How Can Rajasthan lead the way in Renewable Energy Transition by 2030?

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Policy Study on Energy Transition Roadmap 2030

31 December, 2023 | Power Markets

Shalu Agrawal, Disha Agarwal, Prateek Aggarwal, Dhruvak Aggarwal, Arushi Relan, Harsha V. Rao, Rashi Singh, Himanshu Anand, Bharat Sharma, Chanmeet Singh Syal, Tarun Mehta, and Karthik Ganesan

Suggested citation: Agrawal, Shalu, Disha Agarwal, Prateek Aggarwal, Dhruvak Aggarwal, Arushi Relan, Harsha V. Rao, Rashi Singh, et al. 2023. Policy Study on Energy Transition Roadmap 2030. Jaipur: CMRETAC, Government of Rajasthan.

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Overview

India’s energy transition journey will be realised in its states and union territories. Rajasthan, bestowed with abundant renewable energy (RE) resources, has the opportunity to leverage the advantage to drive its own clean energy transition and support the nation’s transition. As Rajasthan pursues ambitious energy transition goals, it will be essential to enable cost-effective integration of RE at scale and increase the off-take of clean energy by state discoms. To achieve this, the state must address the key questions:

How can Rajasthan align itself with the national clean energy targets in the medium-long term?
How can Rajasthan plan to meet its rising power demand reliably and cost-effectively while integrating new RE capacities?
How should the state operate, manage, and remunerate its thermal fleet to support reliable and cost-optimal system operations?
How can the state discoms strengthen their financial position such that they become active participants and enablers of a new energy future?

The Chief Minister's Rajasthan Economic Transformation Advisory Council (CMRETAC) commissioned the Council on Energy, Environment and Water (CEEW) to reflect on these questions and prepare a roadmap for the state’s power sector transition. CEEW undertook a study based on an in-depth analysis of the state’s power sector landscape and the emerging and potential challenges, using modelling tools, secondary research, and consultations with diverse stakeholders. The recommendations aim to assist all key state actors in undertaking timely and data-informed decisions on policy, regulatory, institutional, and financial reforms to help the state leverage its natural advantages of high clean energy potential.

Key Highlights

Pursuing a Net-Zero pathway would present significant opportunities for the state’s power sector:
- State’s electricity demand would nearly double by 2030 and rise tenfold by 2070. And thus, the generation is expected to triple by 2030 and grow up to sixteen fold by 2070. RE will become a dominant generation source well before 2030, and contribute to ~60-70 per cent of generation (equivalent to 80-90 GW capacity).
- Investments of the order of ~INR 5.4 lakh crore (~USD 66 billion) would flow into the state for setting up required generation (70 per cent), transmission (20 per cent) and storage (10 per cent) capacities by 2030.
With 90 GW of RE, Rajasthan will emerge as a major clean energy exporter, helping other Indian states meet their renewable purchase obligations (RPOs).
- The state will require significant investments in new storage capacities, transmission infrastructure, network upgrades, and coal fleet flexibilisation to enhance system flexibility and enable cost-effective RE integration.
- By 2030, ~32 GW of storage – nearly half of India’s storage needs – and ~8.5 GW of flexible coal capacity – with 40 per cent minimum technical load (MTL) – will likely be situated in the state to minimise RE curtailment.
The state-owned coal fleet will play a crucial role in meeting the state’s energy and flexibility needs.
- In FY22, the fleet’s on-bar declared capacity ranged from 32 -69 per cent, much lower than the 83 per cent norm, mainly due to technical faults, coal shortages, and limited maintenance.
- Improving the fleet’s availability and ensuring its economically efficient scheduling, which should be guided by robust demand forecasting, would be imperative for cost-effective operations. For instance, the state discoms would have saved ~INR 500 crore if state’s coal plants were available as per norms and utilised cost-optimally.
To reliably manage the increase in electricity demand while meeting RE purchase obligations, Rajasthan’s discoms will need an additional 21 GW of RE and other capacities beyond current plans.
- This will double the share of RE in discoms’ supply mix and quadruple the ramping needs between 2022 and 2030, underscoring the need for investments in suitable supply- and demand-side flexibility solutions, which need to be guided by robust planning and resource adequacy assessments.
In order to invest in additional RE capacity and the requisite infrastructure upgrades, state discoms must strengthen their financial indicators.
- Over the past three years, the state discoms have progressively reduced their recurring annual losses – down to 17.5 per cent in FY22.
- However, they remain heavily indebted and have accumulated financial losses of ~INR 90,000 crore. Improving discoms’ credit ratings, dissipating the accumulated unfunded revenue gap (URG), and improving billing efficiency through technological interventions will be instrumental in breaking the vicious cycle of losses and rising debt.

