India’s total renewable power installed capacity is 88 gigawatts (GW), with approximately 38 GW of standalone wind energy capacity and 35GW of solar energy capacity as of August 2020. India has plans to reach a total 175 GW of renewable energy (including 100 GW of solar and 60 GW of wind) by 2022 and 450 GW by 2030.
As this energy transition accelerates, we need to explore various options, technologies and business models – aside from plain vanilla contracts – to expedite the adoption of increasing amounts of low-cost but intermittent renewable energy (RE).
Wind-solar hybrid (WSH), which harnesses both solar and wind energy, is fast emerging as a viable new renewable energy structure in India due to the high potential of both wind and solar resources across various locations and the provision of enhanced grid stability and reliability.
To promote the setting up of WSH power plants, the Ministry of New and Renewable Energy (MNRE) adopted the National Wind-Solar Hybrid Policy in 2018 which also provides certain waivers and incentives to developers. Various state governments have also come up with their own WSH policies including Gujarat, Andhra Pradesh and Rajasthan.
As per the tenders allotted under various central and state schemes, according to JMK Research estimates, about 11.6 GW of WSH power is likely to come up over the next three years, riding on strong support from Solar Energy Corporation of India (SECI) and several state governments. Capacity addition will rise at a compound annual growth rate (CAGR) of 223% from 2020-2023.
SECI tenders for WSH without storage have attracted low tariffs to the tune of Rs 2.67/kWh (US¢3.7/kWh) which are comparable to solar tariffs. Adani Green Energy, SB Energy, Greenko and ReNew Power are the key active participants across WSH tenders.
To understand the tariff trends for WSH projects, we developed a financial model for a 250MW wind-solar hybrid project based on the various assumptions gathered from stakeholder consultations. Our analysis shows that for solar and wind blended at a ratio of 80:20 respectively for a 250 MW WSH plant, the levelised tariff comes to Rs 2.49/kWh (US¢3.32/kWh), while blending solar and wind at a ratio of 50:50 results in a tariff of about Rs 2.57/kWh (US¢3.43/kWh).
On analysing the impact of adding a storage component to the WSH project, for a 2- hour battery back-up, the levelised tariff increases substantially to Rs 4.59/kWh (US¢6.12/kWh).
Clearly, adding battery storage is not a feasible option at present because it significantly increases project costs and hence the tariffs. However, the declining trend in the battery prices will make these projects viable within a few years and provide more stable power. The engineering, procurement and construction (EPC) cost of battery storage is expected to fall by 15-20% to US$250-270/kWh by 2021 from $300-320 per kWh at present.
The report analyses in detail national and state policies and regulatory developments, tender activity, key players in the market, upcoming capacity addition, tariff analysis and the risks and challenges associated with WSH technology.
India’s long coastline is endowed with high-speed wind and is also rich in solar energy resources, thereby providing a great opportunity for the wind-solar hybrid industry to thrive.
Solar and wind power potential in India is concentrated mainly in Gujarat, Tamil Nadu, Karnataka, Maharashtra and Rajasthan. Hybridisation of the two technologies can happen either at the same location or at different locations depending upon the project requirement.
Solar and wind are intermittent power generation sources that characteristically generate power at different intervals and during complementary seasons. Wind power is typically most productive during the night while solar only produces during the day. Whereas WSH plants produce both solar and wind power.
With the government’s commitment to 100 GW of solar by 2022 and 450 GW of renewables by 2030, relying solely on wind or solar to achieve the target is a suboptimal option.
Demand curves in India usually have one morning peak and one evening peak, though the duration and time of peak may vary slightly from state to state. Daytime demand can be met with solar alone, but as the sun sets in the evening and the demand curve rises, ramping is required. The ramp rate will increase significantly with the integration of more solar into the grid. The higher the ramp rate, the higher the costs associated with maintaining grid stability.
Capacity utilisation factor (CUF) for standalone solar and standalone wind are also low. Combining the two will result in better CUF and hence enhanced efficiency of the plant. It can also address the pertinent land issues related to standalone solar and wind, as co-location optimises land use.
As we set out to achieve ambitious renewable targets, the underlying issues discussed above need to be addressed.
WSH can be an effective solution to address some of these issues. As the peak operating times of wind and solar systems occur at different times of the day and year, hybrid systems are more likely to produce dependable power that meets demand. Wind power plants integrated with solar power plants can take care of the morning and evening peaks in the demand curve.
These hybrid plants are designed to act as a single supply of clean megawatt-hours, with average capacity factors far higher than individual solar or wind plants.
Key advantages associated with hybrid projects include:
- Better utilisation of transmission infrastructure and maintaining grid stability;
- Lower generation variability due to hybridisation;
- Better utilisation of land resources;
- Reduced possibility of undesirable power peaks;
- Complementary generation profiles.
