Open access: A game changer for green energy?

News: Government recently notified green energy open-access rules. The article analyses the rules.

India’s 2030 target is 500 GW of non-fossil generating capacity. However, the present grid-connected installed capacity (including large hydro) is about 165 GW.

What was the need for green energy open access rules?

To reach the figure of 500 GW, the renewable capacity will have to be increased from about 10 GW per year to about 40 GW per year. But it is a difficult task due to the following factors:

First, this capacity addition will require incremental investments to the tune of Rs. 13 trillion.

Second,  The accumulated losses of discoms (as of March 2020) are about Rs 5 trillion, or 3.5 percent of gross domestic product (2019-20). Each unit of energy sold results in a loss of 60 paise for the discoms. Thus, there will be few investors, who would be willing to take risk of investing in them.

Third, the solar capacity is suffering from the following issues

1. The imposition of safeguard duty for two years led to the postponement of the investment in the solar capacity.
2. Usual issues like land acquisition
3. upsurge in solar tariff
4. The imposition of basic customs duty is going to increase the cost of capital expenditure (capex)
5. Increase in freight charges due to a shortage of containers and
6. Increase in goods and services tax on solar cell/modules from 5 percent to 12 percent.
7. The directive to buy solar panels from an approved list of models and manufacturers (ALMM) for government projects. ALMM only includes domestic manufacturers.

How green energy open access rules are helpful?

Consumers can now demand green power from discoms (power distribution companies).

The eligibility for applying for open access has been reduced from 1 MW to 100 KW for any consumer.

A decision to grant open access or not would have to be taken in 15 days. If the permission is not granted within the time limit, it would be treated as deemed permission.

What are the issues with the green energy open-access rules 2022?

First, with the decrease in the required capacity, a larger number of commercial and industrial consumers will become eligible for open access.

It will create a situation where only the subsidised consumer will remain in the billing fold of the discoms.

Second, the states still can deny open access citing technical issues. Some states are already denying open access to even mighty railways citing, so there will be no question if the same is done to the consumer.

Third, government’s indulgence in tariff-related issues does not give the desired impact. It is because, Electricity Act 2003 under section 176(2)(z), just allows rules framing for government, only for those activities which are under its domain, and tariff is not one of them.

What should be done?

Improve the financial health of Discoms: nobody will invest in renewable capacity also, if they are uncertain of their payments.

Source: This post is created based on the article “Open access: A game-changer for green energy?” published in Business Standard on 22^nd June 2022.