The Ministry for New and Renewable Energy’s draft National Renewable Energy Act, 2015, is a veritable box of goodies. The proposed legislation says ‘aye’ to several long-standing wishes of the industry. These include the earmarking of funds out of the National Clean Energy Fund for the renewable energy sector, deemed generation benefits, enforcement of renewable purchase obligations and removal of charges if a generator wishes to supply to a consumer directly.

However, industry experts note that while all these provisions are welcome, two fundamental problems remain unanswered. First, the lack of proper transmission system for electricity and, second, the ‘off-taker’ risk, in other words the poor financial health of the main buyers of electricity, viz., the various state-owned electricity distribution companies.

Some industry observers have pointed to not enough clarity on several other points as well in the draft Act. For example, there are no details about the proposed ‘Renewable Electricity Investment Zones’. On ‘manufacturing and skill development’ again the Act is platitudinous. It says the MNRE shall “create a facilitating framework with appropriate incentives” and “strengthen supply chain through expanding domestic manufacturing of critical components”.

But despite the fluff and generalities, the Act has goodies for the industry. For instance, it is quite forceful on enforcing compliance of renewable purchase obligations. (‘Obligated entities’ are mandated to buy a portion of their power requirements from renewable sources — a statutory obligation (RPO) that has so far been neither followed nor enforced.) The draft green-signals setting aside a portion of the National Clean Energy Fund for the renewable energy sector, perhaps for subsidising loans for renewable energy projects. It says that the generator will have to be paid even if the distribution company does not buy the power, bringing renewable energy on par with conventional power. Further, it makes it easier for generators to supply to (say) bulk consumers directly by removing the ‘cross-subsidy surcharge’ that the state governments levy to defray the cost of providing subsidised power to poor people.

Two challenges Yet, the two major challenges to meeting the government’s target of 175 GW of clean energy capacity by 2022 remain unmet. At a recent conference on green energy in Chennai, the two big queries voiced by various speakers were: One, where is the transmission infrastructure? And second, how will the loss-making state electricity distribution companies—the major buyers of power—pay for the still-expensive green power?

Experts point out that though solutions are in sight, they are distant in the horizon.

The green corridor can help in transmission, but still has a long way to go.

The new Electricity Act will enable renewable energy companies to sell power directly to a new crop of private sector supply companies, which to some extent might reduce the ‘off-taker risk’, but there is a question mark on the legislation as several states are opposed to it.

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