Making India a Solar Energy Economy – Prospects & Challenges
Submitted by – Ravi Prakash, 5th Year, B.A.LL.B.(Hons.), HNLU
Hidayatullah National Law University, Raipur
Email id – [email protected]
1 MAKING INDIA A SOLAR ENERGY ECONOMY – PROSPECTS AND CHALLENGES
Ravi Prakash*
Abstract
The Indian power sector is witnessing a revolution as excitement grips the nation about
harnessing electricity from various renewable sources of energy. India has become the world’s next clean
energy ‘hotspot’ as it plans to meet its substantial future energy from renewable sources. These include
wind, solar, bio-mass, hydro, wastes etc. Electricity generation from renewable energy sources is
increasingly recognized to play an important role for the achievement of a variety of primary and
secondary energy policy goals, such as improved diversity and security of energy supply, reduction of
local pollutant and global greenhouse gas emissions, regional and rural development, and exploitation of
opportunities for fostering social cohesion, value addition and employment generation at the local and
regional level.
Due to its geographical location; India receives a high intensity of solar radiation. Currently, India is
pushing forward a massive plan of generating electricity by using solar radiation. Against this backdrop,
the paper attempts to discuss the existing legal and policy framework for solar power generation. A power
system mainly comprises three aspects i.e. generation, transmission and distribution. The present paper
focuses on generation of electricity from solar power plants and the existing legal and regulatory
framework for setting up of solar power plants. Many states in India have formulated renewable energy
policies and states like Gujarat have come up especially with a solar power policy. An attempt has been
made to make a comprehensive analysis of five leader state policies relevant for solar power generation
with existing central govt. policy & against the framework of existing Electricity Act, 2003. The paper also
advocates for a new renewable energy law to provide a new stimulus to the sector.
1. Introduction
1.1 Renewable energy in India – an overview
The electrical and power sector in India has developed significantly over the 65 years of Independence.
As the socio-economic pattern of India kept continuously evolving and development reached far off to the
1
remotest village of it, in spite of achieving great strides in electricity sector , access to power and reliability
of power remains the major issues. Currently, India is ranked fifth globally in installed power capacity with
nearly 147.965 GW.2 The fossil fuel (mainly coal) based power generation contributes to 76 GW of
electricity while renewable comprises of 48.6 GW including hydro- power and 12.6 GW without it.3
Howsoever, India’s fast economic growth comes with a growing demand for energy and it is also
predicted that as it propels the path of socio-economic reforms, it will face an acute shortage of power
until & unless total generation capacity is increased proportionately. The impact will be most severe on
rural masses4. There would be a desperate need for some miraculous energy sources for remote village
house –holds.
* Ravi Prakash, 5th Year, B.A.LL.B. (Hons.), Hidayatullah National Law University, Raipur. The author can be reached at
[email protected]
1
For a study on growth and development of Indian power sector refer Rajiv K Mishra, A Report on Rural Electrification in
India “Looming crisis of Indian Power sector” available at
http://www.ic2.utexas.edu/images/faces/mishra-2008-indianpowersector.pdf
2
As on 31 March 2009, India has a total installed capacity of 147. 965 GW. See, Annual Report 2008-09, Ministry of Power,
available at
http://www.powermin.nic.in/reports/pdf/Annual_Report_2008-09_English.pdf
3
ibid
4
The Integrated Energy Policy states that "Access to electricity is very uneven. Around 57% of the rural households and
12% of the urban households i.e. 84 million households (over 44.2% of total) in the country did not have electricity in 2000.
Even those who have access to electricity suffer from shortages and poor quality of supply. Unscheduled outages, load
shedding, fluctuating voltage and erratic frequency are common. Consumers and the economy bear a large burden of the
consequences of this poor quality of supply."
See also, National Electricity Policy 2005, available at http://www.powermin.nic.in
2 The challenges & problems are manifold (energy security being one) before an emerging economy like
India which has millions of it populace below poverty line. A country which faces crisis of energy security
and at the same time cannot refrain from contributing positively in averring the impact of climate change
is left with no other solution than to switch over to renewable energy production. India has been endowed
with a vast pool of renewable energy sources such as hydro, solar, wind, bio-mass etc. At presently
renewable energy contributes about 9% (12.6 GW) of total installed electricity capacity in India5. The
result achieved in the renewable energy sector during 10th five year plan (2002-07) was positive and it
provided the regulatory authorities with the optimism to initiate major reforms in renewable energy power
sector.6 Even the current five year plan outlines a target of generating additional 14-20 GW of electricity
7
from renewable source of energy. It identifies solar power generation as one of the means to achieve it.
If the trend during tenth five year plan (2002-07) was to promote & generate electricity from wind power
plants then perhaps current five year (2007-12) plan will be known for generation of electricity from solar
power plants. The advantages of renewable energy are expected to contribute significantly in the
developmental process.
India’s recent success in clean energy is just a beginning. The trends and analysis outlines in the
following pages provides a glimpse of exciting developments to come, and reveal that with continued
policy support, investment and technological innovation, India could become a global leader in renewable
energy. A sound legal and policy framework is essential to continue this trend. These policies largely
relates to financial, fiscal incentives or special directives aimed to encourage/enforce utilities to buy
renewable energy power, promotes companies to set up renewable energy projects, equipment
companies to manufacture renewable energy equipment or private and government entities to undertake
R&D relating to renewable energy.
1.2 Solar energy – the promising prospect
“The Central power plant, like much bulk electric transmission, will soon become a white elephant,
uneconomic to run, and difficult to sell. Such plants are likely to survive in significant number by 2030 in
any market economy and would be replaced by more localised electricity generation.”
‐
Amory Lovins, Int’l Energy Expert
The days will not be far off when power plants will shift from large, remote centralised stations to rooftops,
basements, backyards with no fuel cost characterised by quality & reliability. As human civilisation
witnesses a gradual shift towards harnessing cleaner form of energy from various sources; the solar
energy is going to play an important role. Perhaps, it is the only energy which has absolutely no fuel cost.
To tap the infinite energy from the sun and transform as well as to transmit it to each household, the
Indian govt. has accelerated promotion of the use of universally available solar energy through its various
policies and incentives.
India due to its geo-physical location receives solar energy equivalent to nearly 5,000 trillion KWh/ year,
which is far more than the total energy consumption of the country today.8 But it produces a very
negligible amount of solar energy i.e. a merely 0.2 percent compared to other energy resources.9 The
Govt. of India, in all its recent policies relating to power sector has given due importance to harness the
sun’s energy in various ways10. Solar energy is harnessed through the available technologies like Solar
Photovoltaic (SPV), Solar Thermal (ST), and Concentrating Solar Power (CSP). Some parts of India like
5
Excluding Hydro- Power Generation which accounts for approximately 24 % of total capacity
During X Five year plan a total of additional 27 GW of electricity was achieved, out of which Renewable Energy accounted
almost one-fourth of it. It was mainly due to the scaled installation of wind power generation in various states supported by
good policy framework.
7
The XI five year plan envisages a total addition of 80 GW of electricity to the installed capacity from all sources.
