An initiative led by the industry intends to deepen the penetration of renewable energy in Telengana, a state that leads in promoting clean energy in India
The Green Power Market Development Group (GPMDG), an initiative of Confederation of Indian Industry (CII) in partnership with World Resources Institute (WRI) and Shakti Sustainable Energy Foundation (SSEF), intends to promote the cause of clean energy in the state of Telangana. P. Vinay Kumar, chairman of the GPMDG in Telangana, spoke with indiaclimatedialogue.net in an exclusive interview on how the group could alter the status quo of renewable energy in the years to come. Edited excerpts:
What is the aim behind incepting the Green Power Market Development Group? How will it help further the role of renewable energy in Telangana?
The Green Power Market Development Group is an industry-led initiative aimed at rapidly increasing the share of renewable energy in the overall energy consumption of commercial and industrial establishments. We’ll accomplish this by addressing policy, regulatory and market barriers that currently impede the growth of the sector. The GMPDG in Telangana aims to work with regulators, distribution companies (discoms), transmission utility, the government of Telangana, the regulatory commission, clean energy generators and the bulk consumers of power in Telangana in order to develop and sustain a healthy market for purchase of clean power by industries and businesses.
In 2015, Telangana released a solar policy that provides many incentives for solar development. However, the policy is facing challenges in implementation. What are the measures required to address the issue?
Telangana’s solar policy of 2015 is one of the most progressive policies in the country today, since it recognises the potential for solar development in the State and lays down an enabling framework for scaling capacity. Owing to this policy, Telangana is leading in solar capacity and has beaten traditional leaders like Rajasthan, Tamil Nadu and Andhra Pradesh. On the other hand, it is also facing operational issues. The capacity created is lopsided and has favoured direct purchase of clean power by discoms at the expense of a health open access bilateral market for clean power between generators and commercial and industrial establishments. Furthermore, the policy does not have the approval of the regulator.
The lack of a regulatory approval has meant gaps in giving effect to and implementing crucial provisions of the policy relating to cross subsidy charges and other network charges. Currently, Cross Subsidy Surcharge (CSS) is being levied on buyers of clean power, which is contrary to the policy provisions. The policy is up for review and we hope that the government will take into account these gaps during the review. Similarly, there are some niggling issues in rolling out the solar rooftop capacity. Thankfully, the Ministry of New and Renewable Energy (MNRE) has realised that discoms need to be incentivised to permit solar rooftops in the broader direction of distributed generation and are coming out with tangible policy measures soon. Also, there is a need for capacity building among the filed formations of the discom in handling and disposing rooftop applications.
Even though Telangana has successfully installed a large capacity of solar power, only 188 MW of power has been installed so far under open access. How can the scenario be improved?
There seems to be a strong disinclination among the discoms and the State Transmission Unit (STU) to allow more plants under the third party sale operating under open access. In fact, some plants which have come up with due permissions have not been allowed to be commissioned. This is proving to be a disincentive for investors who want to invest in additional capacity. Moreover, it is also impairing the ability of corporates who want to buy clean power either for reasons of affordability or for meeting their sustainability and climate change goals.
The reluctance to allow additional capacity stems from a genuine fear by the STU and discoms about the loss of customers owing to the economics of clean power and also to perceived challenges in managing volatility in the grid due to increased injection of intermittent renewable power. These factors have been weighing on their minds and are hampering the scaling up capacity under open access. There is a need to change this victim mind-set. For this, we plan working with the government and the discoms to allow scaling up of capacity, in a way that does not imbalance the grid nor make any significant dent on the commercial viability of the discoms due to customer and demand defection. It is important to address their concerns if we have to progress.
As far as wind installations are concerned, what kind of policy will help ensure better implementation? What are the steps would you recommend?
Telangana’s draft wind policy was done over a year ago, but is yet to be issued. Now that the MNRE has issued the competitive guidelines for bidding, I think the time is opportune for Telangana to come out with the wind policy and announce competitive bids in the state. The recent price discovery in the Gujarat wind bids where the lowest price was a record INR 2.47 (USD 0.04) is encouraging and should embolden the state not only to issue the policy, but also to announce a procurement program for wind. Also, with Telangana being the first state to announce 24X7 power to the agricultural sector, the demand for power will increase in the state. It is our submission that both and wind and solar can meet this additional requirement at the lowest cost.
With regard to financing, lenders have expressed concern that the tax holiday for renewables is only being issued for 10 years whereas the typical lending period is 20 years. They also feel that the policy uncertainty is a deterrent for investment. How do you see this being solved?
I think renewables have become mainstream now and may not be in need of policy and tax props for them to scale further. For the larger Independent Power Producers (IPPs), which have contributed to most of the growth in recent times, accelerated depreciation rollback has not been a growth dampener. We need to maintain the sanctity of the power purchase agreements and lenders and investors would derive comfort from that. In fact, conventional policy tools like Renewable Purchase Obligation (RPO) and tax breaks may need to be re-visited with renewable becoming more main stream. Tax incentives under the Income Tax Act fall outside the purview of the local state governments and this is a fit case to be taken up by the CII at a national level.