India may compensate for renewables curtailment

According to credit rating agency India Ratings and Research (Ind-Ra, Indian Power Ministry has put forward plans to compensate for grid curtailment of existing renewable energy projects.

This would protect the cash flows of developers and would come as huge comfort to the industry, especially given that curtailment is expected to become a serious bottleneck in the next 18 months. The threat will grow as renewables penetration increases and if the environment of financially struggling distribution companies continues.

For example, curtailment has affected the state of Tamil Nadu for some time now, yet despite its reputation for this combined with payment delays, the Tamil Nadu Generation and Distribution Corporation (TANGEDCO) still recently announced a tender for 1,500MW of solar through reverse auction, with project sizes capped at 500MW.

The proposed compensation provisions would apply only to projects that provide day-ahead forecasting and scheduling, but it has been suggested that such a compensation mechanism should be built-in the power purchase agreemtn (PPA) provision for future projects.

Curtailments due to grid security issues will not involve compensation. Meanwhile, curtailment as a result of low system demand will involve a INR0.5/kWh (US$0.008) compensation, after curtailing of conventional generators has been carried out up to technical minimum limits. However, Ind-Ra noted a lack of clarity over determining what will count as a low system demand incident.