Co-generation power plants do not have to meet ‘renewable purchase obligations’ (RPO), even if they generate electricity using fossil fuels; also, the entities mandated to meet RPO can buy power from these co-generation plants to discharge their obligations, according to the Appellate Tribunal for Electricity.

This means big industries that are ‘obligated entities’ and have to meet the prescribed renewable purchase obligations, could just put up a captive co-generation plant and buy electricity from that plant, to meet their obligations.

Implications

The implication of this is that a large chunk of potential buyers of green power (or renewable energy certificates, instead) are effectively out of the net. For instance, if an aluminium smelter has a co-gen plant, it can buy power from that plant even if it is coal-fired, and yet be considered to have met the ‘renewable purchase obligation.’

In its recent decisions on appeals filed by Emami Paper Mills and Vedanta Aluminium, APTEL did not go into the fundamental issue —whether a plant that produces electricity using fossil fuels produces ‘green’ power or not. Instead, it went by the legal definition of who are all counted as ‘obligated entities’.

“The definition nowhere provides that a co-generation plant having fossil fuel as its basis would be a conventional captive generating plant, and that therefore, it is an ‘obligated entity’,” Justice Karpaga Vinayakam, Chairperson, APTEL, said in his judgment on a petition filed by Emami Papers.

Setback for green power

This is not good news for the renewable energy industry. Already, these companies, which generate electricity from wind, solar, biomass and small hydro plants, are finding it impossible to sell their ‘renewable energy certificates’. In the January trading — REC trading happens on the last Wednesday of each month on the two power exchanges — 17.41 lakh certificates were offered for sale, but only 1.93 lakh were sold. This shakes the already weak faith financiers have in the REC regime and renewable energy companies will find it harder to raise debt from banks for their projects.

“With a large proportion of captive power producers running one of other form of co-gen process, we can expect significant proportion of coal-based captive capacity getting away with RPOs that could otherwise have resulted in good participation in the REC market, already hit by lack of participation from obligated entities,” says Vishal Pandya, Director, REConnect, a consultancy that operates in the REC market.

The biggest ‘obligated entities’ are the State electricity distribution companies, that are not in the best of financial health.

The State regulators seem to take the view that the discoms merely buy the certificates and get no energy for their money, so why force them to do so.

ramesh.m@thehindu.co.in

(This article was published on February 27, 2013)
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