New Realities

Key focus on renewables in draft amendments to the Electricity Act

By Khushboo Goyal 

In 2017-18, renewable capacity additions exceeded thermal power capacity additions for the first time in Indian history. On the other hand, the country’s power sector is still facing power quality and availability issues. Moreover, the country’s power laws are not in sync with these trends. In this regard, the Ministry of Power has recently proposed amendments to the Electricity Act, 2003, to make adequate provisions for renewable energy generation and distribution as well as quality power supply to keep pace with the changing market dynamics. The amended act is proposed to be called the Electricity (Amendment) Act, 2018, and will apply to the entire country except Jammu & Kashmir. The draft act is open for comments till October 22, 2018. Some of the provisions proposed under the act are:

Inclusion of renewable energy

  • Hydro, wind, solar, biomass, biofuel, biogas, waste including municipal and solid waste, geothermal, tidal, forms of oceanic energy and cogeneration to be included under renewable energy sources.
  • The terms renewable energy service company (RESCO) and renewable purchase obligation (RPO), which were not mentioned in the original Electricity Act, 2003, are also included in the proposal. To further encourage renewable energy uptake, the draft act proposes a penalty of Rs 1 per unit to Rs 5 per unit as applicable for distribution licensees on non-compliance with the RPO.
  • The proposal introduces the concept of renewable generation obligation (RGO), which is quite similar to RPO. While RPO is applicable to all obligated entities, RGO is applicable to generating companies only, which are involved in developing coal- or lignite-based thermal power projects. As per the proposal, thermal power generators have to generate or procure renewable energy equivalent to thermal energy generation to comply with their RGOs, which will be considered as RPO compliance for an obligated entity.

New policies and plans

  • The proposal emphasises the timely review and revision of the National Electricity Policy and the Tariff Policy by the central government after consultation with the state governments. It mentions a national renewable policy to ensure electricity supply to unelectrified rural areas.
  • The National Power Committee, regional power committees and state power committees may be established by the central government or state governments as applicable for facilitating the integrated operation of the power system.
  • To safeguard developers, the draft act proposes penalisation for the violation of power purchase agreements without approval from the appropriate commission. These penalties will be determined by the appropriate commission from time to time, and may extend to Rs 10 million per day and even lead to the suspension and cancellation of licences.
  • The selection committee, which nominates members of the Central Electricity Regulatory Commission, has to include the secretary-in-charge of the Ministry of New and Renewable Energy (ex-officio) in place of the Department of Consumer Affairs counterpart.

Quality power supply

  • As per the draft amendments, the distribution licensee is obligated to provide 24×7 power supply to the consumers. They can be penalised by the appropriate commission for undue power cuts. In some circumstances, even their licences can be revoked.
  • The draft amendments propose to make the installation of smart meters mandatory at each stage from the point of generation up to consumption for proper accounting and measurement of energy. This can help in reducing losses of utilities by keeping a check on power theft.
  • The draft amendment proposes multiple electricity suppliers in a single area. Any consumer with a connected load of 1 MW or above may procure power from any generating company or licensee or any source through open access under contractual agreement.
  • To improve power supply in the country, the proposal promotes the development of a smart grid along with ancillary support and distributed generation.

Conclusion

Inadequate power supply is still a big impediment in the country’s economic development, with prolonged power cuts quite common even in urban areas. The target of 175 GW of renewable energy by 2022 makes regulatory impetus absolutely necessary at present. Hence, these long overdue provisions in the Electricity Act are definitely a step in the right direction. It remains to be seen whether the industry and other stakeholders will accept all of these proposed changes though the final decision to include them in the Electricity Act ultimately rests with Parliament.

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