The draft order has introduced a soft escalation scale for deviation penalties related to renewable energy (RE) sources. This scale is currently set at a relatively low level, but it is expected to increase over time. By 2031, the penalties are anticipated to rise to the same level as those imposed on conventional energy supplies.
The current energy landscape relies heavily on coal-fired plants to provide extra supplies and meet shortfalls, particularly during periods of high demand or when renewable energy sources are unable to generate sufficient power. However, with the introduction of stricter deviation penalties for RE sources, coal-fired plants are likely to benefit financially by helping to stabilize the energy system.
As the deviation leeway for renewable energy sources tightens, coal-fired plants will play an increasingly important role in ensuring a stable energy supply. By providing additional power when RE sources are unable to meet demand, these plants will help to prevent shortages and maintain grid stability. In return, they will earn more revenue for their services, as the penalties for non-compliance with the proposed deviation standards will increase.
The proposed escalation scale is likely to have significant implications for the energy sector, particularly for renewable energy sources and coal-fired plants. As the penalties for deviation increase, RE sources will need to improve their reliability and consistency in order to avoid incurring significant financial penalties. This may lead to increased investment in energy storage technologies and other solutions that can help to stabilize the output of RE sources.
In contrast, coal-fired plants are likely to benefit from the proposed changes, at least in the short term. By providing a reliable source of backup power, these plants will be able to earn more revenue and maintain their position in the energy market. However, it is likely that the long-term trend will continue to favor renewable energy sources, as governments and companies increasingly prioritize sustainability and reduce their reliance on fossil fuels.