India requires a new market design to resolve stressed power assets: FICCI
ET Energy World , Jun 13, 2018
Industry chamber Federation of Indiana Chambers of Commerce and Industry (FICCI) today pitched for creation of a completely new market design in the power sector apart from linking the upcoming natural gas trading hub with spot power market as a solution for resolving the stressed assets in the electricity sector.
“Holistic solutions to address the systemic issues will involve creating a new market design that will allow capacities, including the stranded ones, to be matched with demand projections via tradable instruments and risk management tools,” FICCI President Rashesh Shah said.
Stressed coal-based power generating assets, especially those of Independent Power Producers (IPPs), will need a differentiated resolution path primarily because the crisis is caused more by externalities beyond the control of sponsors, according to the industry body.
“A related approach would be to converge the proposed gas trading hub with power market operations to set up gas short-term trades and spot purchases and enable gas-based power plants, which are also stranded, to serve peak and balancing loads and also provide supply on demand,” Shah said.
He also added that for many of these projects coal supply was made subject to signing to Power Purchase Agreements (PPAs) and Fuel Supply Agreements (FSAs) were re-calibrated to serve part capacities. These factors had negatively affected under-construction projects from the perspective of financial tie-up or fund-raising.
“Additionally, running power plants suffered further financial strain due to delay in both regulatory decision making on fuel related costs and timely payments by Discoms of power purchase bills,” Shah said, adding that out of 26 Gigawatt (GW) of coal-based power plants taken up, projects totalling 23 GW are stalled because of funding constraints and a majority of them also suffer from fuel and PPA related issues.