Catch-22 situation for Telangana, Andhra Pradesh solar power bids

Hyderabad: Both AP and Telangana are planning on developing solar power in a bid to create a larger energy pool but experts say that entering into the traditional 25-year PPA (Power Purchase Agreements) will be a loss-making move, as the cost of power is expected to go down in the future.

Preference to solar power projects under the state Gencos (AP Genco and TS Genco) should thus be given. While power sector insiders have pointed out several times that the preference to private sector projects has hit both the power sector as well as the consumers hard, there is need to give preference to Genco projects.

“If in future the costs comes down, discoms will be paying the higher costs for a long time. Once entered into PPAs, the discoms will have to purchase power from the producers. The Electricity Regulatory Commission has given orders under which discoms have been mandated to purchase a minimum of 5 per cent of their energy needs from non-conventional sources, which means irrespective of cost, even when cheaper power is available, first priority is given to that percentage,” said power sector expert, P. Venugopal Rao.

As per experts, a better way would be to extend subsidy to the individual Gencos by the state governments, which can be translated to subsidies for end consumers.

“The Gencos can be given subsidies to set up solar parks, to the extent that they get the subsidy that has to be passed on to consumers. Also by using solar power for agricultural needs, power supply can be given at a single stretch to farmers and the problem of staggered timings can be avoided,” added the expert.

There is also a catch in encouraging solar power for all segments as in case of captive consumption, those who can afford to set up a solar power plant will generally have a higher consumption capacity.

This is likely to be true even in the domestic sector and especially true for the industrial and commercial sector. In case of a consumer setting up a captive plant, the state will also lose out on the cross subsidy to that extent.