India: Renewable Energy Grid Integration Support
Scaling up renewable energy is a priority for the Indian government. But increasing renewable energy generation—which tends to be highly variable—is no easy task. Designing the necessary support structures and market mechanisms requires a thorough understanding of the technical, regulatory, and market policy issues. PPIAF began discussions with the Ministry of Power and the Central Electricity Regulatory Commission (CERC) in early 2018 to help.
POSOCO, the state-owned national grid operator, was tasked with recommending a strategy for going forward with renewable energy to India’s Ministry of Power. PPIAF supported POSOCO by helping it conduct studies and use the findings to formulate the recommendations.
The activity consisted of several complementary initiatives that helped POSOCO tackle the challenge. First, PPIAF provided advisory services to improve POSOCO’s power sector planning capacity. Second, it examined approaches for removing commercial constraints in power purchase agreements that discourage new investment in renewable energy . And finally, PPIAF provided support that enabled POSOCO to structure the power market better and integrate renewable energy into the country’s power system.
The first step was preparing a case study that examined international experience in renewable energy and deriving recommendations for India. The paper identified issues, challenges, and opportunities in the global wholesale electricity market and included insights on enhancing liquidity, the market share of variable renewable energy, and ancillary services.
From there, PPIAF supported POSOCO in developing an actionable approach for India. It helped create a dynamic model of India’s power systems and recommendations for redesigning India’s power market, including a phased roadmap for implementation. The recommendations were developed with consultation with stakeholders—including the central regulator, the system operator, private distribution companies, and the central transmission utility. These enabled the PPIAF team to understand the issues constraining the wholesale power market and laid the foundation for developing solutions. A roadmap for deepening the wholesale power market in India was presented in a dissemination workshop.
The activity improved the technical strength of POSOCO. Capacity building helped POSOCO officials understand and use models for optimizing power dispatch with a significant amount of renewable energy generation—up to 10 percent above the “business-as-usual” scenario.
Implementing the recommendations can potentially save on costs. A dispatch model developed by POSOCO and the World Bank team estimates savings of around $135 million annually—from optimized dispatch. The model has also been expanded to include hydropower, which would increase the savings. Further savings may be realized with improvements to power purchase agreements and market rules.