Green Power Tariff

MERC allows consumers to procure 100 per cent renewable energy for a small charge

Maharashtra has the fourth highest renewable power capacity installations in the country, as of February 2021. Commercial and industrial consumers, which have been adopting green and more sustainable strategies so as to project themselves as environmentally conscious, have been contributing significantly to the state’s green power deployments. There has thus been a rise in the number of consumers opting for renewables to meet their power requirements through captive, group captive or open access arrangements. However, many other willing consumers have been unable to switch to renewables due to a variety of reasons such as regulatory restrictions and lack of expertise or resources. To enable these consumers to meet their green energy targets, the Maharashtra Electricity Regulatory Commission (MERC) has allowed a “green power tariff” of Re 0.66 per unit to be levied on consumers opting for 100 per cent renewables.

Background

Many corporate consumers have approached Tata Power Company Limited (Distribution) (TPC-D) in the past to meet their requirement of 100 per cent green energy through power sourced from TPC-D. This led to TPC-D filing a petition with the MERC in June 2020, seeking approval for a green power tariff for consumers willing to utilise 100 per cent green energy for their entire energy needs. In the petition, TPC-D also sought approval for the procurement of additional renewable energy to meet the 100 per cent green energy requirement of consumers. Further, it sought approval for the issuance of a monthly certificate to these consumers attesting to 100 per cent green energy sale and allowing this renewable power to be treated as part of TPC-D’s renewable purchase obligation (RPO) in case the consumers did not wish to use the green attributes to meet their own RPOs. After verification of the petition, the MERC decided that the issue of determination of a green power tariff was not specific to TPC-D, but could also be applied to other discoms in the state. Thus, TPC-D was directed to implead the other discoms in the state as well. Finally, on March 22, 2021, the MERC decided to allow the levy of an additional green power tariff of Re 0.66 per unit for consumers opting to meet their demand through 100 per cent green energy.

Rationale for the tariff

All discoms in Maharashtra are now offering their customers the option to meet 100 per cent of their energy needs through renewable energy for an additional tariff of Re 0.66 per unit, as per the MERC scheme. This procurement is completely voluntary and is open to all consumers (extra high voltage, high voltage and low voltage). However, since the discoms would have to incur additional expenses in ensuring the provision of renewable energy, this set of consumers, and not the others, would be liable to pay any additional charges. As such, the green power tariff is applicable only to consumers opting for 100 per cent renewable energy to meet their consumption. Since it is difficult to have a discom-specific green tariff, a uniform green power tariff has been computed. This tariff is the difference between the pooled power purchase cost of non-conventional and conventional sources of energy (variable cost only) for all discoms in the state, for the multiyear tariff control period. All the revenue earned through this tariff by a discom should be treated as tariff income.

Outlook

The MERC order solves two serious issues. One, corporate consumers willing to procure 100 per cent renewable power to meet their energy needs can now do so through their respective discoms, thus not needing to adopt alternative procurement models such as open access or group captive. This reduces the risk of discoms losing the high-paying customers that want to switch to renewable power. Two, discoms will now have an additional source of revenue, enabling them to adopt more sustainable practices. Adani Electricity Mumbai Limited (AEML) has already launched the Mumbai Green Energy Initiative, which will enable all customers to procure renewable energy, according to a recent company announcement. AEML customers can set their own targets and will have the option to buy renewable power by paying an additional Re 0.66 per unit, as per the MERC scheme. AEML, in turn, will provide monthly certificates to consumers opting for green power.

Such initiatives, when replicated on a large scale across other states and discoms, would promote significant uptake of renewable energy. They would, moreover, benefit not just a single stakeholder, but the entire value chain as consumers would now procure renewables, discoms would get additional revenue, developers would get more renewable projects to develop, and governments would be able to meet their clean energy targets.

Khushboo Goyal

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