WSH systems gained traction in India following the announcement of the National Wind-Solar Hybrid Policy 2018. To be deemed a hybrid project, the policy mandated that the rated power capacity of either solar or wind should be at least 25% of the rated power capacity of the other resource.
Various state governments have come up with their own policies to provide an effective regulatory landscape for the developers. Gujarat came up with its policy first, in June 2018, followed by Andhra Pradesh and Rajasthan. Karnataka and Kerala have also issued draft versions of the policy and more states are expected to follow suit.
Adding battery storage systems is the key to effectively integrating high shares of solar and wind renewables in power systems. When neither the wind nor the solar systems are producing, most hybrid systems provide power through energy stored in batteries.
While storage costs have gone down by 80% in the last 5 years, a further decline in cost will play a pivotal role in the success of WSH projects in meeting demand reliably.
SECI plans to bring out different types of hybrid renewable tenders with the aim of making renewables more dispatchable rather than just available. The objective is to utilise energy storage in such tenders to elevate the Capacity Utilisation Factor (CUF) of renewables to higher levels. The recently closed 400 MW round-the-clock (RTC) tender has set requirements of 80% annual CUF with minimum monthly CUF of 70%.
SECI has issued a total of 12,860 MW hybrid capacity tenders (with and without storage), of which 4,290 MW has been auctioned. According to estimates by JMK Research, about 11.6 GW of WSH projects will be operational by 2023.
The Ministry of New and Renewable Energy (MNRE) adopted the National Wind- Solar Hybrid Policy on 14 May 2018. The objective of the policy is to provide a framework for the promotion of large grid-connected wind-solar PV hybrid systems for efficient utilisation of transmission infrastructure and land. It also aims to reduce renewable power generation variability and achieve better grid stability.
National Wind-Solar Hybrid Policy 2018
The policy seeks to promote new hybrid projects as well as hybridisation of existing wind/solar projects. The existing wind/solar projects can be hybridised with higher transmission capacity than the sanctioned transmission capacity, subject to availability of margin in the existing transmission capacity.
- Rated capacity: To be recognised as a hybrid power plant, the rated power capacity of one resource should be at least 25% of the rated power capacity of the other resource in a wind-solar plant. In terms of system size, in areas where wind power density is high, the size of the wind power system should be significantly higher than the size of the solar power system installed and vice versa.
- Integration: On the technology front, the policy provides for integration of both the energy sources i.e. wind and solar at alternating current (AC) as well as direct current (DC) level.
- RPO fulfilment: Power purchased from hybrid projects is eligible for fulfilment of RPO obligations depending on the proportion of wind and solar rated capacity.
- Incentives: All fiscal and financial incentives available to wind and solar power projects will also be made available to hybrid projects.
- Transmission Charges: No additional connectivity/transmission capacity charges shall be levied for already existing plants; however, transmission charges will be applicable for additional transmission capacity.
With significant renewable energy capacity additions in recent years and with the hybrid policy aimed at better utilisation of resources, it is envisaged that this policy will open a new avenue for availability of renewable power at competitive prices along with reduced variability.
Various state governments have come up with their own policies to provide an effective regulatory landscape for the developers. Gujarat came up its policy first, in June 2018, followed by Andhra Pradesh and Rajasthan. Karnataka and Kerala have also issued draft versions of the policy and more states are expected to follow suit. These policies mention various waivers and incentives provided to developers including deferred payment of transmission charges and electricity duty among many others.
Since the introduction of the National Wind-Solar Hybrid Policy in May 2018, SECI, the nodal agency, has issued various tenders for wind-solar hybrid (with and without storage).
The first tender, issued by SECI in June 2018, was undersubscribed due to a tariff cap on the lower side. Adani Green Energy and SB Energy emerged as the winners with 390MW and 450MW allocated capacity, respectively.
The next 1,200MW tender, issued in March 2019, also remained largely undersubscribed due to a poor tariff ceiling of Rs2.7/kWh (US¢3.7/kWh). However, Adani Green Energy and ReNew Power emerged as winners for 600MW and 120MW capacity, respectively.
SECI issued the first tender with a mandatory storage component in August 2019. Greenko and ReNew Power emerged as the winners with allotted capacity of 900MW and 300MW, respectively.
It stipulated that the hybrid power developer must maintain an annual CUF of 35% – and a failure to do so would result in the developer being penalised. The minimum energy storage system (ESS) rated energy capacity installed must be equal to “X/2” MWh, where X is the contracted capacity of the project as per PPA. ReNew Power is using battery storage and Greenko pumped hydro storage. Therefore, for ReNew Power, the battery energy storage system (BESS) rated capacity would be 150MWh, while Greenko’s pumped hydro storage capacity would be 450MWh.
