Renewable Energy and the Current Energy Mix in India
On the global power generation and consumption platform, India emerged as a key player during the 2015 Paris climate talks[i], when it committed to reduce its carbon footprint and produce clean energy instead. It currently ranks third in global power generation, after China and the US, producing a massive 1.5 Mn GW of energy. The problem of power deficit in the country has gone down significantly over the years, and it is projected that the global share of India’s energy demand will increase to 11% by the year 2040. The allowance of 100% Foreign Direct Investment (FDI) in the renewable energy, power generation, and electricity sector has led to a record 12% ($85 Bn) growth of investment in the power sector in the past year. The total installed energy matrix in India is almost equally distributed between the public and private sectors, handling about 53.5% and 46.5% respectively. While conventional energy sources like thermal, natural gas and nuclear power make up for the majority of the energy generated, the government plans to increase the output by Renewable Energy Sources (RES) which currently stands at 34.6%, making it produce more than the conventional sources in the long run. The government further plans to increase the nuclear output from 6780MW to 13,480 MW, by building 10 more heavy-water-type nuclear reactors.
In India, the development of grid-interactive renewable power took flight with the inception of the Electricity Act, 2003 (EA). This legislation, inter alia, provides for regulatory interventions for the promotion of renewable energy sources through the determination of tariff, specifying renewable purchase obligation (RPO), facilitating grid connectivity, and promoting development of the market. While the EA does not entail a definition of renewable energy, it is defined by certain legislations at both central and state levels. Renewable energy as per the Central Electricity Regulatory Commission (Terms and Conditions for Tariff Determination from Renewable Energy Sources) Regulations, 2017 is defined as the grid quality electricity generated from renewable energy sources.
Electricity is assigned to Entry 38 in the Concurrent List (List III), granting the Centre and states the power to legislate on this subject. The Centre regulates matters of inter-state transactions while intra-state sale, distribution, and purchase are regulated by the states. This functioning is not as simple in practice, which is evident from the way State Electricity Regulatory Commissions (SERCs), function in comparison to the Central Electricity Regulatory Commission (CERC), since Concurrent jurisdiction restricts the Centre from giving specific directives to states. For instance, to boost RPO compliance by the states, the CERC REC Regulations[ii] were presented in 2010 to introduce the Renewable Energy Certificate (REC). However, on account of the constitutional framework formulating, setting targets, and implementing the Renewable Purchase Obligation (RPO) framework was on the SERCs, while the CERC was only a facilitator.
This structure comes in conflict with the Central Government’s plans for implementing more renewable sources for the production of electricity. The Centre can only provide a stimulus for this reformation in the energy sector, but it cannot penalize the states for not complying with or implementing the same. Most states have a low level of RPO compliance, which highlights that this reform in the energy sector is not a simplistic process, and has various constitutional, legal, and political obstacles.
Legal and Regulatory Framework
The emphasis on a renewable energy model was forwarded with the enactment of the Electricity Act (EA), which brought about a paradigm shift in India’s traditional power sector. This gave India’s power generation sector a push towards a globally competitive model. Section 86(1)(e) of the EA provides for the use of renewable energy sources for the cogeneration and production of electricity. The act aims to increase the transparency and accountability of the power sector, leading to the establishment of independent regulatory commissions at the central and state levels. The EA further stimulated the implementation of renewable energy in the National Electricity Policy (NEP), which in turn initiated a progressive shift from the usage of conventional energy sources to renewable energy sources. It stipulated that Power Distribution Companies (Discoms) should buy renewable sources through competitive bidding. To help renewable sources achieve the grid parity, the National Tariff Policy (NTP) was released in 2006, aimed at guiding regulators in tariff determination for electricity generated by renewable sources. The National Action Plan on Climate Change (NAPCC) in 2008 laid down 8 core missions, one of which required the establishment of a minimum renewable purchase standard, which was to increase annually till a certain threshold is reached.
SERCs, according to the EA can stipulate a fixed percentage of electricity that has to be generated through renewable energy sources, contingent upon the total energy consumption of the specified areas. Entities that are bound to adhere to RPOs have to comply with these regulations. RPOs are bifurcated into solar and non-solar categories and can be discharged through the purchase of RECs. According to the REC framework, a producer apart from selling the electricity, separately sells the environmental attributes associated with clean energy. RECs are issued by the National Load Dispatch Centre and can be purchased by entities who want to fulfill their RPO obligations under the regime. The Ministry of New and Renewable Energy (MNRE) has established the RPO compliance cell, which in coordination with the CERC and SERCs will handle matters regarding compliances, and take action in case of defaulting entities.
