Amendment to India’s electricity rules seen to bring green energy to more small consumers

A recently introduced second amendment to the Green Energy Open Access Rules 2022 intends to empower small consumers to access clean electricity by allowing them to aggregate their total capacity.

The amendment is an enabler, note experts but caution against practical challenges in implementation such as lack of infrastructure and resistance from distribution companies. Image: , CC BY-SA 3.0, via Flickr.

The Ministry of Power has amended the Electricity (Promoting Renewable Energy Through Green Energy Open Access) Rules, with fresh provisions to support small consumers with better access to electricity through renewable energy sources. 

The Electricity Rules were first notified in June 2022 after which there has been an amendment in January 2023 and now in May 2023. The latest amendment, now notified as the Electricity (Promoting Renewable Energy Through Green Energy Open Access) (Second Amendment) Rules, 2023, updates the definition of entity, eligibility criteria for open access, and adds offshore wind projects to the energy sources for which additional surcharge shall not be applicable.

As per the latest amendment, a consumer with an aggregate demand of a minimum 100 kW with multiple connections at different locations, within the defined operating area, can pool in their demand for open access of the green energy sources. This offers flexibility to consumers with single or with multiple connections to be eligible for green energy open access.

Earlier, the June 2022 notification noted that consumers with a load of 100 kW are eligible for open access but did not specify about single or aggregated multiple connections. The 2022 notification had also reduced the minimum requirement of energy for consumers seeking to purchase green energy via open access, from one MW to 100 kW, to enable consumers with a lower energy requirement, usually commercial or industrial entities of various sizes, to purchase renewable power.  

The Ministry’s latest amendment is expected to further empower smaller consumers such as Micro, Small, and Medium Enterprises (MSMEs), commercial consumers, and large households to shift towards green energy.

For example, telecom towers in an operating area can pool in to reach a cumulative power requirement of 100 kW to access renewable electricity through open access at a cheaper cost. Other cases for open access under this policy would be multiple bank branches or retails stores with single defined territory.

There would be obvious pushback from discoms and state regulators. But the biggest challenge is 100 kW supply, which is mostly supplied through low tension (LT) lines, and there is no framework as of now to give open access on LT lines even for 11 KV. So, this is impractical to implement.

Balwant Joshi, founder, Idam Infrastructure Advisory

Vinay Rustagi, Managing Director of the clean energy-focused consulting and research services company, Bridge To India, told Mongabay-India that open access becoming available to small units, which collectively can add up to 100 kW or more, is an important policy enabler by the government. It is an attractive proposition for a large group of smaller consumers who want to but unable to buy renewable power.

Added charges can make costs unviable

In the 2022 notification, the government imposed several charges, including banking, transmission, wheeling, and standby charges. Banking means storing surplus energy generated and withdrawing when needed.

Further, in the amendment, the applicable standby charges threshold were increased from 10 per cent to 25 per cent of the energy charges applicable to the consumer tariff category. Standby charges refer to charges applicable when generating entity is unable to supply power and a standby arrangement is made by the electricity distribution company. The consumer has to pay a standby charge to the distribution company.

These charges may impact the cost of accessing green power. Balwant Joshi, Founder and MD of a firm providing policy and regulatory advisory services in the energy sector, Idam Infrastructure Advisory Pvt. Ltd., said that distributions charges, along with the addition of banking charges and increased standby charges will make the cost of electricity exorbitantly high, making open access policy unviable for 11kV consumers. The 11 kV consumers are those who receive electricity via low voltage transmission line primarily used in residential areas, feeding the local transformers.

Charith Konda, an energy analyst at Institute for Energy Economics and Financial Analysis (IEEFA), says that any charge will increase the cost of electricity. But with these specifics, the power ministry appears to be attempting to standardise the open access regulations, which vary across states, Konda told Mongabay-India.

Bottlenecks at state-level implementation

The rules now need to be converted to implementation policies for state level implementation where bottlenecks are likely to emerge.

Konda says that the central open-access rules are usually guidelines in nature. Ultimately, states hold the implementation power on the ground. Not all power producers and consumers using open access are connected to the central transmission lines and have to rely upon state transmission networks. In these cases, additional charges levied by states will apply, which discourage open-access users.

However, the distribution companies (discoms) are reluctant to promote open access to large commercial consumers as large consumers cross-subsidise the tariff paid by low-income and agriculture consumers, say experts.

States then attempt to demotivate open-access consumers by adding charges such as the additional surcharge in Maharashtra and reliability charges in Haryana.

Rustagi from Bridge to India said that there would be some short-term challenges such as resistance by states and lack of requisite billing and IT infrastructure among discoms.

Commenting on the challenges, Joshi of Idam Infrastructure Advisory Pvt. Ltd. said, “There would be obvious pushback from discoms and state regulators. But the biggest challenge is 100 kW supply, which is mostly supplied through low tension (LT) lines, and there is no framework as of now to give open access on LT lines even for 11 KV. So, this is impractical to implement.”

Further, LT supply is fault-prone, and many a time, it happens that the generator generates, but consumers cannot consume, which would create practical challenges for metering, data collection, and settlement under open access policy, he explains.

Potential for growth among commercial consumers

Despite these hurdles, commercial and industrial consumers are increasingly seeking to buy electricity directly from renewable energy generators through open access for financial gains due to competitive or cheaper tariffs and decarbonisation goals articulated in their Environmental, Social, and Governance (ESG) frameworks.

The number of Open Access (OA) Consumers in both Indian Energy Exchange Ltd. (IEX) and Power Exchange India Ltd. (PXIL) increased from 825 and 170, respectively, in 2010-11, to 4967 and 661, in 2021-22, says Central Electricity Regulatory Commission (CERC) report. The report also highlights that in 2021-22, open-access consumers (not just green power) were mostly located in Tamil Nadu, Andhra Pradesh, Gujarat, Haryana, Punjab, Chhattisgarh, and Karnataka.

Regarding the potential opportunity, Rustagi from Bridge to India further stated that the May 2023 amendment and virtual net metering provide a similar opportunity with huge potential to make affordable, clean electricity accessible to smaller end consumers.

Konda says that distribution companies also need to take it as an opportunity to generate additional revenue, which they can do by providing grid and balancing services such as power banking, energy storage, etc.

Additional boost for offshore wind

The May 2023 amendment of the rules extends the waiver of surcharge to electricity generated from offshore wind farms commissioned from 2025 to 2032. This intends to incentivise tapping the potential of the offshore wind energy sector.

Giving a push to offshore wind, the Ministry, on May 29, also approved a 100 per cent exemption on Inter-State Transmission System Charges for offshore wind projects commissioned by December 2032, lasting 25 years.

As of today, India does not have any installed offshore wind capacity but plans to bid out 37 GW by 2029-30.

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