Comment | Hybrid wind-solar policy – Tackling state electricity boards issue will be key to success

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Shishir AsthanaMoneycontrol Research

The much-awaited wind-solar hybrid policy has been announced by the government. The industry had been asking for a hybrid policy that would help earn a better return on their capital, and its prayers have finally been answered.

To boost renewable power generation, the policy aims to promote new projects as well as make some of the existing one's hybrid. Under the policy, solar farm and wind farms will be connected to a common grid, thus efficiently utilising the transmission infrastructure and the land bank.

After a strong start, the renewable energy sector had run into rough weather, both at the operating level as well as the regulatory level. The poor financial health of state electricity boards (SEBs) forced them to default on their power purchase agreements (PPAs).

The government has set a target of 175 gigawatt (GW) of renewable power which includes 100 GE of solar and 60 GW of wind power capacity. India currently has an installed base of 70 GW of alternate power. By 2030, nearly 40 percent of India’s installed capacity will be from renewable power. Most of the incremental power generation capacity is renewable in nature.

Why a hybrid policy makes sense can be understood from the shortcomings of both wind and power generation separately. Solar and wind power both work only when their source of energy is good. Thus only when the sun shines at a particular intensity will the solar panels convert it into electricity and similarly, a relatively high windy day is needed to rotate the blades at a meaningful speed to generate current.

For the most part of the day, both these units are sitting idle. Plant load factor (PLF) of solar farms are around 20 percent levels while for wind power plants, thanks to technology advantages and height of the tower can touch around 40 percent. This too is seasonal.

The other shortcoming is land, or rather the cost and availability of it. Apart from the cost of equipment, one of the biggest cost of renewable energy is land acquisition.

The hybrid policy intends to overcome these shortcomings. The same parcel of land can be used to generate solar as well as wind power. This would result in optimum utilization of natural resources and more ‘working hours’ during the day. In other words, more energy is generated from the same land which would address the falling yields for the investors.

Falling equipment costs and increased domestic and foreign competition with access to cheap capital sent power tariffs crashing. Now with hybrid units, that would enable more electricity generation, and yields for investors can improve substantially.

While hybrid policy will definitely tackle a key pain point for the sector the main bottleneck remains.

The government will need to make SEBs stick to their commitments. Fiscally stressed state governments are keeping renewable power as backup power and not encouraging its compulsory use despite rules stating that they should. Unless this issue is addressed, the hybrid policy would look good just on paper.

Renewable power, in any case, has low utilization rates and if the power generated is not evacuated to the grid, losses of the generation companies will mount.