The spike in power market prices

“Wind and solar power projects are powered by natural sources and hence their tariffs should be low”, is a general statement you would have heard often. In the last couple of years in India, the penetration of renewable energy has seen an increase and the spot market prices, the rates at which electricity is bought and sold in the commodity market has seen a constant decline.  The major sellers in the electricity market are Independent Power Producers including wind and solar developers who are not tied with contracts to public utilities to sell power and on the other hand a buyer can be any electrical consumer with a contract demand of generally over 1MW. Like in any general market dynamics, the price of electricity in the open market is determined by the supply-demand scenario. In the last few years owing to increase in development of power projects particularly wind and solar power plants the supply side of the market was strengthened. On the contrary demand growth has not been able to match the supply scenario and hence the spot electricity market prices were declining. If you have been closely tracking the updates from Indian Power Ministry’s ‘Vidyut Pravah’, an online platform that shows the instantaneous power availability and prices for every 15 min time block, you would have seen prices between INR 2-3/unit i.e. below 5 Cents/kWh. Since September 2017 India has managed to achieve ‘One Grid, One price‘ with the spot market price same throughout the country for every individual time blocks.

Yearly price

Daily average price (2016 vs. 2017)

Weekly prices

Average weekly prices (2016 vs. 2017)

The daily average price was in fact lower in the summer of 2017 compared to 2016 while the prices have just gone one way ever since. A closer look in the months of September and October 2017 will reveal the prices have doubled year on year. During a few 15 min time blocks the spot price has also touched INR 7/kWh.

In the last few months however, the market prices have scaled new highs. They have doubled on average for every 15 min time block with peak price nearly tripling from the average for the same time last year. Why is this happening in spite of India’s Renewable Energy deployment increasing faster than ever?

Listen to this episode from Emerging Tech Radio to find out the reasons in detail.

The reasons range from increased buying from DISCOMs in the spot market moving from long term contracts to lack of availability coal across power plants in the country.

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Energy Access for All

If you have been closely following the global electrification drive, you would have heard of the ‘Power for All’ campaign. It is driven by a mission to deliver energy access to all by including decentralised energy solutions, mobilizing capital and delivering high quality energy technology solutions. Power for All is supported by UK Aid, UN Environment, Climate Works among other agencies. Partners associated with power for all campaign include various agencies working on energy access in India and Sub-Saharan Africa.

William Brent, a Director in the Power for All campaign joined in the conversation on Emerging Tech Radio podcast to talk about their objectives, progress and particularly on the opportunities for cross-region collaboration between India and Africa in the space of energy access

Part 1

In the first episode, William Brent spoke about Power for All’s  campaign  objectives work and progress in India and Sub Saharan Africa. He did highlight a few key findings from IEA’s recent publication, Energy Access Outlook for 2017. The report incidentally points out to a lack of progress in electrification in Sub Saharan Africa where it is failing to keep track of the population growth in spite of increased awareness. On contrast in India nearly 500m have gained access to electricity since 2000 i.e. close to 85% of the population have access to electricity in comparison to less than 50% in 2000. With the new electrification scheme, Saubhagya, India has a target of 100% electrification by end of 2018. The power for all campaign has also greatly emphasised on the United Nations Sustainable Development goals, particularly, SDG No 7 which aims to ensure affordable, reliable, sustainable and modern energy for all. The Sustainable Development Goals aim to achieve the objectives by 2030.

In the second part of our conversation where we discuss the technical collaborations that is happening between India and Sub Saharan Africa in the space of energy access and what are the key challenges to be addressed if the energy access for all is to be a global reality.

Part 2

You can find out more about the topic here.

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Karnataka Electric Vehicle and Energy Storage Policy

The Electric Vehicle and Energy Storage policy announced by the state government of Karnataka is well ahead of even the Indian government’s proposed Electric Vehicle policy. The opening lines of the policy declare that Government of Karnataka wishes to make Bengaluru, the Electric Vehicle (EV) capital of India.

