The government has come out with a slew of measures for promoting power generation using renewable sources. These incentives will coincide with trading in renewable energy (RE) receipts on power exchanges, that will begin in the next couple of months.
The incentives for RE producers include exemption of customs duty on import of equipment for state electricity projects and relaxation of norms for grid access. The government has also specified terms for issue of RE receipts ( RECs) for promoting power generation using renewable sources.
Trading in such receipts was officially set going by the Central Energy Regulatory Commission (CERC) on energy exchanges last week. While trading will start in a couple of months, the exchanges have asked for registration of certificates duly accredited by states for registration, officials said.
An REC is a market-based instrument which would facilitate states and other consumers to comply with RE purchase obligations. Each state is now obligated to take a certain percentage of its total power requirement from renewable sources in the National Action Plan on Climate Change . If the demand for such receipts goes up, it can command better premiums, giving further incentives to generating companies.
This stipulation varies across places. For some like Delhi, which do not have access to renewable energy readily, the norm is stipulated at five per cent. For Tamil Nadu, it is at 10 per cent, given its easier access to wind energy. For such states which do not have access, purchase of RECs would help in complying with the mandatory obligation, officials explained. Energy exchanges will facilitate such purchase and selling.
While the National Load Dispatch Commission will be the nodal agency for registration of RECs, the salient point in the recently finalised norms is the directive to NLDC by CERC for specifying floor and forbearance prices for trading of such receipts, officials said. They specified that this price band would help seller to avoid losses while trading.
Other incentives
CERC has relaxed its norms for grid connectivity for such renewable power projects, so as to expedite physical delivery of the commodity, RE, while redeeming such receipts.
Saying it was a major liberalisation to boost renewable power projects, officials said the threshold capacity for connecting to the interstate grid had been slashed drastically, from 250 Mw for thermal power stations to 50 Mw for hydroelectric and other power generating stations, based on renewable sources. An electric grid is a central power system network that integrates transmission grids, distribution grids, distribution generators and loads across states. It is also specified that renewable power generating units with small capacity, even below 50 Mw, can approach the central transmission utility collectively, with an aggregate installed capacity of 50 Mw and above, for grid connectivity.
Imports of all items of machinery required for the initial setting up of a project for generation of power using non-conventional or renewable materials by state electricity boards are now exempt from customs duty. Only a five per cent ad valorem rate would be paid. State governments are also exempt from furnishing a valid power purchase agreement between importer and purchaser for a period not less than 10 years while availing of this tax benefit, otherwise a mandatory clause.
