Due to the coming together of several enabling factors, India will see around 25,000 MW of renewable energy capacity set up on a ‘merchant basis’.
Merchant power plants are those whose electricity generation is not committed to a buyer through a long-term power purchase agreement (PPA); instead, it is sold either via an energy exchange or under short-term contracts.
In India, renewable power plants have developed under the PPA route, because the financiers feel comfortable as this guarantees an assured purchase of the power. However, on the basis of tariff, selling of electricity through the exchange fetches better price at around Rs 3.50 a kWhr vis-à-vis the price of Rs 2.15 and Rs 2.40 a kWhr under the PPA scheme.