By Sarthak Takyar
India is driving one of the world’s largest renewable energy expansion plans. The country’s target under the Paris Agreement to achieve 40 per cent of its installed power capacity from non-fossil sources by 2030 was achieved in November 2021. At the COP26 summit, India made a commitment to achieve 500 GW of non-fossil fuel energy capacity by 2030. Currently, the total capacity based on non-fossil fuel sources (including nuclear power) stands at around 157 GW. Transmission infrastructure will play a key role in the achievement of the 500 GW target. The government has also been focusing on interstate transmission system (ISTS)-connected renewable energy projects to increase the uptake of renewables and synchronise the electricity produced from renewable energy sources with conventional power stations in the grid. Renewable Watch tracks the key developments in this space…
Recently, the Ministry of Power (MoP) announced 100 per cent ISTS charges on power supplied by solar plants commissioned on or after July 1, 2028. Currently, distribution companies are exempt from paying ISTS charges for solar- and wind-generated electricity, helping incentivise the construction of renewable energy projects. Initially, the waiver was only available for solar and wind projects to be completed by March 21, 2022. It was later extended till June 2023 and then again till June 30, 2025. As per the MoP’s recent order, electricity generated by renewable energy projects commissioned between July 1, 2025 and June 30, 2026 will be subject to 25 per cent of the appropriate ISTS rates. Electricity generated from July 1, 2026 to June 30, 2027 will be subject to 50 per cent ISTS charges, and electricity generated by renewable energy plants between July 1, 2027 and June 30, 2028 will be subject to 75 per cent ISTS charges.
The government has also made it easier for pumped hydro storage plants and battery energy storage systems (BESSs) to get waivers on ISTS charges. Previously, these projects were only eligible for waiver benefits if at least 70 per cent of the electricity utilised came from wind or solar power facilities. Such projects can now qualify for rewards if at least 51 per cent of the electricity generation is from wind or solar projects. Solar, wind and pumped hydro storage projects will be exempt from ISTS transmission charges for 25 years after commissioning, whereas BESS projects will only be exempt for 12 years. Green hydrogen plants that are operational by July 30, 2025 will be exempt from ISTS charges for the first eight years. Renewable energy-based electricity traded in spot power markets (green day-ahead and green term-ahead) will be exempt from ISTS charges till July 30, 2025.
New ISTS projects
On December 8, 2021, the union minister of power and new and renewable energy approved 23 new ISTS projects with an estimated cost of Rs 158.93 billion. Of these, 13 projects with an estimated cost of Rs 147.66 billion will be developed under tariff-based competitive bidding and 10 projects with an estimated cost of Rs 11.27 billion will be developed under the regulated tariff mechanism. The new transmission projects will facilitate the evacuation of 14 GW of renewable power in Rajasthan, 4.5 GW in Gujarat, 1 GW from the Neemuch Solar Park in Madhya Pradesh, and power from feeding areas near Akhnoor and the Jammu region by establishing the Siot substation in Jammu. These projects have been approved after examining the recommendations of the National Committee on Transmission and in accordance with the National Tariff Policy, 2016. Under this policy, ISTS projects are to be developed through tariff-based competitive bidding, except for projects that are strategic, for technical upgradation or time-bound.
At the Meeting of the Parliamentary Consultative Committee of the MoP held on December 10, 2021, the power and new and renewable energy minister mentioned the key policy initiatives to promote renewable energy management and strengthen the transmission infrastructure. These include the development of renewable energy management centres for renewable energy integration, allocation of intra-state transmission system projects via the competitive bidding process, implementation of the Green Energy Corridor (GEC II) for Ananthapur (1,500 MW), Pavagada (2,000 MW), Rewa (750 MW), Bhadla III (500 MW), Bhadla IV (250 MW), Essel (750 MW), Banaskantha (700 MW) at an estimated cost of Rs 43 billion. In addition, 66.5 GW of renewable energy zones have been planned, for which 13,500 ckt. km of transmission lines will be laid. The transmission network expansion will augment the seamless transfer of energy from power-surplus regions to power-deficit regions and support the growth of renewable energy capacity.
The way forward
Since the majority of large solar and wind power projects were concentrated in states such as Gujarat and Rajasthan, the ISTS waivers were a big driver for promoting large-scale uptake of renewable power. However, renewables have now become cost competitive and do not necessarily need any preferential treatment for their growth given the favourable market and economic conditions. Overall, the impact this recent order will have on renewable energy project development, power prices and offtake in the coming auctions remains to be seen.
“We welcome the waiving of ISTS charges. This proactive initiative will encourage optimal utilisation of transmission and distribution resources and enable the development of large-scale renewable energy projects. By covering the projects under the renewable energy bundling scheme, this initiative will also facilitate better utilisation of excess land available with the thermal utilities and reduce the delivered cost of electricity to the end consumers.” – Sharad Pungalia, Business CEO – Utility Scale Projects, Amplus Solar
“While the waiver of ISTS charges is a long pending move in the right direction as it brings discom and other C&I consumers at par when it comes to sourcing inter-state energy, state regulatory framework and dynamics are still going to play significant role in power procurement decision making. Consumers with variable load, located in states with banking/monthly settlement facility may still prefer to purchase power from intra-state projects as it provides flexibility. ISTS waiver will largely open up a new source of power procurement for bulk consumers with round-the-clock consumption.” – Aditya Malpani, Director Open Access & Regional Head- West, Amp Energy India