India Might Compensate Grid Curtailment

• Indian government has proposed offering compensation for grid curtailment for renewable energy projects
• It will only be applicable to renewable power plants that provide day-ahead forecast and schedule
• Decision on curtailment will depend on balancing cost for accepting renewable energy in the grid
• Utilities may project demand for the next six to 12 months and define low-system demand in order to make the process transparent, suggests India Ratings and Research
• Future wind and solar power project PPAs can include terms for compensation in case of grid curtailment, as per Ind-Ra suggestion

Solar power project developers in India may get some reprieve if the Indian government's proposal to offer compensation for grid curtailment comes into force. The proposal takes into its ambit existing renewable energy projects.

If the proposal is adopted, it will ensure a 'favourable operational environment' for renewable energy projects, especially wind and solar, believes India Ratings and Research (Ind-Ra). The government had made the proposal recently at a conference of Power, Renewable Energy and Mines Ministers of States and Union Territories.

As per the proposal, the compensation will only be applicable to renewable power plants that provide day-ahead forecast and schedule. "Decisions on curtailment are recommended to be made on considering the balancing cost for accepting renewable energy in the grid, where major balancing cost will be additional cost to run thermal plants below their technical limits. For existing projects, the compensation mechanism may be notified by the respective Electricity Regulatory Commission," stated Senior Analyst of Ind-Ra Namrata Sharma.

With a compensation system in place, grid operators and distribution utilities would be able to reduce curtailments, while it would also help project developers in scheduling, forecasting and enabling integration of increasing renewable energy capacity.

  A thermal power plant can be shut down under existing rules if it falls below the technical minimum operating level. In the case of renewable energy plants, it is not clear what situations will be considered as 'low system demand incidences'.

The ratings agency suggests utilities should project demand for the next six to 12 months while defining low system demand. At the same time, a recommended format of PPA for future wind and solar projects must include provisions for curtailment compensation, like in the PPA for the 750 MW Rewa Ultra Mega Solar Power Project.

Recently, Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO) floated a tender for 1,500 MW solar power capacity where in it has incorporated compensation for grid curtailment in the request for submission documents (RFS) (see TANGEDCO Tenders 1.5 GW PV Capacity). The compensation mechanism will come into force only if there is no grid availability beyond 175 hours in a financial year.