The policy and regulatory developments in the past year demonstrate the government’s focus on integrating larger volumes of renewable energy sources and strengthening the distribution segment to improve end-user satisfaction. The country’s green energy commitment was evident with the publication of the final National Electricity Plan (NEP) (Volume I: Generation) by the Central Electricity Authority (CEA) in June 2023. The new plan estimates more than 400 GW of capacity addition in the renewable energy sector, far exceeding the combined capacity addition of less than 70 GW in the thermal and nuclear power sectors. To achieve these targets, several bold policy and regulatory measures were put in place. One of these was the introduction of a five-year bidding trajectory for renewable energy projects, with plans to bid 50 GW of capacity every year. The government recently announced standard bidding guidelines for renewable energy projects with energy storage systems. In the transmission segment, the waiver of interstate transmission system (ISTS) charges for 25 years for green hydrogen and offshore wind projects was another key development. Various incentives were offered for a green hydrogen and electrolyser ecosystem. Meanwhile, further amendments to the Green Open Access Rules, which were notified in 2022, were introduced in the past year aimed at empowering smaller consumers to access green energy.
Power Line presents a round-up of the major policy and regulatory developments in the past year…
- In June 2023, the CEA released a revised version of the Report on Optimal Generation Capacity Mix for 2029-30. The report has projected a total installed capacity of around 777 GW in the country by the year 2030 with a battery energy storage capacity of 41,650 MW/208,248 MWh. The share of non-fossil fuel-based sources in the total installed capacity is expected to increase to 64 per cent in 2029-30 from the present level of 42 per cent. Similarly, in terms of gross power generation, the share of non-fossil fuel sources is expected to increase to 44 per cent in 2029-30 from 25 per cent in 2022-23.
- In the same month, the CEA released the National Electricity Plan targeting 900 GW of total power capacity by 2031-32. Of this, roughly 40 per cent is expected to come from solar power, which is higher than the 29 per cent share from coal and lignite power. Wind power is expected to make up 13 per cent of the capacity while small-hydro, hydropower and pumped storage will contribute only 11 per cent in total.
- In April 2023, the Ministry of Power (MoP) finalised a revised structure of the day-ahead national-level merit order despatch mechanism. As per the revised mechanism, the merit order for cheapest generating resources across the country to meet the system demand would be finalised a day in advance as against 1.5 hours in the existing system. These guidelines are expected to result in cost optimisation and better planning for generating units, and also enlarge the scope of the present mechanism by including all the regional thermal power plants and subsequently all the intra-state thermal power generators.
- During the same month, the MoP released guidelines to regulate and promote the development of pumped storage projects. Among other things, these guidelines specify the methods for allotment of project sites through competitive bidding, rule out any upfront premium for project allocation to make it financially viable, and rationalise environmental clearances for PSPs.
- In May 2023, the MoP notified a scheme for pooling the tariffs of central sector-owned thermal (coal or gas) plants that are older than 25 years. As per the scheme, the minimum requisition period for power from the common pool will be five years. A single-window system will be established to streamline the submission of power allocation requests by interested states/discoms. All new interested beneficiaries will be allocated power from the common pool and the unallocated power will be sold through the power exchanges.
- In September 2022, the Ministry of Environment, Forest and Climate Change (MoEFCC) issued the Environment (Protection) Second Amendment Rules, 2022. Under this, the MoEFCC extended the deadlines for thermal power plants (TPPs) to install equipment to cut sulphur dioxide (SO2) emissions by two years. The deadline for TPPs within a 10 km radius of Delhi-NCR and cities with a population of more than 1 million was extended from December 31, 2022 to December 31, 2024. For TPPs in a 10 km radius of critically polluted areas or non-attainment cities, the deadline was pushed from December 31, 2023 to December 31, 2025. For all other TPPs across the country, the deadline has been pushed from December 31, 2024 to December 31, 2026.
- In June 2023, the MoP revised the biomass co-firing policy to enable purchase of biomass pellets by TPPs at the benchmarked price. The price shall take into account the business viability, impact on electricity tariff, and efficient and faster pellet procurement by power utilities. Price benchmarking of pellets will enable the TPPs as well as pellet vendors to establish a sustainable supply mechanism for co-firing of pellets.
- In April 2023, the MNRE announced a trajectory for renewable power bids which directs bids for renewable energy capacity of 50 GW per annum to be issued between 2023-24 and 2027-28 to reach the desired capacity by 2030. Further, it directs that at least 10 GW of this capacity be allocated for wind power projects. A clear timeline has also been issued for the current year.
- In January 2023, the Union Cabinet approved the National Green Hydrogen Mission with an initial budget outlay of Rs 197,440 million. The mission aims to scale up the country’s annual green hydrogen production capacities to at least 5 million metric tonnes per annum by 2030, with a further potential to reach 10 million metric tonnes per annum. This will be supported by the growth of an associated renewable energy capacity of about 125 GW.
