NTPC mulling solar power project without a power purchase agreement

State-owned power generator NTPC is mulling a solar power project without signing a power purchase agreement (PPA) with State Discoms.

The moves follows IRENA reporting that solar power is the lowest-cost source of power generation today. Against this backdrop, the power generator feels that solar power should be bought by the power distribution companies (Discoms) or other entities without any hurdles.

The Hindu BusinessLine quoted a top NTPC official as saying: “The power can be sold either through the power exchanges or through any other platform. We are considering the option of setting up a solar power project without a PPA.”

The details of the generation capacity or location of the project were not disclosed.

Significantly, there have been demands from cash-strapped electricity distributors to review existing PPAs which have a duration of 25 years, in view of the subsequent reduction of prices of wind and solar energy.

Earlier this year, pv magazine reported that Andhra Pradesh Electricity Regulatory Commission (APERC) is considering an appeal by power distribution companies in the state to shorten the length of power purchase agreements from an industry average of 25 years to just five.

Electricity distributors say they are locked in to paying unfairly high power prices to solar generators because of deals signed before the recent precipitous drop in wind and solar tariffs.

Viability

Selling power without PPAs has its own set of challenges, according to Sambitosh Mohapatra, Partner-Power and Utilities at PwC India, who feels that it requires aligning the entire value chain starting from setting up the projects to other stakeholders.

“Right from lending institutions which favour projects with long-term PPAs to the prevalent industry and market structure wherein the option of selling power generated on the exchange or to own consumers is fraught with transient risks,” Mohapatra told BL.

Further, selling power without PPAs has more built-in costs. “Currently, the regulators don’t provide comfort with cross-subsidy surcharge ranging from Rs 0 to 2 or more per unit for supplying on open access. This rate is changed every year and adds much uncertainty to the viability of any projects that will depend on exchanges or non-PPA routes for offtake,” Mohapatra said.