September 08, 2008

Power companies may be allowed to spot sale of 20% output

ET reported that power projects in India may soon be able to undertake market oriented spot transaction of power for 15% to 20% of the total installed capacity as union government is considering a policy initiative that would facilitate development of hybrid power projects.

A senior official of power ministry said that “We are considering the option to permit power projects to reserve some portion of their capacity for open sale to meet peak demand. A beginning may be made in the case of hydro electric projects, before moving to other fuel based power projects.”

The official added that “Such projects are also of interest to general consumers as it would provide project developers an option to increase their revenues through open market sale of power at a premium. This would also help them to bring down the electricity tariff locked under PPAs.”

Such projects would be a mix of traditional power plant projects, where the entire capacity is locked up on long term contract through power purchase agreements and merchant plants which would undertake market oriented sale of power through open access.

The concept of hybrid power projects is permitted under the Electricity Act, 2003. Already, captive plants are diverting a portion of their surplus to the grid or selling it to power trading companies. With government encouraging merchant projects now, hybrid projects are also expected to become a popular option. While government is expected to make a beginning on the new model soon, experts point out that its success would depend largely on growth of transmission capacity across India.