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Analysis | December 2015

Integrate Technology & Policy

Concerted efforts are being made to push and evolve the Indian power system and to place greater reliance on renewables, the purported future of our energy ecosystem. While renewable energy encompasses several technologies such as hydropower, wind power, solar power, tidal power and geothermal power, amongst others, ambitious targets have been specifically set by the Government with respect to solar and wind energy in a bid to boost renewable installed capacity within the same. These efforts, in large part, follow emerging policy initiatives to address concerns of climate change, energy security, zero fuel, removing price volatility and external influence and environment protection.

It may be fruitless to talk about renewable energy without devoting attention to the evacuation infrastructure for renewable energy. The targets and initiatives are anticipated to help India become one of the largest green energy producers in the world. However, there are certain challenges in integrating renewable energy, especially solar and wind, into the power grid. For one, intermittency in generation of such power leads to a requirement for additional energy to balance supply and demand on the grid on an instantaneous basis, as well as regulation of frequency, voltage support, frequency controllers, reactive power compensators, harmonic protectors and the like. Secondly, renewable energy sources are dependent on specific locations that are not necessarily grid optimal. Further, incorporation of renewable energy into the grid is a multiple nodal predicament involving several stakeholders with varying degrees of coordination. These stakeholders include the Central and state electricity regulatory commissions, grid operators, generators of renewable energy, state electricity boards, the Ministry of New and Renewable Energy (MNRE) and local planning bodies.

In the wake of the growing need to address these gaps, MNRE and the Forum of Regulators entrusted the Power Grid Cooperation of India Ltd. (PGCIL) the job of identifying additional transmission infrastructure capacity required in renewable energy rich states such as Tamil Nadu, Karnataka, Andhra Pradesh, Gujarat, Maharashtra, Rajasthan, Himachal Pradesh and Jammu and Kashmir, estimate capital expenditure of such additions, and propose approaches to funding. PGCIL, in its August, 2013 report estimated the cost at Rs 40,000 crore.

A variety of measures, financial and technical assistance have since been advanced to initiate supporting interventions for promoting renewable energy capacity addition in India; among these is the implementation of the green energy corridor project (the Project) for evacuation of renewable energy from the generation points to the load centres by creating intra-state and inter-state transmission infrastructure in renewable resource rich states. The Project has been put forward as a critical policy intervention to modernise an aging transmission system, and in particular, to build a smart grid, to take on the likely renewable energy capacity addition by March 2017. The intra-state transmission component is being implemented by the respective states and PGCIL is implementing inter-state transmission component.

In October 2015, Germany gave a huge impetus to the Project by providing loans worth ñ125 million for financing two projects in Himachal Pradesh (ñ57 million) and Andhra Pradesh (ñ68 million). Given this backdrop, this article appraises the state of affairs of our promised initiatives and policies, which are imperative for a smoother renewable energy project development environment.

Integrated Strategies
It has become something of a clichT to say that India has a multitude of laws that weave and interconnect with each other. The power sector has had an extremely chequered past in India with inadequate investment issues to significant constraints in power evacuation across India. Recognising the need for restructuring, the Electricity Act, 2003 (Electricity Act) was enacted, repealing the then existing electricity laws and introducing many new measures for enabling reforms.

The Electricity Act mandated the state electricity regulatory commissions (SERCs) to promote generation of electricity from renewables by providing suitable measures for connectivity with the grid and sale of electricity to any person. The Electricity Act further mandated the Government to prepare a National Electricity Policy (NEP) and National Tariff Policy, 2006 (Tariff Policy) in consultation with the State Governments and the Central Electricity Authority (CEA). NEP aims at laying guidelines for accelerated development of the power sector, including identifying the economics of generation using different resources. The National Tariff Policy, 2006 (Tariff Policy) directs SERC to fix certain minimum percentages for purchase of renewable power. The Indian Electricity Grid Code, notified by the Central Electricity Regulatory Commission in 2010, lays down technical and commercial rules concerning the inter-state transmission system. Additionally, the CEA, in discharge of its functions under the Electricity Act, has issued various standards on codes of practice, safety requirements, electrical apparatus, furnishing of statistical information, which need to be adhered to by entities involved in the transmission sector.