Check the link to know more about India’s Electric Vehicle Vision

The statement from the Government of Karnataka looks ambitious, but considering what Bengaluru, the silicon valley of India, has managed to achieve with the IT sector and subsequently turn into a start-up capital, the statement could in fact have more substance than what meets the eye. In the past few years, there has been an upspring of start-ups not only in the IT space but also in alternate energy and electric vehicles in the region.

A key characteristic feature of this policy happens to be the fact it tries to integrate energy storage manufacturing which is key to fostering an electric vehicle industry. The proposed policy as expected is filled with incentives and concession packages to lure investments. The policy has a validity of 5 years or until a new policy is announced.

The policy document intends to align with the national objective of having an all-electric vehicle fleet by 2030. In addition to reducing the dependency on crude oil consumption, where in 80% of India s oil requirement is imported and about 1/3rd of it is used in the transportation sector; the policy also emphasizes to reduce emissions in the sector by promoting EVs, which is laudable. Incidentally there is a mention of recent World Health Organization report that says India is home to 10 of the world’s 20 most polluted cities.

Highlights of the policy

Listen to the conversation to know more.

  • A key major objective of the policy is attracting investments of around 31,000 Crore (about 5Bn$) and employ 55,000 people in the sector.
  • EV manufacturing zones and clusters with complete infrastructural facilities is envisaged like in similar automobile manufacturing.
  • Three wheelers, cab aggregators, corporate fleets and school buses/vans are to be encouraged to shift to electric transportation. Already, non-transport private vehicles are exempt from paying taxes under the Karnataka motor vehicles act. Also, the national committee is evaluating the proposal to use standard batteries for public vehicles like 3 wheeler rickshaws. These are likely to aid this objective.
  • Similarly public fleet operators will introduce 1000 EV buses during the policy period with Bangalore Metropolitan Transport Corporation proposed to have EV fleet services within city by 2018.
  • An emphasis on EVs has been made for goods transportation within city limits operated by logistics firms. Logistics firms operating with e-commerce platforms are likely to benefit.
  • Battery manufacturing will be facilitated by the Karnataka Udyog Mitra who will operate an online clearance system with special incentives for modular lithium ion batteries.
  • The policy proposes to adopt BIS standards for setting up charging infrastructure with proposal to amend any existing bylaws to setup charging stations in public buildings.
  • The government will encourage industry and academia to undertake research in this space and setup charging infrastructure that adheres to ARAI/BIS standards.
  • A Special Purpose Vehicle (SPV) involving different government agencies in Bangalore will be mooted to setup charging infrastructure in the city.
  • A special tariff is likely to be proposed for EV charging in the state including proposals to permit energy resale at charging stations. This is an interesting proposal considering there are regulatory hurdles before any such proposal can go through even at the central level.
  • Fast charging stations and battery swapping networks at every 50km interval to be established on prominent highways of the state including Bangalore-Mysore is also proposed.
  • Public bus and metro stations to have EV charging infrastructure.
  • The policy also intends to encourage lease or pay-per-use business models for battery swapping stations. A few companies in the state are already evaluating the business proposition of swappable batteries.
  • An end of life battery use for solar PV applications is also envisaged including a safe disposal mechanism in Public-Private Partnership model.
  • On the manufacturing side for batteries the state has declared a target of inviting investments up to the tune of 5GWh, which is expected to generate a net employment of over 10,000.
  • Special incentives for skill development in battery manufacturing is also proposed.
    • An Investment Promotion Subsidy (IPS) in the range of 20-25% of total fixed assets shall be provided to manufacturers of EV components.
    • The Investment Promotion Subsidy will be available over and above any subsidy offered by Government of India (GoI).
    • Total exemption on payment of stamp duty, concession on land registration charges, reimbursement of land conversion fee and exemption from tax on electricity tariff are other incentives proposed.
  • A special package of incentives and concessions will be considered for Ultra Mega and Super Mega EV enterprises/Lithium ion battery manufacturers catering to exclusively for EV market based on investment and employment potential.
  • All project proposals and incentives will be subject to the approval of technical committee. A high level inter departmental review committee will also be constituted to regularly review the progress of developments under this policy.
  • Incentives in the form of capital subsidy up to the tune of 25% of capital investment for the first 50-100 fast charging, battery-swapping stations depending on the type of EV served.

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Cover image :Tesla Energy