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Shalu Agrawal

Director — Programmes

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“Indian states are progressively aligning with the national clean energy vision and setting ambitious clean energy goals for 2030 and beyond. This study from Rajasthan shows why and how states can prepare detailed, action-oriented roadmaps to drive all key actors to achieve their clean energy goals”

Executive Summary

The transition required to meet India’s ambitious clean energy goals will take place in its states. By 2030, India aims that 50 per cent of its installed power generation capacity will be based on non- fossil energy sources, and its emissions intensity of GDP will reduce by 45 per cent (over 2005 levels). Rajasthan, with abundant renewable energy (RE) resources, is positioned to lead India’s energy transition to cleaner sources of energy. The state is already the largest producer of RE in the country with more than 23 GW of installed RE capacity in June 2023 (MNRE 2023). The Government of Rajasthan (GoR) aims to achieve 37.5 GW of RE capacity by 2025 (MNRE 2022), and ~90 GW by 2030 in line with enhanced national clean energy targets. However, an assessment of the state’s past efforts and current context shows that several challenges may impact the pace of this transition.

A holistic approach is needed to determine future transition pathways for Rajasthan’s power sector such that the transition is aligned with the state’s development aspirations, nation’s international commitments and the changing global context. An understanding of the long-term pathways should inform the state’s medium-term policy goals, which in turn should guide the state’s near-term strategies for sectoral transition. In this backdrop, the Chief Minister’s Rajasthan Economic Transformation Advisory Council (CMRETAC) commissioned CEEW to develop an Energy Transition Roadmap 2030 for the state’s power sector. This roadmap, developed by CEEW with support and guidance from CMRETAC, is based on an in-depth analysis of the state's power sector landscape, emerging and potential challenges, and use of suitable modelling tools and secondary research to answer the following key questions.

The underlying research and roadmap development has benefitted from multiple rounds of consultations with key actors in the state’s power sector. We hope that this Roadmap is able to assist and inform the Government of Rajasthan in its efforts to leverage its natural advantage of high RE potential to assume a pole position in India’s clean energy transition and ensuring universal access to clean, reliable and affordable energy for its people.

Aligning state ambitions with national clean energy targets

Our assessment of long-term transition pathways for Rajasthan suggests that aligning with the national aspirations of building a Net-Zero economy by 2070 would help the state retain its clean energy leadership while meeting its development aspirations.

Pursuing a Net-Zero pathway would present significant opportunities for the state’s power sector, as compared to a business-as-usual scenario, as depicted through the model results below.

State’s electricity demand would nearly double by 2030 and rise tenfold by 2070 due to a growing economy, rising incomes, urbanisation and a rapid electrification of various end- uses.
Power generation within the state periphery would rise even faster to cater to clean electricity demand from within and outside the state.
- Generation is expected to triple by 2030 and grow up to sixteen fold by 2070.
- Renewable energy will become a dominant generation source well before 2030, and contribute to ~60-70 per cent of generation (equivalent to 80-90 GW capacity).
Power sector would present the biggest opportunity for emission mitigation, given its majority contribution to the state’s emissions (54 per cent share in 2020). Power sector emissions would peak around 2040 and drop to zero by 2050.
Investments of the order of ~INR 5.4 lakh crore (~USD 66 billion) 3 would flow into the state for setting up required generation (70 per cent), transmission (20 per cent) and storage (10 per cent) capacities by 2030.

