Why interstate transmission waiver will fall short of its desired goal

Renewable power sector is expected to get a boost from the recent announcement by the government. According to a Business Standard report, the centre has waived inter-state transmission charges and losses on transmission of electricity generated from solar and wind projects by revising the National Tariff Policy.

It is nearly a year since power minister Piyush Goyal first said that a waiver will be introduced to give a fillip to alternate sources of energy. The waiver comes with an expiry date. For wind power projects, only those units commissioned till March 31, 2019 and for solar power projects, those commissioned till March 31, 2017 will be considered.

Though there is a limit for commissioning the projects the benefits will be available for 25 years from the date of commissioning. There is one more rider – only those projects awarded through competitive bidding will be entitled for waiver. Wind projects entering into power purchase agreements for sale of electricity to distribution companies for compliance with their renewable purchase obligation (RPO) can also avail the waiver.

The intention of the policy is good and much needed if benefits of renewable energy have to be spread across the country.

Not every state is blessed with enough sunshine or wind force to generate solar and wind power. Setting up a solar power generation unit in a state which gets few hours of sunshine, that too of low intensity, is meaningless. Breakeven for such projects will be too long. Same is the case with wind power. Many states do not get wind at the force it is needed to generate energy.  

This handicap is now taken care of by the current policy. By removing transmission charges and taking care of the losses, the government has removed the natural disadvantage some states face. A state which does not get enough sunshine can now avail of power generated in other states without any cost and loss in transmission.

Also, in order to enable states that are deprived of natural resources, the central government has decided to setup a 1000 MW wind power project connected to transmission network of central transmission utility (CTU).  

This way states which are setting up thermal units can use this route to fulfil the Renewable Purchase Obligation (RPO), which makes it mandatory to set up renewable energy capacity equivalent to 10 per cent of the newly installed thermal capacity.  

There are however, certain shortcomings in the policy. First is the short tenure for commissioning the unit to avail of the facility, this is especially true for solar players who have to commission the unit by March 31, 2017, which is just five months from now. Even for wind power the date of 2019 is too short.

If the benefits are available for a period of 25 years, government could have been a little more generous with the deadline.

Secondly, restricting only those players who bid through the competitive bidding process is restricting the private consumers out of it. Suppose if a manufacturer is setting up a unit in a state deprived of natural resources to generate energy but has other mining resources. These units require huge amount of energy. They will be unable to take advantage of the policy.

While the policy is much needed and can boost the performance of companies in the renewable power space, the shortcomings needs to be ironed out to make it a success.