The spread of grid curtailment is starting to threaten the credit worthiness of renewable energy projects and has the potential to impede capacity addition, says India Ratings and Research (Ind-Ra). The non-availability of the grid has majorly impaired the operational strength of some wind projects, given the sizable installed capacities. The failure to address grid issues can gradually destabilise the solar projects in the ensuing years. Grid curtailment is unpredictable, thus the ill-equipped developers have been grappling to manage their finances, barring the large ones. The uncertain source supply (uncontrollable) and grid non-availability (controllable), despite its ‘must run’ status, is slowly shaking the fledgling renewable energy sector.
The front runner in renewable energy Tamil nadu widely curtailed the grid availability in the last three years; the phenomenon appears to have spread to Rajasthan in FY17 and FY16. Ind-Ra believes that inadequate forecasting systems have compelled the utilities to curtail the grid. In the agency’s view, due to the relative source certainty in solar projects, generation in solar is more predictable than in wind projects. Anecdotal evidence suggests that solar capacities in Tamil nadu have also encountered grid issues in FY17.
The average annual grid availability for wind assets in Tamil nadu from FY14 - FY16 stood at less than 80%, while the average annual grid availability from FY11 - FY13 was around 95%. The drastic reduction in availability from FY14 onwards didn’t coincide with any major capacity addition, since total capacity of merely 604MW was added in the period FY14 to FY16 compared to the overall installed capacity of around 7600MW. Grid availability and increased wind supply in 1QFY17 has significantly improved the wind energy generation (94% increase over 1QFY16, source: Southern Region Load Despatch Centre). Providing certainty in grid availability can make Tamil nadu attractive for repowering of old wind turbines (1900 MW installed till 2003).
There is large solar capacity additions envisaged to come on track in Rajasthan in 2016; however the lack of assurance on the evacuation infrastructure and the grid availability can affect the credit profile of the upcoming projects. Forecasting and scheduling regulations have been notified, wherein the generator will be penalised in case of inaccurate forecasts. On the other hand, there is no mandate on the transmission and distribution utilities to manage the grid to ensure the ‘must run’ status which is conferred on renewable energy projects is adhered to.
Ind-Ra notes that there is no provision for compensation in case a renewable energy project is unable to supply power in the event of grid curtailment. The lack of this provision, leaves the renewable energy project stranded whenever there is curtailment and they appeal to the regulators over the non-compliance of the must run status.
In other parts of the world namely Germany and Belgium have exhibited integration of a large quantum of renewable energy. Technical and commercial challenges are emerging for the distribution utilities because of changes in the energy mix. Efforts to address these challenges are trailing behind the envisaged pace of capacity addition. The effect of forecasting and scheduling regulations notified by Central Electricity Regulatory Commission in facilitating the utilities to balance the load and demand hasn’t yet show on ground improvement. All state electricity regulatory commissions are yet to notify the same, with an exception of Karnataka. Although, Ind-Ra through its interactions with issuers notes that the joint effort of large developers, industry associations, specialised institutes (National Institute of Wind Energy) and state utilities has given some respite, concerted measures are pivotal for the sustenance of the renewable energy sector.
The monopoly in distribution infrastructure and lack of technology aids - to predict the source risk, tests the endurance of renewable projects and consequently renewable energy remains hostage to state utilities. There is also a need to address the costs of integration of renewable energy in the grid in an equitable manner.