Power purchase agreements as an albatross

India is now an electricity surplus country with an installed capacity of 369,000 megawatts (MW) against its peak demand of 183,804 MW. Independent power producers in the private sector now account for 47% of overall capacity—48% of thermal and 43% of renewable—while the Centre owns 25% of it and state governments the rest. The utilization trend has been away from coal and natural gas fired plants towards facilities for renewable energy.

Peak demand has plummeted during the country’s current lockdown. This has made India’s excess capacity problem even worse. What has caught distribution utilities in a bind, however, are the power purchase agreements (PPAs) they had signed earlier with suppliers that generate electricity. Larger supplies have been tied up through these deals than there is demand for.

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