The great States barricade

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Last month, the Ministry of New and Renewable Energy put out a year-ender which mentions, among other things, the renewable energy targets for the current year and the next two years. They seem to be out of sync with reality.

The Ministry expects capacity additions for solar and wind in the current year to be 12,000 MW and 4,000 MW respectively, when the achievement till October has been 1,750 MW and 1,502 MW.

The highest ever wind power capacity addition — of 3,423 MW — happened last year. But the Ministry’s targets for the next two years are 4,600 MW and 5,200 MW. Ironically, such a high hope rides alongside a move by the government to scrap two helpful incentives – accelerated depreciation and generation-based incentive. Last time these incentives were briefly absent, in 2012-13, wind power capacity dropped to 1,700 MW, from 3,164 MW in the previous year.

If you take renewable energy as a whole, India ended October 2016 with an installed capacity base of 46,327 MW; this number is sought to be raised to 175,000 MW in the next 65 months – it works out to 23,400 MW a year.

As much as industry players feel these targets are very stiff, they believe they are not impossible to achieve, provided a crucial condition is met—getting state governments on board. Today, the states are not.

From delayed payments to renewable energy generators to policies inimical to renewable energy, industry players are facing hurdles from state governments, when they ought to be securing their support. “Each state has its own peculiar problem,” says U Ramdas Kamath, Executive Vice President, Infosys, who oversees the software giant’s sustainability activities.

Wind and solar power producers are broadly of two kinds—those who sell their power to the state-owned electricity distribution companies (discoms) and those who sell directly (typically large) consumers.

The first category of power generators face problems of highly competitive prices for their power, inordinately delayed payments and discoms refusing to buy the power under some pretext or the other. The second type of generators in business are burdened with a plethora of charges. The charges vary with the states, but common among them is the cross subsidy surcharge (CSS), a levy that state governments impose to pay for the free or cheap power they provide to poor consumers. Often these charges are so high as to make rapid progress in renewable energy project roll-out impractical. For instance, in Tamil Nadu, Karnataka and Punjab, the CSS works out to between ₹2 and ₹2.5, depending upon who they sell the power to. Rajasthan had exempted CSS for wind and solar but has recently brought in an ‘additional surcharge’ of 87 paise per unit of power. Maharashtra (a State, incidentally, notorious for delaying payments to generators) charges ₹3.20.

Many industry sources say that the most unhelpful policy environment exists in the BJP-ruled Maharashtra, while the most helpful State is the Congress-ruled Karnataka.

“Signing of power purchase agreements is a big issue in Maharashtra,” said the head of a renewable energy developer, who did not wish to be named. “A consumer can buy power only from one generator and for a minimum period of one year. Consumers are forced to buy from only one developer,” he said.

Maharashtra has also brought in an electricity duty on consumers who buy directly from generators, in order to prevent customers of its discom moving away to private generators. Furthermore, consumers in IT Parks and software technology parks cannot buy power from private generators.

Renewable energy producers also face the problem over the method of levying transmission charges, for using the state-owned transmission lines while selling their electricity. In most states, these charges are based on the installed capacity, which is a problem. A coal-fired power plant of 100 MW will produce around 800 million kWhr of electricity in a year; a 100 MW wind plant will be lucky if it generates 265 million, solar will be around 175 million. If the transmission charge is levied on per-MW of installed capacity, renewable energy plants will be paying far higher per kWhr than conventional.

They have been asking for transmission charges to be based on the generation, rather than installed capacity – but no state is agreeing. The transmission charges could be punishing — in Rajasthan, for instance, it works out to nearly a rupee per unit.

Further, RE generators complain that they are treated on par with conventional energy producers when it comes to keeping up their promise on supply of electricity. If a wind company, for example, promises to supply say x units of electricity between 3.45 pm and 4 pm the following day, it is strictly held to the commitment, even though the norms of the Central Electricity Regulatory Commission allow 15 per cent deviation either way to renewable energy plants.

“This is a very serious problem,” says Sunil Jain, CEO & Executive Director, Hero Future Energies, a wind and solar power producer. Renewable energy is intrinsically infirm, they can produce electricity only if wind blows or sun shines, and it is impossible for them to adhere to the schedules the way thermal power generators do. “States should follow CERC norms,” says Jain.

Perhaps the best example of states not being in alignment with the Centre’s ambition is ‘net metering’. Net metering allows rooftop solar power plant owners to put the energy they do not self-consume into the grid and get a credit for it in their electricity bills.

Entities with large roofs, such as colleges and factories, would put solar plants if only they get some credit for any surplus they may generate. In the absence of net metering, a solar plant on the roof of an educational institution will lie unutilised during the summer months, as the institution will be shut for vacation and will have no use of the power.

Most states have unhelpful rules for net metering. Tamil Nadu, for instance, allows net metering only for individual houses, and not for educational institutions or factories. Many other states limit the capacity for net metering, say 1 MW – if a roof has more than 1 MW, too bad. And yet, the government of India intends to see 40,000 MW of rooftop plants set up by 2022; today India has 1,000 MW. Many industry players observe that there is a lack of seriousness on the part of the states in encouraging renewable energy. They note, for instance, that policies are brought in, but it takes inexplicable long time to formalise them by way of gazette notifications. Till the policies are notified, officials down-the-line refuse to implement the policies.

“Whether it is open access or rooftop or enforcement of renewable purchase obligations, the intent on the part of the state machineries seems completely missing,” observes Vishal Pandya, Co-founder & Director, REConnect Energy Solutions, a consultancy. Without cooperation from the states, which is absent today, the Central government’s targets have no chance of being met, he says.

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