Power utilities get a ‘green’ shock

In an apparently absurd decision, the central power regulator has made it mandatory for all power utilities to purchase 6% green power,even though the country doesn't have enough electricity generated through renewable energy sources. What’s adding to the woes of the utilities is a hefty penalty that follows if they fail to procure green power. In a notification, the Central Electricity Regulatory Commission (CERC), to ensure its compliance, has made it clear that power companies need to buy a minimum 6% of their total installed capacity from renewable energy sources. These sources include solar, wind, mini and micro-hydro projects, along with electricity generated by using bagasse and biomass.

Each category has been given a separate weightage. For example, for the Maharashtra state power distribution company, it is necessary to buy 140 mw of solar power and 10 mw of electricity generated by mini and/ or micro-hydro projects. Against this, the state has just about 1 mw of solar electricity available, whereas the electricity from mini/micro projects available is 1.5 mw.

The option given to power utilities, in case of a failure to procure green electricity, is to buy ‘Renewable Energy Certificates’ (REC). Designed on the lines of carbon credits, these certificates can be bought from utilities that generate green power. To oversee the transactions, CERC has designated certain agencies. “This is nothing but a ploy to help certain players who have made huge investments in renewable energy,” a top official from the Union energy ministry said, requesting anonymity.

The rate at which power utilities can buy RECs has also been fixed by CERC. For solar power, it would be Rs 17/unit, while the electricity generated from mini/micro projects has been set at Rs 3.9/unit. The CERC-appointed agency has been mandated to certify buying of RECs. Power utilities need to deposit the requisite amount with these agencies, which in turn will release it to units producing green electricity.

“On solar power alone, a state like Maharashtra shall have to fork out close to Rs 358 crore. The state’s total outgo on buying RECs would be Rs 944 crore for the current financial year,” the official said. The regulator has allowed utilities to recover this cost from consumers by levying additional charges.

This, however, may not solve the problem for various power utilities. “Even if we decide to spend money on buying RECs, there is a huge shortfall of renewable energy in the market,” an official of another utility said. In such situations, the utilities are slapped with non-recoverable fine. “The regulator allows us to recover the money spent on RECs. But it prevents us from reclaiming the amount spent on fine. Isn’t it unfair and unjust,” this official asked.

Not everyone is upset though. Tata Power said it already has more than 6% of its electricity produced from renewable sources. “The CERC decision will not affect us. We have many more plants, including a few wind mills, in the green field,” a spokesperson for Tata Power said. The company has 477 mw coming in from hydel ways, while its wind mills generate 200 mw. “Our 50 mw solar farm in Gujarat will start generating soon. Besides, we have 100 mw wind mill farm plans at various stages of implementation,” he said.