8
See, CERC Draft explanatory memorandum for tariff norms for Solar Power Projects, available at
http://www.cercind.gov.in/2009/July09/Draft-Explanatory-Memorandum_Solar-Power-Projects.pdf
9
ibid
10
The solar energy can be harnessed mainly through two roots i.e. Heat & Light. The thermal ( heat) route uses the heat for
water heating, cooking, drying, water purification, power generation, and other applications; the photovoltaic route ( light)
converts the light in solar energy into electricity,
6
3 western part of Rajasthan (Thar desert) receive the required solar radiation for use of Concentrating Solar
Power (CSP) technology. It is estimated that a 60 km x 60 km of area can produce 1, 00,000 MW of
power using CSP technology. The advantages which distributed generation of solar energy brings are
unique. It provides easy access to power for tail-end users like rural people, it avoids high transmission &
distribution (T&D) costs, provides reliable and quality power and is environmentally benign. It also
indicates that a decentralised power generation can perfectly complement decentralised development
and governance11. Even national electricity policy 2005(NEP) envisages that in order to ensure better
rural electrification infrastructure and to operate and maintain supply system for securing reliable power;
the responsibility of operation & maintenance and cost recovery could be discharged by utilities through
12
appropriate arrangements with panchayats, local authorities, NGOs and other franchisees etc. So, the
promotion of generation of solar energy can significantly contribute in attaining the developmental
agenda.
Such renewable energy power production potential in India can be easily scaled up innovatively in an
affordable and sustainable manner. Howsoever, the prerequisite to success of any such massive plan is
a comprehensive legal/policy framework for the entire cycle of development for each of these renewable
energy resources.
Presently, solar energy is facing three fundamental challenges i.e.; cost, its manufacturing procedure (R
& D) and the land acquisition for erecting solar power plants. Nevertheless, the Govt. (Central as well as
State) through various policy measures has recently attempted to address these challenges. It is also
estimated that once the scaling of solar energy is done a greater access to the market will be facilitated13
and its cost will come at par with conventional source of energy. All the policy measures focus on
promotion of R & D in the respective technology to enhance the efficiency and viability of the project. As
these technologies will be categorised as environmental sustainable technologies(EST’s); under the
existing international legal framework, the developed economies have an obligation to transfer
technology.14 The land acquisition policy has been always a controversial issue in India,15 but, perhaps
one of the viable solutions to it is the acquisition through local bodies, panchayats & municipality. All the
existing policies provide for the acquisition of land by involving local bodies and panchayats for the
successful implementation of projects.
2. Indian electricity sector (Legal & regulatory framework)
The constitutional scheme essentially provides for a federal structure of governance16. Electricity is a
subject matter of concurrent list17 in the constitutional scheme which essentially means that both Centre &
State can legislate & regulate the subject matter. As the delicate balance of power in legislative field is
tilted in favour of Centre rather than federal units (states)18, the central law gains a primacy over state law
in situation of conflict. According to article 254(1) of the constitution, in case of conflict between laws
made by centre & state over the same subject matter, the state law becomes void to the extent of
repugnancy19. Howsoever, presently the most important legislation to regulate power sector is Electricity
Act, 2003 by central govt.
2.1. Electricity Act, 2003
The Electricity Act, 2003 is a major enactment which regulates generation, transmission and distribution
of electricity in India. This law is well supplemented with a set of by- laws, policies, codes, rules, and
regulations covering all aspects of power sector.20 The impact of such a sound legal framework can be
11
See, 73rd & 74th Constitutional Amendment Act 1992
See, Para 5.1.6, National Electricity Policy 2005
13
See, Alexandra L Carleton, Mandating Market Access for Renewable Energies in Australia, (2008) 26 JERL 402
14
See, Art. 66.2, TRIPS
15
Ravi Prakash, Reconsidering law relating to Land Acquisition, (2008) 6 MLJ 83(Art.)
16
Federalism is one of the basic features of Indian Constitution. See, Kuldeep Nayar v. Union of India (2006)7SCC1
17
Entry 37, List III, VII Schedule, Constitution of India
18
See, S.R. Bommai v. Union of India (1994) 3 SCC 1. Also see, Kuldip Nayar v. Union of India (2006)7SCC1,44 para 37
19
See, Deep Chand v. State of U.P. AIR 1959 SC 648
20
Various policies like National Electricity Policy 2005, National Tariff Policy 2006, National Rural Electrification Policy 2006,
respective Grid Code, and rules, regulations made by CERC and SERC held in regulating Electricity sector in India.
12
4 easily witnessed by analysing power sector performance post-2003.21 The Central law provided an
enabling framework to stimulate private investments for capacity augmentation in a de-licensed regime22,
ushered required competition in the power market23, established regulatory and monitoring agencies/
bodies24 and contained features like open access25, captive generation26, cogeneration27 etc. Various
provisions of the Electricity Act, 2003 give a major thrust to the renewable energy sector & puts forth the
need and priority to promote renewable energy through its enabling provisions. The relevant provisions
for this are as follows:‐ Under Sections 3(1) and 3(2), it has been stated that the central govt. shall prepare and publish
the National Electricity Policy and National Tariff Policy, in consultation with the state
governments and authority for development of the power system based on optimal utilization of
resources such as coal, natural gas, nuclear substances or material, hydro and renewable
sources of energy.
The central govt. had notified the two policies viz. National Electricity Policies- 2005 (NEP) & National
Tariff Policy- 2006 (NTP) which lay down further policy framework for the development and generation of
renewable energy.
‐ Section 4 states that the central govt. shall, after consultation with the state governments,
prepare and notify a national policy, permitting stand-alone systems28 (including those based on
renewable sources of energy and other non-conventional sources of energy) for rural areas.
In pursuance of the above mandate, the Central govt. had formulated a policy known as Integrated Rural
Electrification Policy- 2006 (IREP).
‐ Section 61, 61(h) and 61(i) states that the appropriate commission shall specify the terms and
conditions for the determination of tariff, and such determination should be guided by the
following factors such as the promotion of cogeneration and generation of electricity from
renewable sources of energy; and the National Electricity Policy and Tariff Policy.
‐ According to Section 86(1) and 86(1) (e); the SERC’s shall discharge the following functions in
order to harness a cost efficient renewable energy from various sources :- (i) promote cogeneration
and generation of electricity from renewable sources of energy (ii) to providing suitable measures
for connectivity with the grid (iii) sale of electricity to any person, (iv) purchase of electricity from
such sources, a percentage of the total consumption of electricity in the area of a distribution
license.
21
See, Annual Report 2008-09, Ministry of Power, available at
http://www.powermin.nic.in/reports/pdf/Annual_Report_2008-09_English.pdf
22
See, Objects & Reasons of the Electricity Act, 2003
23
The electricity Act, 2003 introduces newer concepts like power trading and open access to overcome the ills of existing
mechanism cross subsidies & sinking financial status of SEB’s under previous regime. Open Access on Transmission and
Distribution on payment of charges to the Utility will enable number of players utilizing these capacities and transmit power
from generation to the load centre. This will mean utilization of existing infrastructure and easing of power shortage. Trading,
now a licensed activity and regulated will also help in innovative pricing which will lead to competition resulting in lowering of
tariffs.
24
See, Electricity Act, 2003, sec. 2 (4) Electricity Act defines ‘Appropriate Commission’ means the Central Regulatory
Commission referred to in sub sec. (1) of sec. 76 or the State Regulatory Commission referred to in section 82 or the Joint
Commission referred to in sec. 83 as the case may be.
25
See, Objects & Reasons of the Electricity Act, 2003. Sec. 2 (47) defines ‘Open Access’ means the non-discriminatory
provision for the use of transmission lines or distribution system or associated facilities with such lines or system by any
licensee or consumer or a person engaged in generation in accordance with the regulations specified by the Appropriate
Commission.
