Regulatory Framework and Emerging Issues Mahesh Vipradas

Content Regulatory Framework Electricity Act 2003 Electricity and tariff policy Implementation status Emerging Issues RPO and tariff National RPO and RECs Transmission capacity

Policy support through guidelines from the Ministry in Electricity Regulatory Commissions Act 1998 The state commissions became the key player for determining tariffs Initial Developments

Electricity Act 2003 Section 61(h) : The Appropriate Commission shall, subject to the provisions of this Act, specify the terms and conditions for the determination of tariff, and in doing so, shall be guided by the following, namely:- (h) the promotion of co-generation and generation of electricity from renewable sources of energy;

Electricity Act 2003 Section 86(i)e: The State Commission shall discharge the following functions, namely: promote cogeneration and generation of electricity from renewable sources of energy by providing suitable measures for connectivity with the grid and sale of electricity to any person, and also specify, for purchase of electricity from such sources, a percentage of the total consumption of electricity in the area of a distribution licensee;

Other Policies The National Electricity Policy Need for promotion of renewable energy … Progressively the share of electricity from non-conventional sources would need to be increased as prescribed by State Electricity Regulatory Commissions

Other Policies The Tariff Policy Section 6.4….It will take some time before non-conventional technologies can compete with conventional sources in terms of cost of electricity. Therefore, procurement by distribution companies shall be done at preferential tariffs determined by the Appropriate Commission.

Other Policies Tariff Policy Such procurement by Distribution Licensees for future requirements shall be done, as far as possible, through competitive bidding process under Section 63 of the Act within suppliers offering energy from same type of non-conventional sources. In the long-term, these technologies would need to compete with other sources in terms of full costs.

Implementation Status StatePercentage to be procured from renewable Year Tamil Nadu13%, 14%09 -10, Maharashtra3% - 6%06-07 to Karnataka10%08-09 to Andhra Pradesh5%09-10 to Rajasthan4.88 – 9/5%07-08 to Madhya Pradesh10%till Kerala3%till 2009 Andhra Pradesh5%Till West Bengal2%- 10%08-09 to Gujarat2%08-09 Total 19 states have specified the percentage of power to be procured from renewables

Implementation Status

Emerging Issues Determination and implementation of RPO/RPS Private licensees Captive and Open Access Being contested by Industries promote cogeneration and generation of electricity from renewable sources of energy by providing suitable measures for connectivity with the grid and sale of electricity to any person, and also specify, for purchase of electricity from such sources, a percentage of the total consumption of electricity in the area of a distribution licensee;

Emerging Issues Lacks of enforcement provision Maharashtra Commission and Rajasthan Commission have imposed penalty for on compliance Being contested by the licensees

Emerging Issues Tariff determination Preferential tariff Competition as mentioned in Tariff Policy Are there success stories of competitive bidding in renewables ?

Emerging Issues Renewable Energy Certificates Uneven distribution of resources Difficulty in scheduling the renewable power generation

Emerging Issues RECs Settlement between distribution licensees in the same / different states for compliance Compliance easy for captive and OA consumers No need of scheduling/ OA charges for inter state transfers In the openly traded REC – market discovery of price….

Emerging Issues RECs Provide a balanced mechanism for competitive market price discovery A portion of revenue is assured through sale of power at a predetermined rate The other component, through RECs, is market dependent

Emerging Issues Transmission bottleneck National Action Plan on Climate Change prescribes 5% RPO with annual increase of 1% The annual 1% increase would need addition of about 4000MW of wind power The transmission capacity needs Planning Strengthening Providing suitable (regulatory) measures is responsibility of the regulator while as STU is responsible for providing evacuation