To realise these opportunities, Rajasthan should consider enhancing its clean energy ambitions by:

Formally aligning with the national aspirations to build a Net Zero economy by 2070,
Setting enhanced clean energy goals for 2030 in the form of 80-90 GW of RE capacity, with a parallel emphasis on decentralised renewable energy, and
Creating an attractive ecosystem to mobilise adequate investments for its clean energy goals.

Cost-effective integration of renewable energy

Rise in share of variable RE (VRE) in Rajasthan’s generation mix would pose several challenges linked to variability and uncertainty in RE generation, surplus availability during low demand (leading to negative net load) and limited inertia or reactive power support available for secure grid operations. In view of these challenges, we assessed the flexibility needs of the state's power system using a national level and a state-level dispatch model.

To become India’s clean electricity powerhouse by 2030, Rajasthan will need to enhance the flexibility of its power system

Our assessment of all-India dispatch model results suggests that:

The share of VRE in the state’s generation mix would rise to 72 per cent by 2030 (Figure ES1), which will be significantly higher than the share of VRE in the nation's power mix (33 per cent). This reconfirms that Rajasthan is expected to emerge as the clean power supplier to the nation.
Storage and flexible generation resources will play a key role in meeting the peak demand and reducing RE curtailment. At the national level, to limit the annual RE curtailment within 5 per cent, power system would need 44 GW of battery energy storage systems (BESS), 81 GW of thermal capacity retrofitted to operate at 40 per cent minimum technical loading (MTL), and 22 GW of pumped storage hydropower (PSH). Despite this, 12 per cent of RE generation would be curtailed at the Rajasthan periphery (due to demand and transmission constraints)
Of the total BESS capacity required, a majority (~32 GW) will be located within Rajasthan at utilisation levels which are attractive for investors. This indicates that Rajasthan will also be a major contributor to meeting the national flexibility needs.

Figure ES1:With 90 GW of RE in Rajasthan, VRE share in generation would rise to 72 per cent

*Source: Authors’ analysis of inputs and outputs of the all-India dispatch model (case 1)*
Note: (1) ‘Thermal’ includes coal and gas-based plants, and ‘Nuclear*’ predominantly includes nuclear, along with bio-energy and small hydro projects (SHP).
(2) The base year is considered as the calendar year (CY) 2022.

Rajasthan discoms will need a robust resource adequacy planning to meet the rising electricity demand

To meet their RPO targets, one-third of the 90 GW RE capacity installed within Rajasthan must be contracted by the state’s discoms. In this scenario, our assessment of the state-level dispatch model suggests that:

The share of VRE in the contracted generation mix will increase from 17 per cent in 2022 to 39 per cent in 2030. In parallel, the share of thermal generation will drop from 74 per cent to 51 per cent. However, the annual utilisation of thermal capacity will increase to ~65, up from 58 per cent in 2022, to meet the rising electricity demand.
But even with current and planned conventional generation capacities, seven per cent of demand remains unmet in 2030, mostly during non-solar hours and due to limited flexibility in the system (Figure ES2).
Rajasthan’s net load ramping requirement increases by 4-fold by 2030. The state will need to reduce the minimum technical load (MTL) of select thermal units and operate the existing coal fleet at part load and ramp it rapidly. However, even if planned generation capacities become operational and CEA’s current standards for flexibilisation of thermal power plants are met, the system will not be flexible enough.

