Renewable energy is cost competitive .. How it changes the market dynamics..?
The falling cost of renewable electricity from renewables has initiated a debate on early retirement of coal based power plants in order to keep the average power procurement cost lower. Many of the coal based power plants are finding it difficult to operate. The Discom power procurement strategies are also changing. The recently released report from Lazard, highlights that as much as 42% of global coal based power plants are globally are running at a loss. The situation is nothing different in India. While the average price of PV is about Rs. 2.4/kWh, the typical coal based electricity is Rs. 4-5/kWh, in case of a new coal based plant it is much higher and can be of the order of 7 Rs/kWh.. This is at part with the cost of solar + energy storage,
Due to rising procurement cost pressures, the procurement from coal based power plants is under the lower priority, and the typical PLF of coal based power plants has come down below 50% in last five years from over 60% PLF. This has led to cascading effect on the revenue of the coal based power generators. Though there is no economic sense in building up the new coal power plants in India, rather there is a need to do early retirement of coal power plants to achieve our climate change targets as well as keeping the cost of power procurement at low.
The LCOE of solar power plants have dropped over 80% during the last decade, the coal power cost is continue on increasing trends. It is in consumers interest if we do away with the coal based power plants. As coal still contributes about 70% of our power supply, the falling cost of RE is not yielding much benefits in terms of reduced average power procurement cost (APPC). The APPC has increased from Rs. 3.4/kWh in 2015 to Rs. 3.85/kWh as of now.
If we want to control our power procurement cost and keep the electricity tariffs low, it is important to do some of the major policy changes in terms of our coal based power procurement program and initiate an early retirement of these coal based power plants. Though there are challenges of grid integration of RE generation, however we may consider to focus on RE + Utility scale storage to address the grid integration issues.