In a big boost to India's goal of achieving 500 gigawatt (GW) non-fossil fuel power generation capacity by 2030, the government has allowed the bundling of renewable to replace thermal power under existing power purchase agreements (PPAs).

The Ministry of Power and the Ministry of New and Renewable Energy have issued revised guidelines providing for thermal generation companies to set up renewable energy generation capacity either by themselves or through developers by open bids and supplying it to the consumers under the existing PPAs.

This will enable the replacement of fossil fuel based energy by renewable energy under the existing PPAs, the Ministry of Power said in a statement on Tuesday (16 November).

"As the cost of renewable energy is less than the cost of Thermal energy, the gains from the bundling of renewable energy with thermal will be shared between the generator and distribution companies/other procurers on a 50:50 basis," the ministry said.

It further added that as the renewable energy will be balanced with thermal energy, therefore, the DISCOMs will now not need to acquire any separate capacity for balancing of renewable energy.

According to the ministry, this is a very significant step towards achieving the goal of 500 GW of non-fossil fuel capacity by 2030.

The distribution companies will be able to count the renewable energy supplied under the scheme towards their renewable purchase obligation and this will be without the financial burden of separate PPA, the ministry said.

The move by the Centre will lead to a faster energy transition and will be beneficial for both the power generators and the distribution companies, it added.