Renewable Energy Policies,
Regulations, REC and RPO
alka, assistant director,
NPTI, PSTI, Bangalore
June 2011
ENERGY
Then………
&
Now…..
Energy use has changed a great deal
since people relied solely on the sun,
their own strong bodies or beasts of
burden as energy resources.
Long ago, people learned how to use water
power to turn paddle wheels and wind
power for transportation and irrigation
People learned to use the chemical energy
stored in materials like wood to cook and
heat their homes.
But machines and technologies introduced during the
Industrial Revolution of the late 18th century required
the use of other energy resources, especially fossil
fuels.
Limited Fuels
At present consumption levels Crude
 Gas
 Coal
oil will last only for 40 years.
will last for 60 years.
will be finished in nearly 200 years.
India’s Oil Balance
PROVEN OIL RESERVE/CONSUMPTION
World
99.55%
INDIA VS. WORLD
I ndi a
2.72
%
World
India
India
0.45%
World
India
Wo r l
d
97%
Ever thought of life without oil and
gas?
PROBLEMS?
Limited fuels available on earth.
Increasing Consumption of energy
Polluted environment
Energy Security
• To be an Energy Secure Nation, best measure
is switching to Renewable Energy and
persistent Energy Conservation
RENEWABLE ENERGY
Policies for Renewable Energy in
India
Background of the MNES
Early 70’s: search for new and renewable energy
resources that would ensure sustainable
development and energy security.
1981: GoI establishes CASE (Commission for
Additional Sources of Energy) in the DST
1982: CASE formally incorporated in the newly
founded DNES (Dept of Non-conventional Energy
Sources).
1992: DNES became MNES (Ministry of Nonconventional Energy Sources)
Policies, Procedures and Incentives
Policies
Prime Minister of India has announced a
goal of 10% share for RE or 10,000 MW
in the power generation capacity to be
added during the period upto 2012.
Policies, Procedures and Incentives
Renewable Energy Policy
A comprehensive RE Policy for all-round
development of the sector, encompassing
all the key aspects, has been formulated by
MNES. The broad objectives envisaged in
the policy are:
Meeting the minimum energy needs through RE
Providing decentralised energy supply in
agriculture, industry, commercial and household
sectors in rural and urban areas, and
Providing grid quality power.
Policies, Procedures and Incentives
Policy for All-round Development of Renewable
Energy
Policy measures aim at overall development and
promotion of renewable energy technologies
(RETs) and applications.
Policy initiatives encourage private as well as FDI
including provision of fiscal and financial
incentives for a wide range of RE programmes.
Further, the procedures have been simplified, and
provide excellent opportunities for increased
investment in technology up-gradation, induction
of new technologies, market development and
export promotion.
Foreign Investment policy
Foreign investors can enter into a joint venture with an
Indian partner for financial and/or technical collaboration
and for setting up of RE-based power generation projects
Hundred per cent foreign investment as equity is
permissible with the approval of the Foreign Investment
Promotion Board (FIPB).
The Government of India also encourages foreign investors
to set up RE-based power generation projects on Build, Own
and Operate (BOO) basis. Various Chambers of Commerce
and industry associations in India provide guidance to the
investors in finding appropriate partners
Foreign Investment policy
The Government of India encourages foreign investors to
set up power projects on BOO basis. Investors are required
to enter into a power purchase agreement with the
concerned state government
No prior approval of the government is required to set up
an industrial undertaking with Foreign Direct Investment
(FDI) by Non-Resident Indians (NRIs) or Overseas
Corporate Bodies (OCBS)
The Reserve Bank of India (RBI) has permitted Indian
companies to accept investment under the 'automatic
route' without obtaining prior approval from RBI. Investors
are required to notify the regional office of RBI, of receipt
of inward remittances within 30 days of such receipt and
file required documentation within 30 days of issue of
shares to foreign investors
Industrial policy
MNES is promoting medium, small, mini and micro
enterprises for manufacturing and servicing of various
types of RE systems and devices.
