The goal of creating 500 GW of fossil fuel free capacity by 2030 appears within reach. This needs large scale storage to absorb excess solar power generation in the day and to supply it at night.

As the share of electricity from renewables and storage begins to increase vis-a-vis flexible thermal power, the nature of distribution would undergo a transformation. The State Electricity Regulatory Commissions have a pivotal role in ensuring that this transition is smooth.

A decision on the rate at which solar power would be bought by the Distribution Companies (Discoms) from the solar power generated by its consumers is an immediate need. The PM’s roof top solar panel programme for one crore households requires purchase by the Discom of the surplus solar power that is not consumed in the day.

Under the Kusum programme for provision of solar panels and energy efficient pumps to farmers for irrigation, surplus power has to be purchased by the Discom. The ongoing solar roof top programme provides for net metering. The Discoms resist net metering as they not only lose revenue from their highest rate paying cross subsidising consumer, but have to buy his surplus solar power at this high rate.

The household with a solar panel under PM’s programme would get a much lower rate under net metering as his tariff would be at the lowest slab. It would be unsustainable to have different rates for the purchase of solar power by the same Discom, with the wealthier consumers getting a higher rate.

Solar rate

The State Commissions should instead determine one rate for the purchase of solar power by Discoms. The rate should be one which is less than the cost of supply of the Discom making it financially beneficial for them to buy solar power.

At the same time it should be high enough to give an attractive return on the investment for installing solar panels. This is feasible as solar power has become so cheap.

Reliable 24x7 quality power supply is becoming a reality; no power cuts when demand soars for irrigation, or, when there is a demand spike for air conditioning loads in the summer heat. To provide reliable supply, Discoms have been entering into long-term Power Purchase Agreements (PPAs) with new thermal plants. This has been extended to renewable energy projects of solar and wind power.

A major change is now needed. It is time for the State Regulators to get Discoms to undertake demand projections for daily and seasonal peaks. They would, going forward, need to arrange for peaking power separately (separate PPAs). Separate procurement would result in optimising power purchase costs.

Discoms could, alternatively, buy storage capacities and use the power available to them during the day under existing PPAs (during off-peak hours) for storage to meet their peaking power needs. This would be cheaper as a higher capacity utilisation of the thermal plants, with whom they have long-term PPAs, would have a lower per unit cost of electricity.

Storage capacities

Procurement of storage capacities would also be cheaper than asking for renewable green electricity round the clock as this increases the responsibility of the developer, his risks and his costs. Buying solar power and storage capacities separately would be cheaper. All this requires the State Regulators to assume greater responsibility and provide leadership.

Regulators now need to revisit consumer rates to provide the right price signals to consumers to reflect the higher costs of peaking power. This implies having time of day tariffs which should, ideally, reflect the marginal cost of power.

Some consumers may then choose to set their AC temperatures at 22-24 instead of 18 degrees. Some may get their appliances to react to signals from their smart meters and get freezers to switch off for brief time intervals, or, programme their geysers and washing machines to use cheaper off-peak power.

Smart meters enable such optimisation. The Regulators have to create a new time of day and time of year variable rate regime for the large consumers.

The State Regulators have to provide a forward looking regulatory regime to the Discoms to enable them to handle the complex challenges of the energy transition smoothly.

The writer is Distinguished Fellow at TERI; and former Secretary, DIPP, Government of India