26
See, Electricity Act, 2003, sec. 2 (8) defines ‘Captive generating plant’ means a power plant set up by any person to
generate electricity primarily for his own use and includes a power plant set up by any co-operative society or association of
persons for generating electricity primarily for use of members of such co-operative society or association.
27
See, Electricity act, 2003, sec. 2 (12) defines ‘Cogeneration’ means a process which simultaneously produces two or
more forms of useful energy (including electricity).
28
See, Electricity Act, 2003, sec. 2 (63) defines ‘Stand alone system’ means the electricity system set up to generate power
and distribute electricity in a specified area without connection to the grid.
5 The Electricity Act, 2003 casts a significant duty upon the concerned various authorities to provide a
suitable framework for the generation of power from renewable sources of energy.
2.2 National electricity policy- 2005 (NEP)
The policy formulated by central govt. in pursuance of sec. 3 of the Electricity Act, 2003 aims at laying
guidelines for accelerated development of the power sector, providing supply of electricity to all areas and
protecting interests of consumers and other stakeholders keeping in view availability of energy resources,
technology available to exploit these resources, economics of generation using different resources, and
energy security issues.
Accessibility to electricity and availability of power by 2012 to all are the twin goal set out in the NEP.29
The policy in order to meet its various objectives emphasises in harnessing power from renewable
sources of energy. It postulates a decentralised distributed generation facility from renewable sources of
energy for establishing a reliable rural electrification system.30 It also provides for the necessity &
importance of grid connected renewable energy.31 The policy outlines following measures for the
promotion & generation of renewable energy:•
To make efforts to reduce the capital cost of projects based on non-conventional and renewable
sources of energy by promoting adequate competition within such projects and promotional
measures.32
•
To make efforts for research, development, demonstration and commercialization of nonconventional energy systems which meets international standards, specifications and
33
performance parameters
•
The spirit of sec. 86 of Electricity Act has been given a new life in the policy by mandating
following to the SERC34 :
•
o
To specify percentage of RPO (Renewable Energy Purchase Obligation)
o
To determine applicable tariffs for renewable energy power
o
Such purchase of power by distribution companies shall be through competitive bidding
process
o
To determine an appropriate differential in prices to promote renewable energy
technologies.35
The cogeneration of electricity should be promoted to encourage energy efficiency and grid
stability. The SERC to facilitate necessary arrangements between co-generator and distribution
licensee for purchase of such surplus power.36
The policy strengthens the mandate of Electricity Act, 2003 regarding generation of power from various
sources effectively. The provision also mandate generation of power based on stand-alone system37.
2.3 National tariff policy- 2006 (NTP)
29
See, Objective, National Electricity Policy-2005.
See, National Electricity Policy- 2005, para 5.1.2
ibid, para 5.1.2 (d)
32
ibid, para 5.12.1
33
ibid, para 5.6
34
ibid, para 5.12.2
35
See, CERC Draft notification on (Terms and Conditions for Tariff determination from Renewable Energy Sources)
Regulations, 2009 Available at http://www.cercind.gov.in/2009/July09/Consolidated-Draftf-Regulation_incorporating-SolarPower-Projects.pdf
36
See, Supra 29, para 5.12.3
37
See, Supra 29
30
31
6 The NTP has been formulated by Central govt. in compliance with sec. 3 of Electricity Act, 2003 and in
continuation of National Electricity Policy-2005. The NTP sets out objectives like assured electricity to
consumers at reasonable and competitive rates, financial viability of the sector, promoting transparency,
consistency & predictability in regulatory approaches across jurisdiction & encouraging competition.38
The policy stipulates that the appropriate commission39 has to determine preferential tariff for
procurement of renewable energy power by distribution licensees under renewable purchase obligation
(RPO) regime as envisaged under section 86(1)(e) of Electricity Act, 2003.
“………..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.
(2) 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.”
(3) The Central Commission should lay down guidelines within three months for pricing
non-firm power, especially from non–conventional sources, to be followed in cases
where such procurement is not through competitive bidding.
The various SERC had taken an active initiative (either suo- motu or on received application by
stakeholders) to determine the tariff for electricity generated from solar power according to the norms and
40
principles set out in NTP. Integrated Rural Electrification Policy (IREP) as formulated under mandate of
sec. 4 & 6 of the Electricity Act, 2003 supplements the electricity generation from renewable sources as
envisaged in the above mentioned policies appropriately.
2.4 Other Legislations / Statutes
Setting up of solar power plant on a commercial basis and increased grid- interactive energy will attract
(directly/ indirectly) various other central or state statutes e.g. land reforms, environmental legislations
and tax regulations. Perhaps this is one of the reasons why a majority of state policies contain a
41
As the financial incentives are granted and administered by
mechanism of single window clearance.
both centre & state respectively, various regulatory authorities at both level assume an important function.
Similarly, even to set up a large grid interactive solar power plant under MNRE scheme require basic
input such as land; which remains an exclusively state subject.
Another set of legislations which is likely to cause more hiccups are environmental legislations. Some
state policy proposes to use barren wasteland for the generation of solar power, but by virtue of Supreme
court ruling all such wasteland falls within the definition of ‘Forest’42 which demands clearance under
Forest Conservation Act, 1978. Although, generation of solar energy is a zero-carbon program which
hardly has any adverse impact on climate change and environment, the land policy (especially
agricultural land) will certainly affect and impact the future of project in several states.43 The advantage
with solar power generation is that it neither causes air pollution, nor requires any environmental impact
assessment (EIA) as needed in case of hydro power, neither does it cause noise pollution. So, the
energy promised by solar power plants generally reflects a win- win situation for all stakeholders.
2.5 Why not a new renewable energy law
38
See, objective of National Tariff Policy- 2006 available at
http://www.powermin.nic.in/acts_notification/electricity_act2003/pdf/Tariff_Policy.pdf
39
See, Electricity Act 2003, Sec. 2 (4)
40
See, Maharashtra State Electricity Regulatory Commission order dated May 08, 2009 in the matter of tariff for solar based
power generation projects within Maharashtra under MNRE scheme. Available at
http://www.mercindia.org.in/pdf/PubN_13_02_09_Solar_Eng_Draft_Order.pdf
41
Refer part 4 of this paper
42
T.N. Godavarman Thirumulpad Versus Union of India, WP 202/1995 judgment dated (2005.09.26)
43
See, Respective renewable energy policy of Haryana & Karnataka.
7 With all promising future of renewable energy potential in India, a separate renewable energy law is
expected to play the role of a catalyst in the sector. It is important to note that India is one of the few
countries that pioneered the development of renewable energy and initiated reforms at institutional and
policy framework in early 1990s. The anomaly of the situation lies in the fact that the administrative
machinery at the centre as well as at the state level for dealing with the activities of the renewable energy
sector has been in place for a fairly long period of time but no concrete legislative policy exists. Moreover,
there is a specialized financial agency, the Indian Renewable Energy Development Agency (IREDA)44 to
cater the financial requirements of the renewable energy sector in India. So, perhaps a concrete,
comprehensive legal framework on renewable energy will stimulate growth and provide greater
opportunities in the area.
