Proactive Approach: Policy and regulatory developments in the renewables sector

Policy and regulatory developments in the renewables sector

By Sarthak Takyar

Policymakers have been proactive in introducing policies and regulations in the renewable energy space. They have been working extensively on all rene­wable energy segments to achieve the am­bitious goals that have been set. In addition, initiatives have been taken to promote round-the-clock (RTC) renewables, green hydrogen and domestic manufacturing of solar components by floating tenders or iss­uing policies. Renewable Watch provi­d­es a roundup of the key policies and re­gulations introduced for the renewable energy sector in the past one year…

RPO and ESO trajectory: The Ministry of Power (MoP) issued a renewable purcha­se obligation (RPO) and energy storage obligation (ESO) trajectory till 2029-30. Ac­cording to this order, the total pres­cribed RPO will progressively increase from 24.61 per cent in 2022-23 to 43.33 per cent by 2029-30. This includes wind RPO, hydropower purchase obligation (HPO) and other RPOs. During this period the wind RPO will increase from 0.81 per cent to 6.94 per cent, the HPO will inc­rease from 0.35 per cent to 2.82 per cent, and other RPOs will go up from 23.44 per cent to 33.57 per cent.

The ESO will be calculated in energy terms as a proportion of the total electricity consumption and will be regarded as satisfied only when at least 85 per cent of the total energy stored in the energy storage system is obtained from renewable energy sources each year. The prescribed storage obligation is 1 per cent for 2023-24 and will in­crease up to 4 per cent in 2029-30.

Green Energy Open Access Rules, 2022: Under the Electricity (Promoting Renew­able Energy Through Green Energy Open Access) Rules, 2022, the MoP reduced the limit of open access transaction from 1 MW to 100 kW for green energy, to en­able small consumers to purchase re­ne­wable power. Further, it provided for tra­nsparency in the approval process. App­roval is to be granted in 15 days, else it will be deemed granted, subject to fulfilment of technical requirements. Further, banking of surplus green energy with the distribution licensee has been mandated. Cross-subsidy surcharge and additional surcharge will not be applicable if green en­ergy is utilised for the production of gr­een hydrogen and green ammonia, am­ong other features.

In the open access space, a key development was the launch of the National Open Access Registry (NOAR) on May 1, 2022. The NOAR has been designed as an integrated single-window electronic platform that is accessible to all stakeholders, in­clu­ding open access participants, traders, power exchanges and national/regional/ state load despatch centres (LDCs), for electronic processing of short-term open access (STOA) applications, thereby automating the administration of STOA in the interstate transmission system (ISTS). The NOAR platform will act as a repository of information related to STOA in the ISTS, including the standing clearance issued by regional LDCs or state LDCs and the STOA granted to open access customers, and make such information available to stakeholders online.

Energy Conservation Bill, 2022: The En­ergy Conservation (Amendment) Bill, 2022 has been introduced in the Lok Sa­bha to put in place enabling provisions to make the use of clean energy mandatory and to establish carbon markets. The amendment bill seeks to mandate the use of non-fossil sources, including green h­ydrogen, green ammonia, biomass and ethanol, for energy and feedstock. It also proposes to establish carbon markets, en­­hance the scope of the Energy Con­serva­tion Building Code, and bring large residential buildings within the ambit of the energy conservation regime. In addition, the bill seeks to amend penalty pro­visio­ns, increase members in the governing council of the Bureau of Energy Effi­ciency, and empower the state electricity re­gulatory commissions to draft regulatio­ns. The bill will empower the state governments to constitute a State Energy Con­servation Fund for the promotion of efficient use of energy and its conservation within the state.

CERC (Terms and Conditions for Rene­wable Energy Certificates for Renewable En­ergy Generation) Regulations, 2022: Under this regulation, the price of certificates will be discovered in power exchan­ges or as mutually agreed between eligible entities and electricity traders. Rene­w­a­ble energy generating stations, captive generating stations based on renewables distribution licensees and open access consumers are entities that will be eligible for the issuance of certificates.

