Dr. Pramod Deo, former Maharashtra Electricity Regulatory Commission chairman, was appointed chairman of the Central Electricity Regulatory Commission (CERC) in June 2008.
Out of his 30-year service as IAS officer, Dr. Deo spent over two decades at both policy and project management levels in the energy sector. An alumnus of IIT Delhi, he has also been a part of the United Nations Environment Programme Centre in Denmark and worked with the Asian Institute of Technology. Dr. Deo was honoured with the World Wind Energy Award in 2005. In the following year, he was conferred with the CII National Award for Distinguished Personality-Energy Management.
The eminent electricity regulator is quite a writer and has so far co-authored three books on energy planning, energy management and regulatory practice.
IWC quizzed him about his new role as chairman, CERC and his take on the Indian renewable energy sector.
1. How can CERC help in increasing the share of renewable energy through the Forum of regulators? Is it possible to build a consensus among regulators on RPS and tariffs?
The forum of regulators (FOR) is a body comprising of all chairpersons of electricity regulators and chairman CERC is the chairperson of FOR. FOR had appointed a working group on renewable energy which deliberated on issues related to renewables and prepared a final draft in Bhubaneswar. The recommendations of the group have been adopted, with minor modifications, in Chennai on 30 January.
The report suggests that in view of the National Action Plan on Climate Change (NAPCC), a minimum of 5 per cent target for RPS be set by all SERCs to be achieved by 2010. It also talks about increasing this target further by 1 per cent.
There are some States that already have set targets of 10 per cent and achieved it also like Tamil Nadu and Karnataka. In their case, this percentage will have to be further increased but at a lower rate. Moreover, once Renewable Energy Certificates (REC) market is developed these states will be able to trade excess generation to states that are deficit in renewable resources. The important thing, however, is that this purchase has to be in terms of energy because the capacity utilisation factor for renewable energy plants is very low in comparison to conventional power plants. Moreover, the availability is also limited like in the case of wind energy which can be tapped only during a certain season. This is why we are talking of purchase as the percentage.
The other important recommendation is that it has to be applicable to captive as well as open access consumers. The recommendation has been deferred for the time being. In a distribution licensee’s area these two entities do not draw power from the Discom but consuming electricity – either their own electricity or from some other supplier. The idea was that they must also meet this RPS target.
Another critical area is that there are certain fledgling technologies like concentrated solar, solar-thermal etc these may have to be given sub reservation within the RPS.
Now that a consensus has been built among all the State regulators, it is going to be approved. However, since a lot of amendments in regulations may be required in the process of implementation and orders will need to be passed, it may take a while for it to become effective.
2. Given the increasing percentage of renewable power, how do we overcome the problems of scheduling infirm power like wind power?
The solution is not easy hence we are recommending renewable energy certificates. Since you cannot schedule wind power, it is difficult to facilitate inter-state exchange of power. Though it is possible to do some kind of scheduling, the commercial risk involved in this is very high for the developer. Besides, any inter-state power exchange cannot be less than 1MW, and open access regulations do not provide for revision of a schedule over a day and deviation from the schedule has to be charged at UI rate. However, the commission is in the process of amending the short-term open access regulations to facilitate revision of schedule by the wind generator in a day. Hence Renewable Energy Certificates (RECs) are the only solution.
Wind power is generated where the conditions are favourable, and it can be best absorbed by the power system there. In the case of Tamil Nadu, the state already has 10 per cent share. As wind energy has to be purchased at a preferential rate the weightage in the tariff for the costly power goes higher and the burden falls on the consumer. The idea here is to utilise wind power without letting it pinch the budgets of consumers in Tamil Nadu. Hence to neutralise the effect of costly electricity, this power will have to be transferred to consumers in Uttar Pradesh. This can be done only through the mechanism of RECs.
Except for co-generation plants and big biomass plants, scheduling is an issue with other alternate energies like small hydro, wind power, small biomass gassifiers and solar. However, this can be resolved with the help of efficient storage systems.
3. Should we try to encourage renewable power sale at the UI (unscheduled interchange) rate?
The concept of Unscheduled Interchange and related charges was introduced for maintaining grid discipline. Thus it is mainly about scheduling the generation and adhering to it and any deviation is penalised. The penalty is linked to the frequency of the grid at the time of deviation. The developer will have to provide a schedule of generation and if he fails to adhere to the schedule, the penalty could be high. It is because deviation from the schedules would be charged at the UI rates. Thus there is high commercial risk involved for the developer, especially in case of variable generation like wind and small hydro.
4. How can power-trading firms be induced to purchase and sell RE power?
If a mechanism like REC is available companies will come forward to invest. To bring this into effect, MNRE has commissioned a study with which CERC is also closely associated.
As far as inter-state exchange of power is concerned and meeting the RPO obligation of achieving the 5 per cent target, it is expected to happen once RECs are introduced.
States with high wind potential will receive more projects and developers in those States will trade excess wind energy after meeting RPO to other RE power-deficit states Although Karnataka has already achieved 10 per cent RPO, due to power shortage it has agreed to buy more. So in that sense power shortages are helping in the development of wind energy.
5. What is your general opinion about introduction of RECs?
RECs are the only solution. The Forum of Regulators has constituted a Task Force to finalise the details of the REC scheme and we should be getting the results of its deliberations in a month or two. The States deficient in renewable energy resources can buy RE component of green power and associated conventional power will be absorbed in the local State grid without burdening the originating state with high cost of renewables.
6. Many countries have promoted RE through feed-in tariff and long term PPAs by legal authority. What are the prospects of having such legislation in India?
We already have a legislation – Electricity Act 2003. The tariff policy provides that preferential tariff should be given to renewables. Then Section 86 (1) of the Electricity Act talks about the percentage to be prescribed, and providing grid connectivity for renewables. Preferential tariff is actually cost plus return tariff and the return has to be on equity in such a way that the risk is covered and becomes commercially attractive.
The CERC shall soon be coming out with the terms and conditions of tariff for renewable energy as mandated in the National Tariff Policy. It is also required to be done as NTPC is planning to set up a wind project; the tariff determination will have to be done by CERC as SERCs cannot do that under the law itself.
7. How the regulatory process matches in terms of pace and interventions with the overall policy development/direction e.g. the National Action Plan on Climate Change mentions increasing the National RPS while in many states there is resistance for increasing RPS percentages?
There might have been resistance in the States that have already reached 10 per cent RPS target and going beyond that at the past rate will increase the retail tariff of consumers due to high cost of renewables. As stated earlier the SERCs in the last meeting of the FOR have agreed to achieve the RPS target of 5 per cent by 2010 for the country as a whole, as provided in the National Action Plan on Climate Change (NAPCC), and to increase it further by 1 per cent every year thereafter. Hence once a credible commercial mechanism like RECs to meet the renewable purchase obligation becomes available to States which have low renewable energy potential they would be able to meet their target by purchasing RECs from States which have abundant RE resources. In short, with the introduction of RECs all these problems will disappear.