The policy and regulatory landscape of the Indian power sector has evolved significantly over the past year. The outcomes of the regulatory developments of the previous year began to emerge this year, while new regulations and policy initiatives were also introduced, putting the sector on a target-based growth trajectory. These initiatives will help attract significant investments in solar and wind power projects. A round-up of the recent policy and regulatory developments…
In February 2019, the Cabinet Committee on Economic Affairs (CCEA) approved the Kisan Urja Suraksha evam Utthan Mahabhiyan (KUSUM) aimed at promoting the use of solar energy in the agricultural sector. The scheme received a total central financial assistance (CFA) of Rs 344.22 billion. The primary objective of KUSUM is to encourage farmers to utilise advanced technology to generate power. It aims to add 25,750 MW of solar capacity by 2022. The key components of the scheme are solar pump distribution, solar power factories, solar tube wells, and modernisation of existing pumps. It will allow farmers to sell surplus energy from solar pumps and solar power plants back to the grid, opening up a new revenue stream.
Wind-Solar Hybrid Power Policy
The emerging solar-wind hybrid power segment gained significant traction in May 2018 with the release of the final policy, which was proposed in June 2016. On the technology front, the policy provides for the integration of both the energy sources, wind and solar, at the alternating current (AC) and direct current (DC) level. The policy also allows flexibility in the share of wind and solar components in hybrid projects, provided the rated power capacity of one resource is at least 25 per cent of the rated capacity of the other resource. Also, the existing wind/ solar projects can be hybridised with a higher transmission capacity than the sanctioned one provided there is scope for expansion.
The policy allows power procurement from a hybrid project through a tariff-based transparent bidding process, for which government entities may invite bids. It has permitted the use of battery storage in hybrid projects for optimising output and reducing variability. The policy also mandates the regulatory authorities to formulate necessary standards and regulations for wind-solar hybrid systems.
At the state level, the Gujarat government announced the Wind-Solar Hybrid Power Policy in June 2018. The policy aims to achieve optimum utilisation of land. To this end, it has allowed the setting up of wind power plants on the same land being used by solar power plants. In January 2019, the Andhra Pradesh government issued the Wind-Solar Hybrid Power Policy, 2018, with a target to achieve 18,000 MW of renewable energy capacity by 2021-22.
CCEA approval for rooftop solar programme
In February 2019, the CCEA approved Phase II of the Grid-connected Rooftop Solar Programme for achieving 40,000 MW of a cumulative rooftop solar capacity by 2022. The programme will be implemented with a total CFA of Rs 118.14 billion. Under Phase II, the CFA for the residential sector has been restructured, with the availability of 40 per cent CFA for rooftop solar systems up to 3 kW capacity and 20 per cent CFA for systems ranging from 3 kW to 10 kW. For group housing societies, the CFA will be limited to 20 per cent for the supply of power to common facilities. The CFA will not be available for other categories such as institutional, educational, social, government, commercial and industrial.
Draft rules for offshore wind
In January 2019, the Ministry of New and Renewable Energy (MNRE) issued draft offshore wind energy lease rules to increase activity in the offshore wind segment. According to the draft rules, no project development activity or site survey for assessing the potential of offshore wind can be undertaken without a lease. The MNRE will grant a lease to only those offshore wind projects that lie in the exclusive economic zones. The area covered by a lease will be specified and the terms of the lease will be valid for a period of 35 years (five years for prospecting and 30 years for the establishment of offshore wind power projects). For getting the lease, applicants must deposit Rs 100,000 per MW for installations and Rs 1,000 per square km for prospecting. In addition, the applicants must pay a yearly lease fee, a sum calculated for each square km at the rate of Rs 10,000.
National Mission on Transformative Mobility and Battery Storage
In March 2019, the union cabinet approved the National Mission on Transformative Mobility and Battery Storage with a focus on local manufacturing in the electric vehicle (EV) segment including battery and cell manufacturing. The mission includes a five-year phased manufacturing programme to set up large-scale, export-competitive integrated batteries and cell manufacturing giga plants in India.
Modifications to the solar park scheme
In March 2019, the MNRE introduced modifications to the Development of Solar Parks and Ultra Mega Solar Power Project scheme, suggesting a new mode for developing solar, wind and hybrid parks. It aims to address the two most critical issues for developers – land allocation and development of power evacuation infrastructure. Under the new mode (Mode 7) introduced by the MNRE for renewable energy parks developed through the Solar Energy Corporation of India (SECI), developers will be required to pay the state government a facilitation charge of Re 0.02 ($0.029) per unit of power generated from the projects for facilitating the identification of land and obtaining right of use. Further, funds from the CFA will not be used to pay these facilitation charges. Under the new mode, SECI will develop the external power evacuation infrastructure, while developers will set up the internal park infrastructure at their own cost. Instead of the 60:40 ratio for the development of internal infrastructure and external transmission system, the MNRE has introduced the new ratio of 0:100, that is, no CFA will be provided for developing internal park infrastructure.
Amendments to the Electricity Act, 2003
In October 2018, the government announced draft proposed amendments to the Electricity Act, 2003. The amendments propose the introduction of the terms, renewable energy service company (RESCO) and renewable purchase obligation (RPO). They have also proposed a penalty of Re 1-Rs 5 per unit as applicable for distribution licensees for non-compliance with the RPO. The amendments introduce the concept of renewable generation obligation (RGO), which is quite similar to the RPO. While the RPO is applicable to all obligated entities, the RGO is applicable only to generating companies, which are involved in developing coal- and lignite-based thermal power projects. As per the draft, thermal power generators will have to generate or procure renewable energy equivalent to their thermal energy generation to comply with their RGOs, which will be considered as RPO compliance for an obligated entity. A national renewable energy policy is yet to be prepared by the central government.
Safeguard and anti-dumping duties
In February 2019, the government imposed an anti-dumping duty of $114.58 per metric tonne for a period of five years on the import of textured, tempered, coated and uncoated glass from Malaysia. Earlier, in July 2018, the government had imposed a safeguard duty of 25 per cent on solar imports from China and Malaysia based on the final recommendations of the Directorate General of Trade Remedies. The duty will be valid from July 30, 2018 to July 29, 2019. It will gradually come down to 20 per cent between July 30, 2019 and January 29, 2020, and 15 per cent during January 30-July 29, 2020.
MNRE amends VGF guidelines
In December 2018, the MNRE amended the guidelines for the implementation of the viability gap funding programme for solar photovoltaic (PV) projects under the National Solar Mission Phase II. According to the new amendment, if there is a delay in land allotment or connectivity by the government, the SECI can extend the date of financial closure and commissioning of the project, without any financial implications for the solar power developer, after recording due justifications for the same. These amendments will apply to over 2,000 MW of grid-connected PV projects under Batch III of NSM Phase II.
Going forward, to achieve the revised 227 GW renewable energy target by 2022, there is a need for a more efficient and targeted development of the sector, supported by a robust policy and regulatory framework.