There is a need of a new comprehensive renewable energy law because:o The use and prospect of renewable energy is not limited to only electricity generation rather
extends to important sectors like transport.
o Under the existing regulatory and legal framework there is a divide between the electric power
sector and other energy sector (like coal, petroleum, Natural gas)45
o To make renewable energy an engine of the common man’s growth requires a detailing of
technological, developmental, legal policy and institutional framework.
o Renewable energy like bio-fuels cannot be regulated under Electricity Act 2003.
3. National policies
The Central government’s approach to renewable energy is quite clear as it targets for at least 10% of
grid-connected power to come from renewable sources by 2012; which indicates an increasing push for
clean energy. In addition to the Electricity Act, 2003 and policies outlined above, the central government
has provided several specific renewable energy incentives. These are predominantly fiscal incentives,
including direct and indirect tax benefits, renewable energy financing and guidelines for solar feed-in
tariffs. For the purpose of all these fiscal incentives as well as the monitoring of projects, the ministry of
new and renewable energy along with IREDA remains the nodal agency.
3. 1 Other important incentives by central govt. for promotion of renewable energy
Direct tax benefits
• Accelerated depreciation:- The Central govt. presently allows for accelerated depreciation at the
rate of 80-100% on a written down value46 basis for various renewable energy items under
section 32 Rule 5 of the Income Tax Act, 1961.47
•
Tax Holiday: - Under section 80 (I) (A) of the Income Tax Act, the central govt. offers a 10 year
tax holiday for all infrastructure projects.48
Indirect tax benefits
• Specified renewable energy devices (including Solar Energy) and equipment can obtain excise
duty exemptions or concessions.
•
Equipment for solar photovoltaic and solar thermal and power generation plant and machinery
enjoy a reduction in customs duty.
Foreign Direct Investments
44
The Indian Renewable Energy Development Agency was incorporated as a Public Limited Government Company in 1987
only. The twin objectives are The objectives of IREDA are:
• To operate a revolving fund for development and deployment of New and Renewable Sources of Energy.
• To give financial support to specific projects and schemes for generating energy through new and renewable
sources and conserving energy through energy efficiency.
45
These do not necessarily apply to the renewable energy sector; nevertheless they underline the need to have a central
renewable energy law for India in order to have a clear demarcation of the subject matter, activities, policies and regulations,
particularly in the context of portfolio standards and obligations.
46
Written down Value means the net value of an asset, i.e. its original cost (its book value) minus depreciation and
amortization. It is also called net book value.
47
Describe rule 5 & sec. 32 of IT Act
48
8 •
Foreign investors can enter into a JV with an Indian partner for financial and/or technical
collaboration
•
Proposals for up to 100 per cent foreign equity participation in a JV qualify for an automatic
route49
•
Government encourages foreign investors to set up projects on Build, Own and Operate (BOO)
50
basis
Apart from all these in direct benefits and incentives include:
•
Industrial clearances are not required for setting-up a renewable energy industry
•
No clearance is required from central electricity authority (CEA)51 for generation projects up to Rs
1 billion.
•
Soft loans are available through IREDA for renewable energy equipment manufacturing
•
The project can also enjoy various incentives under Semi-conductor Policy 2007, as silicon used
in STP & SPV power plants is a semiconductor.
3. 2 Generation based incentives (GBI) by MNRE for solar power plant (SPV & STP)
The MNRE has issued two separate GBI schemes (one for STP and other for SPV) exclusively for
promoting solar power generation in the state. The guidelines propose to extend the incentive to a
cumulative capacity of 10 MWp in a state and a total of 50 MWp across the country during 11th five year
plan. The scheme is available to only those solar power project developers who install and commission
their eligible project before 31st December 2009. The essential criterions to be satisfied by the eligible
projects are:ƒ
Grid interactive solar power generation plants with a minimum installed capacity of one MWp52
ƒ
A project developer can set up a solar power project (SPV or STP) up to a maximum capacity of
5 MWp in the country.
ƒ
Captive utilisation of power will not be eligible.
ƒ
If a project developer avails the benefit under sec. 32, rule 5 of the Income Tax Act, 1961
(claiming accelerated depreciation), then is not eligible for GBI incentives.
According to the GBI guidelines, all eligible solar power developer needs to furnish specific information in
the prescribed format to the IREDA.53 A project developer needs to furnish detail information on technical
and performance features, technical specifications, requirement and availability of land, title of the land,
capital cost, estimated life of the SPV/ STP power plant, quantum of electricity expected to be generated
and fed to the grid, proposed sale price of electricity from PV power plant, duration of power purchase
agreement and power purchase rate(s), arrangements for power evacuation and the time frame for
installation / commissioning of the grid PV power plant etc.54 The disbursement of incentive will begin only
when a minimum capacity of one MWp is commissioned and sold to the grid. Howsoever, the GBI
scheme excludes the provision of third party sale, banking and wheeling of power while availing it.
Feed-in tariffs for solar power
49
See, Policies for renewable energies/biomass in India, available at
http://www.nri.org/projects/biomass/conference_papers/policy_material_section_3.pdf
50
See, Guidelines for generation based incentives grid interactive solar thermal power generation projects, MNRE,
No.8/1/2007-08/ST, available at http://mnes.nic.in/pdf/guidelines_stpg.pdf
51
See, Part IX (Sec. 70-75) of Electricity Act, 2003.
52
Such generation of power may be either at single location of may be through modular units.
53
See, Application format for seeking GBI scheme for SPV/ STP. available at
http://mnes.nic.in/pdf/application_format_spg.pdf
54
See, para 3.5, Guidelines for generation based incentives grid interactive solar photovoltaic power generation projects,
MNRE, No.8/1/2007-08/ST, available at http://mnes.nic.in/pdf/guidelines_spvg.pdf
9 The GBI guidelines have provisions requiring IREDA to pay eligible solar photovoltaic power (SPV)
generators a maximum of Rs. 12 per kWh providing they were commissioned prior to 31 December
2009.55 Photovoltaic projects commissioned after this date will receive a maximum of Rs. 11.40 per
kWh.56 Solar thermal projects (STP) will receive a feed-in tariff of Rs. 10 per kWh.57 This incentive amount
would be in addition to the power purchase rate negotiated with the purchaser of the power. The total
amount paid to the generator (power tariff plus incentive payment) would be no more than Rs. 15 per
kWh for solar photovoltaic plants (SPV)58 or Rs. 13 per kWh for solar thermal plants (STP)59. This GBI
scheme will be available to all qualified developer for a maximum period of 10 years from the date of
approval provided that the utility continues to purchase power from that grid interactive solar power
project.
GBI schemes for SPV & STP power generation is a welcome step towards creating a competitive regime
among member states and indicates some progress toward harnessing solar power. Nevertheless, the
scheme is available to only a total capacity of 50 MW and that also to a max. of 10 MW in one state. Due
to technological deficiency, the cost associated with such power makes it uneconomical; hence such
scheme only serves the superficial purpose.
3.3 Draft national solar mission under national action plan on climate change (NAPCC)
Govt. of India60 had formulated NAPCC61 in July 2008 to deal with the global threat of climate change
while maintaining a sustainable economic growth. The NAPCC essentially consists of eight diff. missions
(National Solar Mission being one); which the central govt. will be formulating and a roadmap will be laid
down to mitigate these adverse impact of climate change without having any further negative impact on
62
economic development. As a consensus exists among the nation states that increased global carbon
emission had led to present state; it becomes imperative for the nation state to adopt cleaner and zero
carbon mode of development. A developing economy like India which produces a minimal per capita CO2
emission, nevertheless has attempted to take initiatives to become zero carbon economy. As solar
energy is characterised as zero carbon fuel of future, any such policy will have a greater impact on it.