There have been significant developments in the legal and regulatory framework of energy laws in India. The following are some key developments in the power sector:
1. Energy Conservation Building Code
The MOP announced the ECO Niwas Samhita, a new Energy Conservation Building Code for residential buildings. The purpose of this code is to make the residential sector more energy efficient, by promoting energy-efficient designs of houses, apartments, and townships. This is to help the environment by laying an efficient framework for the ever-growing housing sector.[iii]
2. Flue Gas Desulfurization (FDG)
The Ministry of Environment, Forest and Climate Change (MOEFCC) released a notification in 2015, which mandated the installation of Flue Gas Desulfurization systems in thermal power plants within two years of the notification. The CERC declared this as a change in law[iv], directing all thermal power plants to get their technical consultancy report from the Central Electricity Authority (CEA)[v]. This was done to regulate the emissions of Nitrogen Oxide and Sulfur Dioxide, by installing effective FDG systems. The Central Pollution Control Board has issued a new timeline, mandating the norms to be implemented between 2020-23.
3. Amendments to The Guidelines for Tariff Based Competitive Process for Procurement of Power from Grid Connected Solar PV Power Projects
The MOP in January 2019, issued an amendment to the Guidelines for Tariff Based Competitive Process for Procurement of Power from Grid Connected Solar PV Power Projects.[vi] This was to make solar power more affordable by making its procurement more competitive and increase transparency in the framework. Furthermore, the goal was to increase the bankability of projects, provide affordable power to consumers, reduce risk, and encourage investment.
4. Smart Cities Mission
The Government’s model of Diu Smart City was a massive leap in terms of energy-efficient cities. The city became the first of its kind in India, running completely on renewable energy during the daytime with the help of a fifty-hectare solar park and all government buildings powered with solar panels[vii]. This was furthered by various schemes by the MNRE and state authorities to promote solar rooftop installations, both grid-connected and off-grid.
5. Hydropower Purchase Obligation
The Ministry of Power (MOP) in 2019 notified Hydropower Purchase Obligation (HPO) under the non-solar RPO. To ensure that other sources under the non-solar RPO remain unaffected after the addition of the HPO, their total percentage was increased as compared to the solar RPO. The approval of this measure came soon after the “nine minutes at nine pm” event when power grids with the help of flexible hydropower sources withstood a 32GW drop in demand[viii].
6. Dam Safety Bill, 2019
Large hydroelectric projects were provided with the ‘renewable energy source’ status, which was only provided to projects less than 25MWs before March 2019. The government took this measure to boost India’s hydropower sector, keeping dam safety at the highest priority. The Bill enables the establishment of a National Committee on Dam Safety, to generate policies and issue safety standards, and to probe into the cause of failures of hydroelectric projects and suggest reforms.
7. Draft Electricity (Amendment) Bill 2020
The Draft Electricity (Amendment) Bill 2020 was released by the MOP in April, which seems to have worked on the shortcomings of amendments of the EA in 2014 and 2018 that failed to become law[ix]. The bill was drafted sidestepping contentious issues and focusing on critical concerns that impact the sector. The bill was welcomed by various entities in the energy production sector.
Certain policy measures like the One Nation, One Grid scheme[x] were introduced by the Central Government. This plan was put forward in the 2019-20 Union Budget and plans on interlinking five regional Indian grids, making them operate on the same frequency. Furthermore, amendments were made to bidding guidelines for wind energy projects[xi], increasing windows for land acquisition, and revision of declared Capital Utilization Factor (CUF) of wind power.
Dispute Resolution Framework and Judicial Trends
With the absence of special bodies or a framework for renewable energy disputes, in particular, the CERC and SERCs have the jurisdiction to handle interstate and intrastate disputes. The CERC has the authority to adjudicate matters involving power generating companies or trading licensees with respect to regulation of trading, interstate transmission of electricity, and determination of tariffs. SERCs have the power to handle disputes between licensees and generators within their jurisdiction. Both bodies possess the authority to refer disputes to arbitration. The Appellate Tribunal for Electricity (APTEL) is the appellate body that can also take suo motu cognizance of orders passed by CERC or SERCs. APTEL’s decisions can be challenged before the Supreme Court of India.
APTEL in Indian Wind Power Association v. Gujarat Electricity Commission and others[xii] stated that SERCs can allow carrying forward of RPO in case of non-availability of resources, while strictly abiding by the regulations. In this case, the order of the Gujarat ERC was challenged by Indian Wind Power Association, showing the increasing pressure on states and SERCs in attempts to meet their RPO targets.
