Power producers need a new paradigm amid low, unpredictable demand

PPAs are proving inflexible in a regime of falling demand and the rise of renewable power

When power demand is relatively low and largely unpredictable, is it time to move away from planning generating capacity on the basis of the lowest cost of supply to distribution companies or discoms?

The practice of buying power from generators on the basis of the lowest levelised tariff embedded in a 25- or 30-year power purchase agreement (PPA) with a discom has been in vogue since the mid-2000s (see table: The road to competitive bidding).

Under current norms, power produ­cers are re­quired to declare the tariff stream for the fixed cost component for the life of the PPA (fuel is