Electricity (Rights of Consumers) Amend­ment Rules, 2022: One of the provisions of these rules is to ensure that consu­me­rs, who are using diesel generator sets as es­sential backup power, shift to cleaner technology options such as renewable energy with battery storage in five years from the date of commencement of these rules.

Guidelines for RTC renewables, wind-solar hybrids and RTC Tranche III tender: During the past year, the government has provided a significant policy impetus to promote greater uptake of RTC renewables through policies and tenders. The MoP issued guidelines for the tariff-based competitive bidding (TBCB) process for power procurement from grid-connected renewable power projects for utilisation under the scheme for Flexibility in Generation and Scheduling of Thermal/Hydro Power Sta­tions through bundling with renewable en­ergy and storage power. The MoP also issued amendments to guidelines for the TBCB process for RTC power procurement from grid-connected renewable en­ergy projects, complemented with power from any other source or storage. Mean­while, the Ministry of New and Renewable En­ergy (MNRE) amended the TBCB gui­delines for wind-solar hybrid projects.

Green hydrogen policy: The MoP notified the green hydrogen policy to facilitate the transition from fossil fuel/fossil fuel-based feedstock to green hydrogen/green am­mo­nia. A key measure that the policy provides is the waiver of ISTS charges for a period of 25 years to manufacturers of green hydrogen/ammonia for projects commissioned before June 30, 2025.

Simplified rooftop solar procedures for re­sidential consumers: The rooftop solar segment continues to face implementati­on issues, especially in the context of net metering and open access. To solve the segment’s woes, the MNRE issued a simplified procedure for residential consu­mers to get rooftop solar plants installed by themselves or through any vendor of their choice under the Rooftop Solar Prog­ramme. The ministry also launched a roof­top solar portal to promote this segment during the past year.

Bidding timeline for offshore wind: The year gone by witnessed some headway in the offshore wind segment. In June 2022, Union Minister for Power and New and Re­newable Energy R.K. Singh announced at a meeting on transmission planning for offshore wind energy projects in India that bids for offshore wind energy blocks of 4 GW would be issued every year for the next three years. Following that, 5 GW of capacity will be bid every year for the next five years, up to and including financial ye­ar 2029-30. All offshore wind capacity that will be bid up to financial year 2029-30 will receive free evacuation and transmission of power from the offshore pooling substation to onshore transmission infrastructure.

Ethanol blending: In June 2022, owing to the coordinated efforts of the state-owned oil marketing companies, the target of 10 per cent blending was achieved much ahead of the targeted deadline of Novem­ber 2022. In April 2022, Minister of State for Petroleum and Natural Gas Ra­m­eswar Teli, in a written reply to a question in the Rajya Sabha, informed that based on the encouraging initiatives on the supply side of ethanol, the governme­nt had made a decision to advance the target of 20 per cent blending of ethanol in petrol from 2030 to 2025-26. Subsequ­e­n­tly, the Minis­try of Petroleum and Natural Gas notified that oil companies will be selling up to 20 per cent ethanol-blended petrol from April 1, 2023. Similarly, an in­di­cative target of 5 per cent biodiesel blen­ding in diesel was proposed to be implemented by 2030.

Notification of National Bioenergy Prog­ramme: The MNRE notified the National Bioenergy Programme on November 2, 2022. The programme will continue from financial year 2021-22 to financial year 2025-26 and has been recommended for implementation in two phases. A budget outlay of Rs 8.58 billion has been app­ro­ved for Phase I. The programme will constitute the following subschemes:

  • Waste-to-Energy Programme – This pro­gramme on energy from urban, in­dustrial and agricultural waste/re­sidues has been introduced to support the setting up of large biogas, bio-CNG and power plants (excluding municipal solid waste-to-energy projects).
  • Biomass Programme – It has been de­vised to support the manufacturing of briquettes and pellets, and promote biomass (non-bagasse)-based cogeneration in industries.
  • Biogas Programme – It supports the se­t­ting up of family- and medium-sized biogas plants in rural areas.

In the Union Budget 2022 speech, Union Minister for Finance and Corporate Affairs Nirmala Sitharaman proposed co-firing of 5-7 per cent biomass pellets in thermal power plants. This would save 38 MMT of carbon dioxide annually.

