Costly solar power PPAs will continue to burden Punjab consumers Feb 11,2019

Posted On : February 20, 2019
The state power sector which has been making a steady progress towards improving its finances is likely to be burdened with the costly power from solar plants and the power purchase agreements signed with the independent solar power producers (ISPPs) in the state.

A windfall brought in by sale of surplus power had helped the Punjab State Power Corporation Limited (PSPCL) bring down its losses from Rs 2836 crore in 2017 to Rs 908 crore during the current fiscal. Besides, the resumption of the Shahpur Kandi Hydel Project and re-operationalisation of Pachhwara coal mine is all set to further strengthen the financial health of the power corporation. The Shahpur Kandi project would bring in an annual saving of Rs 850 crore for the power corporation and the Pachhwara coal mine will have a direct annual benefit of Rs 650 crore.

However, the high cost to be paid on renewable sources of power during the next fiscal may take away some of the financial benefits of these developments. As the Punjab State Electricity Regulatory Commission (PSERC) has made it obligatory for the Punjab State Power Corporation Limited (PSPCL) to source 2.70% of total generation from solar energy and 4.3% for non-solar power sources, the power corporation is to buy 927 million units of electricity from solar plants and 1548 million units under power purchase agreements signed with the IPPs. With the commissioning of more solar units, the next year’s purchase of solar power is likely to be 1663 million units against target of 1089 million units. With the cost of solar power being more than the power being generated from coal based thermals units, this rise in power from solar plants will put a burden on the PSPCL.


The power corporation in its tariff petition for 2019-20 has stated that the corporation will buy 1440 million units of solar power at the average rate of Rs.6.93 per unit amounting to Rs 968 crore and 1090 million units from biomass units at average rate of Rs 5.95 per unit amounting to Rs 638 crore. The costly injunction of renewable energy will cost Rs.1606 crores. In the current financial year the supply from renewable energy sources is likely to be 2211 million units for Rs 1407 crore.

Sources said the power corporation has already signed PPAs with the solar plants that extend over 25 years under which the cost of power varies between Rs 5.97 per unit to Rs 17.91 per unit with average cost of Rs 6.73 per unit. They said even cost of power generated from solar plants has come to less than Rs 3 a unit, Punjab cannot renegotiate these power purchase agreements and reduce the burden to the common consumers.

As of today, the power generation from solar and biomass plants is more in Punjab as compared to the total generation of electricity from the state owned thermal plants and hydro projects, the balance power is being supplied by the independent power producers. The solar and biomass plants are supplying more than 50 lakhs units per day while the state owned thermal plants at Ropar and Lehra Mohabbat are under shut down due to no demand.

The Punjab Energy Development Agency (PEDA) has commissioned already 27 solar power plants with capacity of 219 MW under phase I and 21 plants of 194 MW capacity under phase II. Under Phase III the PEDA had planned 19 more solar plants of 500 MW capacity. Out of these 12 plants of 325 MW capacity have already been commissioned and remaining are under construction.