SECI introduced the first round-the-clock (RTC) tender in October 2019, signalling a move towards assured, scheduled and affordable supply of RE power. The tender was fully subscribed, with ReNew Power winning the entire 400MW capacity. The developer is mandated to fulfil an annual minimum CUF requirement of 80% and a monthly CUF requirement of 70%.
SECI also introduced 2500MW interstate transmission system (ISTS) blended wind- power projects (Tranche-IX) in March 2020 for blended power (at least 80% wind component and 20% solar).
Global Infrastructure Partners’ Vena Energy and JSW Solar emerged as the winners with 160MW and 810MW of allotted capacity, at a tariff of Rs2.99/kWh (US¢4.1/kWh) and Rs3/kWh (US¢4.1/kWh) respectively. With this win, JSW Solar became a new key independent power producer (IPP) to enter the renewable energy sector.
Private players are also taking an interest in the issue of tenders for wind-solar hybrid projects. Adani Electricity Mumbai Ltd. (AEML) floated a 700MW tender which is fully subscribed. Rosepetal Solar Energy Private Ltd. (a wholly owned subsidiary of Adani Green Energy Ltd.) won the tender at a tariff of Rs 3.24/kWh (US¢4.4/kWh).
Recently, Tata Power Company Ltd. also issued a letter of award (LoA) to Tata Green Power for 225MW hybrid capacity.
The rates quoted in these auctions are competitive and the industry is optimistic about these tenders which have something new to offer. SECI’s Tranche-I and Tranche-II saw an under-subscription because the tariff ceilings were set extremely low. Tranche-I and Tranche-II saw the lowest bidding tariffs of Rs 2.67/kWh (US¢3.70/kWh) and Rs 2.69/kWh (US¢3.73/kWh), respectively. AEML secured a fixed PPA tariff of Rs 3.24/kWh (US¢4.50/kWh) for a period of 25 years.
The RE with storage projects saw a slight tariff increase of Rs0.19/kWh (off-peak) over the previous tender. The storage tender has two components – flat tariff (off- peak) and peak tariff. The off-peak tariff was Rs2.88/kWh (US¢4/kWh) and the price discovered for the peak tariff for Greenko and ReNew Power was Rs 6.12/kWh(US¢8.50/kWh) and Rs 6.85/kWh (US¢9.51/kWh), respectively.
Further, the RTC tender by SECI is the first of its kind in the RE space globally. However, the price discovered in the RTC tender is overly aggressive at Rs 2.90/kWh (US¢4/kWh). It remains to be seen how the company will be able to maintain a minimum annual CUF of 80% at such a low tariff.
Likely Capacity Addition in Next 3 Years
A total of 148.8MW of wind-solar hybrid capacity has been commissioned to date. In April 2018, India’s first wind-solar hybrid project including 50 MW of wind and 28.8 MW of solar was developed on a pilot scale by Hero Future Energies. In July 2020, CleanMax developed a 15 MW wind-solar hybrid captive power plant for US food giant, Cargill. In June 2020, Continuum Wind Energy installed a 55 MW hybrid plant in Periyapatti, Tamil Nadu. As per the tenders allotted under various central and state schemes, the capacity addition of such projects is expected to grow at a CAGR of 223% to reach about 11.6G W in the next three years.
To understand tariff trends in the WSH market in India, we developed a financial model for a 250 MW wind-solar hybrid co-located project based on the various assumptions.
The cost of a co-located system is 7-8% lower than the cost of a standalone solar system. Co-locating the WSH and storage subsystems produces cost savings by reducing costs related to site preparation, land acquisition, interconnection, hardware (via sharing of hardware such as switchgears, transformers, and controls) and other installation overheads. Four different scenarios have been considered for evaluation. Across all of these scenarios, a solar overloading factor of 40% is considered.
Key project costs across the various scenarios include solar PV module and wind turbine costs (60%) and balance-of-system (BOS) cost (25%). The project is considered as part of the solar park, so upfront charges must be paid for land on a lease basis. Land cost about is 3-4% of the total project cost. Other costs, including transmission cost, preliminary and preoperative expenses, contingency cost and interest during construction (IDC), constitute the remaining 9% of the total project cost.
The four scenarios are:
- Scenario 1: 250 MW co-located hybrid project with 80:20 split between solar and wind without a battery backup. The levelised tariff comes to around Rs 2.49/kWh (US¢3.32/kWh).
- Scenario 2: 250 MW co-located hybrid project with 50:50 split between solar and wind without a battery backup. The levelised tariff comes to around Rs 2.57/kWh (US¢3.43/kWh).
- Scenario 3: 250 MW co-located hybrid project with 50:50 split between solar and wind with a 2-hour battery backup. The levelised tariff comes to about Rs 4.59/kWh (US¢6.12/kWh). If the battery backup is used only for 1 hour in this scenario instead of 2 hours, the effective tariff comes down significantly to Rs 3.59/kWh (US¢4.8/kWh).