The Draft Mission envisions to make India’s economic development energy efficient & to move from fossil
fuels to non- fossil fuels by depending much upon solar power generation. It also recognises the
importance of decentralised distribution of energy in rural India which is in tune with the Electricity Act
200363, National Electricity Policy- 2005 (NEP)64 & Integrated Rural Electrification Policy- 2006 (IREP)65.
The draft mission identifies to bring down cost of solar power generation to Rs. 4-5/Kwh by 2017-2020
taking 2009 as base year as one of its objectives. Although, the policy is presently in draft version,
howsoever, if implemented, the next phase of revolution in power sector will be brought by Solar Power
Generation. The plan lays down the following as main objectives:Solar Power Generation
ƒ
By 2020 – a capacity of 20,000 MW
ƒ
By 2030 – a capacity of 1,00,000 MW
55
See, GBI scheme for Solar Photovoltaic Power Generation projects, available at http://mnes.nic.in/pdf/guidelines_spg.pdf
ibid
57
See, Supra 50
58
See, Supra 55
59
See, Supra 50
60
PM's Council on Climate Change was constituted on 6th June 2008, a committee chaired by the Prime Minister called
Prime Minister's Council on Climate Change will coordinate national action for assessment, adaptation and mitigation of
climate change. Available at http://pmindia.nic.in/pmcommittee.htm
61
Available at http://pmindia.nic.in/climate_change.htm
62
See, Objectives; NAPCC available at http://pmindia.nic.in/climate_change.htm
63
See, Sec. 6, Electricity Act, 2003
64
See. Objectives of the National Electricity Policy 2005. The policy has been formulated by Central Govt. under sec. 3 of
the Electricity Act, 2003
65
Objectives of National Rural Electrification Policy 2006, available at
http://www.powermin.nic.in/acts_notification/electricity_act2003/pdf/RE%20Policy.pdf
56
10 ƒ
By 2050 – a capacity of 2,00,000 MW
1. Cost reduction to achieve grid tariff parity by 2020
2. Achieve parity with coal based thermal power generation by 2030
3. 4-5 GW of installed Solar manufacturing capacity by 2017.
The draft proposes to create Solar Energy Authority of India (SEAI) under MNRE as monitoring agency
for implementation of plan. The generation of solar power under the plan is envisioned into three phases
with a clear target to be achieved.
Phase I (2009 -12) – This phase will be marked with specific challenges as it involves initial costs and
making any plan operational is always an exigent task. It has specific objectives such as driving down
cost, spurring domestic manufacturing and making solar energy technologically & economically viable.
But, year 2009 is almost over & the mission still in draft phase; thus it seems that plan will have certainly
diff. phase duration.
Phase II (2012-17) - The second phase of the plan is critical because the goal it sets to achieve will
mainly depend on the R&D and availability of technologies. The transfer of technology under existing
climate change regime is certainly going to play an important role. This phase involves the following
aims:1. Scaling up of various validated applications
2. To roll out rural electrification business model
3. Commercial deployment of solar thermal power plants with storage facility.
4. Pilot deployment/ dissemination of next generation technologies
5. Promotion of solar lighting & heating system on large scale through market mechanism but
without subsidies.
6. To reach an installed capacity of 6-7 GW by 2017.
Phase III (2017-20) - The third phase of plan will mainly depend upon success of first two phases as it
mainly seeks to achieve commercialisation of solar power, through the following aspects :1. Achievement of tariff parity with conventional grid power.
2. Commercialisation of storage technologies through incentives such as subsidies.
3. Commercialisation of indigenously developed PV & solar thermal technologies.
4. To reach installed capacity of 20 GW by 2020.
Policy & regulatory framework for solar power generation under draft mission
The regulatory framework and scheme which the draft mission envisions are similar to the existing one.
Nevertheless, it has some unique mandate to create an environment which will enable large, rapid capital
investment in solar energy applications which encourages technical innovations & lowers the cost in solar
power generation. The draft policy envisages following incentives for the investors66:1. A proposed feed- in –tariff for various applications based on National Tariff Policy & Electricity
67
Act, 2003.
2. 10 years of tax holiday.
66
Howsoever, it is pertinent to note that similar incentives and mechanisms do exist under various central / state govt.
policies for promotion of renewable energy.
67
Many SERC in India had determined the tariff policy for solar power generation.
11 3. Exemption of various duty/ taxes (customs duty & excise duty) on capital equipment & others.
4. Capital subsidy for solar heating applications & rural electrification for limited period.
5. Proposes revision of tariff guidelines & subsidy levels before the beginning of each financial year
to facilitate tariff announcement by the regulators.
6. Feed- in – tariff for solar power will be distributed between Centre, State & utility, where utility
paying Rs. 3-5/Kwh & the balance by Centre & State in the ratio of (70:30).
7. Mandatory solar power purchase obligation (depending on state’s solar resources) for states.
Introduction of Renewable (Solar) Energy Certificates Mechanism to allow states to buy & sell
certificates to meet this obligation.
8. Single window clearance mechanisms for all required permissions.
9. Standard lease agreement for Solar installation on govt. land
10. State transmission utilities (STUs) mandated to provide connectivity from nearest sub- station to
the solar plant in a prompt and time bound manner.
For successful implementation of the proposed National Solar Mission, the govt. must speed up the
process which must be reflected into suitable action program. With the 2009 coming to an end, and the
policy still in its draft phase, the vision has become more unrealistic. Anymore delay in execution of
Phase- I plan will significantly affect the success of Phase II & III.
4. State policies
“Winning the opportunity to receive the national subsidy is one thing, selecting a winning state is
another.”
-Debashish Majumdar, Chairman IREDA68
As discussed earlier, electricity is a subject matter of concurrent list, both state and centre has legislative
and regulatory power. Many states had formulated respective policies to attract investment and promote
generation of renewable energy. In general the leading & favourable states for generation of renewable
energy are Karnataka, Tamilnadu, Maharashtra, Gujarat, Haryana, Punjab, West Bengal and Rajasthan.
As different states in India have different levels of development & market friendliness and as the scenario
keeps changing constantly, it becomes very important to choose a right state for solar power
generation.69 The study of policies of five different states undertaken here are nevertheless champions
in generation of renewable energy in last 10 years. Gujarat is the leading state which had prepared an
exclusive policy for generation of solar power. It is also expected that in the near future many states will
follow.
4.1 Gujarat
Gujarat is one of the most industrialised states in the India and hence has an acute demand of power
security. In order to sustain this leadership through preventive and other value interventions; which aimed
to reduce the spread and depth of externalities and vulnerability in multiple spheres of economic
development, Govt. of Gujarat formulated Solar Power Policy-2009 which aims at “efficient use of
conventional energy, proactively establish and promote sustained use of new and non- conventional
energy sources and applications to reduce emissions and related impacts of climate change.”70
Solar energy being a non- firm power71 mainly depends on solar radiation as fuel. The state is endowed
2
72
with a high solar radiation levels i.e. approx. 5.6 kWh/m /day with 300 days of clear sun in a year with
68
Alexis Ringwald, India Renewable Energy Trends, Centre for social market , Discussion Paper Series, 2008
Presently, the Solar Power Generation is a costly affair and any project developer would afford to fail the plan.
