Opening Up

Bihar releases a comprehensive renewable energy policy

Bihar’s power supply relies heavily on coal-based power generation due to its proximity to the coal belt of India. As per the Central Electricity Authority, the state had a total installed capacity of 3,832.54 MW as of May 2017. Of this, about 89.5 per cent was coal based, 3 per cent was hydro based and the remaining capacity was based on renewable sources of energy. In an effort to fulfil its renewable purchase obligation of 2,762 MW by 2022, set by the Ministry of New and Renewable Energy (MNRE), and to enable clean and green power generation for sustainable development, the state has decided to step up the deployment of renewable energy with the release of its renewable energy policy in June 2017.

Despite the release of state renewable energy policies in 2003 and 2011, Bihar has been unable to shift towards non-conventional sources of energy owing to their high tariffs and capital costs. The latest policy, however, is expected to open up the state to the multitude of investments pouring into the Indian renewable energy sector and develop the state’s renewable potential.

Key highlights

Bihar’s new renewable energy policy was developed by the Bihar Renewable Energy Development Agency (BREDA) with support from the Centre for Environment and Energy Development and released in June 2017. The policy aims to provide energy access to the entire state, and covers both grid-connected and off-grid systems with comprehensive deployment programmes and financial incentives. The projects will be executed on a build-own-operate-maintain basis.

The policy envisages the development of a total of 3,343 MW of renewable energy capacity, of which 2,696 MW will be grid-connected solar, 244 MW will be biomass and bagasse-based cogeneration and 220 MW will be small-hydro power (SHP) capacity. The state has a target of installing 1,000 MW of rooftop solar capacity during the policy period. Like other land-constrained states such as Delhi, the Bihar government is promoting rooftop solar along with mandatory deployment of the technology on state-owned buildings. This will not only help in optimal utilisation of rooftops for solar power generation, but also enable savings in transmission and distribution infrastructure and reduce network losses. Rooftop solar projects can be distributed and metered through three models as per the policy – gross metering,  net metering and third-party sale for captive power consumers.

Considering the poor grid access in the remote areas of Bihar, the policy lays significant emphasis on the role of decentralised solutions such as minigrids in improving energy access and rural electrification. As per the policy, 100 MW of mini-grids will be deployed across rural Bihar by 2022. This will be beneficial for applications other than lighting such as fans, charging points and other commercial requirements. Apart from the specified target, renewable-based minigrid projects with a capacity of up to 500 kW can be installed in the state.

The policy has set a target of 220 MW to develop the state’s SHP potential of about 223 MW as per the MNRE. The policy suggests that while companies can develop the SHP sites identified by the government, they are also free to identify, choose and develop sites on their own as per government specifications. In addition, the developers will have to build their own sub-transmission lines or use the existing network to deliver power to the nearest substation for distribution.

The policy aims to cumulatively develop 244 MW of bagasse-based cogeneration and biomass potential. According to the MNRE, Bihar has about 300 MW of bagasse-based cogeneration and biomass power generation potential. The biomass segment across the country is currently struggling with the lack of good quality raw material as well as logistical issues. To this end, the government has been promoting the development of captive energy for biomass power plants, particularly on government wasteland and degraded forest land. Also, to avoid any shortage of raw material, the policy suggests that no other plant be developed within a radial distance of 25 km of a biomass plant with a capacity of 5 MW or more.

The policy also discusses the viability of solar parks, which will be developed by BREDA and private players will be allowed to participate through two business models. One model suggests a “plug-and-play” participation mode, while the other talks about a joint venture where BREDA or other state agencies own a minor share of about 26 per cent and private entities own the rest of the project. In another mode, the solar park can be completely developed and owned by the state government agency.

Even though floating solar and canal-top photovoltaic (PV) technologies are currently at a nascent stage, the Bihar policy has mentioned these as key avenues for developing the solar potential in the state in view of the existing land constraints. Thus, BREDA has taken up the role of a facilitator for the implementation of canal-top and floating PV technology in consultation with state irrigation departments, signing of agreements and providing capital subsidy or financial assistance to developers.

Financial incentives

According to the policy, transmission and distribution charges will not be levied on wheeling of power generated from renewable power projects for captive or third-party use within Bihar. The state government has also decided to bear the capital cost of the transmission system used for the evacuation of power from these projects to the nearest substation. For captive and open access consumers, banking of 100 per cent energy from renewable energy projects will be allowed during each financial year. The incentives available to units under the state’s industrial department schemes will be extended to renewable energy power producers as well since the state considers it to be a separate industry. Further, the power generated from these projects will be exempt from the state’s availability-based tariff under the scheduling procedure.

To enable the smooth disbursement of incentives and create a pool of investments for the development of renewable energy projects in the state, the Bihar government is planning to create a renewable energy development fund. This would be done by collecting a one-time fee levied on all renewable projects based on their size. Therefore, as per the policy, the fee levied can vary from Rs 1,000 for a 1 kW system to up to Rs 10,000 for a 1 MW project. In addition, a cess of 10 paise per unit will be charged towards the development fund on each unit of power sold by the discom to all consumers, barring agricultural entities and those falling below the poverty line. Moreover, for the execution of renewable projects, the agency will levy a service charge of 7 per cent, which will go directly into the development fund.

According to the policy, while it is the responsibility of project developers to acquire land for setting up the project, BREDA will create a “land information bank”, which will provide the details of potential sites within the district. Landowners and farmers who wish to install renewable energy projects on their land will have to register the land details with the agency. The information bank will be uploaded on the agency’s website for easy access by developers. In addition, government institutions are advised to conduct surveys to assess the potential and feasibility of rooftops and shade-free areas on buildings and land owned by them.

Given the challenges associated with variable renewable energy generation, the policy outlines the data monitoring and scheduling mechanism for power evacuation from the upcoming renewable energy projects in the state. In this regard, the state government will provide actual performance data on the public portal and extend the monitoring mechanisms to include decentralised and minigrid projects as well. The state has also envisaged the development of 10 new weather stations for better scheduling and forecasting of renewable energy generation.

The policy also aims to undertake skill development through various training programmes. These will be carried out by BREDA in association with the National Institute of Solar Energy to train electricians, mechanics and civil works experts across segments such as installation, operations and maintenance, testing, solar resource assessment, and refurbishment. In line with the government’s local skill development mandate, BREDA has also decided to reach out to local youth and women in order to support entrepreneurship and improve the socio-economic conditions in the state.

Outlook

Bihar’s renewable energy policy has been introduced at a time when the sector is undergoing rapid transformation, particularly in the solar segment with tariffs falling to record lows. Therefore, the outlook for the successful implementation of the policy seems positive. The comprehensive policy is not only expected to promote the use of clean energy in the coal-dependent state, but also promises to improve the standard of living by creating new employment opportunities in both urban and rural areas.

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