Promoting domestic manufacturing of solar components: A major trend in the solar space last year was the focus on sc­a­ling up domestic manufacturing of solar components and reducing dependence on solar imports, especially from China. To this end, the government took several initiatives. With effect from April 1, 2022, 40 per cent and 25 per cent basic customs duty is applied on solar modules and cells respectively. Furthermore, in the budget announcements, the finance minister proposed an additional Rs 195 billion for a production-linked incentive (PLI) scheme for high efficiency module manufacturing. The initial capital outlay of the PLI scheme was increased from Rs 45 billion to Rs 240 billion. During the year, the first tender under the PLI scheme received an impressive response and around 54.8 GW of capacity was bid. However, only about 8.7 GW was sanctioned. The second tranche will have a budget of Rs 195 million. With the implementation of this scheme, it is expected that about 65,000 MW of manufacturing capacity will be op­erated annually, including fully and partially integrated solar PV modules.

Dam Safety Bill, 2019: The Rajya Sabha passed the Dam Safety Bill, 2019 on Dec­ember 2, 2021. It provides for adequate surveillance, inspection, and operations and maintenance (O&M) of all the large dams in the country so as to prevent dam failure-related disasters. These are dams with heights of 10-15 metres or over 15 me­tres, with certain design and structural co­nditions, such as reservoir capacity of at least 1 million cubic metres, and length of top of the dam at least 500 metres.

GEC Phase II: Earlier this year, the central government approved the GEC Phase II programme for intra-state transmission systems. Under this phase, projects wo­uld be set up in seven states – Gujarat, Hi­ma­chal Pradesh, Karnataka, Kerala, Ra­j­asthan, Tamil Nadu and Uttar Pradesh – for evacuation of about 20 GW of renewable energy. In addition, under the Tra­ns­mi­ssion Scheme for Renewable Energy Zones, evacuation infrastructure for about 66.5 GW of renewable energy capacity (50 GW solar and 16.5 GW wind) is being created, with an investment of Rs 432 billion. Another key initiative is “One Sun One World One Grid” (OSOWOG) that en­visions solar energy supply across borders. On the sidelines of the COP26 summit at Glasgow in November 2021, India and the UK agreed to combine forces of the Green Grids Initiative-OSOWOG.


Based on last year’s trends, it is clear that going forward the focus will be on diversification including transition from vanilla solar and wind projects to hybrids and RTC renewables, domestic manufacturing of solar components, promotion of open access renewable power procurement, and green hydrogen.

While the policy push to promote RTC power is impressive, some issues and co­n­cerns highlighted by several sector stakeholders need to be kept in mind. First, the high cost of energy storage im­plies that its use will be minimal and focus would primarily be on renewables and thermal power. Second, supply chain disruptions, duties and taxes applicable on solar components, and an increase in in­put costs may hike the cost of solar and renewable energy projects. This puts a question mark on whether discoms will be willing to buy RTC power considering they always vouch for tariffs going down. Three, there are concerns regarding the co­mplicated nature of rules and provisions for RTC tenders, making the task of developers not only tedious but also pro­ne to stringent penalties. However, issu­es notwithstanding, RTC tenders are the future. In fact, corporates are also deman­ding RTC power from developers, making the segment all the more interesting.

In the green hydrogen space, the much-awaited Phase II of the policy can be ex­pected in the coming year; this will provide consumption obligations for different hard-to-abate sectors.

The most interesting development, ex­pec­­ted in the next year, will be the anticipated transition from competitive bidding to feed-in tariffs in the wind segment. How­ever, it remains to be seen whether this shift will be implemented and if it would solve the fundamental woes of the wind industry. While some believe the key issue with competitive bidding is ag­g­ressive bidding to secure projects, it is also possible that low tariffs are being achieved due to select developers beco­ming more efficient which was the key objective of competitive bidding. Going forward, the industry should debate wh­e­ther the transition to feed-in tariffs is fair or a product of lobbying.

