India Allows Power Plants to Sell Idle Capacity as Usage Drops

  • Step part of reforms to achieve 'power for all' goal
  • New policy also gives push to renewables, waste-to-energy

Indian power producers will be allowed to sell spare capacity via electricity exchanges as part of reforms that seek to improve affordability, reduce litigation and revive investments.

The reforms will seek to achieve Prime Minister Narendra Modi’s twin goals of making electricity available to all and protecting the environment, federal Power Minister Piyush Goyal told reporters in New Delhi on Wednesday.

Generators, including NTPC Ltd., the country’s biggest utility, have been running plants below capacity as money-losing state retailers curb electricity purchases. 

The new plan may reduce the burden of fixed charges, which retailers have to pay to generators as a component of the tariff even for the power they haven’t purchased because of their long-term purchase commitments. Now, although the fixed charges remain, profits earned from the sale of spare generation capacity will be equally divided among generators and buyers, Goyal said.

“If there’s a demand in the market and we can sell the spare generation, nothing like it,” said Kulamani Biswal, finance director at NTPC. “It’s a win-win for both the producer and the buyer.”

Plant Use

Average plant use for November dropped to 60.3 percent, compared with 65.7 percent a year ago, according to data from the power ministry’s Central Electricity Authority.

The new policy also defines tax changes affecting generation costs to allow them to be passed on to buyers, helping reduce friction between the two parties, Goyal said.

The reforms will push clean energy by asking power retailers to increase the share of renewables in their purchases and requiring generation companies to include green power in their plant mix. Retailers will also have to buy all the energy produced from waste-to-energy plants in their states, Goyal said.

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