70
See , objectives, Solar Power Policy 2009 available at http://www.indextb.com/solar-policy-09.pdf
71
Non firm power means the power generated from renewable sources, the hourly variation of which is dependent upon
nature’s phenomenon like sun, cloud, wind, etc. that cannot be correctly predicted.
69
12 conducive arid condition and minimal sun tracking, especially in the barren wasteland areas. The
renewable energy policy introduced in this state is the first of its kind, created exclusively for harnessing
solar energy.
4.1.1 Solar power policy -2009
The policy seeks to achieve three sets of objective mainly: Energy Security, Socio-economic
transformation & technological development (R &D).73 The policy aims to promote generation of clean &
green power using solar energy, to lower its dependence on fossil fuels. It proposes to be a vehicle of
socio- economic change by generating employment locally, by using wasteland productively, by
spreading environmental awareness and putting up an appropriate investment regime for CDM projects74.
One of its objectives is promotion of R & D and facilitation of technology transfer75. Salient Features of
Solar Power Policy 2009
•
To mitigate the adverse impact of climate change; it restricts use of any form of fossil fuel in Solar
Power Projects.
•
Exemption from payment of electricity duty76
•
Exemption from demand cut77
•
The wheeling78 of electricity generated from solar power plants is allowed at a rate of 2% of
energy fed into grid.
•
The electricity generated shall be metered on a monthly basis & ABT79 compliant meters at the
interface point in a grid connected power project.80
•
The power by the solar power units shall be injected at 66 KV.
•
The transmission of power from solar sub-station to grid Sub-station shall be laid by GETCO.
•
In case of open access obtained for third party sale the developer has to pay applicable open
access charges and losses as determined by GERC. Howsoever, if such sale is within the state
then cross subsidy surcharge will not be applicable.
•
Imposes penalty for non-fulfilling power purchase obligation on distribution licensee.
•
Benefits of solar power policy-2009 will not be available to projects set up under MNRE incentive
scheme81 for solar power generation. In case of any subsidy/ incentive received to the project
from any source shall be reduced from the specified tariff except the benefit of accelerated
depreciation under Income Tax Act, 1961.
•
Only new plant & machinery shall be eligible for installation under this policy
•
All such projects which are set up under this policy can claim accelerated depreciation under sec.
32 of Income Tax Act, 1961.
72
See, Govt. of India, Booklet on Solar Heat, available at http://mnes.nic.in/booklets/Book3-h.pdf
See, Solar Power Policy – 2009 & its Objectives, available at http://www.indextb.com/solar-policy-09.pdf
74
All Solar energy power plants will qualify automatically as CDM projects under existing Kyoto Protocol mechanism.
75
Art. 66 of TRIPS facilitate technology transfer under the existing international legal regime. It casts a duty upon the
developed economies to transfer technology to the LDC’s and Developing economies.
76
Electricity duty is a charge paid for the consumption or use of electricity by any user.
77
During the peak load hours, the Discoms had a {demand cut}
78
Electricity Act, 2003 Sec. 2 (76) -Wheeling means the operation whereby the distribution system and associated facilities
of a transmission licensee or distribution licensee, as the case may be, are used by another person for the conveyance of
electricity on payment of charges to be determined under sec. 62.
79
'ABT' means availability based tariff. ABT is a three-part tariff comprising of fixed charges, variable charges, and
Unscheduled Interchange charges. The fixed charges would be linked to availability and variable charges to the scheduled
energy. The Unscheduled Interchange (UI) rate shall be applicable for the deviations from the schedule.
80
Interface Metering shall conform to the Central Electricity Authority (Installation & operation of meters) Regulation 2006.
81
The MNRE incentive scheme is mainly for solar power plant (SPV & STP) available for a total of 50 MW and max. 10 MW
for a particular state.
73
13 •
Solar power project developer has to pass on 50% of the gross benefits of CDM to the
distribution licensee with whom PPA is signed.
•
The solar energy shall not be covered under scheduling procedure for intra- state ABT.
The solar policy -2009 envisages that all solar plants which are installed and commissioned before 31-032014 are eligible for various incentives for 25 years from date of commissioning. The minimum capacity of
project (either SPV or ST) shall be 5MW each. The power plant can be set by any natural or juridical
person (in form of Company/ body corporate/ association/ body of individuals/ artificial person) for the
purpose of captive use82 and /or for selling of electricity. It is important to note that central govt. (MNRE
GBI scheme) is not available for the captive utilisation. The proposal has to be submitted to the nodal
agency (GEDA & GPCL) for approval. Howsoever, for grid interactive solar power projects the evacuation
facility from the solar sub-station to grid shall be laid by GETCO.
The Gujarat govt. policy exclusively for solar power generation has been received warmly by the
renewable energy sector and developer. Howsoever, the policy remains silent over certain important
issues like land allotment / acquisition for setting up of solar power plants, banking of power generated
etc. Absence of some specific mechanism like single window clearance for the project and a time- bound
execution of project can become a hindrance in realising its goal. Nevertheless, giving due account of
solar power radiation it receives and availability of barren land, creation of renewable energy SEZ will be
a welcome step for generation of solar power as envisaged by the policy.
4.2 Karnataka
Karnataka is a model state in the field of harnessing renewable energy in India. It is leading in the area of
green energy as till March 2009; total installed capacity from renewable sources has reached up to 2400
MW. The reason behind Karnataka being a hot spot for renewable energy investor is its initiative towards
formulating & concretising comprehensive legal, financial and administrative framework for this sector.
Karnataka has formulated a new renewable energy policy-2009 which will remain in force till 2014 or until
superseded or modified. The new policy vision is to harness green and clean renewable energy sources
in the state for environment benefits and energy security.83 The important mission which it seeks to
achieve is to increase the installed capacity from 2400 MW to 6600 MW by 201484 and make renewable
energy commercially viable. It not only provides single window service for project clearance but also for
technical consultation and sources of finance. Karnataka receives relatively a high solar radiation levels
2
85
i.e. approx. 5.5 kWh/m /day with more than 300 days; which make it an attractive destination for
development of solar energy. The policy aims a capacity addition of 100 MW grid connected power alone
from solar energy (including PV/CSP/Thermal) by 2014 estimating a likely investment of Rs. 1800 crore
investment in the sector.86 The nodal agency for implementing renewable energy projects in the state is
KREDL, nevertheless the role of various regulatory authorities related with power sector becomes
important for the purpose of successful execution of renewable energy (solar power) projects.
4.2.1 Salient features of Karnataka renewable energy policy 2009 (relevant for setting up of solar
power generation)
¾
Creation of special fund for renewable energy
•
•
“Green Energy Cess” of Rs 0.05 (five paise) per kWh on commercial and industrial consumers
to generate about Rs 55 crores annually.
Akshaya Shakthi Nidhi (Green Energy Fund) of Rs. 500 Crores to finance the renewable
energy projects. Raising up of govt. renewable energy bonds to the tune of 1000 crores.
82
See, Rule (3), Electricity Rules 2005 which explains captive user as the end user of the electricity generated in a captive
generating plant and the term “captive use” shall be construed accordingly.
83
See, objectives, Karnataka Renewable Energy Policy 2009
84
See, Mission, Karnataka Renewable Energy Policy 2009
85
Govt. of India, Booklet on Solar Heat, available at http://mnes.nic.in/booklets/Book3-h.pdf
86
See, Goals, Karnataka Renewable Energy Policy 2009
14 •
•
Akshaya Shakthi Nidhi Trust (a public- private investment trust) to raise funds through bonds or
scheme out portfolio investment for the purpose of project finance in renewable energy sector.