Industrial clearances are not required for setting-up of
an RE industry
No clearance is required from Central Electricity Authority
(CEA) for power generation projects up to Rs 1,000
million
A five-year tax holiday is allowed for RE power
generation projects
Soft loans are available through IREDA for RE equipment
manufacturing
Facilities for promotion of Export Oriented Units (EOUS)
are available for the RE industry
Industrial policy
Financial support is available to RE industries for
R&D projects in association with technical
institutions
Private sector companies can set up enterprises
to operate as licensee or generating companies
Customs duty concession is available for RE
spares and equipment, including those for
machinery required for renovation and
modernisation of power plants. Excise duty on
a number of capital goods and instruments in
the RE sector has been reduced or exempted
Policies by State Governments
A number of states have announced policy
packages including banking, third party sale
and buy- back
Some states are providing concessions or
exemption in state sales tax. These rates vary
widely from state to state and between
different technologies.
Incentives
Incentives for Investing in RETs
MNES provides financial incentives, such as interest and capital
subsidy
Soft loans are provided through:
IREDA, a public sector company of the Ministry
Nationalised banks and other financial institutions for identified
technologies/systems
The government also provides various types of fiscal incentives for
the RE sector, which include:
Direct taxes - 100 per cent depreciation in the first year of the
installation of the project
Exemption/reduction in excise duty
Exemption from Central Sales Tax, and customs duty concessions
on the import of material, components and equipment used in RE
projects
Incentives
Direct Taxes
Concession under Income Tax Rules
Under Income Tax Rules number of concessions are
available to the non-conventional energy sector
Financial Incentives
Details of various schemes on financial incentives and
promotional measures provided for different renewable
energy technologies categorised as
Energy from Waste, Solar Photovoltaic Power, Solar
Thermal Systems, Biogas Plants
EA 2003
The Act 2003 has several enabling provisions, with a view to
promote accelerated development of non-conventional
energy based power generation
Section 86(1) (e), “The State Commission shall
promote co-generation 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 licence”
EA 2003
Section 3 (1), Government of India (GoI) shall, from
time to time, prepare the National Electricity Policy
and Tariff Policy, in consultation with the State
Governments for developing the power system
based on optimal utilisation of resources such as
coal, natural gas, nuclear, hydro, and renewable
sources of energy.
Section 4, GoI shall, after consultation with the State
Governments, prepare a national policy, permitting
stand-alone systems (including those based on
renewable sources of energy) for rural areas.
Legal Frame Work for Renewable Energy
Section 61 (h) of the Act - SERC may specify
the terms and conditions for the
determination of the Tariff for co-generation
and generation from the Renewable Energy
Sources
• May be guided by the Central Commission.
Policy and Regulatory Frame Work for Renewable Energy
The National Action Plan on Climate Change (NAPCC)
– aims at increasing the share of Renewable
Sources of Energy from 5% of the total Energy Mix
in 2010 to 15% by 2020
•Ministry of Power, GoI Resolution dated 20.01.2011
– SERCs shall also reserve a minimum percentage
for purchase of Solar Energy from the date of
Notification in the Official Gazette (22.01.2011)
which will go up to 0.25% by end of 2012-12 and
further upto 3% by 2022.
Quantum of RE required to meet
NAPCC target (BU)
Technology wise capacity addition
required (MW)
Implementation and Delivery mechanism
Ministry: encouraging the setting up of grid-interactive power
projects based on renewable energy through private
investment route.
State Nodal Agencies: are responsible for promotion and
development of private sector projects by way of providing
necessary clearances, allotment of land, allotment of
potential sites in case of SHP projects and facilitating power
purchase agreements etc.
SERCs: determining tariffs.
Leading financial institutions and banks: financing renewable
energy based power projects.
