteworthy to mention that many thermal units in India and the world are operating efficiently much than 25 years. Further, it is a known fact that due to better O&M (operations and maintenance) practices, the generating stations of CPSUs are operating at full capacity even after completion of 25 years of the useful life as per the norms specified by CERC," the government stated in its order.
The pool of such CGSs constitutes thermal stations comprising of
pithead coal stations for catering to the base load, and non-pithead coal stations and gas stations to meet peak demand and provide cycling and balancing services required for smooth renewable energy integration.
Gas stations are important to grid operation as they are capable of fast ramping operations and are best suited for flexing. CPSU gas stations are frequently utilised in providing ancillary services for reliable grid operation.
"The selective approach adopted by procurers currently, who are
exiting from PPAs may lead to the shutdown of significant thermal capacities, especially gas-based capacities, which would be detrimental to the power sector.
"Thus, this measure will ensure availability of adequate resources in the grid for peaking, balancing, and flexing and re-distributing benefits such as reliability, and cost-effectiveness among the beneficiaries," said a senior power ministry official requesting anonymity.
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