Open access rules eased in boost for green power

Open access rules eased in boost for green power

8 Jun    Finance News

The Union ministry has paved the way for small consumers to get access to green power by reducing the limit of open access transaction by 10 times to 100 kilowatt (kw) and curbing the surcharges to be built into tariffs. The ministry notified the Green Power Open Access Rules, 2022, on Tuesday.

The new norms also eased the process to apply for green power, under which approval will be granted via a national portal in 15 days or else it will be deemed to have been granted.

Renewable power is cheaper than thermal power already, with the tariffs ranging around Rs 2.3-2.7/unit, while thermal power under long-term contracts are mostly sold at Rs 5-6/unit.

Under the new open access rules, tariff for the green energy will be determined by a separate commission, instead of the power regulators at the central and state levels. The tariff will include average pooled power purchase cost of the renewable energy, wheeling and transmission charges, cross-subsidy charges, if any, and service charges covering the prudent cost of the distribution licensee.

Cross-subsidy surcharge won’t increase beyond 50% of the tariff for 12 years from the date of operation of the renewable plant. Also, no additional surcharge will be imposed on the consumers. The two surcharges won’t be applicable, if green energy is utilised for production of green hydrogen and green ammonia.

The ministry has also provided for “banking” (storage) of surplus power with discoms subject to a cap of 30% of the consumption by each open access consumer of green energy. “Banking shall be permitted at least on a monthly basis on payment of charges to compensate additional costs, if any, to the distribution licensee,” the ministry said.

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It costs roughly Rs 4 crore to set up a renewable energy unit of 1 MW capacity. The reduction in the limit for open access transaction will allow smaller players to enter the sector.

Rahul Raizada, executive director at PwC India, noted that cross-subsidy and additional surcharges together constituted roughly 70-75% of the open access charges, thwarting the procurement of renewable energy through open access. “Incentives like capping of cross subsidy surcharge will aid open access purchases by large commercial and industrial consumers but even by small and medium enterprises (SMEs) and farmers,” he said.

As per the eased norms, consumers will be given certificates if they consume green power. Besides, there shall be a uniform renewable purchase obligation on all obligated entities in the area of a distribution licensees.

Like in Europe and other advanced countries, open access could lead to “peer-to-peer trading” among small consumers in India too, analysts said. It will also allow people to borrow from industrial and commercial consumers with large rooftops. Besides, the adoption among residential consumers with big rooftops will see a pick-up due to sharp reduction in transaction size, they noted.

Rupesh Sankhe, vice-president and power analyst at Elara Securities, said the new norms will reduce the minimum capital size of green energy units and also make such power much more affordable for small consumers. It will also lead to creation of micro-grids meeting the needs of far-flung areas and boosting last-mile access, he added.

According to Kushagra Nandan, co-founder & MD of SunSource Energy, the new rules are a shot in the arm for the green power sector. This will let the green energy market to grow manifold in the coning years, with increased purchases by industrial consumers which account for about 50% of electricity consumption in the country.

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