India should focus on increasing solar power to address supply concerns: Elara Securities
Sep 15, 2024
New Delhi [India], September 15 : As India's energy demand continues to rise, a report by research firm Elara Securities highlights the need for swift action to prevent supply constraints.
To address potential supply issues over the next five years, the report emphasises increasing solar capacity and shifting energy demand to solar hours.
The report projects that India's energy demand will grow at a compound annual growth rate (CAGR) of 7-8% over the next 10-15 years, with peak demand potentially rising even faster.
To mitigate supply constraints, the report recommends separating agricultural feeders and promptly implementing time-of-day (TOD) tariffs, which states must prioritise to maintain a balanced supply-demand dynamic.
The rooftop solar market, expected to reach around 10 GW annually in the near future, holds significant potential to relieve supply pressures. However, progress is being hampered by the delayed signing of power purchase agreements (PPA) by distribution companies (DISCOMs).
The report also calls for a restructuring of the traditional 25-year fixed offtake agreements to better align with DISCOMs' operational realities. A more flexible approach would reduce their financial strain and accelerate the adoption of renewable energy across the country.
Despite the improvements brought by the late payment surcharge (LPSC) mechanism, the financial health of DISCOMs remains fragile, the report points out.
It also highlights a gap between the average cost of supply (ACS) and average revenue realised (ARR), while noting that the slow rollout of smart metres is further complicating the energy supply situation.
The report stresses that Distributed Energy Resources (DER), including rooftop solar and the PM KUSUM scheme, will play a major role in meeting future energy demand. However, the scheduled phase-out of transmission charge waivers for interstate transmission systems (ISTS) post-2025 is likely to dampen investment in new energy projects.
Addressing other energy generation methods, the report mentions that thorium-based generation and small modular reactors (SMR) are still 10-12 years away from large-scale deployment.
"Additionally, pumped storage projects (PSP) face delays similar to hydro projects and require significant policy intervention to ensure timely completion," the report concludes.
