‘Indexed renewable energy tariffs can save up to Rs 21,880 cr for discoms’
    Date :22-Oct-2020

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■ Business Bureau :
 
INDEXED (inflation linked) renewable energy tariffs can save India’s discoms up to Rs 21,880 crore over next five years, a joint study by IEEFA and CEF said. Inflation indexation of tariffs for future solar capacity could provide much-needed financial respite to the distressed power distribution sector and help India move away from coal-fired power, a joint briefing note by the Institute for Energy Economics and Financial Analysis (IEEFA) and CEEW-Centre for Energy Finance (CEF) said. Zero indexation tariffs have been the norm in India for many years, co-authors CEEW-CEF Adviser Gagan Sidhu and IEEFA Research Analyst Kashish Shah said in the study.
 
Indian solar power tariffs hit a record low of Rs 2.36 per unit in June 2020, with zero inflation indexation for 25 years. However, state-owned power distribution companies (discoms) have not been able to take full advantage of new cheaper renewable energy due to twopart thermal contracts which command a fixed capacity charge even if no power is drawn, the study said.
 
The study proposed that solar tariffs start at a very low Rs 2.00/kWh for the first year of the 25-year PPA (power purchase agreement), rising at an indexed rate of 2.2 per cent of annual inflation for 15 years and then at a flat rate of 0 per cent for the remaining life of the contract. The discoms face the twin challenges of a decline in electricity demand, exacerbated by the COVID-19 crisis, and expensive and under-utilised legacy thermal power contracts at a time when ambitious growth in new renewable energy capacity is being targeted, Sidhu said.