- Later in June 2023, the MNRE announced two financial incentives under the Strategic Interventions for Green Hydrogen Transition Programme to support the domestic manufacturing of electrolysers (Component I) and the production of green hydrogen (Component II). Component I has a budget of Rs 44.4 billion. Under this, incentives will be provided in terms of Rs per kW. In the first year, the base incentive will be Rs 4,440 per kW, which will be annually reduced till it reaches Rs 1,480 per kW in the fifth year. Component II has two modes. Mode 1 covers the competitive selection process based on the least incentive demanded over three years, and Mode 2 covers competitive bids post aggregation of demand for green hydrogen and derivatives. The total budget outlay for both modes is Rs 130.5 billion, and they will be implemented during the period 2025-26 to 2029-30.
- In June 2023, the MoP released a notification for the Carbon Credit Trading Scheme, which aims to establish a framework for the Indian carbon market. As per the scheme, the governance of the Indian carbon market and direct oversight of its administrative and regulatory functioning will be vested in the governing board, to be called the Indian Carbon Market Governing Board. The obligated entities, including designated consumers covered under the compliance mechanism, must register themselves for the Carbon Credit Trading Scheme. Earlier, in December 2022, the government amended its Energy Conservation Act, 2001 to empower the central government to specify the minimum share of consumption of non-fossil sources by designated consumers as energy or feedstock.
- In the same month, the MoP issued guidelines for the tariff-based competitive bidding process for procurement of firm and despatchable power from grid-connected renewable energy power projects with energy storage systems. The guidelines are expected to provide firm and despatchable power to the discoms from renewable energy sources; and facilitate renewable capacity addition and fulfilment of renewable purchase obligations/storage power obligations by discoms.
- In January 2023, the MoP issued the Electricity (Promoting Renewable Energy through Green Energy Open Access) Amendment Rules, 2023. As per the amendment, among other things, any consumer may opt to purchase green energy either up to a certain percentage of the consumption or the entire consumption. The consumer may place a requisition for this with their distribution licensee, which shall procure such a quantity of green energy and supply it. The consumer shall have the flexibility to provide separate requisitions for solar and non-solar energy. In addition, the credit for banked energy shall not be permitted to be carried forward to subsequent banking cycles and shall be adjusted during the same banking cycle.
- In May 2023, the MNRE announced reforms in its Approved List of Models and Manufacturers (ALMM) mechanism for solar photovoltaic (PV) modules. The reforms include a reduction in application fee by 80 per cent, and an increase in ALMM enlistment validity from two years to four years. The changes will help in ramping up the domestic production of solar PV modules for catering to the current and future demand.
- In June 2023, the MoP issued guidelines for the resource adequacy planning framework for India, in consultation with the CEA. The guidelines ensure that sufficient electricity is made available by putting in place a framework for advance procurement of resources by discoms to meet the electricity demand in a cost-effective manner. The guidelines also suggest that at least 75-80 per cent of the total capacity required by discoms should be secured through long-term contracts. While medium-term contracts are suggested to be in the range of 10-20 per cent, the remaining power demand can be met through short-term contracts
- During the same month, the MoP notified the Electricity (Rights of Consumers) Amendment Rules, 2023. Through this amendment, the ministry introduced time-of-day (ToD) tariff and rationalised smart metering provisions. Under the ToD tariff system, the tariff during solar hours of the day shall be 10-20 per cent less than the normal tariff, while the tariff during peak hours will be 10-20 per cent higher. The ToD tariff would be applicable for commercial and industrial consumers having a maximum demand of 10 kW and above, from April 1, 2024, and for all other consumers from April 1, 2025. Further, all types of smart meters shall be read remotely at least once in a day and the other pre-payment meters shall be read by an authorised representative of the distribution licensee at least once in every three months.
- In July 2023, the MoP notified the Electricity (Second Amendment) Rules, 2023 entailing measures to improve the financial health of discoms by streamlining the process of accounting, reporting, billing and payment of subsidy by states. The new rules mandate that a quarterly report shall be submitted by the distribution licensee within 30 days of the end date of the respective quarters and the state commission shall examine and issue the report within 30 days of its submission. The report will interalia cover findings regarding demands for subsidy based on accounts of the energy consumed by the subsidised categories, the subsidy payable to these categories as announced by the state government and the actual payment of subsidy in accordance with Section 65 of the Act.
- In August 2023, the CEA released extensive guidelines to forecast the energy demand in the medium and long terms from discoms, states and union territories. The guidelines aim to facilitate the realistic assessment of future electricity demand from discoms/states by the CEA in its Electric Power Survey of India, aligned with the methodology followed at the central level. It will also serve as a guiding document for such an assessment with respect to new and emerging market segments such as electric vehicles, solar rooftop and green hydrogen.
