Why India’s Coal Plants Are Stranded After Sunset
India’s dispatch logic still rewards the cheapest power, not operational discipline. As solar peaks push down market prices, thermal units are stranded — waiting to rescue the grid when the sun sets.
India’s power scheduling framework prizes least-cost energy.
When solar output surges midday, market clearing prices crash to ₹2–3 per kWh.
State utilities cut back long-term coal allocations and chase cheap exchange power instead.
But coal stations can’t ramp down easily. They must stay online at technical minimum load to preserve grid inertia and spinning reserve — incurring losses even as their schedules vanish.
On 1 June 2025, NTPC Farakka-I, II & III were instructed to maintain generation through solar hours despite curtailed schedules.
Because SCUC–SCED optimisation wasn’t invoked, these plants were penalised under the Deviation Settlement Mechanism (DSM) for producing above schedule — punished for doing the right thing.
The incident appeared in the 53rd and 54th Commercial Committee meetings of the Eastern Region but remains unresolved.
When Discipline Gets Penalised
DSM rules aim to deter erratic behaviour. Yet here, deviation meant discipline.
Farakka’s units generated above entitlement only to stabilise frequency and prepare for evening ramp-up.
Result: losses booked against prudence, while discoms profited from the same grid stability that these units maintained.
SCUC–SCED: Missing in Action
The IEGC 2023 and First Amendment 2024 (Clause 6(5)(10)) explicitly require SCUC–SCED protection for technical minimums.
Implementation, however, still lags.
Until these optimisation tools run automatically, disciplined Section 62 generators will continue paying DSM penalties for holding the line.
Several eastern discoms now rely first on RTM and DAM markets during solar hours.
Their long-term allocations — meant to ensure baseload — often go un-requisitioned.
That shifts balancing responsibility to generators, who absorb both DSM hits and under-recovery.
The Hidden Cost of Flexibility
Every megawatt held at minimum load consumes fuel and auxiliary power with no assured compensation.
Coal plants can’t cycle cheaply like gas or storage, yet they remain India’s only flexible buffer during the solar-to-evening transition.
This readiness — vital for reliability — is effectively subsidised by the very generators penalised for providing it.
India’s dispatch reform is only half complete.
Economics chase the cheapest marginal unit; physics demand stable inertia.
Until scheduling tools and DSM accounting recognise both, disciplined coal generators will keep paying for reliability others enjoy free.
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