Centre's ambitious plan to bundle costlier solar power with cheap thermal power produced by older plants is coming unstuck with most state electricity boards refusing to sign purchase deals over fears that it will raise their costs.
Modi had earlier this year proposed that power from old plants such as Singrauli, which costs Rs 1.80 per unit, be bundled with costlier solar power. However, the bundled power turned out to be more expensive at Rs 3-3.50 a unit.
The government plans to bundle Singrauli's 1,700-megawatt (MW) output with electricity generated by 3 gigawatts (GW) of solar installations.
However, top power ministry officials said repeated attempts to get states, whose power purchase agreement (PPA) are coming up for renewal, to sign new agreements for bundled power had yielded no results.
Among states that draw power from Singrauli are Uttar Pradesh, Uttarakhand, Rajasthan, Punjab, Haryana and Delhi. Officials said only NDA-ruled Haryana and Rajasthan had shown interest. Others are resisting higher prices.
"States do not have the appetite for costly power and are saying no to even power from new coal-fired projects, which are cheaper than solar power. They do not want to raise their costs at a time their financial health is in a bad shape," officials said.
The Centre is separately looking at a bailout package for state electricity boards (SEBs), which are holding on to Rs 3 lakh crore in debt.
Officials said Singrauli bundling was a test case. If it works out and they can convince the states to buy the costlier power on environment grounds, power from more old plants will be bundled with solar power.
Thermal power from Korba in Chhattisgarh, Rihand Stage I in Uttar Pradesh and Ramagundam in Telangana, which will complete 25 years in 2016, will be mixed with solar power.
It is Modi's stated goal to add 60GW of solar capacity over the next seven years from less than 4GW or 4,000MW at present.
NTPC alone plans to set up around 10,000MW capacity in the near future.
However, these plans depend on states' willingness to buy the bundled power, officials said. The lowest bid received so far to generate solar power in the country stands at Rs 4.60 per unit, which is considered "not too viable" by experts who said the bidders had not left room for cost escalations owing to foreign exchange fluctuations.
Normally, it costs Rs 6-7 to generate a unit of solar power and is considered unviable on a standalone basis unless it is in a difficult terrain where it is tough to set up a high-tension power line.
However, despite cost economics, the government is pushing ahead with solar power bundling as India has pledged before the United Nations to reduce the intensity of carbon emissions by 33-35 per cent by 2030 from its 2005 levels and to source 40 per cent of electricity from non-fossil sources.