CERC (Terms & Conditions for
recognition & issuance of REC
for RE Generation)Regulations,
2010
2. Definitions and Interpretation
‘Act’ means the Electricity Act, 2003
‘Certificate’ means the renewable energy
certificate issued by the Central Agency in
accordance with the procedures laid down by
it and under the provisions specified in these
regulations
‘eligible entity’ means the entity eligible to
receive the certificates under these
regulations
2. Definitions and Interpretation
‘floor price’ means the minimum price as
determined by the Commission in accordance with
these regulations at and above which the certificate
can be dealt in the power exchange
‘forbearance price’ means the ceiling price as
determined by the Commission in accordance with
these regulations within which only the certificates
can be dealt in the power exchange
‘obligated entity’ means the entity mandated under
clause (e) of subsection(1) of section 86 of the Act to
fulfill the renewable purchase obligation
2. Definitions and Interpretation
‘preferential tariff’ means the tariff fixed by the Appropriate
Commission for sale of energy, from a generating station using
renewable energy sources, to a distribution licensee
‘renewable purchase obligation’ means the requirement
specified by the State Commissions under clause (e) of subsection (1) of section 86 of the Act, for the obligated entity to
purchase electricity from renewable energy sources;
‘State Agency’ means the agency in the concerned state as
may be designated by the State Commission to act as the
agency for accreditation and recommending the renewable
energy projects for registration and to undertake such functions
as may be specified under clause (e) of subsection (1) of
section 86 of the Act;
RPO & REC
The Electricity Act, 2003, the policies framed under the Act, as also
the National Action Plant of Climate Change (NAPCC) provide for a
roadmap for increasing the share of renewable in the total generation
capacity in the country.
However, RE sources are not evenly spread across different parts of
the country. In some states there are avenues for harnessing the RE
potential beyond the RPO level fixed by the SERCs. However, the
high cost of generation from RE sources discourages the local
distribution licensees from purchasing RE generation beyond the RPO
level mandated by the State Commission.
It is in this context that the concept of REC assumes significance. This
concept seeks to address the mismatch between availability of RE
sources and the requirement of the obligated entities to meet their
renewable purchase obligation. It is also expected to encourage the
RE capacity addition in States where there is potential for RE
generation as the REC framework seeks to create a national level
market for such generators to recover their cost.
3. Central Agency and Functions
CERC has designated National Load Dispatch Center(
NLDC) to undertake the functions of Central Agency
under the CERC REC Regulations.
The CERC REC Regulations envisage functions of the
Central Agency as follows:
1. Registration of Eligible Entities,
2. Issuance of Certificates,
3. Maintaining and Settling Accounts in respect of certificates,
4. Repository of Transactions of Certificates and
5. Other function incidental to the implementation of Renewable
Energy Certificate Mechanism as may be assigned by the
Commission.
State Load Despatch Centre
a. Follow Indian Electricity Grid Code and State Grid Code for
the purpose of accounting renewable energy injected into
the grid.
b. In case the Eligible Entity is connected to the transmission
network, maintain the record of meter readings and
communicate the energy injection report for each accredited
RE project of the registered Eligible Entity within State to
the Central Agency on monthly basis.
c. In case the Eligible Entity is connected to the distribution
network of Distribution Utility, establish protocol for receipt
of information and maintenance of the record of meter
readings for such RE projects.
Further, arrange to communicate injection report for each
accredited RE project of the registered Eligible Entity within
the State to the Central Agency on monthly basis.
State Load Despatch Centre
d. In case the Eligible Entity is CPP and is connected to the
transmission/distribution network of Transmission/Distribution
Utility, SLDC shall establish protocol for receipt of information
and maintenance of the record of meter readings including
self consumption for such RE projects.
Further, SLDC shall arrange to communicate injection report
for each accredited RE project of the registered Eligible Entity
within the State to the Central Agency on monthly basis.
e. Communicate renewable energy injected into the grid for
each accredited RE project of the registered Eligible Entity
within State to the State Agency.
