System Friendly

Procurement Through

Round-the-Clock (RTC)Opportunities and Challenges for

Transition to 450 GW of RE

Anurag Mishra,

Energy Team Leader, USAID/India

June 12, 2020

Partnership to Advance Clean

Energy -Deployment 2.0

(PACE-D 2.0 RE) TA Program

• The last 5 years have seen significant transformation in the Indian RE Sector – converting India into a RE Power House:

• Last 3 years saw RE generation growth of around 25% annually

• Significant cost reduction in key RE technologies (Wind & Solar) – making these more cost competitive than gas and coal

• India has now one of the most robust RE development Eco-systems in the world

• India plans to install 175 GW by 2022 and 450 GW of RE by 2030, generating 55% of its electricity

• Strong support from the private and public sector –from consumers to investors to developers making these achievable

• This rapid change, in the energy mix will have a significant impact on the sector and constituents

38,959 45,924

57,244 69,022

78,111

61,719 65,781

81,548 1,01,839

1,26,759

2014-15 2015-16 2016-17 2017-18 2018-19

India's RE Capacity & Generation Growth between 2014-19

Installed Capacity (MW) RE Generation (MUs)

Renewable Energy - key role in India’s Power Sector

22GW23GW

10GW 5GW 3GW

2GW7GW

18GW 12GW 9GW

0%

20%

40%

60%

80%

100%

FY15 FY16 FY17 FY18 FY19

Capacity Addition Trend – RE Focused

Thermal & Hydro RE

6/12/2020 FOOTER GOES HERE

1. Prove RE Technology Reliability

• Solar PV

• Wind

• Small Hydro

• Wind (On-shore)

• Bio-fuels2. Attain Generation Cost Competitiveness

• Small hydro

• Wind

• Solar PV

• Biomass (still evolving)

3. Seamless Integration with the Grid

• System Friendly Procurement – RTC, Peak Supply through energy storage

• Green Energy Corridors

• Solar Parks and RE Hybrids

• Storage

4. Drive India’s economic growth through cheaper and reliable energy

• High penetration of RE

• Generation responding to demand of grid and consumer on standalone basis

• Long term goal – 175/450 GW– we are at stage 3, with RE ready to scale but faces grid integration challenges

• One solution for managing grid integration - better manage RE procurement at the systemic level

India’s Journey to High Renewable Energy Future

A Growing Challenge

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The biggest challenge to meet round-the-clock power through renewable resources is its nature

1. Higher Penetration- More Variability- High Integration Costs

6/12/2020

Challenges with the Current Approaches (1/2)90GW-175GW-450GW

1. Higher Penetration-

More Variability- High

Integration Costs

2. Burden on Grid

Management and

Operations

3. Impact on Existing

Resources

More reserves

High transmission

capacity

Better voltage control

Higher cost of thermal

assets

Higher system flexibility for

balancingE.g. of a unilateral 700 MW Solar

procurement by a state & its impact on

the supply curve

1. Higher Penetration- More Variability- High Integration Costs

6/12/2020

Challenges with the Current Approaches (2/2)90GW-175GW-450GW

4. Struggle of

Discom’s/Consumer’s in

Managing RE Integration

5. Planning for of RE

Procurement

6. Focus on LCOE vs overall

Cost of Supply to

consumers

• Limited understanding of generation profiles of various RE sources

• Managing variation in RE generation is expensive

• Demand side management approaches are not fully utilized

• Sizing RE to respond to present & future demand

• Identifying the best actors who can analyze, develop and supply RE to better match and manage demand

• Understanding system

level costs of integrating

stand alone RE critical

• Purchasing low cost single

source RE does not

necessarily lead to low

cost of power supply

System Friendly Procurement- A Cost-effective Solution

System Friendly Procurement - supply of power from a

portfolio of energy sources to meet the requirements of

DISCOMs/Consumers while maintaining a maximum share of RE

Manages variation

in RE generation

at supply side –

unburdening

consumer/ utility

Manages supply

with demand

profile across

various time slots

and seasons

Determines

optimal capacity

requirement of RE

sources- cost

Shifts

responsibility of

managing

portfolio of assets

to suppliers

Types of System Friendly Procurement• Time-slot based procurement• Round the Clock Power• Time based Incentives and penalties• Hybrid Systems• Virtual Power Plants• Location Signal

Benefits

India’s successful use of Round-the-Clock Power Model

• National Guidelines for Round-the-clock (draft) and

Hybrid Projects

• Three SECI Tenders of 6,600 MW capacity

• High market interest- 4 bids for 400 MW & 3 bids for

1200 MW. Both tender were oversubscribed. 5000 MW

results awaited

• Competitive price- Rs 2.90 kWh, for 400MW tender

• MNRE’s Vision

– may now hold auctions only

for RTC and hybrid projects.

Objectives • To provide RTC power to the DISCOMs through bundling of RE power with thermal power

• To scale up renewable capacity additions and achieve economies of scale.

• To facilitate fulfilment of RPO requirement of the obligated entities

Technologies Technology agnostic, use of ESS and thermal is permitted

Project

structure

• Developed under Build-Own-Operate model

• PPA will be with SECI for 25 years

Tariff • To be determined through competitive bidding

• Composite tariff - Composite Fixed Charges(70 %) + Composite Variable Charges(30 %), indexed

to relevant fuel price index of CERC

• Alternative tariff mechanism - 51% RE tariff + 30% variable thermal tariff + 19% fixed thermal tariff

Power supply

conditions

• Minimum 51% from RE, to be assessed on a yearly basis

• Developer has to provide meet the demand at least 80% of the time in a year. However on a

monthly basis the developer has to meet for 70% of availability

• Penalties 25% of PPA tariff on shortfall – below 80% availability in a year; less than 51% of RE in a

year

• Developers to be compensated for curtailment

Key features of MNRE’s RTC Scheme Guidelines (draft 2020)

Common features • Can be developed anywhere in the country

• Tariff based competitive bidding, PPA for 25 years

• Selection of RE technologies is left to developers

• Minimum 51% RE, 80% availability/year and 70% availability/month

Tender 1: 1200 MW ISTS-

Connected RE Projects with

assured Peak Power Supply in

India (ISTS-VII)

The developer has to supply energy during Peak Hours with RE using storage

• Two-part tariff- “Off-Peak Tariff” fixed at INR 2.88/kWh and Peak Tariff

• Minimum annual CUF of 35%. Penalty- 25% of cost of shortfall, calculated as PPA tariff.