Figure ES2: With current and planned conventional generation capacities, 7 per cent of Rajasthan’s power demand would be unmet in 2030, indicating need for more resources

Source: Authors’ analysis based on dispatch results obtained from case 2
Note: ‘Other_RE’ includes Bio-Energy and small hydro projects (SHP)

To manage load reliably in an RE-rich power system, flexibility can be enhanced by:

Utilising RE with storage (BESS and PSH), the short-term market, and demand-side management,
Upgrading the intra-state transmission network to ensure better system controls and enhanced communication abilities, and
Implementing integrated resource planning to achieve a technically and economically sound resource mix in a planned and systematic manner.

Cost-effective operation of the coal fleet

To ensure that the system runs at least cost, flexible operation of coal-based generating resources will have to be managed cost-efficiently. Currently, six state-owned and two privately-owned thermal power plants comprise nearly 40 per cent of Rajasthan’s total long-term contracted generation capacity and half of the annual energy procurement.

Our assessment of current operational trends suggests that:

The annual declared capacity (DC) of state-owned plants was 32-68 per cent in the fiscal year 2022 (FY22), much below the annual target availability of 83 per cent, primarily due to technical issues. On an average, nearly half of all thermal generating capacity that was in outage per day in the second half of the fiscal year was due to technical issues.
While the ‘merit order dispatch’ (MoD) principle was largely followed for scheduling thermal power plants, discoms would have saved nearly INR 500 crore in FY22 if eight of the largest coal plants had met their target availability and were utilised cost optimally.
Historically, Rajasthan has witnessed significant deviations in the projected and actual annual peak demand and consumer segment-wise energy requirement, which are a critical input of power system operation and planning. The accuracy of forecasts on operational timescales of week- and day-ahead is 80-90 per cent, which can be improved.

Figure ES3: Higher declared capacity of the largest state thermal plants could improve peak generation availability by almost 1 GW

*Source: Authors’ analysis using data from Rajasthan SLDC for FY22*
Note: The maximum possible declared capacity is the cumulative plant wise installed capacity minus auxiliary consumption.

State entities can ensure that the coal fleet continues to operate cost-efficiently by:

Increasing the utilisation of allowed O&M expenses to reduce the incidence of technical outages, revising regulations on normative O&M expenses, and facilitating timely payments for energy,
Notifying a methodology for estimating the variable costs of plants and drawing up the MoD stack, and
Using advanced metering infrastructure to collect and store granular load data and using advanced statistical tools for high accuracy demand forecasts.

Towards a financially robust power distribution sector in Rajasthan

Rajasthan’s discoms are in financial distress with aggregate technical and commercial (AT&C) losses of 17.5 per cent in FY22, accumulated losses of ~INR 90,000 crore (including regulatory assets worth ~INR 49,000 crore), total debt worth ~INR 66,000 crore, and a low debt-to-service-coverage ratio of 0.91. State discoms are in a vicious cycle of recurring losses, debt, delayed payment to generation companies, poor credit ratings, and high interest burden. Since discoms are the largest off-takers of clean energy, a perception of high off-taker risk is a key barrier to clean energy investments in the state.

Our assessment of the factors leading to loss accumulation suggests that disallowed costs by the state regulator during the true-up process are a major contributor to the accumulated losses of Rajasthan discoms. In FY22, RERC disallowed over INR 6,000 crore of the discoms’ claimed expense, 59 per cent of which pertained to power purchase owing to gaps in forecasting and discoms’ operational inefficiencies. Disallowed costs reflect as losses in the discoms balance sheet, affect cash flows, and add debt and interest costs.

To break out of the vicious circle, Rajasthan discoms must undertake measures to:

