Policy Pathway: Odisha gives direction to the clean energy transition

Gagan B. Swain, Director (Finance & Corporate Affairs), GRIDCO Limited

The challenges of climate change are affecting us all, and they are manifesting in the form of changing weather patterns, rising sea levels, frequent cyc­lo­nes, melting permafrost, etc. The last de­cade witnessed a global consensus on the need for concerted efforts to combat climate change. The energy sector, which accounts for roughly three-quarters of the greenhouse emissions, took the lead, us­h­ering an era of regulatory and policy in­terventions, technological breakthrou­ghs, and public and private investments in clean energy sources.

Being a mineral-rich state, Odisha is home to numerous energy-intensive large industries, which have primarily depended on coal to cater to their energy needs. A significant portion of the working population is also engaged in coal- and mining-based activities. Therefore, it was incumbent upon a state like Odisha to ensure that the transition towards a clean energy future happens in a just and equitable ma­nner so that there is minimal impact on livelihoods. With the dual objective of po­sitioning Odisha as the preferred destination for renewable energy investors and providing a sustainable pathway for its industries and working population to transition to clean energy, the state has crafted its new renewable energy policy. The policy aims to add over 10 GW of renewable capacity in the state and provide best-in-class incentives to attract investments to “generate in Odisha”. The policy was launched at the flagship investor su­m­mit, Make in Odisha Conclave 2022, held in Bhubaneswar, as the country reiterated its COP26 commitments at COP27, Egypt.

The elementary step in this direction is to dismiss the perception that India’s renewable energy potential is confined to its western and southern regions. Odisha is endowed with vast and largely untapped renewable energy potential. Although the techno-commercial study of the entire potential capacity is to be completed, a preliminary study states that a large part of the potential can be leveraged with proper technology, policy and regulatory framework and market mechanisms. The policy mentions undertaking a comprehensive resource potential study, which will clearly establish the total potential of the state for various renewable energy technologies. Once the resource potential is

establish­ed, the requirement is to create a robust pipeline of projects in the state. It involves a complex list of activities, such as preparing DPRs, building supporting infrastructure and introducing the project for bidding for potential investors. As per the policy mandate, GRIDCO Limited, the state-owned power utility responsible for bulk power aggregation, has been notified as the nodal agency to facilitate this process and implement other provisions of the policy. GRIDCO is positioned as a strategic link between generation companies, the st­ate transmission utility (STU), the state load despatch centre, discoms and the st­ate government.

The next step is to bridge the gap bet­we­en renewable energy rich-states and Odi­sha. The capacity utilisation factor of Odi­sha is lower than that of other states like Rajas­than, Gujarat and Tamil Nadu, which mak­es projects and consequently the en­ergy tariff economical in those states. The waiver of interstate transmission charges on renewables further exacerbates the inequity. The policy, through suitable ince­n­tives and waivers, has overcome this gap, which will make the ultimate energy tariff competitive, when compared to projects in renewable energy-rich states. A wide range of incentives like direct wai­vers of electricity duty, cross-subsidy surcharge, wheeling charge and STU char­ges, and indirect benefits like availability of government land on lease at nominal rates, single-window project facilitation and green channelling, backed by requisite legislative and regulatory support will create a conducive environment to foster the growth of renewable energy projects in the state. The major incentives provisioned in the policy are:

  •                An exemption of 50 paise per unit on electricity duty and 20 paise per unit on STU charges for captive/open access consumers that consume energy from renewable energy projects set up inside the state. The exemption will be valid for a period of 15 years from the date of commissioning of the project, and will be extended by another five years for projects commissioned by March 31, 2026.
  •                An exemption of 50 paise on electricity duty for input energy to energy storage projects for 15 years, provided such energy is sourced from renewable energy projects in the state.
  •                A 50 per cent exemption on cross-subsidy surcharge and 25 per cent exemption on wheeling charges for open acc­ess consumers, on consumption of en­er­gy from renewable energy projects co­m­missioned in the state during the policy period. The exemption is valid for 15 years.
  •                Exemption from stamp duty on the purchase/lease of land, land conversion charges and registration charges for renewable energy projects.
  •                Permission for project developers to connect their renewable energy projects with the STU, subject to evacuation feasibility. The grant of connectivity approval from the STU will be provided within 15 days of receiving the requisite documents for registration.
  •                No clearance from the state pollution control board would be required for renewable energy projects except for hydro, pumped storage, biomass and waste-to-energy projects.
  •                Allotment of government land on a lease basis at an annual lease rent of 2 per cent of the prevailing IPR rate for the duration of the power purchase agreement or life of the project.

Identifying the limited potential of wind energy in the state, the policy lays special emphasis on the development of wind en­ergy projects in the state. The policy provides for the allocation of 500 MW of wind capacity on a first come, first served basis with a ceiling of 50 MW per developer. Power procurement is guaranteed at the generic tariff determined by the state el­ectricity regulatory commission.

The new renewable purchase obligations (RPOs) mandating the uniform applicability of RPO on all obligated entities including captive power plants, which account for nearly two-thirds of the total generation in the state, will create a new market for renewables. While a large industrial base predominantly relies on thermal power, industries are on the cusp of embarking on ESG (environmental, social, governan­ce) journeys. This provides an abundant market for green power in the state, and the new policy, through its progressive in­centives, has opened the doors for renewable developers to meet this demand from projects set up in the state. To further promote the adoption of renewable energy by industries in the state, GRIDCO will aggregate the demand for renewable power from industries, procure and directly supply such power to the industries ag­ainst a trading margin. The policy allows for a waiver of cross-subsidy surcharge in such cases.

The final step is to create an enabling eco­system to support the growth of renewables in the state. This involves a myriad of measures, including capacity building of human resources, supporting renewa­ble energy equipment manufacturing in the state, accelerating renewable energy adoption through the promotion of electric mobility, green buildings, low-carbon agricultural practices, etc., and supporting innovations in the domain of new energi­es. To this end, the policy has earmark­ed a dedicated renewable energy develop­me­nt fund to provide incentives and viability gap funding, and set up a renewable energy research institute to nurture rese­arch and development in the new en­er­gi­es. The latest Industrial Policy Re­so­lution, 2022 also identifies green energy equipment manufacturing as a focus area and provides special incentives for its growth, which are as follows:

  •                Certain special concessions on land for higher value or higher employment producing projects.
  •                A Rs 2 per unit discount on energy tariff for 10 years for green energy equipme­nt, and Rs 3 per unit discount for 20 ye­ars for green hydrogen and green am­monia projects.
  •                30 per cent capital investment subsidy on the actual investment in plant and machinery.
  •                Exemption in electricity duty, cross-subsidy surcharge and stamp duty, etc.
  •                100 per cent net SGST reimbursement for 200 per cent of investment in plant and machinery.

Further, to support capacity addition, the policy encourages professional institutions to design renewable energy-related courses to bridge the skill gap and create a better employable workforce. The policy also envisages setting up of wor­ld-class dedicated research and innovation excellence centres for renewable energy in Odisha.

This multi-pronged approach envisioned in the policy will create a robust institutional mechanism to promote the growth of re­newables in the state. The policy will go a long way in establishing Odisha as a preferred location of renewable energy inves­tors and developers globally. Not only will it make Odisha more competitive as compared to other places, but also build an ecosystem equipped to support the future growth of renewables in the state.