As electricity prices soar with demand growing, Gujarat Urja Vikas Nigam Limited (GUVNL) has invited bids from independent power producers (IPPs) for 1,000MW of electricity on a short-term basis, for eleven months, from August 1, 2018 to June 30, 2019.
Bids have been invited under the central government’s policy allowing flexible utilization of domestic coal at power generating stations. Also known as coal tolling, this mechanism allows more fuel-efficient power producers to generate electricity using coal allocated to public sector power utilities and supply the electricity so generated back to the utility at a tariff discovered through bidding.
According to the tender document released by GUVNL, its subsidiary Gujarat State Electricity Corporation Limited (GSECL) will provide coal to the successful bidder from mines allocated to GSECL. The coal will be made available from the Korea Rewa coalfield in Madhya Pradesh and Korba coalfield in Chhattisgarh. GUVNL has fixed a ceiling tariff of Rs 3.01 per unit. The last date for submitting bids is June 22.
With the discontinuation of power purchase from Adani Power and Essar Power under PPAs and power plants of 4,000MW capacity unable to generate power because of unavailability of gas and water (for hydropower plants), GUVNL has been forced to source more electricity from power exchanges. The average electricity tariffs at the Indian Energy Exchange have firmed up to Rs 6 per unit recently. GUVNL last week bought 40 million units at Rs 6.14 per unit.
Power producers believe coal tolling could help state utilities such as GUVNL reduce their procurement costs. “Because of the longer distances from mines and with some plants being older than 30 years, GUVNL is not able to generate enough power and is buying the deficit from the spot exchange at a higher price. If GUVNL shifts coal linkage from its expensive, older plants to more efficient or supercritical plants near the mines at tolling tariff, it will be able to generate the required power and save approximately Rs 2,300 crore a year on power procurement. This decision will benefit the state government and consumers in Gujarat,” a GMR Group spokesperson said.
In one of the first power purchase agreements (PPAs) under flexible utilization of coal policy, GMR Chhattisgarh Energy Ltd (GCEL) is already supplying 500MW power to GUVNL at a delivered tariff of Rs 2.81 per unit at the border of the state.
Despite the policy coming into force in May 2016, only Gujarat and Maharashtra have signed PPAs under this policy.
“The flexible coal utilization policy provides an excellent opportunity for states to use their coal optimally and reduce power procurement costs. It is surprising and inexplicable why states are not bringing bids under this framework,” said Ashok Khurana, director general of the Association of Power Producers (APP).
From Energy World