Mpp Vineeta

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Merchant Power Plants in India

Vineeta Kaushik Power Practice

Merchant Power Plants: Definition

• No regulation defines MPPs. Some common definitions are “MPPs are plants that do not enter into any long-term power purchase contract for the sale of their power”. “MPP is one which produces power as a commodity or more accurately ‘a generator that has only the market place to assure its long term income stream”. “Plant that sells all of its outputs on the spot market”.

MPP: Appropriateness in India

Factors favouring MPPs • Power deficit scenario • High wholesale prices • Energy exchanges Factors against MPPs • Transmission capacity constraint • Price cap • Fuel availability

• Merchant sale encouraged • Financing woes • Open access

MPP: Present Scenario

• The total declared merchant capacity is 1673.5 MW which includes

– Jindal Power’s coal based 1000 MW Raigarh plant – Tata Power’s imported coal based Trombay Unit#8 of 100MW – GMR’s naphtha based barge mounted plant of capacity 220MW – Malana Power’s 86 MW hydel plant in Kullu

Growth in MPP Capacity (in MW)

2000 1500 1000 500 0 20 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 326 326 326 326 326 326 326 1326 1673.5


Source: Infraline Research & Company Reports

MPP: Policy Support

• The new hydro policy allows and encourages the developers to make merchant sales by selling as high as 40% of the electricity generated from the project in open market at the price set by market forces. • MoP released guidelines for setting up of merchant power plants in 2006. According to it, MPP of 1,000MW to be provided coal linkages and under the initial plan, 15 coal blocks with estimated reserves of about 3.6 billion tonnes have been identified for MPPs and CPPs, out of which 2.4 bt is likely to be MPPs share.

• Recently released Mega Power Policy is silent on extending benefits to merchant plants

MPP: Planned capacity

• The total planned merchant capacity of approx...