Renewable Energy Production by Thermal Power Plants

Renewable Energy Production by Thermal Power Plants

Recently, Ministries of Power and New and Renewable Energy released guidelines which allows thermal generation companies to set up renewable energy generation capacity and supply power to consumers under existing Power Purchase Agreements (PPAs).

Key Points

• Guidelines:
  
  • Thermal Energy Producer to Produce Green Energy: The new guidelines allow thermal generation companies“to set up renewable energy generation capacity either by themselves (or) through developers by open bids and supply power to consumers under existing PPAs.
    
    • A Power Purchase Agreement (PPA), or electricity power agreement, is a contract between two parties, one which generates electricity (power generating companies (gencos)) and one which is looking to purchase electricity (Discoms).
  • Complements Discoms’ RPOs: The discoms would be allowed to count renewable energy purchased under the scheme towards their Renewable Purchase Obligation (RPO).
    
    • RPO is a mechanism by which the State Electricity Regulatory Commissions are obliged to purchase a certain percentage of power from renewable energy sources.
    • RPO is being implemented throughout the country to create demand for renewable energy.
  • RPO Targets: Under the long-term growth trajectory of RPOs, states have been asked to increase the proportion of power procured from renewable sources to 21.2% of their total procurement in FY2022.
  • Funds Sharing with Discoms: Any savings to thermal power plants from lower cost of power generation through renewable energy would be shared with discoms on a 50:50 basis.

Structure of Power Sector

• Significance:
  
  • Green Energy Push: This will enable the replacement of fossil fuel based energy by renewable energy under the existing PPAs.
  • Synergy with Global Commitments: The move is aimed at boosting the installed capacity of renewable energy to 500 GW by 2030 in line with commitments made by the Indian Prime Minister at the COP26 climate change conference.