Boost their credit ratings so as to enable access to debt at attractive rates and check the rising interest cost burden.
- In the short term, discoms and the state regulator must pursue timely subsidy and revenue realisation, timely tariff filing and release of tariff orders.
- In the medium term, efforts must focus on timely payments to the generating companies, and reducing the ACS-ARR gap through optimizing power procurement projections, improving billing efficiency and dissipating built-up regulatory assets.
Improve their billing efficiency to reduce distribution losses and lower the extent of disallowed costs and revenue gap. In FY22, Rajasthan discoms reported 100 per cent collection efficiency but their billing efficiency was 82.51 per cent. State discoms must leverage the opportunity to improve their billing efficiency through smart meter deployment, and focus on:
- Effective consumer engagement and awareness strategy.
- Designing and developing system architecture for secure and integrated data storage, sharing and management system.
- Enhancing institutional capacity by creating well-staffed smart meter units, conducting periodic trainings on smart meter technology
Implement a dissipation schedule for the unfunded revenue gap which forms the majority of the accumulated losses. Between FY2011 and FY2023, cumulative carrying costs of ~INR 49,300 crore have been allowed on the accumulated unfunded revenue gap, which have resulted in interest cost burden on consumers equivalent to 8-10 per cent (INR 0.58/kWh) of the average electricity tariff. If the status quo remains, we estimate that the consumers would be levied with a carrying cost of INR ~52,000 crores over the next decade, with the unfunded revenue gap remaining unrecovered. Proposed solution:
- Using transitional finance route, discoms can swap the existing expensive loans against unfunded revenue gap with cheaper debt, and reduce the carrying cost burden. Along with swapping of loans, a regulatory surcharge of ~5 per cent (per unit additional impact of INR 0.35/kWh), can ensure dissipation of the accumulated unfunded revenue gap in 5 to 8 years (5 years for AVVNL, 7 years for JVVNL, and 8 years for JdVVNL). The dissipation schedule would result in consumers saving a carrying costs of INR ~17,300 crore in the near term.
- Regulatory surcharge should be levied separately in the electricity bills for consumers. For discoms, they should be reported separately in their billing database. A clear and separate accounting of the revenue gap and its associated carrying costs will improve transparency and allow their time-bound recovery.

We propose a detailed Energy Transition Roadmap until 2030 for Rajasthan based on our assessment of system requirements and the various aspects of power sector operation. The Roadmap (refer to Chapter 6) has been made after multiple rounds of stakeholder consultations and is based on the current understanding of technologies and institutional capacities. The proposed timelines may vary based on the pace of technological developments and momentum of
implementation.

We also propose a two-tier institutional framework that draws from the institutional arrangements under existing policies in the state, such as the Rajasthan Solar Energy Policy, 2019 (Government of Rajasthan, 2019a) and the Rajasthan Wind and Hybrid Energy Policy, 2019 (Government of Rajasthan, 2019b).

FAQ's

How does this roadmap align with the national net zero target?

“An action-oriented detailed roadmap helps all actors in state to prioritise on timely interventions, which are essential for a smooth energy transition in the state. India’s energy transition journey will be realised in its states and union territories. Rajasthan with its bestowed RE potential is positioned to lead the transition. The roadmap is the first of many steps for the state’s and national journey towards achieving net zero emissions by 2070.”
What role will Rajasthan play in the national energy transition?

“Rajasthan is likely to be one of the leading states in achieving national energy transition. With 90 GW of RE capacity installed in the state, it will supply heavy quantums of clean energy to nearby states. Along with this, the state will also share its flexible resources such as energy storage and flexibility from its thermal fleet.”
How can states develop robust plans to meet their clean energy targets?

“Every state has its unique set of challenges and opportunities. The states must identify the growing energy needs of the state’s economy, to identify the clean energy targets for themselves. Some interventions such as having integrated resource planning activities and expanding and modernising the network capacity are essential and common across all states for enabling cost-effective integration of RE. The state must identify and prioritise the interventions to solve the challenges and leverage their strengths.”
What other states can learn from Rajasthan’s energy transition roadmap?

“Rajasthan’s energy transition roadmap focuses on state’s journey towards net zero, by (i) identifying short, medium and long term clean energy targets; (ii) preparing the state’s grid to enable cost-effective RE integration; and (iii) improving financial health of discoms, such that they become enabler of this clean energy transition. The roadmap also defines short, medium interventions and roles to be played by the state regulator, energy department, discoms, power procurement company, load despatch centres, state generating company and state’s transmission utility.”