Consortium of KREDL, Akshaya Shakthi Nidhi Trust and energy department in collaboration with
the Karnataka State Finance Corporation (KSFC) will raise project finance from International
Finance Corporation (IFC), Power Finance Corporation (PFC) and External Commercial
Borrowings 87(ECBs).
¾
Land allotment/acquisition
• Land inventory of surplus and unused land will be undertaken district wise and will be provided
for renewable energy projects in and accordance to section 71 of the Land Revenue Act to
KREDL.
• It proposes a suitable amendment to sec. 109 of Karnataka Land Reforms Act for facilitating
private land purchase (mainly agricultural land). Provides equity of not less than 5% to take the
land owner farmers as equity partners in the renewable energy project.
• Forest land clearance within 4 (four) months.
• Land development by KREDL to facilitate setting up of RE projects. The project developers will
be leased out for a period of 30 years and are not allowed to further mortgage the land to any
financial or other agency.
¾
Approval or clearance of project
• Various statutory clearances within 90 days and 120 days in case of forest land.
• All SEZs’ 10% lands to be reserved for renewable energy projects and creation of Special
Economic Zone exclusively for renewable energy.
• Single window clearance mechanism within 90 days of application being submitted.
• Renewable energy developer to complete the project and commission it with grid synchronization
within 3 years from the date of statutory clearance.
¾
Grid connectivity & misc.
•
KPTCL and KREDL to undertake the work of LV, HV and EHV Substations and required
transmission and distribution lines necessary for the renewable energy projects. Howsoever, the
developer will have to bear the cost of transmission line from the project site to grid connectivity.
• Generation of electricity from renewable energy will be treated as an ‘Industry’ and all incentives
available under Industrial Policy-2009 of Karnataka will be made available.88
• Renewable purchase obligation- State govt. to procure 20% of the total renewable energy in
the state subject to KERC guidelines.
• Wheeling89 charges at the rate of 5% will be applicable whereas banking facility for the power
generated shall be allowed for a period of one year at the rate of 2% of the energy banked with
the KPTCL/ distribution licensee.
• Roof top grid connected solar power quantum fed to the grid will also receive additional tariff of
Rs. 5 per KWh along with Net Metering Facility.
• Exemption of demand cut to the extent of 50% of the installed capacity assigned for captive use
purpose.
¾
Financial incentives (Tax incentives)
• All the Central govt. incentive and schemes will ipso-facto continue to be passed by the state
govt. to the project developer through KREDL.
• Exemption from Entry Tax on energy generation and renewable energy devices/ machinery/
equipments
• Exemption
from
VAT
applicable
on
various
renewable
energy
equipments/
instruments/appliances under the provisions of Karnataka State Sales Tax Act.
• Facility of Letter of credit to the developer by ESCOMs for realising payment in scheduling period
for the renewable energy power sold to the ESCOMs.
• All agreements executed in setting up of renewable energy project are exempted from payment
of registration fee under the relevant provision of Karnataka Stamps & Registration Act.
• The renewable energy developer will share 50% gross benefits of CDM, with the KREDL/
distribution licensee with whom the PPA is signed.
87
For ECB’s the regulatory authority is the Central bank of India (RBI).
See, Karnataka Industrial policy -2009, available at http://www.fkcci.in/fkcci_pdf/industrial_policy.pdf
89
See, Supra 78
88
15 Besides all these provisions, the Solar Karnataka programme which focuses on rural solar energy
90
program sets out diff. approaches and policies based on stand-alone system .
•
•
A target of setting up 25000 solar roof tops of 5 to 10 kw with net metering
Use of rural solar technologies like Solar PV/ Solar wind hybrid system based on stand -alone
systems.
• Mandatory use of solar water heating systems – Local body by- laws to be amended.
Karnataka Renewable Energy Policy is comprehensively well crafted and its effect can be witnessed by
measuring the performance of renewable energy generation in the state.
4.3 Rajasthan
Rajasthan is one of the first states to kick-start the solar based power projects. Recognising the potential
of solar energy, government of Rajasthan had promoted setting up of the Mathania Integrated solar
combined cycle power project in the early Nineties.91 However, the said project did not materialize due to
various factors. Nevertheless, the recent shift in policy and regulatory framework in the power sector has
brought the development of renewable energy agenda to the forefront. The existing policy is known as
‘Policy for promoting generation of Electricity through Non- conventional Energy Sources -2004.
Rajasthan is an attractive destination for all renewable energy developer (specially for solar & wind
energy) as majority of its area receives solar radiation as high as i.e. approx. 6.2 kWh/m2 /day92 while
receiving minimum average rainfall. The vast availability of land (especially western part of Rajasthan)
makes it best suited for solar power generation. It is estimated that state of Rajasthan is likely to emerge
as the power house of the country with the possibilities of setting up installed capacity exceeding 100,000
MW from solar energy alone. It is also estimated that 5% of Thar desert (as part of Rajasthan & Gujarat) if
is covered with solar fields, it can meet today’s energy demand. The policy makes Rajasthan Renewable
Energy Corporation (RREC) the nodal agency for facilitating and implementing renewable energy
projects.
4.3.1 Salient feature of Rajasthan policy-2004 (relevant for setting up of solar power generation)
•
It defines Solar Plant as a power plant or system utilizing solar thermal energy through solar
photovoltaic or concentrated solar thermal devices including its integration into conventional fossil
fuel for generation of electricity.93
•
The power producers may use the power for captive consumption or for sale to consumers/
licensee including distribution licensee.
•
Renewable purchase obligation- for the state of Rajasthan has been kept at 12% maximum &
9.5 % as minimum of total energy consumption by Discoms from non- conventional energy
sources by 2011-12 as per Rajasthan Electricity Regulatory Commission (RERC’s) order dated
29th Sept. 2006
•
Interfacing arrangements from the points of generation to the pooling station shall be developed
and maintained by the power producer as per specification and requirements of other regulatory
framework.
•
No grid connectivity charges shall be paid by solar power plants up to total installed capacity of
50 MW in the state.
•
The transmission system from pooling station to the receiving station shall be developed by
power producer at its own cost.
•
Execution of Wheeling and Banking Agreement between power producer and Discom for such
banking.
90
See, Supra 27
See, Mathania Solar Hybrid Power project, available at http://www.rajenergy.com/mathania.htm
Govt. of India, Booklet on Solar Heat, available at http://mnes.nic.in/booklets/Book3-h.pdf
93
See, Policy for promoting generation of Electricity through Non- conventional Energy Sources -2004, 3.1 (xxix)
91
92
16 •
Except in case of power sold to Discoms, the power producer shall pay wheeling charges at the
rate of 10% of the energy billed into the grid irrespective of the distance from the generating
94
station and such charges will be inclusive of the T&D losses.
•
The price of power except sell to Discoms will be determined by the agreement between the
seller and the purchaser.
•
The power plants commissioned under the Policy would not be subject to merit order dispatch
regulations95.
•
Exemption from electricity duty at the rate of 50% for a period of 7 years from commercial
operation date for its captive use or for sale to a third party.
•
Mechanism of single window clearance on proposals received for developing the power plants
based on renewable energy sources.