• Greenko- 900MW with pumped storage; INR 4.04/kWh avg tariff & INR 6.12/kWh peak tariff

• ReNew Power - 300 MW with battery energy storage; INR 4.30/kWh avg tariff & INR 6.85/kWh peak

tariff

Tender 2: Round-the-Clock

Supply of 400 MW RE Power to

NDMC, New Delhi, and Dadra

& Nagar Haveli under Tariff-

based Competitive Bidding

(RTC-I), Oct-2019

100% RE supported by energy storage round the clock

• Single part tariff

• Penalty = Equal to the PPA tariff, on generation shortage.

• ReNew Power - INR 2.9/kWh tariff with an annual escalation of 3% for first 15. Estimated levelized cost

of energy about INR 3.5 – 3.6/kWh

Tender 3 - Supply of 5000 MW

RTC Power from ISTS-

connected RE Power Projects,

complemented with Coal based

Thermal Power in India (RTC-II)

Round the clock supply from RE and thermal

• A minimum of 51% of annual energy should be from RE sources

• Penalty =25% of cost of shortfall (<80% annual supply and <51% RE supply), calculated as PPA tariff

• Tariff for bidding structure (One part or two part)

• Tariff for payment = Composite tariff with fixed tariff + variable tariff

Highlights of recent RTC Tenders of SECI

Allow buyers to leverage the strengths of

developers and solution providers to achieve their

desired outcome

RTC procurement can be designed as

per the need of the buyers

• Fixed (Continuous) Demand

procurement

• Slot wise Fixed Demand

procurement

• Real time Demand procurement

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Fixed-Demand Procurement

Slot 1 Slot 2 Slot 3 Slot 4

Real Time-Demand Procurement

Slot wise Fixed Demand Procurement

• Developers have better understanding of

generation profiles of various technologies and

geographies

• Developers can leverage new technologies and IT

to design better integration methods

How RTC helps address RE Challenges?

Model Benefits Challenges

Fixed

(Continuous)

Demand

procurement

• Simple procurement model

for the supplier and buyer

• Expected to receive high

responses from suppliers

• Meeting peak demand – surplus power disposal

• Not meeting peak demand - buyer needs to find other

avenues for procuring power – difficulty in

management

Slot wise Fixed

Demand

procurement

• Higher potential to meet

peak demands

• Same as above, but in lesser degree

• Comparatively complex

• Optimizing slots VS expected tariffs

• Structuring procurement

• Potentially higher cost of power

Real time Demand

procurement

• No surplus power, no

shortfalls

• Granular load curve forecasting needed - modelling

• Additional flexible generation capacity reserves

needed

• Difficult to monitor the contracts

• Comparatively much higher expected cost of power

Comparison of RTC Design Options

6/12/2020

Buyers

Priority- low tariff OR high RE share

RE share beyond a certain % (say 50%) can increase

the cost as due to larger RE surplus

Procurement Options

• Demand management matching with RE generation

pattern can lead to higher RE and cheaper cost

• Fixed demand procurement is the easiest option

for contracting and monitoring

Seasonality

Higher seasonal variation would need higher thermal

and energy storage, and hence more expensive

Tolerance limit

DISCOMs have higher tolerance limits as compared

to industrial consumers

Developers

Liquidity of wholesale markets

RTC would involve buying and selling on wholesale

market for better optimization-consider the liquidity

of the wholesale markets while selecting portfolio

Selection of generation sources and

geographies

• Profiles of various geographies need to be

leveraged for cheaper costs

• Transmission constraints need to be considered for

selecting project locations

Feasible Balancing solutions

• Chemical energy storage-shorter gaps (few hours)

• Pumped-hydro- longer gaps (seasonal)

• Gas based or thermal support- improving reliability

Key Considerations for RTC Procurement

Short to medium term Long term

Objective Integrate renewables with grid Make renewables 100% responsive to demand

Requirements Generation curve needs to be more

predictable

100% flexible to suit the needs of the

consumer/ Discom

Technology Buyers should be technology agnostic as long

as minimum RE requirement is met

Should target 100% renewables (or any

feasible technical maximum)

Project structure • Plants within a project need not be co-

located.

• Capacity of project/plants should not be

defined. Only demand needs to be defined.

• Short term purchases from the exchanges

and merchant plants should be allowed.

• Move away from project based approach to

aggregator based approach. A developer

should be able to buy from existing plants

Regulations • Tighter forecasting and scheduling

requirements for RE

• How do you address F&S requirements

• Remove must run status of RE – allow it to

be used as base and/ or peaking load

• Allow energy aggregation rather than

project specific approach

Procurement • All upcoming PPAs should be system

friendly procurement

• Re-structure all generating capacity to

system friendly procurement

How can we Improve System Friendly Procurement?

Anurag Mishra

Energy Team Leader | US Agency for International Development

American Embassy

Chanakyapuri, New Delhi – 110021 | Tel: +91 – 11 - 24198000

amishra@usaid.gov

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