- In May 2023, the MoP waived ISTS charges for offshore wind, green hydrogen, and green ammonia projects to facilitate their implementation and expansion. The waiver is only applicable for ISTS charges and not for ISTS losses. The charges will be waived for 25 years from the commissioning date of the projects. The green hydrogen and ammonia projects covered under the new scope must utilise renewable energy sources for production. The ISTS charges waiver was previously only applicable to renewable energy generating stations, including solar, wind and pumped hydroelectric stations.
- In the same month, the CERC notified the CERC (Indian Electricity Grid Code) Regulations, 2023. For stable, reliable and secure grid operations and to achieve maximum economy and efficiency in the power system, the grid code, apart from the provisions relating to the role of various statutory bodies and organisations and functional linkages among them, contains extensive provisions pertaining to the reliability and adequacy of resources; technical and design criteria for connectivity to the grid including integration of new elements, trial operation and declaration of commercial operation of generating stations and ISTS; and protection setting and performance monitoring of the protection systems, including protection audit.
- In August 2023, the MoP notified an amendment to the standard bidding documents for procurement of inter-state transmission services through the tariff-based competitive bidding (TBCB) process to include technical qualification requirements for high voltage direct current systems. The amendment mandates the bidders to specify their experience in developing infrastructure projects during the past 10 years with aggregate capital expenditure, and also mentions that the capital expenditure of at least one project should not be less than a certain amount.
- In June 2023, the MoP issued the Draft Electricity (Amendment) Rules, 2023, detailing several reforms aimed at facilitating power transmission and open access, and improving the financial viability of discoms. A key proposal is the elimination of the transmission licence requirement for dedicated transmission lines connecting large consumers and energy storage systems. This measure aims to streamline the establishment of transmission and evacuation infrastructure, considering the substantial growth anticipated in green energy capacity. The draft rules propose to rationalise the currently prohibitive open access charges in certain states by introducing a different methodology for computing these charges, thereby making them more reasonable.
- In October 2022, the MoP issued guiding principles for monetisation of transmission assets in the public sector through the “acquire, operate, maintain and transfer-based” public-private partnership model. The guiding principles are intended to enable implementation of the monetisation programme for identified transmission assets of state government-owned transmission undertakings and central public sector enterprises/public sector undertakings/other government organisations in the central sector that may adopt this framework with the approval of the respective competent authorities.
- In February 2023, the CEA issued the draft CEA (Construction of Electric Lines in Great Indian Bustard Area) Regulations, 2023. These regulations will apply to the generating companies, transmission licensees, distribution licensees, central transmission utilities and state transmission utilities operating electric lines in the Great Indian Bustard area. As per the proposed draft, electric lines of 33 kV and below voltage level passing through the Great Indian Bustard area shall be underground cables, while electric lines above 33 kV voltage level passing through the Great Indian Bustard area shall be overhead lines installed with bird flight diverters.
- In June 2023, the MoP directed the CERC to initiate the consultation process for market coupling and to finalise the framework for its implementation. Market coupling, which involves the aggregation of buy and sell bids from all power exchange platforms in the country under a single power trading entity, will lead to the determination of a uniform market clearing price across the country.
- In August 2023, the CERC issued a staff paper on market coupling. The paper discusses the regulatory provisions for market coupling, international experiences, objectives of market coupling in India, the issues and challenges in implementing market coupling, and the key points for discussion.
- In July 2023, the CEA notified an amendment to the procedure for approving and facilitating import/export (cross-border) of electricity by the designated authority. As per the amendment, any Indian power trader, on behalf of any entity of a neighbouring country, may trade in Indian power exchanges (day ahead market (DAM)/ real-time market (RTM)/both DAM and RTM segments), after obtaining approval from the designated authority, up to a specified quantum (MW) and duration.
- In the same month, the CEA amended the CEA (Cyber Security in Power Sector) Guidelines, 2021. The amendment has been notified to address the issue of frequency of operational technology (OT) audit for compliance by all entities in clause 2.3 of the guidelines. The amendment states that the responsible entity shall through a Indian Computer Emergency Response Team empaneled cybersecurity OT auditor, shall, get their information technology system audited at least once in every six months and the OT system audited at least once in a year.
In sum, there have been several policy and regulatory actions taken in the past year to resolve lingering issues and stimulate growth within the sector. Notably, the introduction of the Carbon Credit Trading Scheme, advancements in green hydrogen policies, the establishment of guidelines for TBCB, revisions to the biomass co-firing policy, and the publication of a staff paper on market coupling all point to forthcoming and exciting changes in the sector.