Several issues and the slow progress of policies in promoting domestic manufacturing and reducing import dependence show that India still has a long road to travel to achieve self-reliance. For instan­ce, according to a report by the Standing Committee on Energy (2021-22), the an­nual manufacturing capacity in India is around 3 GW for solar PV cells, around 10-15 GW for solar PV modules, 5 GW for solar inverters, and nil for polysilicon, wa­fers and ingots. Considering the government’s ambitious solar energy targets, the demand expected per annum is clearly way more than the current manufacturing base. In addition, the data provided by the renewable energy minister, in response to a Lok Sabha question, dated March 31, 2022, shows that India’s total value of solar imports (in $ million) in 2018-19, 2019-20, 2020-21 and 2021-22 (April to January) first fell gradually but is now increasing. In this space, the elephant in the room is in fact the non-tariff barrier in the form of the Approved List of Models and Manufac­turers (ALMM). While the quality of components can be ensured by complying with various standards of international and Indian agencies, the relevance of the ALMM should be debated going forward. Meanwhile, the PLI scheme has received a positive response from the industry and the in­dustry is ex­pecting the same for electrolysers going forward.

There are two different viewpoints with respect to the policy on RPOs. First is the imposition of stricter penalties for non-co­mpliance with RPOs in the draft Electricity Act and  the second is that there should be a gradual phasing out of RPOs (not the REC mechanism), given the falling cost of renewables and the unnecessary restrictions and unjustified penalties being impo­s­ed on utilities that are already in a­c­ute financial stress. Obligations pertaining to di­fferent renewable energy sources and hi­gh penalties for non-compliance are going to become the norm. However, the phasing out of this complicated regulation for all renewables apart from the emerging segments, such as green hydrogen and ocean energy, may be discussed going forward.

Ironically, even with the right policy environment, the renewables sector has been suffering due to a variety of implementation challenges, including delays in land acquisition, transmission unavailability and bu­reaucratic hurdles. These issues further ex­acerbated during the Covid-19 pandemic. Following this, upheavals in commodity ma­r­kets and volatility in currency, made worse by the Russia-Ukraine war, impacted manufacturing, equipment prices and supply chains. Going forward, policymakers will have to be proactive to subdue the negatives of such new disruptions.

The financial viability of discoms remains a major challenge for the renewable energy sector. The need for a financially sound distribution segment assumes greater importance with the ongoing energy transition, since renewable energy generators and in­vestors need payment security from dis­coms. Moreover, in the coming years, electricity flow will become increasingly complex with the growth of decentralised generation and the proliferation of EV ch­arging infrastructure. This will necessitate greater automation and technology adoption, whi­ch would require significant in­vest­ments.

The Revamped Distribution Sector Sche­me (RDSS), launched in July 2021, has made some headway in recent months with discoms finalising their implementation plans. The reforms-based and resul­ts-linked scheme has an outlay of Rs 3,037.58 billion over five years, with an es­timated government budgetary support of Rs 976.31 billion. As of December 2021, the government had reportedly approved proposals worth over Rs 1.62 trillion for 13 states. Under the scheme, most states plan to take over the financial losses of their discoms and liquidate 100 per cent of the government department’s dues by 2024-25. In case a state is unable to meet the milestones, it will not be eligible to avail of the funds.

Another key policy development has been the announcement of the Electricity (Late Payment Surcharge and Related Matters) Rules, 2022 to address the issue of mounting discom dues, which have now crossed Rs 1,500 billion. As per the­se ru­les, the total dues owed by discoms to the generation and transmission companies can be paid in equated mo­nthly instalments. States such as Rajas­than, Jh­ar­kh­and, Tamil Nadu, Maha­rashtra, Ja­m­mu & Kashmir, Madhya Pra­desh and Uttar Pra­desh, with pending power purchase dues to the tune of Rs 960 billion, are complying with the rules. Accordingly, the distribution licensees of these states paid arou­nd Rs 26 billion to their electricity suppliers on August 5, 2022. REC Li­mi­­ted has provided financial assistance of Rs 220 billion for clearing the outstan­ding dues of the distribution licen­sees of Jharkhand, Rajasthan, Chha­ttis­garh, and Jammu & Kashmir.

Overall, the intent has been to not only tap niche renewable energy segments but also to solve several legacy issues in the power sector impacting the renewable en­ergy industry. The proactive approach of the government should continue in the next year as well.