Statements by Mr. Upendra Tripathy, Secretary, Ministry of New and Renewable Energy (MNRE), suggest that the government is thinking about a “Renewable Energy Act 2015” to create a comprehensive framework for investment in the sector (refer). Such an act would be a part of the build-up towards the Renewable Energy Global Investors Meet and Expo (RE-INVEST) hosted by the MNRE in February 2015 in Delhi (refer). Preparations for RE-INVEST have already begun. Road shows in London and Hyderabad have informed the investors about the sector and the event; the next roadshow is planned for Singapore on the 27th of October’14. A “Renewable Energy Act 2015” could focus on reducing the risks and transaction costs in the Indian renewables market, creating a framework that makes India an attractive option for professional and for global investors.
- To keep pace with the ambitious NSM, it’s about time for a comprehensive new arrangement that gives clarity on grid rules to consumers, investors, utilities and grid operators
- The MNRE has in the past stated that reducing the cost of capital for renewables would be one of its key tasks
- BRIDGE TO INDIA assumes that, Renewable Energy Act 2015 – if really in the works – is still in the conceptualization phase
Currently, all generation, transmission and distribution of renewable electricity falls under the broad ambit of Electricity Act 2003. The Electricity Act has been drafted with centralised non-intermittent power in mind. Since 2003, the global and Indian electricity landscape has changed fundamentally. Wind and solar power have risen from the fringes to the mainstream. Since the government has very ambitious plans for their future growth, there is a dire need for a comprehensive new arrangement that gives clarity on grid rules to consumers, investors, utilities and grid operators.
For example, if a company wants to sell power to a customer by setting up a rooftop solar project at the customer’s premise (this model is fairly common in the US), it is often unclear, whether the locally consumed power should be subject to charges, such as wheeling charges, losses and interconnection charges (perhaps not), or electricity duty and cross subsidy surcharges (a political call). Or should there be – as long as the generator/consumer remains grid-connected – a grid maintenance or stability charge, or even a bonus if distributed generation can help stabilize the grid?
Renewable energy plants are typically more capital intensive than fossil fuel plants and the cost of finance is a key determinant of the levelized cost of energy. The MNRE has in the past stated that it regards reducing the cost of capital for renewables as one of its key tasks. In this endeavor, the government is currently negotiating a soft loan for a billion euros from KfW (a German government-owned development bank) exclusively for the rooftop solar market. The World Bank has already committed to long term funding for very large scale solar projects through the Solar Energy Corporation of India (SECI). Some of these interests could also be guarded through a new legislation.
We contacted the MNRE and the Ministry of Power on the specifics of this plan, but could not get any confirmation, clarification or details. We assume that a Renewable Energy Act 2015 – if really in the works – is still in the conceptualisation phase. We hope that the government would seek broad inputs from stakeholders in the process.