In July 2015, MNRE issued a draft renewable energy act (RE Act) inviting comments from all the stakeholders. The intention of the RE Act appears to provide a comprehensive and definitive legislative framework dedicated to renewable energy while still staying connected to the existing principles set out in the Electricity Act. The RE Act has proposed, inter alia, (i) dedicated institutions at the Central and state level with homogenised development of renewable energy, (ii) creation of national renewable energy policy and fund, (iii) mandatory renewable energy targets and compliances, (iv) development of supporting ecosystem containing best practices on streamlining of project permits, clearances and institutional structure and standard bidding guidelines under section 63 of the Electricity Act, and (v) publishing updated set of technical, safety and quality standards after the Ministry has consulted with its agencies, to ensure all manufactured renewable energy equipment, renewable energy products and renewable energy fuels shall comply.

All of these propositions are not far from the recommendations made by various stakeholders in the recent years-establish renewable energy targets, identify financial support required for achieving those targets, restructure the renewable purchase obligations and make them mandatory, introduce new connectivity standards to ensure that the large scale renewable energy integration does not affect the power grid´s security and reliability, provide necessary technical requirements for connecting to the grid such fault ride through, reactive power support etc., and standardise the contracting documentation. However, the RE Act, is at its infancy; whether the final version engineers the desired change remains to be seen.

With a strong legislation in place, the focus on implementation support is even more desirable. At the core of the issue is the time taken to obtain all the applicable clearances, lack of a single window clearance mechanism and lack of clarity on the process, whether the project is new or being transferred to a new owner. Further, a developer is often overwhelmed by the lack of coherence and clarity, for example, on enforceability of renewable purchase obligations, or whether the renewable energy related incentives and schemes are applicable, or whether the local panchayat´s approval is required or whether there are any local law restrictions to the project.

Local law regulations typically come into play, when dealing with land use (agricultural, private, forest, tribal, and barren unused land etc) and cess/royalty payments. While some states have introduced single window clearance mechanisms for new industries/projects, the Government is yet to put together the promised platform for centralised single window clearance mechanism. Perhaps it comes across as no surprise that in addition to lending to the Project, Germany has also signed an agreement with India to fast-track business approvals, providing German firms with a single point of contact to help them navigate the maze of approvals that often deters initiatives.

If the emerging policies were a Venn diagram of initiatives, renewable energy would be at the centre point of it. We have enabling frameworks in place which are just about adequate to deal with power technologies of the past. We also have in the pipeline enabling frameworks, which promise to fill in the gaps and overcome existing barriers to deployment of electricity from future energy sources. This brings us full circle. Our policy promises are not catching up with our technology deployment. The complex relationship between power sector constraints and renewable energy policies should not be underestimated; policies provide the motivational force behind new renewable energy generation, restructuring of the power grid, strong grid interconnections, supply balancing, forecasting, deployment of smart technologies, corridor prioritisation and future corridor locations. It is important for policy makers to take into account current and potential future energy requirements when the final legislative framework is finalised, to avoid the need of additional legislative frameworks. It ultimately does not matter if the technology comes first or the policies. It is significant on its own, but ineffectual until the legislative framework links through and addresses all the constraints to the renewable energy challenge.

Author: Aakanksha Joshi,
Associate Partner and Pooja
Chatterjee, Associate Manager at Economic Laws Practice (ELP),
Advocates & Solicitors.
Disclaimer: The information provided in the article is intended for informational purposes only and does not constitute legal opinion or advice. Readers are requested to seek formal legal advice prior to acting upon any of the information provided herein.

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