Discoms buying cheaper electricity from exchanges impacting solar power

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HYDERABAD, SEPTEMBER 21:

Power distribution companies (discoms) are purchasing cheaper power from the exchanges, resulting in curtailment issues for solar power.

Some discoms that are faced with financial issues are simply resorting to power cuts as they cannot even afford to purchase power at low rates on the exchanges, according to consultancy firm Mercom Capital Group’s latest report, ‘India Solar Quarterly Market Update’.

Some States have surplus power and yet do not supply power 24/7 for fear of losses due to low tariffs from residential and agricultural customers.

The power deficit numbers in India do not paint the full picture, said the report. Though low power deficit and even a surplus situation is touted by a Central Electricity Authority report, large populations in the country are still without electricity.

The reduction in the power deficit is largely due to a combination of a drop in power demand in the commercial and industrial sector, and the financial health of discoms. Falling demand has led to record low prices on the power exchanges.

This increase in renewable energy addition has caused some solar power curtailment issues in Rajasthan and Tamil Nadu, where discoms have flouted the ‘must run’ status of solar power, thereby negatively affecting developers.

Curtailment is not widespread, but the issue needs to be addressed immediately before it starts to hurt investor sentiments in the sector, said the report.

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