4.Category of Certificates
Solar and Non-Solar certificates
5. Eligibility and Registration of
Certificates
Eligiblity conditions:
Obtained accreditation from state agency
No PPA to sell at preferential tariff
Sell electricity to distribution lecensee at a price not
exceeding the pooled cost of power purchase of that
licensee
6. Revocation of Certificates
7. Denomination and Issuance of Certificates
8. Dealing in certificates: only through power
exchanges
9. Pricing of Certificates
10. Validity and extension of Certificates
11. Fees and Charges
12. Funding for capacity building of state
Agency
13. Appointment of Compliance Auditors
14. Power to give Directions
15. Power to relax
Salient Features of REC framework
Renewable Energy Certificate (REC) mechanism is a
market based instrument to promote renewable energy
and facilitate renewable purchase obligations (RPO)
REC mechanism is aimed at addressing the mismatch
between availability of RE resources in state and the
requirement of the obligated entities to meet the
renewable purchase obligation (RPO).
Cost of electricity generation from renewable energy
sources is classified as cost of electricity generation
equivalent to conventional energy sources and the cost
for environmental attributes.
Salient Features of REC framework
RE generators will have two options i) either to sell the
renewable energy at preferential tariff or ii) to sell electricity
generation and environmental attributes associated with RE
generations separately.
Salient Features of REC framework
The environmental attributes can be exchanged in the
form of Renewable Energy Certificates (REC).
REC will be issued to the RE generators for 1 MWh of
electricity injected into the grid from renewable energy
sources.
REC would be issued to RE generators only.
REC could be purchased by the obligated entities to meet
their RPO under section 86 (1) (e) of the Act. Purchase of
REC would be deemed as purchase of RE for RPO
compliance.
Grid connected RE Technologies with minimum capacity
of 250 KW and approved by MNRE would be eligible
under this scheme.
RE generations with existing PPAs are not eligible for REC
mechanism.
Salient Features of REC framework
SERC to recognize REC as valid instrument for RPO
compliance.
SERC would define open access consumers, captive
consumers as obligated entities along with distribution
companies.
SERC to designate State agency for accreditation for RPO
compliance and REC mechanism at State level.
CERC to designate Central Agency for registration,
repository, and other functions for implementation of REC
framework at national level.
Only accredited project can register for REC at Central
Agency.
Salient Features of REC framework
Central Agency would issue REC to RE generators for
specified quantity of electricity injected into the grid.
REC would be exchanged only in the CERC approved
power exchanges.
Price of electricity component of RE generation would be
equivalent to the weighted average power purchase cost
of the discom including short term power purchase but
excluding renewable power purchase.
REC would be exchanged within the forbearance price
and floor price. This forbearance and floor price would be
determined by CERC in consultation with Central agency
and FOR from time to time.
Salient Features of REC framework
In case of default SERC may direct obligated entity to
deposit into a separate fund to purchase the shortfall of
REC at forbearance price.
However, in case of genuine difficulty in complying with
the renewable purchase obligation because of nonavailability of certificates, the obligated entity can
approach the Commission for carry forward of compliance
requirement to the next year.
Schematic for REC
Implementation Procedures
Model Guidelines / Procedure for Accreditation
Procedure for Registration
Procedure for Issuance
Procedure for Redemption
MODEL GUIDELINES FOR
ACCREDITATION BY STATE
AGENCY
Model Guidelines: Contents
Objective
Applicability & Scope
Step wise description
Functions, roles and responsibilities of entities
involved
Information requirement – application form &
content
Report: format for accreditation certificate
Timelines
Fees and charges
Event of default and consequences thereof
Powers to remove difficulties
Model Guidelines: Applicability & Scope
Applicable to all Generating Companies Using RE
sources for generation as recommended by
MNRE.
State Commission to designate State Agency to
recommend the accreditation of RE Generators.
State Agency to undertake accreditation six
months earlier than from commissioning date.
Validity of accreditation: 5 years
Model Guidelines: Information Requirement
Owner
Operator
RE Station
Connectivity
Metering
Statutory Clearance
General
Fees & Charges
Declaration
Online generation of Application, print & submit to
State Agency along with enclosures
Model Guidelines: Timelines, Fees & Charges
Timelines:
Undertake accreditation of those generating facilities which are
proposed to be commissioned within period not exceeding 6
months from the date of application.
