New restrictions on banking of power sector to hit country’s renewable energy prospects: JMK Research

New restrictions on banking of power will inhibit the growth of the rooftop and open-access solar market, and potentially slow progress towards India’s national target of 450 gigawatts (GW) of installed renewable capacity by 2030, according to a new briefing note by the Institute for Energy Economics and Financial Analysis (IEEFA) and JMK Research.

Banking of power allows renewable energy generators to deposit surplus power into the grid and withdraw it later when needed — much like putting money into a savings account at a bank.

“Solar and wind projects are likely to produce excess energy during peak summer or windy seasons,” said the report’s co-author Jyoti Gulia, founder of JMK Research, in the statement.  The authors have analysed banking provisions across key states, noting that some states, for example, Gujarat and Maharashtra, have moved from annual to monthly banking.

In some states such as Andhra Pradesh and Tamil Nadu, banking facilities have been withdrawn altogether, it stated. Without the banking provisions for excess energy, the business model for open-access renewable energy projects, which sell electricity direct to commercial and industrial (C&I) consumers, will become unviable, Gulia said in the statement.

The banking restrictions follow the introduction of net metering limits and the withdrawal of waivers for open-access renewable energy projects, it stated. Co-author Vibhuti Garg, energy economist at IEEFA, explained that power distribution companies (discoms) are concerned about the impact on their revenues of high-paying C&I consumers moving from conventional to alternative power procurement through the rooftop and open-access solar model.

“While imposing restrictions on banking will do little to help the discoms’ finances, it may have a significant impact on India’s renewable energy roll-out that now needs to accelerate dramatically to reach the target of 450 GW (gigawatts) by 2030,” she said. The authors suggested procuring banked energy by discoms themselves. Instead of returning power back to the end consumer/developer, discoms can simply pay for the quantum of banked energy after each month at their lowest cost of procurement, they suggested.

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