1. Energy Conclave 2006 Presentation by Debashish Majumdar, Managing Director Indian Renewable Energy Development Agency Limited New Delhi July 27, 2006 Implementing the Integrated Energy Policy: The Way Forward

2. Need for Policies in RE Sector To create markets To create markets To reduce risks To reduce risks Provide acceptable rates of return Provide acceptable rates of return Create conditions for sustainable & profitable industry Create conditions for sustainable & profitable industry

3. What is required ? Long term regulatory frameworks Long term regulatory frameworks To create conducive investment climate To create conducive investment climate Niche public finance mechanisms Niche public finance mechanisms To address specific technology gaps / barriers To address specific technology gaps / barriers To aid commercialization through project development To aid commercialization through project development End-user Finance Mechanisms End-user Finance Mechanisms Carefully designed public support initiatives Carefully designed public support initiatives

4. Regulatory Issues affecting Growth of RE Sector Frequent change in policies Frequent change in policies Tariff not conducive for renewable energy Tariff not conducive for renewable energy Third Party sales discouraged in most States. Third Party sales discouraged in most States. High wheeling charges. High wheeling charges. Cost of infrastructure development, evacuation facilities and transmission lines left to be borne by developers. Cost of infrastructure development, evacuation facilities and transmission lines left to be borne by developers. Late or Non-payment by Electricity off-takers. Late or Non-payment by Electricity off-takers. Government / forest land issues. Government / forest land issues.

5. Renewable Energy - Key Obstacles to Growth Absence of assured customer / market Absence of assured customer / market All RE projects are : All RE projects are : Small in size Small in size Widely dispersed in remote locations Widely dispersed in remote locations Lacking infrastructure (evacuation facilities, roads etc ) Lacking infrastructure (evacuation facilities, roads etc ) Generally high cost ( not factoring positive environmental and social impacts) Generally high cost ( not factoring positive environmental and social impacts) 90% of small hydro potential is in hilly areas which have no industry – No demand. 90% of small hydro potential is in hilly areas which have no industry – No demand. Only buyer SEBs – Not willing to pay more for RE Power. Only buyer SEBs – Not willing to pay more for RE Power.

6. Renewable Energy - Key Obstacles to Growth Absence of aggregating agency / trader. Absence of aggregating agency / trader. All small RE projects are forced to market their products (electricity) directly to monopoly buyer (SEBs) – Buyer’s Market. All small RE projects are forced to market their products (electricity) directly to monopoly buyer (SEBs) – Buyer’s Market. Higher cost of generation due to : Higher cost of generation due to : Small size ( no economies of scale) Small size ( no economies of scale) Disadvantaged locations Disadvantaged locations Lack of adequate capital at affordable cost. Lack of adequate capital at affordable cost. Absence of National Renewable Energy Policy. Absence of National Renewable Energy Policy.

7. The Way Forward - Suggestions b Policies to be consistent and valid for long term b Fiscal benefits to be linked to performance preferably through tradeable credits. b State Nodal Agencies to develop shelf of “Bankable Projects ” complete with all necessary clearances to be made available to private investors through suitable bidding mechanism. b Special Awareness & Focused Training Programmes on RETs for senior members of SERCs & SEBs. b Availability of adequate and affordable resources.

8. Resource Mobilization for RE Sector Setting up of Renewable Energy Development Fund (REDF) Setting up of Renewable Energy Development Fund (REDF) Cess of Rs 5/MT Coal Cess of Rs 5/MT Coal Cess of Re 1/LPG Cylinder Cess of Re 1/LPG Cylinder Cess of 1 paisa / Kwh on conventional electricity generation Cess of 1 paisa / Kwh on conventional electricity generation Green Stamp Duty on IPOs Green Stamp Duty on IPOs Setting up of RE Innovation Fund – to provide Venture Capital for taking R&D and demo projects to commercialization. Setting up of RE Innovation Fund – to provide Venture Capital for taking R&D and demo projects to commercialization. Establishment of specialized Assets Re-construction Company – to tackle NPA & recovery. Establishment of specialized Assets Re-construction Company – to tackle NPA & recovery. IREDA to be converted to Apex FI – similar to NHB, NABARD etc. IREDA to be converted to Apex FI – similar to NHB, NABARD etc. MoEF, MoRD to contribute to IREDA’s equity. MoEF, MoRD to contribute to IREDA’s equity.

9. Conclusion Conducive policies are the strongest drivers for market development. Conducive policies are the strongest drivers for market development. Preferential treatment of renewables is important for creating “critical mass”. Preferential treatment of renewables is important for creating “critical mass”. Availability of specific funds for RE development and dedicated institutional mechanism for financing of RE sector is critical. Availability of specific funds for RE development and dedicated institutional mechanism for financing of RE sector is critical. Boosting of private sector confidence required for larger investments Boosting of private sector confidence required for larger investments Strong political will and commitment required in the form of Renewable Energy Policy Statement or Renewable Energy Act. Strong political will and commitment required in the form of Renewable Energy Policy Statement or Renewable Energy Act.

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