Power distribution companies from Uttar Pradesh will not sign new long-term coal-based power contracts for the next three years to avoid the burden of fixed costs and to optimise their current agreements.
The companies will instead contract long-term renewable energy through tariff-based competitive bidding to fulfil their renewable purchase obligations.
Industry experts said though UP accounts for around 10% of the country’s power demand, the decision of the state government will not adversely affect power generators since there have been no long-term agreements in the industry for almost a decade.
Long-term power contracts are those signed for more than seven years. Long-term power purchase agreements (PPAs) have not been contracted since long.
Both discoms and generators do not want to get into long-term PPAs of 25 years in any case,” said a senior private power firm executive, who did not wish to be identified.
Uttar Pradesh Electricity Regulatory Commission has ordered power distribution companies to procure long-term renewable power through competitive bidding and to contract hydro-power or battery storage based power if it is economical.
It said that discoms can purchase short-term power from exchanges or the central government’s bidding portal.
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