The Supreme Court in Energy Watchdog v. Central Electricity Regulatory Commission[xiii] held that a change in the coal pricing regime in India does not constitute force majeure in a Power Purchase Agreement (PPA). This led to issues in cash flow, making the continued operations of generators unfeasible. A High-Power Committee was constituted by the Gujarat Government that decided to rehabilitate such assets in the public interest. Commercial restructuring of PPAs was recommended.
With the government planning a massive 40% renewable energy sources in the energy mix by 2020, the Indian energy sector is in for a seismic shift. Policy recommendations, legislation, and amendments both at the central and state levels have been pushing the country towards that projection. A major aspect of this goal is to be in line with the international standards, i.e. producing more energy while subsequently reducing unwanted emissions and carbon footprint. But, to carve out an effective structure, reforms are needed to facilitate smooth operations between the Centre and states and to create an environment that let Discoms operate without being impeded by regional politics. India’s growth towards its renewable energy targets depends on the effective implementation of the RPO regime. Although the shift to renewable energy may not be embraced by many states, the Centre needs to pay attention to state-specific realities and address existing institutional inefficiencies before moving ahead with a Renewable Energy reformation.
This Article Can Be Cited As
Pranav Nayar, Reflecting upon the Legal Framework for Renewable Energy in India, Metacept- InfoTech and IPR, accessible at https://metacept.com/reflecting-upon-the-legal-framework-for-renewable-energy-in-india/.
[i] Justin Worland, Why No Country Matters More Than India at the Paris Climate Talks, TIME, (Dec 11, 2015 3:06 P.M. IST), https://time.com/4144843/india-paris-climate-change/.
[ii] CERC (Terms and Conditions for recognition and issuance of Renewable Energy Certificate for Renewable Energy Generation) Regulations, 2010, Section 66, Section 178(1) read with Section 178(2)(y) of the Electricity Act confer power on the CERC to make regulations to promote the development of the power market in a manner specified and guided by the National Electricity Policy, http://www.cercind.gov.in/Regulations/CERC_Regulation_on_Renewable_Energy_Certificates_REC.pdf.
[iii] Shaurya Bajaj, India Announces New Energy Conservation Building Code for Residential Buildings, MERCOM INDIA,(Dec21,2018), https://mercomindia.com/india-energy-conservation-building-code-residential/.
[iv] CENTRAL ELECTRICITY REGULATORY COMMISSION NEW DELHI (Nov 20th, 2019), http://www.cercind.gov.in/2019/orders/346-MP-2018.pdf
[vi] Anand Gupta, Amendments to the Guidelines for Tariff Based Competitive Bidding Process for Procurement of Power from Grid Connected Solar PV Power Projects, EQ INTERNATIONAL, (Jul17, 2019), https://www.eqmagpro.com/amendments-to-the-guidelines-for-tariff-based-competitive-bidding-process-for-procurement-of-power-from-grid-connected-solar-pv-power-projects-3/
[vii] PTI, Diu Smart City 1st in India to run on 100% renewable energy during day, ECONOMIC TIMES ENERGY WORLD,(Apr 24, 2018), https://energy.economictimes.indiatimes.com/news/renewable/diu-smart-city-first-in-india-to-run-on-100-pc-renewable-energy-during-daytime-official/63889099
[viii] Sarita Singh, States may soon get hydro power purchase targets, THE ECONOMIC TIMES, (Apr14,2020), https://economictimes.indiatimes.com/industry/energy/power/states-may-soon-get-hydro-power-purchase-targets/articleshow/75135313.cms?from=mdr
[ix] Anupam Chatterjee, Draft Electricity (Amendment) Bill 2020: Proposals brighten outlook for sector, FINANCIAL EXPRESS, (May 4, 2020), https://www.financialexpress.com/industry/draft-electricity-amendment-bill-2020-proposals-brighten-outlook-for-sector/1947156/#:~:text=Among%20the%20other%20major%20changes,for%20removal%20of%20regulatory%20assets.&text=The%20Draft%20Electricity%20(Amendment)%20Bill,of%20some%20of%20its%20provisions.
[x] One Nation, One Grid, POWER GRID CORPORATION OF INDIA, https://www.powergridindia.com/one-nation-one-grid
[xi] PTI, Government amends bidding guidelines for wind power projects, THE ECONOMIC TIMES, (Jul 24, 2019), https://economictimes.indiatimes.com/industry/energy/power/government-amends-bidding-guidelines-for-wind-power-projects/articleshow/70363537.cms?from=mdr
[xii] Judgment dated April 16, 2015 in Appeal no. 258 of 2013; Appeal No. 21 of 2014 and IA-28 of 2014 before the APTEL
[xiii] Energy Watchdog v. Central Electricity Regulatory Commission, (2017) 14 SCC 80.