- Scenario 4: 250 MW co-located hybrid project with 80:20 split between solar and wind with a 2-hour battery backup. The levelised tariff comes to about Rs 4.76/kWh (US¢6.35/kWh). If the battery backup is used only for 1 hour in this scenario instead of 2 hours, the effective tariff comes significantly down to Rs 3.65/kWh (US¢4.9/kWh).
Based on this analysis, tariffs are lowest in Scenario 1, where solar capacity is 80% of the total hybrid project capacity with a DC overloading factor of 40%. Some developers are even considering a DC overloading factor of as high as 50%, in which case the tariffs come down to about Rs 2.47/kWh (US¢3.29/kWh).
It is also clear that adding battery storage is not a feasible option at present, because it significantly increases project costs and hence the tariffs.
Further, due to aggressive tariff trends in recent solar auctions in India, at Rs 2.36/kWh (US¢3.14/kWh) with zero inflation indexation over the 25-year PPA, the discoms are tariff-shopping6 and are reluctant to ink power supply agreements (PSAs) for relatively higher tariff projects.
The COVID-19-induced collapse in demand has made this even more problematic as discoms have contracted excess supply, with thermal power plant contracts often incorporating capacity payments due even if they don’t take the generation. This is likely to create issues with the newly auctioned RTC and RE plus storage projects.
Risks and Challenges
Wind-solar hybrid has merit over standalone wind and solar. However, developers in this market are grappling with certain issues such as lower tariffs, policy uncertainty and technical challenges. Key issues and challenges include:
Land constraints: Minimum CUF of 32-38% is expected in the tenders, which means that most of the capacity must be wind-based. However, installing new wind capacity is a challenge as most of the good, high wind potential sites with grid access are already saturated. Land constraints have always been a key issue in the Indian renewable energy sector. Implementation of a ‘co-location’ clause in certain tenders can be dismal to the developers who are looking forward to a more flexible policy. India also has a significant opportunity to ‘repower’ end-of-life wind farms in prime locations, particularly in Tamil Nadu.
Integration challenges: Technical challenges in integrating both wind and solar with the grid on the DC side. As per the MNRE policy, till the time the DC metering framework is not in place, only AC integration is permitted. This reduces the cost benefits associated with DC integration in terms of utilisation of the balance-of-system (BOS).
Lack of experience: Presently, there is a lack of experience in executing hybrid plants due to a shortage of skilled resource availability.
System sizing: Sizing of the plant to optimise the generation portfolio differs from site to site based on the potential available for wind and solar resources. The most optimal sizing of storage is also a key question. A high capacity installation can result in an underutilisation risk during high RE generation days when there will be almost no utilisation of storage.
As the sector matures, most of these issues can be addressed by having a more coherent policy and standards in place. The technical issues can be taken care of by having proper design, advanced fast response control facilities, and good optimisation of the hybrid systems. Policy corrections coupled with phasing out technical inefficiencies will ensure that WSH gains the requisite traction.
India is well suited to wind-solar hybrid projects as the potential of both wind and solar resources is vast across various locations. Given the inherent complementary nature of both wind and solar resources, the plant load factor (PLF) can be increased to about 50% vis a vis 20-35% PLF for standalone solar or wind plants.
The government has also tendered out some large-scale investments in this area that will drive this market. To further increase the share of WSH in the overall energy mix, some policy-related changes must be explored.
More states should follow suit to come up with coherent and comprehensive policy in alignment with the National Wind Solar Policy 2018. States can reserve a certain percentage of their renewable targets for WSH, along with providing impetus in the form of waivers and incentives designed to help grow the market. Criteria of co- location should be made optional for the developers, so that they can find ideal locations to set up the plants.
SECI has taken the lead by regularly coming up with large tenders to scale up market growth. The government is now also planning to hold renewable energy auctions for RTC and hybrid projects instead of plain solar or wind tenders. The objective is to reduce the problem of intermittent supply and make clean power more competitive against traditional thermal plants.
Moreover, the government should also plan to structure hybrid-plus-storage tenders with CUF in a range that will not demand oversizing. This is likely to be the case for RTC tenders with a condition in place of 80% annual CUF.
In addition, battery storage is likely to make sense for commercial and industrial (C&I) consumers for onsite rooftop solar plants. It is expected that in the next 2 years, battery storage will take up about 20% of all C&I installations in India.
Although for utility-scale renewable plants, battery storage is unlikely to be an economically feasible option for 4-5 years.
Falling battery prices alongside an increasing share of renewables in the total generation portfolio will drive the adoption of battery storage which will become an important element in the total power generation mix.
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