•
Allotment of govt. land on concessional rates viz., 10% of DLC rates.96
•
The project will be treated as an “industry” and all the incentives available under state industrial
policy will be made available.
•
The policy imposes an amount of Rs. 50,000/ - per MW with RREC towards processing fee.
•
The time frame for completion of solar power projects shall be determined by concerned
committee.
•
In case of delay of completion of project, the policy envisages extension of time- framework in
lieu of payment of certain sum/ MW.97
Rajasthan, as discussed above has an enormous potential to become solar state of India. But, till date it
has recorded a very low rate of success. The non- existence of a concrete comprehensive and dedicated
policy & over regulation like imposition of fines/ fees are few areas for concern.
4.4 Haryana
Haryana is one of the states which has the potential of becoming the next renewable energy power house
(especially in case of solar energy). It receives an average of approx. 5.8 kWh/m2 /day98 solar radiation
with more than 320 clear sunny days in a year99. The state has formulated a policy for promoting
generation of electricity through renewable energy sources -2005. Through this policy the state govt. aims
to add a total generation of 500 MW through renewable energy by 2012. It identifies promotion of solar
energy based power projects to meet the specific target set by the policy.
4.4.1 Salient feature of Haryana policy-2005 (relevant for setting up of solar power generation)
•
The nodal agency i.e. Haryana renewable energy development agency (HREDA) shall function
as a single window clearing agency for facilitating renewable energy projects in the state.
•
The policy does not imposes any restriction on legal structure of entrepreneur in generation of
power.
•
Grid interfacing will be undertaken by the power producer as per specification and requirements
of the utilities at its own cost.
94
In case of third party sale or captive use of power, the transmission, wheeling and other charges shall be as specified by
RERC.
95
Merit order Dispatch – It helps in achieving optimal production of electricity from maximum production. It helps in multiple
unit power plant to identify optimum loading for each unit to save on operational costs.
96
The land other than the Govt. land will be procured by the Power Producer/ Developer at his own cost.
97
In case of Solar Power Plant the provision of waiver of extension charges or reduction is possible considering merit of the
case and the circumstances beyond the control of the power producer.
98
Govt. of India, Booklet on Solar Heat, http://mnes.nic.in/booklets/Book3-h.pdf
99
See, Policy for promoting generation of electricity through Renewable Energy Sources -2005.
17 •
For grid interfacing the plant should have a capacity of at least 1 MW or above.
•
The state transmission utilities (STU) / distribution licensee will bear the cost of EHV / HV
transmission line up to a distance of 10 km from the point of energy metering. Beyond the 10 km.
distance, the balance cost of the transmission line shall be shared equally between developer
and STU/ distribution licensee.100
•
The wheeling charges shall be levied at the rate of 2 % of the energy fed to the grid irrespective
of the distance from generating station.101
•
Banking facility shall be allowed during all times of the day and night subject to the condition that
surplus energy at the end of the financial year shall not be carried over to the next year.102
•
Renewable Purchase Obligation – Every distribution licensee in Haryana will have to procure
electricity generated from renewable source of energy at the minimum percentage specified
below of its total consumption of electricity within the area of distribution licensee103:Year
Minimum (%)
2007-08
3%
2008-09
5%
2009-10 & onwards
10%
•
Exemption from electricity duty on generation and sale of power from non- conventional sources.
•
Exemption from local area development tax on plant, machinery, equipment for generation of
power from solar energy.
•
Setting up of renewable energy power projects in agricultural zones will be permitted without land
conversion charges.
•
All renewable energy power projects to be treated as an “Industry” in terms of Industrial Policy,
2005 and all the incentives under the policy will be made available.104
4.5 Punjab
Punjab one of the more highly developed and prosperous state of India is also a leader in harnessing
renewable energy from various sources. Recently, it has given a major thrust to the power generation
from solar energy. Punjab had formulated a New and Renewable source of energy policy -2006
(hereinafter; NRSE) to develop and promote renewable energy technologies. The policy targets to
achieve an additional capacity of 1000 MW by the year 2020. The state receives a rich solar radiation
equivalent to 4-7 KWh/m2.105 The NRSE policy empowers Punjab Energy Development Agency (PEDA)
as nodal agency for the implementation of projects.
4.5.1 Salient feature of Punjab NRSE policy-2006 (relevant for setting up of solar power
generation)
•
Govt. land will be provided on nominal lease rent of Rs. 1/m2 for a period of 33 years.
•
To promote manufacturing and sale of NRSE devices/ systems/ equipments. Machinery required
for NRSE projects, VAT shall be levied at the rate of 4%.
•
Octroi on energy generation and NRSE devices/ equipments shall be exempted.
100
See, HERC order on Renewable Energy Tariff & other Issues for FY 2007-08 to 2012-13 dated 15 May 2007.
ibid
102
See, policy for promoting generation of electricity through Renewable Energy Sources -2005
103
See, HERC order on determination of tariff for renewable energy sources in Haryana dated 31st Jan. 2007
104
Haryana Industrial Policy 2005 available at http://haryana.gov.in/ip2005website/IP2005.pdf
105
See, NRSE 2006, IV(6).
101
18 •
The developer at his own cost shall provide the evacuation system including transmission lines
for purchase of energy from generation site.
•
Single window clearance for all NRSE projects within a period of 60 days.
•
RPO – Punjab state electricity board (PSEB) will purchase electricity in whole or part offered by
the power producer.
•
Wheeling charge at the rate of 2% of the energy fed to the grid.
•
Banking facility for the power generated shall be allowed for a period of one year by the licensee.
•
Exemption from electricity duty for the NRSE power projects.
•
The renewable energy power producer will have a option to sell electricity generated by it to the
third party within the state of Punjab.
•
Sale of power generation from solar energy – Rs. 7 per unit (2006-07 as base year) with five
annual escalations at the rate of 5 % up to 2011-12.
•
Grid interfacing on high transmission side of the generating station and its subsequent
maintenance shall be undertaken by the renewable energy power producer.
•
Renewable energy power producer shall be required to lay its own transmission lines from
generation facility to the grid sub- station.
•
Renewable energy power producer is required to install two separate meters one for the export
of power to the Grid and another for import from the grid on the high transmission side.
In comparison to other states, Punjab receives a relatively lower amount of solar radiation. But what
makes it an attractive destination to all the developers is the sound existing policy with regard to land
allotment, project clearance and fiscal incentive provided to them. The solar policy can make the state
even more attractive to the renewable energy industry by following ABT system. Punjab had been one of
the leading states in development of other renewable energy like (small hydro power plants and
harnessing energy from agro- bio waste). Howsoever, in last two years, the solar power plant of nearly 20
MW had been setup in state.
5. Conclusion
The future of renewable energy in India is limitless. India’s leadership in the clean energy program is
scaling new heights which is supported and facilitated by economic & legal policy. Although, the
renewable energy scenario in India is in nascent stage; the trend keeps growing. The existing laws and
policies have made it easier for this sector to flourish. A developed India fuelled on solar power will be a
model state for the world community. Howsoever, a dedicated uniform policy like that of Gujarat for the
solar power generation can really help in harnessing solar energy at massive scale. Majority states in
India receive a considerable amount of solar radiation, therefore there is a scope for tapping solar energy
at the commercial level. Thus, there is a need to have a uniform national policy for the setting up of solar
power plants in India.
Certainly, India has to walk a mile before it takes a hold.
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