CERC sets up fund to promote renewable energy projects

The Central Electricity Regulatory Commission (CERC) has set up a renewable energy fund (REF) to promote projects in India. This fund is aimed at compensating states if they fail to meet the target given under their schedule of renewable energy (RE) projects. All RE projects are required to provide a schedule of generation to CERC from 2012.

Officials explained REF would bear charges imposed on states hosting RE projects that fail to comply with their supply commitments.At present, only wind energy projects without sale arrangements with states are required to give declarations forecasting their generation to state load despatch centres. CERC allows 30 per cent deviation in the supply commitments, beyond which penalties are levied or incentives offered. The Electricity Act, 2003, and the National Action Plan on Climate Change (NAPCC) provide a roadmap for increasing the share of RE in total generation capacity. Under this plan, every state has to purchase five per cent of total power requirement from renewable resources like wind, solar or water.

The power purchase obligation is fulfilled by trading of RE receipts, which is a tradable receipt representing a value of one megawatt hour (MwH) of power injected into the grid through renewable resources. From 532 RE certificates issued in March, total issuances till date have gone up to 352,0260. Under the proposed fund, deviation beyond 30 per cent is proposed to be shared among all state distribution companies in a ratio of their peak demand met in the previous month. The states, in turn, would be compensated for these charges out of the renewable regulatory fund. Explaining this, an official said if a state proposed to provide 50 Mw of RE power but could supply only 40 Mw, then the state in which the project is located have to draw 10 Mw power from central pool and supply. This is termed as unscheduled interchange and is charged at a higher rate.

This extra cost will be borne by all state distribution companies, which would be compensated by REF. The logic is that some states like Gujarat, Rajasthan or Tamil Nadu are preferred to set up RE projects due to abundance of energy resources like wind or water or sunlight. Thus, the contribution of that particular state in the central pool becomes higher, whether or not it is prepared to commit such supply.

“In case there is short supply, it has to make good the shortfall by drawing power from the central pool. Since the state is naturally endowed with such a resource, it is unfair to expect that it compensates for individual projects’ shortfall. Therefore, such a compensation plan is worked out to promote power projects in states, where there is natural endowment of resources,” they added.

This facility for REF will be applicable for wind energy farms with collective capacity of 10 Mw and above, at connection points of 33 Kv and above. This is irrespective of whether the project is connected to the transmission or distribution system of the state or to the inter-state transmission system, and who have not signed any power purchase agreement with states or union territories. Similarly, for solar generating plants, the cutoff for REF eligibility will be a capacity of 5 Mw.