Understand Renewable Energy Curtailment in India, What are reasons?

India, a country with a rapidly growing economy, has been making significant strides in the field of renewable energy. India's rapidly growing renewable energy sector has increased its share in the total FDI inflows to the power sector from 25 per cent to 35 per cent in the last five years. We expect it to attract larger sums of long-term and cheaper institutional capital.

India has already positioned itself as the world's largest 'real' renewable energy market, with a clean energy transition rooted in market principles. However, the government needs to significantly de-risk the sector to attract further institutional investments in Indian renewables.

Issues like the high cost of capital (60% of the renewable tariff), payment delays, land constraints, and increased uncertainty due to unpredictable domestic and trade duties continue to pose key obstacles. However, the country faces a persistent problem known as ‘curtailment’ of power generated by wind and solar projects.

What is Renewable Energy Curtailment

Renewable Energy Curtailment refers to the reduction in the output of a generator from what it could otherwise produce given available resources. This typically occurs due to transmission congestion or lack of transmission access, but can also occur for a variety of other reasons, such as excess generation during low load periods.

Market-based protocols that dispatch generation based on economics can also result in curtailment. In the context of renewable energy, curtailment can be a significant issue as it can lead to substantial losses for developers and inefficient use of renewable resources.

A post-connectivity risk, the curtailment risk, occurs when the grid operator issues an instruction to limit the scheduled energy output of a specific power generator, due to either commercial or technical considerations. Regulations ban any kind of commercial curtailment.

However, potential violators of these regulations like grid operators have complete control over any information that could demonstrate their guilt. Therefore, older renewable projects that people bid at higher tariffs, compared to recent RE bids or thermal power tariffs, encounter higher commercial curtailment risk.

Reasons for Curtailment in India

Demand and Supply mismatch

After electricity is generated, it must be transmitted and distributed to consumers. The power distribution grid must respond quickly to shifting demand and continuously generate and route electricity to where it’s needed the most. However, there is a difference between peak demand-load periods and peak-energy generation period.

For instance, in the case of solar energy, peak demand-load is at night whereas peak energy generation is during the daytime. Similarly, for wind energy, peak demand-load is during summers and winters whereas peak energy generation is during the monsoon season.

Power Grid issues

The intra-state grid is often unable to accommodate the excess generation due to low demand and can’t transmit it out due to limited interconnections with the national grid, leading to heavy curtailment1. Inadequate grid availability has been a concern in Renewable Energy (RE) rich states.

Violation of government norms

The Indian Electricity Grid Code 2010 provides for a ‘Must-run’ clause for the renewable energy sector. This means that utilities, state load dispatch centres (SLDCs) and distribution companies (discoms) have to prioritise the scheduling of renewable power over other generators/sources to incentivise green energy projects except in cases of technical issues.

However, under the pretext of grid security, which discoms often push for their commercial interests, SLDCs often violate this 'Must run' clause.

Impact of Curtailment

Curtailment in the renewable energy sector has a significant impact on both the economic and operational aspects of power generation.

Economically, curtailment leads to substantial losses for developers, as they often do not fully account for them while bidding for projects. The absence of a restitution mechanism for such losses challenges the viability of projects. This increases the probability of generation curtailment and adds to the operation risk of projects, discouraging investments.

Operationally, curtailment can lead to inefficient use of resources. For instance, when there is excess generation during low load periods, the power that could be used or stored is instead wasted. This not only leads to economic losses but also hampers the overall efficiency of the power grid.

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