State Agency to inform the applicant with regard to the
incompleteness of the application within 2 working days.
Applicant to respond within 7 working days.
Fees & Charges for State Agency
One time application processing fees
One time accreditation charges
Annual charge for accreditation
Accreditation charges for re-validation/extension
REGISTRATION BY
CENTRAL AGENCY
Registration: Applicability and Scope
Applicable to all RE Generating companies
who have received the Certificate of
accreditation
Undertake registration
Not earlier than 3 months prior to proposed
date of commissioning
After receipt of Certificate of Accreditation
Validity of Registration: 5 Years
Registration: Information Requirement
Application for Registration as per the format specified
Should contain
Owner details
RE Generation Station details
Certificate of Accreditation by the state agency
Generation facility commissioning schedule
Any other relevant information as specified
Non-refundable registration fees/charges and annual
fee/charges shall be accompanied
Declaration
Separate applications in case of multiple RE generation
projects
Online generation of Application, print & submit to Central
Agency along with enclosures
Registration: Time Line
Registration: Fees and Charges
One time Registration processing fees
One time registration Charges
Annual charges for Registration
Registration Charges for Revalidation/
extension of validity
ISSUANCE OF RECs BY
CENTRAL AGENCY
Issuance of RECs
Applicability & Scope
Eligible Entities, who have received ‘Certificate of Registration’
from the Central Agency
Central Agency while issuing the REC’S to Eligible Entities
Information Requirement
Renewable Energy Injection Report
The Registration Number issued by Central Agency
Details of Fee and Charges
Compliance Auditor report, if any
Denomination
1 REC = 1 MWh
Issuance of RECs: Timelines
Eligible Entity to apply for issuance of
renewable energy certificates within three (3)
months of energy injection
The application for issuance of Renewable
Energy Certificates may be made on a
fortnightly basis
Central Agency to issue the REC to the
Eligible Entities within fifteen (15) days from
the date of application
REDEMPTION OF RECs
AFTER TRADE IN POWER
EXCHANGE(s)
Redemption of RECs
Validity of RE Certificates : 365 days
Applicable to the Eligible Entity that chooses to place the
RECs for dealing on the Power Exchange(s)
Bidding in the Power Exchange(s)
Central Agency to verify quantity of valid RECs available with
the concerned eligible entity
Extinguishing of the RECs based on the succesful trades
culminated in the Power Exchange(s)
First-in-first-out order for extinguishing
Thank You
Policy and Regulatory Frame Work for Renewable Energy
Till non-conventional technologies compete with conventional
sources of procurement by Distribution Companies shall be
done at preferential tariffs by the Appropriate Commission.
• CERC, in January, 2010, issued Notification on “Terms and
Conditions for recognition and issuance of REC for Renewable
Energy Generation”
• National Load Despatch Centre (NLDC) has been appointed
as Central Agency for implementation of RECs. The Central
Agency has prepared Detailed Procedures for Registration,
Accreditation, Issuance and Redemption of RECs
• REC market is expected to be operationalised during this
calendar year 2011
• Most of the SERCs have specified RPO in percentages for
purchase of electricity from Renewable Sources of Energy
Key Legislation & Policy
74
3/24/2016
Impact of Policy Frame work on RE
(Contd.)
The Tariff for Coal- Fired Power Plants has increased from an
average of Rs.2 per KWH in 2004-05 to Rs.3.05 per kwh in
2010-11 and it is estimated that in FY 2011-12 it will be about
Rs. 3.40 per kwh due to hike in power grade coal by Rs. 90
per tonne by Coal India Limited w.e.f. 01.04.2011.
Recent Case : competitive bids have also discovered tariff above
Rs 3 per kwh in the following cases :
Adani Power in Rajsthan Rs. 3.25/kwh
Adani Power in Maharastra Rs. 3.30/kwh
India bulls in Mahasrastra Rs. 3.27/kwh
Essar Power in Gujurat Rs. 3.13/kwh
• Wind Power is now almost competitive with conventional
Thermal Power